How Big is the CFD Market? A Comprehensive Guide

How Big is the CFD Market? A Comprehensive Guide

Reading Time: 14 Minutes

A Contract for Difference (CFD) is a form of trading in financial derivatives in which the difference between the
opening and closing prices of the market is settled in cash. CFDs do not involve the delivery of any actual
commodities or securities at any point. CFD traders can invest either on an increase or a decrease in the share price
(or any financial market traded).

Today, CFDs are popular in countries where they are available and are offered in a diverse range of asset classes.
CFDs that can be traded include share CFDs, Forex, commodities, Treasury Bonds, and cryptocurrencies. The
United Kingdom, Germany, Switzerland, Singapore, Spain, France, South Africa, Canada, New Zealand, Hong Kong,
Sweden, Norway, Italy, Thailand, Belgium, Denmark, and the Netherlands are among the many important trading
nations that permit the use of CFDs.


Although the identity of the person who first developed CFDs is up for debate, it is generally accepted that the history
of this type of financial instrument can be traced back to a financial services firm in London in the early 1990s. This
was for hedging against the risk of loss associated with trading equities on the London Stock Exchange.

CFDs were first made available to ordinary investors by brokers in the 1990s, during the same decade that witnessed
the growth of internet stocks. Traders were suddenly able to engage in stock, commodity, and index trading, which
was previously out of their reach. Following the dissemination of this information to traders, CFDs experienced a
meteoric rise in popularity and expanded rapidly.

CFD trading has seen a surge in short-term speculation. With leverage available, it makes trading CFDs more
affordable for the retail investor.


CFD Market in Australia

CFD trading is legal in Australia. The Australian Securities Investment Commission (ASIC) is one of the strictest
regulators in the world, which is good news for traders, meaning clients' investments are better protected. Therefore,
before you sign up for an account, if you desire to trade with a regulated broker, you have to ensure that the platform
satisfies the requirements for ASIC regulation in Australia.

CFD trading was the driving force behind a surge in market turnover that was one hundred per cent higher than in
2021, and it is predicted that this trend will continue (Roy Morgan, 2021) .

The Crypto Craze:

Trading cryptocurrencies using CFDs has become increasingly popular due to the volatile price action of the
cryptocurrency markets. Numerous ways to trade the crypto market exist, making it a flexible alternative to the Forex
market and other financial markets. Nonetheless, it is essential to be aware of the charges associated with trading
these instruments. A notable CFD provider with headquarters in Australia is FP Markets which offers crypto CFDs.

CFD Market in Cyprus

A respectable Cyprus CFD broker offers Cypriot traders, as well as investors worldwide, access to a wide range of
financial markets, including CFDs on stocks, indices, currency, commodities, Exchange Traded Funds (ETFs),
cryptocurrency trading, and more.

Many traders globally favor trading with CFDs because of leverage. The investor can place a larger position with a
small initial outlay, which means you can potentially make a higher profit. Nevertheless, equally, potential losses may
also be high if a CFD trade moves unfavorably.

Trading CFDs are normally for more experienced traders. Beginners need to understand how CFDs work before
venturing into the market. The majority of traders can use Cyprus CFD brokers to hedge against other financial
instruments in their investment portfolios, as well as for speculation purposes, without owning the financial asset. When selecting a CFD broker in Cyprus, it is critical to seek a provider subject to a high level of regulatory control.
Unregulated Cyprus CFD brokers are considered less secure, thus offering less protection of client funds.

Always verify your CFD broker in Cyprus is fully regulated. Check whether the Cyprus CFD brokers have a current
license from Cyprus Securities and Exchange Commission (CySEC). To determine whether they are legitimate
businesses permitted to offer CFD financial instruments to CFD traders, ensure they operate as a fully regulated
broker. Finally, enquire whether they have an extensive collection of instructional resources in their library. Most
Cyprus CFD brokers provide clients with an abundance of trading tools, market research, and an updated economic

CFD Market in the United Kingdom

CFD trading is legal in the U.K. Its popularity has grown exponentially in recent years. CFDs in the U.K. can be traded
on virtually any asset, including individual stocks, indexes, commodities, and foreign currencies.

A CFD, a financial derivative product, pays the difference in settlement price between the opening and closure of a
trade. CFDs are popular among traders in foreign exchange and commodities because they offer a tax-efficient (U.K.)
way to speculate in the financial markets. You can speculate on the rising or falling prices of rapidly moving global
financial markets.

Do traders pay tax in the U.K.?

You will owe taxes on any earnings greater than the tax-free Personal Allowance. You'll have to register as a self-
employed person by declaring your income to HMRC. It is the responsibility of the individual to know local tax

Spread betting and CFDs are both popular in the U.K. and can sometimes be confused; the key difference between
spread betting and CFD trading is how they are taxed. Spread bets are generally free from capital gains tax, while
profits from CFDs can be offset against losses for tax purposes, though any gains are typically taxable earnings.
Because you are not the owner of the underlying assets traded you are, however, exempt from paying stamp duty for
either product.

CFD Market in the United States of America

Can U.S. citizens trade CFDs?

