The SFE (Sydney Futures Exchange), now owned by the ASX is at the back end of a new instrument named Exchange Traded CFDs. This idea is so good that there is speculation many other exchanges around the globe are seeking to implement a similar system. The SFE is set to launch the worlds first CFD market of this kind in late September and already has most of Australia’s largest market participants lining up for a piece of the action.
Basically the goal is to create a regulated market for trading CFDs, where individual trades are monitored by an authorized government body. The ultimate purpose for this type of market is perfect transparency. The simple workings of exchange traded CFDs are that the broker or provider is required to hedge every CFD transaction by actually purchasing the shares on the market its self. This will give perfect synchronization between the CFD traders and the price movements of the underlying exchange. Essentially, Exchange Traded CFDs aim to include all the desirable components we associate with stock exchanges along with all the desirable components associated with trading CFDs.