Special mention: CFD providers

IG Markets SA excels on all counts and ThinkMarkets is a competitive value broker

G Markets SA wins the Top CFD Provider of the Year for the second consecutive year, with ThinkMarkets, a relative newcomer to the SA market, taking second place.

A specialist supplier of contracts for difference (CFDs), IG is part of a global company that is the largest provider of CFDs in the world by published financial statements, excluding forex, and offers CFDs on 17,000 instruments globally.

Scores for this award are derived from a combination of client feedback both on the CFDs and research offered, combined with an Intellidex assessment of the online capability, trading costs and credit riskiness of the provider. Better scores for risk are given for firms where the counterparty for CFDs is clear and has a large balance sheet. Small or obscure balance sheets receive lower scores.

IG excels on all counts and since winning the award last

Iyear it has increased the size of its local client service team by 50%, ensuring that client satisfaction remains strong.

ThinkMarkets launched in SA early last year as a CFD specialist, though it now also offers equities trading, with advice services being launched later this year. Also part of an international group, it is positioning itself as a competitive value broker, charging zero commission on local and international CFD shares and indices and 0.25% brokerage for equities and exchange traded fund investments.

Satisfaction levels are assessed from CFD-trading clients’ opinions on the range of CFD products offered, the quality of their brokers’ interaction with them and the support they offer. We use those rankings, costs and our own investigations to determine scores. BP Bernstein acts as an agent for Standard Bank and Nedbank, therefore it scores

“CFDs can now be traded on the JSE, which eliminates the credit risk as it guarantees settlement

high on credit risk as well.

CFDs are useful for shorterterm traders as they are generally cheaper to trade in and out of than normal shares but become more expensive the longer the holding period.

CFDs can now be traded on the JSE, which eliminates the credit risk as it guarantees settlement, or “over the counter” between the broker and client. The latter type has been going for longer and still makes up the majority of CFD trades. CFDs imply credit risk because brokers can end up owing traders money if the underlying asset prices change. That should be no problem for brokers who manage their risk correctly but can become a big problem if they don’t. While we assess this risk as comprehensively as possible, without conducting a full systems audit it remains very difficult to do.

We asked brokers to identify just which balance sheet was the counterparty to the CFD contracts they wrote and to explain how they segregate client money from that of the firm’s. We score brokers highly if there is a clear and substantial balance sheet standing behind the contracts and mark them down if the balance sheet is small or hard to assess.

It is also important to clients that CFD trading facilities are easy to use and costs are low. Costs have two sources: the charges for CFD transactions and the implied leverage in transactions. Often low fees are paid for by charging high interest rates for leverage, or paying low interest rates for short exposures. We measured the difference between these, which is known as the spread.