So, what is a CFD Broker then?
Many people are interested in the stock market and so always ask what is a CFD broker. A CFD broker can be either the broking firm or the individual broker that works within that firm. This post will focus on the individual.
What is a CFD broker and What is a stockbroker? They are pretty much the same question really as being a CFD broker mirrors what a stock broker does, the difference being CFD brokers use a leveraged product called CFDs. Cornhill Capital offers an execution only CFD service for clients, as an addition to our usual range of institutional level service in share dealing, access to IPO’s, secondary issues and other book builds. On the CFD side this includes up to the minute market information and institutional level research, technical analysis and other tools to assist you in your day to day CFD trading strategy.
We have relationships with a range of providers and resources to suit each individual investor’s requirement, from a basic CFD account to execute your own ideas, through to market maker execution and using your account to complement our other services. We have strong relationships with these providers so as well as dealing we can provide support.
In this way, we believe that our CFD clients have a key edge in the market, with a level of service that is rare to find in this space. It is worth bearing in mind that there is no cost involved in setting up an account, clients are charged only on execution. People can often have a misconception of what a stock broker does. A stock broker has many tasks during the day and there are many things to learn and understand about the markets and the many aspects to the role.
Julian Clark is a CFD broker on the desk at Cornhill Capital and we show here exactly how a typical day pans out for him. The desk goes to Julian when clients need to trade products via a CFD.
“I am always conscious that my clients need interaction with the trading floor as market events are time sensitive and we understand that most are not sitting at a price screen all day or watching Bloomberg news 24/7 because they have their own lives to get on with. Typically, I speak to most of my CFD clients at least once every day and there is always some change or event to talk about. The lower costs and leveraged nature of a CFD account lends itself to shorter term trading, so a higher level of contact with clients is important, in particular, during times of volatility. The experience of the Cornhill team provides clients with a broad level of understanding on what makes the markets move however our clients are achieving exposure to them. Coming from a trading background this access is what I would find useful to plug into if I was trading actively myself”.
We have put together a brief synopsis of a typical day working as an equities and CFD broker at Cornhill so hopefully this will answer the question "What is a CFD Broker"
07:15 - Start reading through the latest market info and potential movement regarding overnight events.
07:45 - All clients are sent details on news or trading updates in relation to all individual stocks held through Cornhill. This is an important part of what we do as markets can obviously move quickly.
07:50 - A client emails in, looking to sell a stock before the open, we put this order into the opening auction with a market maker. Most customers aren’t aware that this can be done through a CFD as well as a traditional stockbroking firm, but it is possible in particular for orders in size, we can see how market makers are positioned in a stock and leave an order with a specific market maker if needed.
08.00 - Team meeting to discuss overnight developments including the Dow and Asian markets and how this could affect the London open. We also discussed the significant movers in the equity markets for yesterday as they affected some of our clients open positions.
09.30 - A client calls in as the trading platform that our partners provide has frozen and he has positions in play – A quick call and the Institutional support team at our platform partner swings into action and within a minute, the problem is solved.
10:00 - We receive a call from a client looking for research on the mining sector that has rallied this morning. We send out yesterday’s research note from Credit Suisse on this. We always help our clients with market info and we have access to tier 1 institutional reports.
10.20 - Two of my team members are in a meeting with a new client so I cover the desk, and the phones are ringing constantly as is always the way when I am covering 3 phones! This is because the banking sector is in meltdown as Deutsche Bank shares have fallen again, and now down 90% from its peak in 2008 and 28% in 3 weeks, European banking stocks affected, being off 5% on average. This means that open positions have to be dealt with. I have two clients calling in and they are short, and happy. One client called in and he is long so not as happy as he normally is, however she is professional and understands that these are the risks when dealing in the markets. She decides to hold on to his position. The 2 clients that are short are no longer in fact they have reversed their previous trades and gone long as they think the sector is now oversold.
10.30 - Our finance team email me as one of my client’s needs to increase funds in his account to continue holding his positions. I call the clients and he was aware this was the case and goes online to update the account. My desk receives all client correspondence that comes direct from their platform provider so we can fill in the gaps and make sure clients are properly informed of any developments with regard to their accounts.
12:00 - A holder of an advisory stocks and shares account and execution only CFD account calls in. He is worried that the market is overvalued and is looking to hedge. One of the team talks him through the instruments that are available to him. These will include ETF positions and the most suitable trackers for what the client is looking for, but also options strategies, index and FX hedging in his CFD account. FX hedging and options in FX have been particularly of interest to clients since the Brexit decision, especially international customers with UK based exposure worried about the subsequent sterling devaluation and the best approach to hedge against this. I was a GBP/USD futures trader in the 2008 crisis and so well positioned to help in this case.
14:00 - A client is locked out of their online CFD account and is unable to trade, he wants to go long on Barclays. On receiving the call to help, we execute his order, update on price movements and unlock the account, this is a rare event and this takes less than one minute for us to do as we have institutional access, so no waiting!.
14.15 - US is nearly open and the news is that the Non-Farm Payrolls have come in above expectations at 13:30, this means that the markets have started to turn and the FTSE 100 is now only down 35. With this news we may even end the day positive. The squawk box calls out the number at 13:30 beforehand this could have an effect on long positions so all clients holding relevant stocks are called/emailed with this info. Customers interested in US shares can call in for pre-market quotes and even trade before the market is officially open, especially on more liquid listings.
15.00 - An advisory client has heard that Cornhill are involved with an IPO that we are intermediary broker to. He indicates that he would be interested in applying and the amount. I am able to add his details to the order book that we are running for the issue.
16:45 - A FTSE 250 quoted business announces an accelerated book build with a major shareholder selling down its stake to the market. Clients who have a share dealing account and CFD account will give us orders to go into the book and can subsequently “give up” the shares to hold as a CFD position on margin once stock is allocation if required.
Then it is post market wind down and after I brave the tube home!
So I hope I have explained what is a CFD broker within a stockbroking firm. If you are interested in speaking about CFDs or equities broking in general please contact me on;
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