ASX CFD spreads and problems

[MichaelD]

Hi folks,

Long time no post. It's been very interesting observing the ASX CFD market startup (hello....hello....anybody in here....echo...echo), and particularly illuminating today with RIO (the ASX CFD code is RT).

Given the ASX promoted its product with promises of liquidity and tight spreads...


11:00 The RIO underlying Bid/Ask is 131.47/131.50. The RT spread at the exact same time is 125.00/134.50.

11:30 RIO Bid/Ask is 130.75/131.05. RT spread is 125.00/No Ask.

 

[Boggo]

Re: ASX CFD spread

Same flamin game with RIO instalments, I hold RIOIMU (MacQuarie warrant) and they have completely pulled the market, I could'nt sell them even if I wanted to.
Same nonsense with BHPIMX which I also hold, bid 3.49, ask 4.49.

Amazing

 

[Trembling Hand]

Re: ASX CFD spread

Same flamin game with RIO instalments, I hold RIOIMU (MacQuarie warrant) and they have completely pulled the market, I could'nt sell them even if I wanted to.
Same nonsense with BHPIMX which I also hold, bid 3.49, ask 4.49.

Amazing

Warrants. I think I remember them, they are for selling time decay aren’t they.
They are at the other end of the scale from uranium. They have a half life of a walk to the water cooler.

 

[glenn_r]

Re: ASX CFD spread

Yeah it makes you think Macquarie designed these new ASX CFD's, but really these instruments suck, they have a spread and a commission levied on them plus they can't be traded during the closing auction.

As you can see by their volumes they are a non event.

 

[RichKid]

Re: ASX CFD spread

Anyone following these spreads? A new lot of xt (exchange traded) CFD's listed this week, will be interesting to see the liquidity over the next few weeks before it quietens down over the x'mas holidays. I really hope these xtCFD's are all they were supposed to be, might take several months for the market to accommodate them- commsec is offering free brokerage til the end of December.

 

[MichaelD]

Re: ASX CFD spread

I took it upon myself to mention the absurd spread in RIO (RT) to the ASX, and lo and behold, I actually got a reply;

Dear Michael,

Thank you for the feedback.

The Designated Price Makers (DPMs) are still testing systems in 'fast stocks'. This is only the 1st week of the market and we expect pricing accuracy will improve. We understand the issue in Rio and are working on the DPMs to improve spread and consistency.

However please note other ASX CFDs where the spread and volume have been equal and even inside at times to underlying (eg ANZ, BHP).

Despite the promising sounding words, the spreads on the ASX share CFDs remain quite wide, and since there's essentially no traded volume, you're effectively limited to accepting the price spreads the various Market Makers offer.

Don't know about the currencies and indicies - haven't looked at them at all.

 

[Boggo]

Re: ASX CFD spread

Warrants. I think I remember them, they are for selling time decay aren’t they.
They are at the other end of the scale from uranium. They have a half life of a walk to the water cooler.

Giday trembling hand

I bought 1500 of those RIOIMU over the 30th and 31st of last month at an average cost of $14.81.
I sold 500 on 12th @ $43.31 and another 500 yesterday @ $40.15.

I still hold the last 500.

I am trying to calculate the cost of time decay, can you help me out as my calculator only goes up to ten places after the decimal point and the impact of time decay still has'nt appeared

Mike

 

[Trembling Hand]

Re: ASX CFD spread

Giday trembling hand

I bought 1500 of those RIOIMU over the 30th and 31st of last month at an average cost of $14.81.
I sold 500 on 12th @ $43.31 and another 500 yesterday @ $40.15.

I still hold the last 500.

I am trying to calculate the cost of time decay, can you help me out as my calculator only goes up to ten places after the decimal point and the impact of time decay still has'nt appeared

Mike

Nice one!! Very Nice indeed.

Yeah they are good when you get it right. No doubt about it. My problem I had with them is that all the not so hot to poor trades really brings the average down. And being on the other end of a market maker never fills me with a great amount of enthusiasm. I guess this is true of all instruments just that I got burnt a couple times to many when I was trading them.

But still some people make good $$ out of them. Well done.

 

[RichKid]

How are the xtCFD players finding the spreads now? This thread might be a good place to keep an eye on problems associated with the spreads and order execution.

There appear to be quite a few markets listed now ranging from Aussie stocks to Gold, FX and overseas indices like the Nikkei. How accurately do you find the spreads to be in relation to the underlying? Is there always a market or does it vary?

There has been some great feedback from members in this thread so far. Let's see if we can get an accurate picture of the market though compiling a log of traders' experiences. There might even be a few tips here and there that'll help us cope with those nasty market makers.

 

[Wysiwyg]

Re: ASX CFD spread

I took it upon myself to mention the absurd spread in RIO (RT) to the ASX, and lo and behold, I actually got a reply;

Dear Michael,

Thank you for the feedback.

The Designated Price Makers (DPMs) are still testing systems in 'fast stocks'. This is only the 1st week of the market and we expect pricing accuracy will improve. We understand the issue in Rio and are working on the DPMs to improve spread and consistency.

However please note other ASX CFDs where the spread and volume have been equal and even inside at times to underlying (eg ANZ, BHP).

