Home » Resources » 31+ Important Contract for Difference (CFD) Statistics & Facts (2021)

31+ Important Contract for Difference (CFD) Statistics & Facts (2021)

Published by Bowen Khong

Reviewed by Bowen Khong, ACCA

Contract for Difference, or CFD has a long history in the financial market. It’s been reported that the earliest retail CFD started in the UK back around the 1970s and 80s. 

Over here we have put together some of the most important statistics relating to CFD. 

Key Takeaways

  1. The largest UK provider has around 40% of the market, with a further half dozen firms making up another 30%, and a long tail of smaller firms make up the remaining 30% in 2016, according to FCA. 
  2. Over half (51%) of those who have been doing self-directed investing for less than three years use, or would consider using, a newer platform, versus four in ten (39%) of those investing for more than three years.
  3. The average income of retail consumers at one firm was between £15,000 and £30,000 a year, according to FCA.
  4. BritainThinks showed that Thinking it Through persona  are  38% of self-directed investors more  likely  to  have  studied  maths,  business  or economics related subjects at university and 28% more likely to have worked or currently work in finance than Having a Go persona.
  5. FX (10%) and Peer to Peer lending (13%) have the largest proportion of high risk, high return self-investors indicating a low risk level of 0 – 4. 
  6. Over four in ten (45%) of self-directed investors, particularly those investing in high-risk, high-return types tend not viewing ‘losing some money’ as a potential risk of investing. 
  7. New investors (< 3 years of investing) tend to on contemporary’s sources like YouTube, Podcasts, and Forums as compared to seasoned investors (>3 years of investing).
  8. On average, more than 75% of traders who trade CFD lose their money, and the figure is consistent across all reports from trading platforms and financial institutions. 
  9. FCA estimates a ban on CFD, futures, option, ETNs could reduce harm by £19m to £101m a year for retail investors.
  10. Retail client losses were just over $428 million gross (or $234 million net), in the week of 16–22 March 2020 (Covid period), according to ASIC.

CFD Online Platform Providers

  • On average, 279,000 retail client accounts traded CFDs each month in 2017.
  • An increase in the number of CFD providers  from 103 to 138 providers in Cyprus and from 117 to 143 providers in the UK between 2016 and 2017
  • The largest UK provider has around 40% of the market, with a further half dozen firms making up another 30%, and a long tail of smaller firms make up the remaining 30% in 2016
  • As of 2017 there are around 100 FCA-authorised specialist CFD providers with over 800,000 funded retail client accounts holding over £1.5bn in retail client money.
  • An increase in the number of retail clients’ trading accounts from EEA-based CFD and binary option providers was from 1,5 million in 2015 to approximately 2,2 million in 2017.
  • Over half (51%) of those who have been doing self-directed investing for less than three years use, or would consider using, a newer platform, versus four in ten (39%) of those investing for more than three years.

[Source: 1, 2, 3]

Trader Demographics

  • The average income of retail consumers at one firm was between £15,000 and £30,000 a year, according to FCA.

According to BritainThinks, a leading market research agency commissioned by FCA to conduct a campaign in understanding consumers who invest in high-risk, high-return investments. 

There are three self-investor archetypes that have been identified: 1. Having a go, 2. Thinking It Though, 3. The Gamble. 

  • Having a Go – tend to be motivated by a combination of functional (making money, working harder) and emotional factors (challenge, novelty).
  • Thinking it Through – are often more motivated by social factors, such as feeling like ‘an investor’, being able to prove their know-how and talking to others.
  • The Gambler – are usually more emotionally motivated by the thrill and excitement and are looking to ‘beat the game’ and ‘win’.
  • Survey showed that Thinking it Through  are  38% of self-directed investors more  likely  to  have  studied  maths,  business  or economics related subjects at university and 28% more likely to have worked or currently work in finance than Having a Go. 
  • Over four in ten (45%) of self-directed investors, particularly those investing in high-risk, high-return types tend not viewing ‘losing some money’ as a potential risk of investing – despite the presence of disclaimer warnings.
  • FX (10%) and Peer to Peer lending (13%) have the largest proportion of high risk, high return self-directed investors indicating a low risk level of 0 – 4. 
  • All high risk, high return assets have a greater proportion of self-directed investors who have less than 3  years of investing experience. 
  • New investors (< 3 years of investing) tend to on contemporary’s sources like YouTube, Podcasts, and Forums as compared to seasoned investors (>3 years of investing).

