- Overview of IBKR issued Share CFDs
- IB Forex CFDs - Facts and Q&A
- Overview of ESMA CFD Rules Implementation at IBKR (UK) - Retail Investors Only
- Overview of Central Bank of Ireland CFD Rules Implementation for Retail Clients at IBIE
- TWS Account Window for Retail Clients of IBKR Ireland and Central Europe
Index CFDs - Facts and Q&A
The following article is intended to provide a general introduction to index-based Contracts for Differences (CFDs) issued by us.
For information on IBKR Share CFDs, please click here. For Forex CFDs click here.
Risk Warning
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
61% of retail investor accounts lose money when trading CFDs with us.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
ESMA Rules for CFDs (Retail Clients of IBKRs European entities, including so-called F segments)
The European Securities and Markets Authority (ESMA) has enacted new CFD rules effective 1st August 2018.
The rules include: 1) leverage limits on the opening of a CFD position; 2) a margin close out rule on a per account basis; and 3) negative balance protection on a per account basis.
The ESMA Decision is only applicable to retail clients. Professional clients are unaffected.
Please refer to the following articles for more detail:
ESMA CFD Rules Implementation at IBKR (UK) and IBKR LLC
ESMA CFD Rules Implementation at IBIE and IBCE
Introduction
Our Index CFDs are contracts which deliver the return of a market index. Said differently, the CFD is an agreement between the buyer (you) and us to exchange the difference between the current value of an index, and its value at a future time. If you hold a long position and the difference is positive, we pays you. If it is negative, you pay us.
Our Index CFDs are traded through your margin account, and you can therefore enter long as well as short leveraged positions.
| IBKR Index CFDs | Commissions | ||||
|---|---|---|---|---|---|
| Contract | IB Symbol | Per Trade | Min. Per Order | Currency | Multiplier* |
| US 500 | IBUS500 | 0.005% | 1.00 | USD | 1 |
| US 30 | IBUS30 | 0.005% | 1.00 | USD | 1 |
| US Tech 100 | IBUST100 | 0.010% | 1.00 | USD | 1 |
| UK 100 | IBGB100 | 0.005% | 1.00 | GBP | 1 |
| EURO 50 | IBEU50 | 0.010% | 1.00 | EUR | 1 |
| GERMANY 40 | IBDE40 | 0.005% | 1.00 | EUR | 1 |
| FRANCE 40 | IBFR40 | 0.010% | 1.00 | EUR | 1 |
| SPAIN 35 | IBES35 | 0.010% | 1.00 | EUR | 1 |
| NETHERLANDS 25 | IBNL25 | 0.010% | 1.00 | EUR | 1 |
| SWITZERLAND 20 | IBCH20 | 0.010% | 1.00 | CHF | 1 |
| JAPAN 225 | IBJP225 | 0.010% | 40.00 | JPY | 1 |
| HONG KONG 50 | IBHK50 | 0.010% | 10.00 | HKD | 1 |
| AUSTRALIA 200 | IBAU200 | 0.010% | 1.00 | AUD | 1 |
| *times index level | |||||
The price of the Index CFD is directly related to the price of the exchange-quoted related future. The price-movement of the Index CFD tracks the movement of the related future, although the price levels differ by an adjustment for interest and dividends (fair-value adjustment).
For example (actual quotes):
| 29-Jan-15 | IBDE 30 | DAX Mar'15 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Time | Bid | Ask | Spread | Change | Bid | Ask | Spread | Change | |
| 10:10:04 | 10706.69 | 10707.19 | 0.5 | 10710.00 | 10710.50 | 0.5 | |||
| 10:10:11 | 10704.19 | 10705.19 | 1 | -2.5 | 10707.50 | 10708.50 | 1 | -2.5 | |
| 10:10:19 | 10709.19 | 10709.69 | 0.5 | 5.0 | 10712.50 | 10713.00 | 0.5 | 5.0 | |
| 10:10:27 | 10710.19 | 10710.69 | 0.5 | 1 | 10713.50 | 10714.00 | 0.5 | 1 | |
| 10:10:33 | 10709.69 | 10710.69 | 1 | -0.5 | 10713 | 10714 | 1 | -0.5 | |
IIndex CFD Price Determination: As discussed, our Index CFDs track the related future, adjusted for fair value. The synthetic index level is very close to the cash index but may differ somewhat as explained below.
In the futures market fair value is the equilibrium price for a futures contract. It is the price at which an investor effectively pays the appropriate rate of interest and is compensated for the dividends he forgoes by holding the future rather than the underlying shares.
The fair value is determined by adjusting the cash index as follows, taking into account the time remaining to expiry:
Cash Index Value + Interest - Dividends = Future at Fair Value
To determine the value of the IBKR Index CFD, we reverse the process:
Actual Futures Price - Interest + Dividends = IBKR Index CFD Value
The result is not necessarily the same value as the cash index. This is because the starting point is the actual price of the future, and the future may trade above or below its fair value.
Having established the level for the synthetic index, the actual CFD quotes show spreads and ticks that reflect those of the underlying future. IB charges a commission rather than widening the spread, enabling a transparent comparison between the returns of the Index CFD and the related future.
