Guide To CFD Brokers In Singapore

Gone are the days where we were limited to trading a singular market, which often required a remisier to place a buy or sell order on our behalf. Today, with the proliferation of online brokerages, we are not only able to trade independently but also have access to a wide range of tradable markets and securities.

Among them, CFDs—short for contract for differences—have gained prominence among retail traders in Singapore. Beyond lowering the barriers to trading stocks with a lower capital requirement through leverage, most CFD brokers also offer access to the USD$6 trillion forex market—the largest financial market in the world.

What Is Contract For Difference (CFD) Trading?

Contract For Differences (CFDs) are marginable financial derivatives that can be used to speculate on price movements in either direction (i.e., long or short).

Unlike cash market securities, CFDs are not traded over market exchanges. Instead, they are only offered by CFD brokers as over-the-counter (OTC) instruments. You also do not own the underlying security when trading with CFDs. Rather, you only receive (or pay) the difference in price between the value of your contract when you open it and when you close it.

Another advantage of CFDs is that you only need to place a small margin—a collateral amount of the total value of the position—which typically could be between 5% and 25%, depending on the instrument. This allows you to gain more market exposure than your trading capital and amplify short-term price movements, which could magnify both your profits and losses.

Types Of CFD Brokers

While there are many factors that may differentiate one CFD broker from another, they can be broadly classified as either Direct Market Access (DMA) Brokers or Market Markers.

A DMA broker is one that offers 100% price transparency by providing traders with access to the underlying market without the use of a dealing desk. The broker acts as an intermediary to place the trade, with a focus on speed and order execution, in exchange for a commission fee.

Whereas, a market marker broker provides the price (bid-ask) quotes outside of the underlying market by being the market for the trader. It focuses on providing real-time liquidity to markets and may charge a spread on top of a commission fee.

The most common form of CFD brokers are typically market markers, which generally should meet the needs and requirements of most retail traders.

Read Also: Singapore Online Stock Brokerage Account Fees Comparison (2023 Edition)

What To Consider When Choosing A CFD Broker

Given the plethora of local and overseas CFD brokers, here are some considerations to take note of when choosing a CFD broker.

#1 Access To Tradable Markets And Securities

You should choose a CFD broker that offers access to a wide range of tradeable markets, such as stocks, indices, exchange-traded funds (ETFs), forex, commodities, and cryptocurrencies. The more available markets and securities, the greater the number of opportunistic trades that you could seize upon, even if you currently do not trade these markets.

#2 Cost Of Trading Fees

The cost of trading fees comprises the spread—the difference between the asking price and the bid price—and the commission fee. A broker that has competitive pricing would enable you to have lower trading fees, allowing you to keep more of your profits.

#3 Maximum Leverage Offered And Overnight Funding Fees

The use of CFDs means you will be using leverage when taking a position. A broker that offers high leverage (or has low margin requirements) would allow you to control a large position size with a small amount of capital. Generally, most CFD brokers in Singapore offer a maximum leverage of 20:1.

Furthermore, you should also consider the overnight financing fees for holding these positions beyond the day’s trading hours, as it could affect your overall trading costs. A broker that offers competitive financing charges would enable you to carry a position for longer without incurring heavy costs.

#4 Features And User Interface Of The Trading Platform

It’s important to ensure that the web or desktop trading platform offered by the broker is intuitive and meets your specific trading needs and requirements. Another aspect to note is the different types of platforms, such as MT4, MT5, or even a mobile app that the broker offers, which you can simultaneously use to monitor, place, and review your trades.

#5 MAS-Compliant Brokers

Lastly, it is important to ensure that you trade with regulated brokers for the credibility of trade executions and the safety of your trading funds. For Singapore investors, choosing MAS-regulated CFD brokers may offer a higher level of safety than using unregulated foreign brokers.

Read Also: Buying US Stocks In Singapore: Guide To Stock Trading Platforms And Brokerage Fees (2023)

Popular CFD Brokers In Singapore

Here are some of the popular MAS-regulated brokers in Singapore.

#1 City Index

City Index, established in 1983, is part of the Stone X Group and has a long-proven record of providing retail and institutional traders with trading services. It offers access to over 6,000 instruments ranging from equities to indices, forex, and commodities.

You can trade with City Index through various platforms, including its Web Trader platform, which utilises TradingView’s charting tools, MetaTrader 4 (MT4), and its mobile trading app. City Index also offers additional tools such as research reports, trade ideas, and webinars that could be a value-add for traders to stay in the know.

#2 CMC Markets Singapore

Launched in 1989, CMC Markets is one of the world’s leading CFD providers and has won many accolades in recognition of its service and technology. It offers access to over 9,000 CFD instruments across forex, indices, commodities, shares, treasuries, and cryptocurrencies.

You can trade with CMC Markets Singapore through its award-winning Next Generation online trading platform that combines institutional-grade features and security with lightning-fast execution. Alternatively, you can also use MT4 with CMC Markets or FX Active, which is designed for high-volume traders. CMC Markets also provides trading guides and webinars as part of its resources for traders.

