What is CFD or contract for difference

CFD gives high leverage compared since you only need to put down about 20% of the investment value - but just like margin account, this can work for as well as against you if you do not know how to manage your position.

Also, CFD allows traders to "shortsell" a stock ie selling a stock which someone who does not own with the aim of buying back later at a lower price. CFD allows traders to hang on to the short position for as long as one month or even beyond. See below for more information.

1. What is Contracts for Difference (CFD)?
A CFD is an agreement between 2 parties to settle the difference between the opening price and closing price of the
contract multiplied by the number of shares specified. It is therefore a unique trading instrument that allows the
customers to trade in stocks with the key features of leveraging and short-selling.

2. Key Features of Phillip CFD?
These are the advantages of using Phillip Stock CFD:
_ Portfolio Diversification
Besides SGX, HKSE and KLSE, customers now have the added advantage of diversifying their stocks and CFD portfolio
with selected companies listed on the NYSE and NASDAQ. With lesser initial capital outlay (20%), customers can now
effectively perform portfolio diversification.

_ Convenience to Short Sell*
A CFD allows you to take a position on a stock without needing to buy and sell the shares themselves. Therefore, CFD
investors can take short position, and not be limited to the T+3 days contra period or be tired out by the
administrative hassles that accompany SBL trading.

* Share Borrowing and Lending(SBL) facility allows you to short the market by borrowing shares, the accompanying administrative hassles often
results in investors missing out on the ‘right’ price to sell.

_ 5 Times Trading Power, Increased Leverage
Phillip CFD will enable you to leverage up to 5 times the capital, allowing clients to pay only a fraction of the
underlying capital required.

_ 30 Calendar Days “CONTRA”
Each CFD contract has an expiry date of 30 calendar days. Investors can choose to close out anytimebefore
expiration. If contracts are not closed out within 30 calendar days, they will be automatically renewed at the end of
the 30th day.

_ Sophisticated Trading Strategies
You will have the added ability to protect your existing share portfolio against adverse market conditions by utilizing
the Phillip CFDs to hedge your exposure, via strategies such as pair trading and spread trading.

_ Smart STOP Order§
Increase your chances of winning and minimize losses with the use of the STOP order type. Our Stock CFD (US) now
has a system which allows for higher entries and cut loss trades. Simply by the differentiation of the mid-price and
the price input, the system will be able to identify if a customer is putting in a STOP order.

§STOP order is currently applicable for US markets only.

** Customers are advised to exercise caution when executing orders at current spread especially during volatile conditions.

_ 1.5%p.a. Interest Receivable for Short-Selling
Customers using Phillip US Stock CFD to short-sell will receive interest on their overnight short positions.

3. Corporate Actions

Dividends
A holder of long Phillip CFD on the quoted shares* will receive a credit adjustment** in the account, where the adjustment is equivalent to the net dividend payment due on the underlying shares. Conversely, a holder of short
Phillip CFD will incur a debit adjustment** where it is equivalent to the gross dividend.
*Shares refers to companies being listed on the respective exchanges
**Dividends adjustment will be in the respective exchanges’ currencies.

Bonus, Stock Splits, and Reverse Splits
Quantity and price adjustment will be made to reflect the market equivalent.
Note: Notwithstanding the foregoing, PSPL reserves the right to close all open positions relating to the underlying security before the ex-date for
any corporate action not mentioned above.

In the event there is a combination of Corporate Actions (“CA-Cum All”), where it includes corporate actions other than above mentioned,
clients might not be able to enjoy the entitlement and may be required to close off all open positions before the ex-date.

Eg. ABC stock announces $0.05 dividend per share (which Phillip CFD originally caters for) & 1 for 10 rights issue at $0.60 (which Phillip CFD
originally does not cater for). Ex-date for both Corporate Actions is on 1st October 07.

Clients who are holding the above position would not be entitled to both the rights & dividends and would have to liquidate their positions before
ex-date.

4. Settlement Currency
All Phillip CFD contracts would be settled in the traded currencies. Client’s MYR ledger is not allowed to go into deficit. Should there be a deficit, MYR ledger will be forced converted into SGD. For USD and HKD, there will be NO
AUTO CONVERSION for USD and HKD should there be any margin deficit in these 2 currencies. Should there be any margin deficit in the respective ledger, clients should submit conversion request to avoid margin debit interest.

Exchanges - Settlement Currency
SGX - Singapore Dollars
KLSE / HKSE / US - Traded Currency

Counters Available
For the latest list of counters Phillip CFD issues, please visit our CFD website @ www.phillipcfd.com to download the counter list.

Placing Orders
Phillip CFD orders can be placed in a similar way as placing an ordinary share order. They can be placed through
POEMS online or through your Trading Representatives.