CFDs are Illegal in the U.S. because they are over-the-counter (OTC) leveraged products, meaning they are not
traded on authorised exchanges. It is against the law for citizens of the U.S. to open CFD accounts to engage in local
or international trade of CFDs. This violates regulations set out by the Commodity Futures Trading Commission
(CFTC), and the Securities and Exchange Commission (SEC).

CFD Regulation in Australia

Trading in CFDs is permitted in Australia. Brokerages are monitored by one of the most stringent regulatory agencies
globally: the Australian Securities and Investment Commission (ASIC).According to the ASIC, it's possible to look up brokers or companies to see if they are banned or disqualified from
trading. Navigate to the homepage of the ASIC
website and click on the third option (For Consumers). You will then see a number of options, Banned and
Disqualified being one choice.


  • Navigate to the banned and disqualified register.
  • Select which type of company you want to check; we will search Organisation & Business names for this
  • Type the name in the box below, and select Go.
  • Choose the company you wish to check, and more information will be displayed about your selected


ASIC registration means clients' investments are better protected. Check the trading platform's (broker) regulatory
status in Australia before opening an account and employing the services of any CFD broker.

Tax on trading in Australia?

If you pay less tax on your assets, you'll be able to achieve your financial objectives much quicker.

How investment income is taxed?

You are required to report any income you have received from investments on your tax return. For example, this
encompasses the money you make from:


  • Interest
  • Dividends
  • Rental income
  • Managed funds distributions
  • Capital gains from property, shares, and cryptocurrencies


You pay tax on investment income at your marginal tax rate.

CFD Regulations in Cyprus

The Cyprus Securities and Exchange Commission (CySEC) represents the institution overseeing the country's
financial sector. CySEC's financial regulations and actions align with the Markets in Financial Instruments Directive
(MiFID) financial harmonisation statute. This is a requirement because Cyprus is a member state of the European

To check a company's status with CySEC, consider visiting CySEC: :


  • Navigate to Regulated Entities on the top menu.
  • Click on the drop-down menu, and Investment Firms will be displayed.
  • Choose the first option, and you will be presented with two choices. Search the company's name in the box,
    or select the first letter of the broker you wish to check on the selection of letters displayed.
  • A list of all companies beginning with that letter will be displayed with pending actions against them, which
    are shown in red. The information provided is as follows: licensed number, licensed date, company
    registration number, telephone, and email address.


A wealth of information is also available on the CySEC website: warnings about unregistered companies, public
information, investor protection, and much more.

A regulated broker should have a Money Laundering Reporting Officer (MLSO) to keep your CySEC anti-money
laundering compliance officers (AMLCO) certification current. Every individual must complete 10 hours of Continuous
Professional Development (CPD). This must be completed annually by attending seminars pertinent to their field.

The government of Cyprus established its country as a tax haven around 1989, specifically targeting Russian
oligarchs and Eastern Europeans and companies. The country's low flat corporate tax rate, strict privacy laws, and
geographic desirability are due to its proximity to Europe and Russia.

However, Cyprus is no longer regarded as a tax haven. The Organisation for Economic Cooperation and
Development (OECD) rated Cyprus the same as the U.S., Germany, and the U.K. Although, Cyprus is still
considered a low tax country, operating within E.U. guidelines.

CFD Regulation in the United Kingdom

U.K. CFDs are generally regulated by the U.K.'s Financial Conduct Authority (FCA), as CFDs are considered financial
instruments. You can search the official FCA website here:

The FCA is tasked with regulating the financial services industry and possesses rule-making, investigation, and
enforcement authorities. In addition to these responsibilities, it promotes healthy competition and ensures that major
markets function as intended. Customers are more likely to trust a business if regulated/authorised by the FCA. It
assures clients that the company follows the FCA's stringent guidelines. Therefore, consumers should not need to
conduct more research before choosing a broker, once registration is confirmed. Any firm engaging in activities
outlined in the Regulated Activities Order 2001 or the Payment Services Regulations 2017 should be licensed (or
registered) with the FCA.

The FCA's handbook lists at least 8 principles of business by which the watchdog expects all regulated companies to

  1. Integrity.
    Integrity is essential to the operation of any company.
  2. Relations with regulators.
    A company must engage with the authorities that oversee it openly and cooperatively.
  3. Management and control.
    A Company must take reasonable care to organise and control its affairs responsibly and effectively.
  4. Financial prudence.
    A company must keep sufficient financial resources.
  5. Market conduct.
    A firm has the obligation to maintain acceptable ethical standards in the market in which it operates.
  6. Customers' interests.
    A business needs to carefully consider its clientele's needs and deal with them in a just manner.
  7. Communication with clients.
    A company is required to provide appropriate consideration to the information needs of its customers: provide
    responsive customer service and present information to those customers in an understandable, objective, and
    precise way.
  8. Conflicts of interest.
    It is regrettable that conflicts of interest sometimes occur, but when they do they need to be resolved as quickly as

CFD Regulation in the United States of America

CFDs are prohibited in the U.S. because they are over-the-counter (OTC) financial products, which indicates that
they are not traded on authorised exchanges. In addition, to the prospect of greater losses, the following authorities
are concerned about using leverage—the Commission For Futures Trading (CFTC) and the Securities and Exchange
Commission (SEC).

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