Not all CFD providers are created equal. In fact, there are many types of CFD providers in the market.

Exchange Traded Model: CFD providers who use an exchange-traded model offer CFDs that are listed on the ASX.

Direct Market Access: DMA CFD providers place your order into the market for the underlying asset; hence your price will be determined by the underlying market.

DMA CFD providers do not carry any market risk from the trade, so they will only offer CFDs on an asset if there is sufficient trading volume in the market.

Market Makers: CFD providers who are market makers provide their own prices for the underlying assets, such as shares, forex, and more, on which CFDs are traded. The price they offer may or may not differ significantly from the market price.

But what is the best? Market makers and DMA providers are quite similar in that they are both over-the-counter CFD providers. However, the main difference between them is transparency. DMA providers are much clearer about the breakdown of the cost of trading, and you know that your trades will be hedged in the market. I prefer DMA providers, or providers who offer both DMA and market made CFDs, as market makers may profit from their clients’ losses, and I’m uncomfortable trading with a provider whose business model makes profits from my losses.

The exchange-traded model is a different matter to consider, and may suit those who want to trade with higher regulation and security. However, as this style of CFD trading is only available in Australia, if you decide to trade from another country at some point you won’t be able to continue using the same model.

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