Mini CFDs – Trade BLUE CHIPS at half a lot
You may place long or short CFD order of 500 shares instead of 1 board lot for the following SGX Blue Chips.
Mini CFDs counters
1 City Dev 6 Keppel Corp
2 DBS 7 SGX
3 F&N 8 SIA
4 Great Eastern 9 UOB
5 Jardine C&C 10 Venture

Minimum Deposit
Investors are required to put up an initial deposit of S$3,000 before any trades can be initiated. Thereafter, the
maintenance margin will be 20% of your portfolio market value, marked to market daily.

Withdrawal
Margin Excess from cash deposit may be withdrawn.

Mode of Payment
_ Cash payment for your CFD trading account can be made at the Head Office’s cashier counter.
_ EPS (Electronic Payment for Shares): Please choose “Lump Sum” payment and initiate payments before 9 pm to
ensure that your CFD ledger is credited punctually before the next market day. Kindly inform your dealer/remisier that the EPS is meant for your CFD trading account.
_ Cheque should be crossed and made payable to “Phillip Securities Pte Ltd”. Please state your trading account number, name and contact number on the back of the cheque, and stating clearly that this payment is meant for
Phillip CFD.
_ Existing Phillip clients can initiate transfer from your stock & shares trading account to CFD account via online or through your dealer / remisier.
_ Telegraphic Transfer (TT): Please state your trading account number and name along with the telegraphic transfer. Kindly inform your dealer/remisier that the TT amount is meant for your CFD trading account.

Closure of Account
An administrative fee of up to S$1.07 (inclusive of GST) would be levied for account closure with credit balance
of S$1.00 or below.

Fees & Charges
_ Commission‪
Market Commission Minimum Commission
SGX 0.3% for contract value > S$12,000
0.5% for contract value X S$12,000
Above applies to non STI component stocks
*0.1% for Component Stocks (*Promo till 31 Jul 08)
S$22 / US$15 / HK$150
KLSE 0.6% (Settlement Currency in MYR) RM60 (Settlement Currency in MYR)
HKSE §0.35% (§Promo till 30 Jun 08) HK$150
NYSE / NASDAQ 0.25%* US$25*
An additional renewal commission will be applied on the 30th day closing price. GST on commission.
Upon renewal, the new contract value will be the last done price (on T+30) multiplied by the contract quantity.
* Commission will be calculated on per trade basis, no amalgamation will be performed.

Differences between CFD & Traditional Shares (Singapore Market)
CFD Traditional shares
Settlement period _ T+30 calendar days _ T+3 market days
Capital Outlay _ 20% _ 100% on T+3

“Short-sell”function Just a mouse click away Subjected to T+4 buy-in if you
shortsell
without buying
back on same day
Financing charges 5.5% p.a. (Long) N.A
4.0%* or 8.0% p.a. (Short)
(based on 100% of opening
contract value)

Share ownership No Yes
Commission 0.2% or 0.3% or 0.5% 0.28% - 0.5%
*Rates are subjected to change*

SGX clearing
& access fee N.A 0.0475%


Short A Stock in Singapore Stock Market Using CFD For Example

A client is bearish on ZZ (listed on SGX and non-STI component stock) and sells 4,000 shares (2 times leverage) at S$1.40 after borrowing from SBL. Alternatively, the client can deposit the S$2,800 and sell up to S$14,000 worth of CFD contract in counter ZZ at S$1.40.

Scenario 1: Positions are closed 10 days later @ S$1.30

Original Investment Short CFDS$2,800 Short StockS$2,800

Opening contract value (Day 1) S$14,000 S$5,600
Opening commission (incl GST) (S$44.94) (S$16.78)
Clearing & Access fees (incl GST) S$0 (S$2.85)
Borrowing Charge (S$30.68) (S$10.74)
Closing contract value (Day 10) (S$13,000) (S$5,200)
Handling fee (incl GST) S$0 (S$21.94)
Closing Commission (incl GST) (S$41.73) (S$15.58)
Clearing & Access fee (incl GST) S$0 (S$2.64)
Net Gain S$882.65 S$329.47


Scenario 1: Positions are closed 10 days later @ S$1.50 (with a loss)

Original Investment Short CFDS$2,800 Short StockS$2,800
Opening contract value (Day 1) S$14,000 S$5,600
Opening commission (incl GST) (S$44.94) (S$16.78)
Clearing & Access fees (incl GST) S$0 (S$2.85)
Borrowing Charge (S$30.68) (S$10.74)
Closing contract value (Day 10) (S$15,000) (S$6,000)
Handling fee (incl GST) S$0 (S$21.94)
Closing Commission (incl GST) (S$48.15) (S$17.98)
Clearing & Access fee (incl GST) S$0 (S$3.05)
Net Loss (S$1123.77) (S$473.34)

Source : www.phillipcfd.com