What is the 'Bid'?

This is the price at which the trader can sell the share, unless the trader places an order to sell on the offer using DMA. The bid price indicates a buyer in the market that is willing to pay the price in question for the shares.

How are 'Dividends' treated?

As with standard shares, dividends are received on long equity CFD positions. Using CFDs, dividends are paid on the ex-dividend date rather than the dividend payment date, so there is no frustrating wait. Dividends must be paid by the holder of a short equity CFD contract.

What is Direct Market Access (DMA)?

DMA allows the user to place an order for a share wherever desired, even within the ‘spread’. For example, a trader without DMA can only buy a share at the offer price. With DMA, the trader can place an order on the book to buy at the current bid price or, if possible, within the spread. If the trader is filled on the order, a better price has been paid for the share than a trader without DMA who was forced to buy at market (on the offer).

What is LIBOR?

LIBOR is the London Inter-bank Offered Rate. This is the figure used when London banks lend between themselves, and is usually close to the Bank of England base-rate. It is also used to calculate the interest on overnight CFD financing.

What is Level 2 (L2)?

A live level 2 feed is effectively a snapshot of what is happening on the stock exchange to one particular share at the present time, in terms of demand for the share and whether there are more prospective buyers than sellers, and vice-versa. The ‘Bid’ volume and price is shown on the left, the ‘offer’ volume and price is shown on the right. Professional traders use this to evaluate supply and demand for a share, and therefore predict the likely next move of the share price. To simplify, if there are more prospective buyers than sellers for a share at one particular share price, one would reasonably expect the share price to rise.

What is Overnight Financing?

When a long CFD position is held overnight, interest must be paid by the holder of the position. However, when a short CFD position is held overnight, the holder theoretically receives interest. It is worth noting that, in times of low interest rates, holders of short positions may be required to pay a small amount of interest. The interest paid is based on LIBOR +/- a premium.

What is the Offer/Ask?

This is the price at which the trader can buy the share, unless the trader places an order to buy on the bid using DMA. The offer price indicates a seller in the market that is willing to sell the shares at the price in question.

What is 'Shorting' or 'Going Short'?

Shorting is the mirror image of buying an asset. If an asset is held short and the price of the asset falls, a profit will be made. Please see ‘Guide to CFDs’ for a numerical example.

The mechanics of selling a share or ‘going short’ theoretically involves borrowing an asset from one source, selling it to a third party and then buying it back at some point in the future (hopefully after the price has dropped) to return it to the initial holder.

What is a Spread?

The spread is the difference between the price that a trader can sell or buy an asset. This consists of the ‘bid’ and ‘offer’ prices.
would reasonably expect the share price to rise.

How is Stamp Duty treated?

At the current time, stamp duty must be paid when purchasing standard UK shares at a rate of 0.5%. However, stamp duty is not paid on CFD contracts.

What Tax implications do CFDs carry?

At the current time, profits from CFD trading are subject to capital gains tax. However, losses can be offset against CGT. You are advised to consult a tax expert on this matter, as Accendo Markets is not qualified to offer tax advice.