[Source: 1, 2]

How Much Does CFD Traders Actually Lose?

It is not a surprising fact that most people lose money trading CFD. But the question is, how much do they lose?

  • As reported by the Croatian NCA total client losses for the period from January to September 2016 was approximately EUR 1 017 900, while total retail client gains were approximately EUR 420 000.
  • According to the Luxembourgish NCA in September 2017 that from two LU-CSSF authorised providers providing CFDs the average losses per retail client are EUR 4 500 and approximately EUR 1 700.
  • In the UK, the retail consumers lost £268.4mn from trading over a 3-month period from August to October 2017.
  • Based on the statement of the Portuguese NCA  the associated losses for retail investors were EUR 66,8 million and EUR 47,7 million for the years 2016 and 2017 respectively.
  • In the week 16–22 March 2020, based on a sample of 12 Australian licensed CFD providers, retail client losses were just over $428 million gross (or $234 million net).
  • The Spanish NCA found that approximately 82% of retail clients have lost money overall in a 21-month period between early 2015 and late 2016.
  • The French NCA found that more than 89% of retail investors lost money overall over a 4-year period from 2009 to 2013.
  • According to the standardised risk warnings of firms, an estimated 78% of active retail client accounts were loss-making
  • According to the Irish NCA 75 % of retail clients trading CFDs suffered losses with the average loss amongst those clients being EUR 6 900 during 2013 and 2014.
  • The Italian NCA stated that in 2014-2015, 78% of the Italian retail clients of a specific CFD provider lost money investing in CFDs and 75 % lost money investing in rolling spot forex, with the average loss being EUR 2 800.
  • The Polish NCA reported that 79.28% of the clients lost money in 2016.
  • UK-FCA in 2014 suggested that 82% of retail clients lost money and that the average outcome was a loss of GBP 2 200 per retail client over a year.
  • The Norwegian NCA found that 82% of retail clients lost money with an average loss per client of EUR 29 000 between December 2014 and December 2015.

[Source: 1, 2, 3, 4, 5, 6

Regulation Changes Before and After

FCA 

Before:
 There was no limit on the leverage: Retail clients were being offered smaller minimum account sizes and order sizes combined with higher leverage, with some firms offering in excess of 200:1. At 200:1, clients are only required to post 0.5% of their total notional exposure (this is commonly known as initial margin).
Now:
Limit leverage to between 30:1 and 2:1 depending on the volatility of the underlying asset.Closure of customer’s position when their funds fall to 50% of the margin needed to maintain their open positions on their CFD account.Retail consumers are expected to save between £267 million and £451 million per year from the measures.

[Source: 1, 2

European Securities and Markets Authority Regulation

European Securities and Markets Authority decided to temporarily restrict contracts for differences in the Union on 22 May 2018.

Before:
NCAs have noted that leverage levels applied to CFDs across the Union range from 3:1 to 500:1
After:
The 50 % threshold set out in ESMA’s measure mitigates the risk of substantial loss by retail clients and is therefore proportionate.

[Source: 1]

Ban for the sale of crypto-derivatives to retail consumers

  • FCA estimates a ban on CFD, futures, option, ETNs could reduce harm by £19m to £101m a year for retail investors.
  • Bans for the sale of crypto-derivatives to retail consumers came into effect on 6 January 2021, according to FCA

[Source: 1, 2]

How Does Covid-19 Impact CFD Trading Activity

  • Three in ten (28%) adults who had investments at the end of February 2020 said they have paid closer attention to their value because of Covid-19, according to The FCA’s Financial Lives10.

According to Australian Securities and Investments Commission Changes in retail investor trading activity in securities markets in May 2020 (Covid period) 

  • Retail client losses were just over $428 million gross (or $234 million net), in the week of 16–22 March 2020, based on a sample of 12 Australian licensed CFD providers with 84% market share.  
  • ASIC OTC derivatives trade repository data indicates a significant increase in trading activity during the peak of COVID-19 volatility. 

[Source 12]

Bowen Khong
Bowen Khong
Bowen specialises in global online brokerage research. Head of research and founder of ForexToStocks.
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