Learn about CFDs
- Getting Started
- Trading Stocks on Margin
- Basic CFD Trade Mechanisms
- A Closer Look at CFD Trade Orders
- The Mechanics of a Market Maker CFD Trade
- The Mechanics of an Exchange Routed Trade
The Mechanics of a Market Maker CFD Trade
In this edition, we walk through a the easiest type of CFD trade – where the CFD provider is acting as Market Maker.
Trading a CFD is usually quite simple – a matter of selecting a stock, entering an amount and clicking Buy or Sell. But there are some significant differences you may need to be aware of, depending on whether your CFD provider is acting as the Market Maker for the CFD you are trading or if the trade is routed to an exchange.
In this edition, we will show how simple a CFD trade can be when your CFD provider is the Market Maker. Of course the exact mechanics of a CFD trade is dependent on the CFD provider and the trading platform, but we will take a walk through making a CFD trade using the SaxoTrader trading platform to give you an idea of the basic concepts.
Market Maker CFDs
When your CFD provider is the Market Maker, you buy and sell the CFD directly from your provider and they are in turn hedging their net CFD exposure on the market. This is faster, easier and more convenient for you: Market Maker CFDs have the great advantage that they are traded directly on a live tradable price (up to a certain trade volume). So if the price is shown in green, your trade will be filled directly at the price displayed:
Out of over 4,100 stocks available as CFDs from the 22 stock exchanges we support, we are currently the market maker for around 500 of the most popular. So if you are trading major "blue-chip" companies, we are likely to be the market maker.
Trading a Market Maker CFD
Trading a Market Maker CFD is trading at its easiest: It is a matter of selecting the stock, entering the number of shares and clicking Buy or Sell.
If you have installed our demo SaxoTrader trading platform, why don't you open it up and try this out yourself.
In SaxoTrader, you trade CFDs through the CFD Trade Module. If you don't have this open, open it from the Trading > CFDs > CFD Trade menu.
When the price is green, you buy and sell directly at the price displayed (all trades confirmed immediately).
Yellow Indicative Prices
For some Market Maker CFDs trades it is not possible to offer a firm tradable price (for example for trades with large share volumes and in unusual market conditions); instead, a yellow indicative price is shown. The trade is then treated as an "exchange-routed trade" which will be described in the next edition of this educational series.