How To Select A CFD Broker

There are lots of CFD brokers that you can choose from. To select a CFD broker there are a few factors that can help you to narrow down the field.

CFDs can be traded three different ways:

1. Market MakerDirect
2. Market Access (DMA)
3. ASX CFDs

When using the market maker execution model orders are placed and traded with the CFD broker. The Broker may then hedge their position by entering the same trade in the underlying market. They do not necessarily enter every trade that their client’s do.

Direct Market Access orders are not traded with the CFD provider, but instead are traded on the physical exchange. Your CFD order is filled when the order on the underlying exchange is filled.

ASX CFDs use a central order book in much the same way as stocks are traded. All orders are placed into the order book and the ASX computers execute the trades by matching together buy and sell orders.

Step 1 for Choosing a CFD Broker

Which markets you want to trade will go some way to determining which execution model you choose. Currencies, shares and indices are all traded via the market maker model. ASX CFDs also offer a limited choice of these underlying instruments as well.

To trade during the auctions at open and close you will have to use either DMA execution or ASX CFDs. The market maker model does not allow you to participate in the opening and closing auctions. When you place an order with ASX CFDs or you use the DMA model you will see your orders appear in the underlying security. If this is important to you then opt for one of these forms of execution.

Source: Jeff Cartridge

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