Many people criticize Contract For Difference (CFD) trading and even consider it illegal. The fact is, while CFD trading is prohibited in a small number of countries, it is legal in most countries and regions. In other words, except in countries explicitly prohibiting it, CFD trading is generally considered legal.
Firstly, let's briefly introduce the concept, origin, and underlying assets of CFD trading.
CFD, or Contract For Difference, is a financial derivative that emerged in the 1990s in London, UK. It does not represent actual assets but is a trading contract based on the price difference of assets, allowing individuals to profit from the difference in prices from the contract's initiation to its termination.
Initially used primarily for stock trading, CFD trading has expanded to include forex,bullion, commodities and indices.
Returning to the legality of CFD trading, currently, among the major countries worldwide, the United States prohibits CFD trading, and Brazil also explicitly prohibits it. However, in many other countries, CFD trading is allowed, including the United Kingdom (where CFDs originated), Australia, Germany, Switzerland, Singapore, Spain, France, South Africa, Canada, New Zealand, Sweden, Norway, Italy, Thailand, Belgium, Denmark, and the Netherlands, among others.
Let's provide a bit more detail on CFD regulation in Australia. The regulatory authority is ASIC (Australian Securities and Investments Commission). ASIC's issued product intervention orders limit the leverage provided by brokers for different types of assets and establish clear rules for negative balance protection and standardized margin closeout. These measures protect Australian investors from significant investment losses.
In conclusion, CFD trading is entirely legal, and investors can trade with confidence. It's essential to focus on the investment itself and be responsible for one's own investments.
