ASX CFDs - will they be better?

[IFocus]

Went along to the ASX CFD presentation here in Perth to get up to speed on the offering. Looks like they will be using market makers to maintain liquidity etc for the new market. I wonder if that will translate through to similar issues that I remember in the options market where the makers seem to mess with the spread….

Any thoughts of other positives / negatives anyone

 

[monkey187]

Re: ASX CFD's - will they be better?

"Additional features include transparency, enhanced liquidity, risk management, regulatory and supervisory characteristics associated with normal exchange traded products."

I cant imagine how creating multiple market makers to provide liquidity is going to 'enchance liquidity' as opposed to the infinite liquidity provided by a single market maker in a sinthetic market.

I think there is a definate possibility that this will hurt liquidity and thus the spread.

I think the big benifit is the transparency provided.

If you are trading in a highly liquid stock - you can see the order book for buy/sell orders. This will allow you to perfectly calculate movements in the spread as you can see existing orders. For less liquid stocks there there is minmal activity - I can see similiar affects to the options market taking place.

I guess the other arguement tho is that exchange traded CFDs are limited to CFDs whith a high turnover (as opposed to options where there are thousands of different ones - reducing liquidity for individual options) - so hopefully this will not be so big of an issue.

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