Despite the promising sounding words, the spreads on the ASX share CFDs remain quite wide, and since there's essentially no traded volume, you're effectively limited to accepting the price spreads the various Market Makers offer.

Don't know about the currencies and indicies - haven't looked at them at all.

I notice some posters have said that short selling shares affect the market. To my knowledge ASX cfd's and Designated cfd providers (OTC) are the only way to short sell stocks and even then the list is limited.
Considering ASX cfd's are not liquid and Designated cfd providers (OTC) don't deal directly into the market, where is the short selling affect on share prices?

 

[Wysiwyg]

Re: ASX CFD spread

I notice some posters have said that short selling shares affect the market. To my knowledge ASX cfd's and Designated cfd providers (OTC) are the only way to short sell stocks and even then the list is limited.
Considering ASX cfd's are not liquid and Designated cfd providers (OTC) don't deal directly into the market, where is the short selling affect on share prices?

Maybe someone knows what effect Short selling shares via CFD DMA in Australia has on market prices? Major or minimal effect. Surely all the high rollers aren't enrolled with a CFD provider to access this market.

Like to know. Thanks.

 

[skyQuake]

Re: ASX CFD spread

Maybe someone knows what effect Short selling shares via CFD DMA in Australia has on market prices? Major or minimal effect. Surely all the high rollers aren't enrolled with a CFD provider to access this market.

Like to know. Thanks.

Minimal I would say.

To my knowledge ASX cfd's and Designated cfd providers (OTC) are the only way to short sell stocks and even then the list is limited.

You can short sell share normally without using CFDs too, the ban is only on naked selling.

 

[-Bevo-]

Re: ASX CFD spread

Maybe someone knows what effect Short selling shares via CFD DMA in Australia has on market prices? Major or minimal effect. Surely all the high rollers aren't enrolled with a CFD provider to access this market.

Like to know. Thanks.

Don't know the total effect on ASX, depends on how many people are shorting there just selling borrowed stock into the market creating selling pressure when they cover they buy back which creates buying pressure, when they ban short selling and everyone runs for the exit well its abit like a elevator with no safety brakes and someone cuts the cable.

 

[Wysiwyg]

Re: ASX CFD spread

Minimal I would say.

Yes this list from yesterday has relatively small turnover.
http://www.asx.com.au/data/Shortsell.txt

You can short sell share normally without using CFDs too, the ban is only on naked selling.

How skyquake?

Originally Posted by Bevo --
Don't know the total effect on ASX, depends on how many people are shorting there just selling borrowed stock into the market creating selling pressure when they cover they buy back which creates buying pressure, when they ban short selling and everyone runs for the exit well its abit like a elevator with no safety brakes and someone cuts the cable.

The list of shares available to sell Short is small but they weigh on the Index then that would spill over to the rest of the non shortable stocks when the Index is declining faster.

 

[skyQuake]

Just get stock borrow? Its just covered shorting. The way its always been done. Don't need CFDs to get it done. (the CFD providers get borrow from a fund or something and allow its clients to short the stocks, ASX MM's do the same) its just all covered short selling.

 

[Wysiwyg]

Just get stock borrow? Its just covered shorting. The way its always been done. Don't need CFDs to get it done. (the CFD providers get borrow from a fund or something and allow its clients to short the stocks, ASX MM's do the same) its just all covered short selling.

Okay could you tell at least one broker that I can Short stocks with that aren't CFD please?

 

[Wysiwyg]

I have Shorted stocks on the ASX through a CFD provider (NOT DMA) so they did not borrow the stocks to short sell. Am I right in saying this is naked short selling? This is the practice of non DMA CFD brokers (DMA covers a short sell) and how can it happen since uncovered short selling is banned?

 

[Trembling Hand]

I have Shorted stocks on the ASX through a CFD provider (NOT DMA) so they did not borrow the stocks to short sell. Am I right in saying this is naked short selling? This is the practice of non DMA CFD brokers (DMA covers a short sell) and how can it happen since uncovered short selling is banned?

No there is no guarantee that they even bothered to hedge your position. They are more than likely to hold your position on their books.

 

[nomore4s]

I have Shorted stocks on the ASX through a CFD provider (NOT DMA) so they did not borrow the stocks to short sell. Am I right in saying this is naked short selling? This is the practice of non DMA CFD brokers (DMA covers a short sell) and how can it happen since uncovered short selling is banned?

Non DMA CFD brokers wouldn't need to cover because as far as I know the orders don't go into the real market.

You can short with Macquaire Prime.

 

[Trembling Hand]

Non DMA CFD brokers wouldn't need to cover because as far as I know the orders don't go into the real market.

Yes they are not brokers passing on orders. They act more like an insurance business model. Where they take risk on of each individual 'policy' (trade)and they may re-insure (hedge)their overall exposure but they make money by costing their overall policies greater than there individual losses. If they passed on each and ever trade they wouldn't make any money. ie they don't give a stuff if you win on this trade or not as they know you will lose on average more than you will win.

For the doubters to the above statement there was no greater confirmation than back in 08 when the gov banned short selling, all sorts covered & naked, and you could still short with a few MM CFD providers. They were still taking short position although they couldn't hedge them directly.