#3 IG Market

Founded in 1974, IG Markets has established itself as a market leader in the CFD and FX sectors in the last decade, with over 300,000 clients worldwide. It offers access to over 13,000 instruments across a wide range of markets, such as forex, indices, commodities, shares, options, futures, bonds, interest rates, cryptocurrencies, and knock-outs.

You can trade IG Market on its award-winning trading platform or mobile trading app. In addition to MT4, it also offers ProRealTime, a web-based charting package that allows you to automate your trading and analysis. IG Market also offers access to Level 2 data and DMA trading.

IG Market also offers a wide selection of trading resources, from its IG Academy to webinars and IG Live–its in-house TV channel that provides daily market insights.

#4 Interactive Brokers Singapore

Started out as a market maker in 1977, Interactive Brokers (IBKR) offers its services to sophisticated investors, active traders, and institutions in over 150 market destinations worldwide. Its CFD platform offers access to over 8,500 shares globally, in addition to the forex and indices markets.

IBKR also offers access to DMA for its forex CFDs. You can trade with IBKR using its flagship desktop platform – Trader Workstation (TWS) – which is designed for active traders and investors or the IBKR mobile, which is available on iOS and Android. On the other hand, if you trade more forex CFDs, you could also consider the FXTrader, which has a more optimised trading interface to trade the FX market.

IBKR also provides a wealth of trading resources for its traders under the IBKRCampus, where you can go through free online courses on trading stocks, futures, options, bonds, and even basic economic concepts.

#5 Oanda

Founded in 1996, Oanda may be one of the youngest CFD brokers, but it has established itself as one of the leading brokers in recent years. It offers access to CFD instruments in over 70 forex pairs, 18 popular indices, 10 commodities, popular cryptocurrencies like bitcoin, ether, and Litecoin, and US Treasuries.

You can trade with Oanda with its browser-based platform, MT4 – which comes with 28 premium indicators; its mobile app – available on both iOS and Android, or integrate your Oanda account with TradingView. Oanda also has trading articles as learning resources.

#6 Phillip CFD

Phillip CFD, a member of the PhillipCapital, was established in 2003. It offers access to over 5,000 CFD instruments across 8 markets, such as equities, Singapore DMA, world indices, commodities, and FX.

You can trade with Phillip CFD on the POEMS 2.0 or the POEMS Pro, both of which allow you to trade the cash market and the CFDs on one platform. Alternatively, you could also consider the POEMS CFD MT5 platform for added features like one-click trading or the POEMS mobile 3, which is available on both iOS and Android.

Phillip CFD provides regular educational content and technical analysis ideas that could be helpful for traders. Additionally, it also provides research tools like the FX Swap Heat Map and the Phillip CFD Top 10 Counters that could serve as sentiment indicators as part of its trading resources.

Read Also: Step By Step Guide To Opening A Brokerage Account With POEMS

#7 Saxo Capital Markets

Founded in 2006, Saxo Capital Markets is a well-established securities broker with over 1,000,000 customers that offers CFD trading. It offers access to over 8,800 CFD instruments in single stocks, indices, forex, options, and bonds.

Unlike most CFD brokers, Saxo Capital has 5 types of accounts: Bronze, Silver, Gold, Platinum, and Diamond, which offer tiered commission rates and other trading-related benefits. To get on the higher-tier plans, you need to pay a monthly account fee that can be offset through trading credits.

You can trade with Saxo Capital with its award-winning trading platform, SaxoTraderGO, which provides extensive charting with over 50 technical indicators, integrated trade signals, and innovative risk-management tools. You can also use the platform on a tablet or smartphone.

Read Also: Step-By-Step Guide To Opening A Saxo Markets Trading Account In Singapore

#8 UOB Kay Hian

Backed by the UOB Group, UOB Kay Hian is another local brokerage firm that started offering CFD trading in Singapore in the last decade. It offers CFD trading on single stocks, ETFs, and global indices.

You can trade with UOB Kay Hian on its UTRADE Edge or UTRADE CFD Pro platforms, which offer features enabling you to track market activity with live quotes, monitor your margin requirements, and oversee your order book. UOB Kay Hian also provides daily market reports, including the CFD trading notes, and organises seminars for its clients.

Comparison Of CFD Brokers In Singapore For Stock Trading

We compare some of the CFD brokers in Singapore who provide single stock trading.

Read Also: Options Trading In Singapore: Complete Guide To Platforms And Brokerage Fees

Comparison Of CFD Brokers In Singapore For Forex Trading

We compare the minimum spreads on forex pairs offered by some of the popular CFD brokers in Singapore.

*It’s important to note that these are the minimum spreads offered by each broker and may widen based on the volatility at the time of trading.

What Are The Requirements For Opening A CFD Account In Singapore?

If you are over 18 years old, you can open a CFD account in Singapore. Additionally, it is a regulatory requirement for you to complete the Customer Knowledge Assessment (CKA). When opening a CFD account, the broker will provide the form for you to fill out and submit.

There are no restrictions on the number of CFD accounts that you open with the same broker (unless otherwise stated) or with other brokers.

Start With A Demo Account

If you are new to trading CFDs, you could begin by opening a demo account with a broker of your choice. Given that CFDs are leveraged products, it’s important to understand the risks of using these instruments before you start trading live.

Once you become confident in using the features and mechanics of CFDs, you could switch to a live account and start trading.

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