CFD short position when Co. goes into administration?

[samgribbles]

Hi all,

If anyone has any experience with holding a CFD short position when a company goes into administration and ultimately gets delisted and is worth zero, could they please fill me in quickly?

Much appreciated.

Sam

 

[$20shoes]

Have you checked the PDS? Usually there is a generic clause that says as soon as a stock stops trading for whatever reason (including market announcements) the MM/broker has the right to cover their exposure and may require you to fund the entire position. That is, you'll likely need to pay out any outstanding exposure if they won't re-list for some time. Best to speak to your providor.

I don't know what happens in the event of a re-listing down the track, or whether a CFD holder is considered an unsecured creditor - doubt it.

Hi all,

If anyone has any experience with holding a CFD short position when a company goes into administration and ultimately gets delisted and is worth zero, could they please fill me in quickly?

Much appreciated.

Sam

 

[skc]

Have you checked the PDS? Usually there is a generic clause that says as soon as a stock stops trading for whatever reason (including market announcements) the MM/broker has the right to cover their exposure and may require you to fund the entire position. That is, you'll likely need to pay out any outstanding exposure if they won't re-list for some time. Best to speak to your providor.

I don't know what happens in the event of a re-listing down the track, or whether a CFD holder is considered an unsecured creditor - doubt it.

I thought the OP had a short position.

There is a generic clause indeed and you can possibly get a closing price of $0 from a reputable CFD provider. However, it is fair enough if they wait several months before giving you the money imo because administrators take time to decide when equity holders can write off their investments. When that happens and you don't get $0 from your provider, threaten to spread their bad name around.

Unfortunately this is not from personal opinion - haven't been that lucky...

Even if you are long, CFD holders are definitely not creditors to the company - there is no relationship what so ever. BTW regular shareholders are also not creditors... (despite what the judge to the Sons of Gwalia case like to think).

 

[$20shoes]

I thought the OP had a short position.

Even if you are long, CFD holders are definitely not creditors to the company - there is no relationship what so ever. BTW regular shareholders are also not creditors... (despite what the judge to the Sons
of Gwalia case like to think).

You are right. My logic is best suited to long positions. If your broker actually took receipt of stock to allow your short that would be one scenario ( but that scenario doesn't apply here).

However, assuming its just OTC CFD short, I don't truly know how a provider would deal with this - they may say the contract is only valid for listed companies so there is no pay out to the client.

would be interested to hear more on this if OP gets a response.


Yep on the creditors. Nothing for CFDs as its not the underlying stock you own.