When trading any financial product, it is of the utmost importance that you thoroughly research the company you choose to deal with.
You should always consider counterparty risk and be sure the financial services provider has a proven track record of strength and security. Equally important, is to understand how they will treat your funds.
In a recent release, ASIC published new disclosure benchmarks CFDs. In this release, ASIC highlights its aim to improve disclosure and awareness regarding the risks of leveraged products. IG Markets intends to meet all seven of ASIC's proposed benchmarks to help set the standard for the rest of the industry.
CEO, Tamas Szabo, supports ASIC's new benchmarks and takes pride in IG Markets' maintained transparency and high industry standards:
'The release of the ASIC CFD disclosure benchmarks is a very positive step towards providing clarity to new and existing CFD investors about the dynamics of the product and also the strengths and weaknesses of different CFD offerings. The CFD product is not generic across providers and investors need to be clearly aware of the differences and risks to help them decide who better serves their needs.'
ASIC also suggested investors ask an array of questions when looking for a secure CFD provider. Here are our responses to them.
What is the financial position of the CFD provider?
IG Markets is part of IG Group Holdings plc, a fully-listed FTSE® 250 company (Ticker: IGG) that has been in business since 1974. This affords you the security, resources, global coverage and service of a publicly owned multinational organisation with 12 offices (including Melbourne and London) and more than 900 staff. We process around 5 million transactions a month for more than 130,000 clients, of which over 99% are online.
As of May 2011, IG Group was valued at over A$2.4 billion, which ranks the group just outside the FTSE®100. We have total assets of almost A$835 million, and our own cash of over A$193 million.
Find out more about us. Full information about the financial position of all IG Group businesses, including IG Markets, can be found at www.iggroup.co.uk.
What is the CFD provider's policy on the use of client money?
IG Markets is one of the few CFD providers in Australia to offer all the following protection for your funds and your net running unrealised profits:
| Client Money Protection | Offered by IG Markets |
|---|---|
| IG only uses its own funds for hedging |  |
| All of your funds are held in a regulated trust account |  |
| All of your funds are held in top-tier Australian bank | |
| Your net running unrealised profits are also held in a regulated trust account | |
| This exceeds contractual obligations | |
| This exceeds regulatory obligations | |
| IG Markets is regulated by ASIC | |
| IG Group is a listed company | |
How does the CFD provider determine the prices of CFDs they offer?
We determine the prices of our major CFD markets in the following ways:
| CFDs | How prices are determined |
|---|---|
| Shares | Reflect the best bid/offer available in the underlying market. |
| Indices | Reflect the underlying market price, plus the IG spread (trading charge). Cash indices are determined using the underlying futures price adjusted for fair value. |
| Forex pairs | Determined by taking up to 20 individual bank price feeds. We use the best bid and offer of this price feed and apply an IG spread. |
| Commodities | Reflect the underlying market price plus the IG spread. |
When processing CFD trades, does the CFD provider enter into a corresponding position in the market for the underlying asset?
When processing orders, IG Markets acts as the counterparty to all CFD trades. We aim to internally match client buy and sell trades, however IG Markets often participates in the underlying market to hedge client positions. Clients that opt to use our Direct Market Access (DMA) platform for share CFD trading will have all their orders matched in the underlying market. There is no extra charge for this; it is up to our clients how they chose to trade. The prices offered on each method of trading are the same.
Can the CFD provider change or re-quote the price after you have already placed your order?
Other than for Price Improvement, where we look to pass on favourable changes when the underlying market allows, prices you trade on are not changed by IG Markets. We do not re-quote and will always offer a two-way (bid and offer) price. So when you place an order, you can be assured the price will not move against you.
If there is little or no trading going on in the underlying market for an asset, can you still trade CFDs over that asset; and does the CFD provider let you trade CFDs even if the underlying market is closed?
Our major CFD markets can be traded at varying times, as detailed below:
| CFDs | When the market can be traded |
|---|---|
| Shares | Share CFDs can only be traded when the underlying equity market is open. |
| Indices | You can trade index CFDs when the underlying futures market is open. On a range of popular markets we make prices 24 hours a day. This allows you to enter or exit a position despite the underlying futures market being closed. |
| Forex pairs | You can trade forex CFDs 24 hours a day from 8am on Monday until 9am on Saturday. Prices match the underlying interbank market hours. |
| Commodities | Commodity CFDs can only be traded when the underlying futures market is open. |
Updated: 15/08/11