Low Commissions and Financing Rates: Unlike other Index CFD providers IBKR charges a transparent commission, rather than widening the spread of the related future. Depending on the index, commission rates are only 0.005% - 0.01%. Overnight financing rates are just benchmark +/- 1.5%.
Transparent Quotes: Because IBKR does not widen the spread, the Index CFD quotes accurately represent the spreads and price movements of the related future, and there are no re-quotes. What you see is what you get.
Flexible Exposure to Major Markets: IBKR Index CFDs are available for the main US, European and Asia Pacific indices. They can be traded in lots as small as 1X the index level, a fraction of the size of the related futures. And unlike the related futures, they do not need to be rolled over. You can trade all European and US IBKR Index CFDs from 09:00 - 22:00 CET.
Margin Efficiency: IBKR Index CFDs are margined at the same low rates as the related future, adjusted for contract size (subject to a minimum of 5%). Retail clients are subject to regulatory minimum initial margins of 5% or 10% depending on the index. Please see ESMA CFD Rules Implementation at IBKR for additional detail and examples.
We also offer intraday margin rates on Index CFDs at a level consistent with that of the related futures contract. Intraday rates are generally set at 50% of the overnight rate and are offered during a time frame which begins at the start of liquid trading hours and ends 15 minutes before the liquid trading close. Retail clients are subject to the ESMA minimum margin requirements both intraday and overnight.
| IBKR Symbol | Liquid Hours | Total Hours* | Time Zone |
|---|---|---|---|
| IBUS500 | 09:30 - 16:00 | 18:00** - 17:00 | EST |
| IBUS30 | 09:30 - 16:00 | 18:00** - 17:00 | EST |
| IBUST100 | 09:30 - 16:00 | 18:00** - 17:00 | EST |
| IBGB100 | 08:00 - 16:30 | 07:00 - 21:00 | GMT |
| IBEU50 | 09:00 - 22:00 | 02:15 - 22:00 | CET |
| IBDE40 | 09:00 - 22:00 | 02:15 - 22:00 | CET |
| IBFR40 | 09:00 - 18:15 | 08:00 - 22:00 | CET |
| IBES35 | 09:00 - 17:35 | 08:00 - 20:00 | CET |
| IBNL25 | 09:00 - 17:30 | 08:00 - 22:00 | CET |
| IBCH20 | 09:00 - 17:27 | 08:00 - 22:00 | CET |
| IBJP225 | 09:00 - 15:00 | 07:00** - 06:00 | JST |
| IBHK50 | 09:30 - 16:00 | 17:15** - 16:30 | HKT |
| IBAU200 | 10:00 - 16:00 | 17:10** - 16:30 | EDT |
*Total Hours may be restricted to Liquid Hours during periods of extreme market volatility
**Previous day
Dividend Adjustment: Based on ordinary dividends for the constituents of each index. Dividends are accrued on the ex-date and settled T + 2.
Corporate Action Adjustments: None for the CFD. Corporate actions are reflected in the index level.
Trading Permissions: Same as for Share CFDs.
Market Data Permissions: Index CFD market data is free, but permission is required for system reasons.
Worked Trade Example (Professional Clients):
Opening the Position
You purchase 10 IBUS30 CFDs at $23,534.48 for USD 235,344.80, which you then hold for 5 days.
| IBUS30 Index CFDs – New Position | |
|---|---|
| Reference Underlying Price | 23,465 - 23,466 |
| CFDs Reference Price | 23,533.48 - 23,534.48 |
| Action | Buy |
| Quantity | 10 |
| Trade Value | USD 235,344.80 |
| Margin (variable, minimum 5%) | USD 15,393.00 |
| Interest tier Charged (on USD 235,344.80 over 5 days) | |||
|---|---|---|---|
| Flat Interest (BM + 1.5%) | USD 235,344.80 | 2.684% | (USD 87.73) |
Closing the Position
| Exit CFD Position | ||
|---|---|---|
| Profit Scenario | Loss Scenario | |
| Reference Underlying Price | 23,627 - 23,628 | 23,303 - 23,304 |
| CFDs Reference Price | 23,693.34 - 23,694.34 | 23,369.34 - 23,370.34 |
| Action | Sell | Sell |
| Quantity | 10 | 10 |
| Trade Value | USD 236,933.40 | USD 233,693.40 |
| Trade P&L | USD 1,588.60 | (USD 1,651.40) |
| Financing | (USD 87.73) | (USD 87.73) |
| Entry Commission 0.005% | (USD 11.77) | (USD 11.77) |
| Exit Commission 0.005% | (USD 11.85) | (USD 11.68) |
| Total P&L | USD 1,477.25 | (USD 1,762.58) |
CFD Resources
Below are some useful links with more detailed information on IBKR’s CFD offering:
The following video tutorial is also available:
How to Place a CFD Trade on the Trader Workstation
Frequently asked Questions
What Indices are available as CFDs?
The principal indices in the United States, Europe and Asia Pacific. Please see CFD Product Listings for more detail.
Do you have CFDs on commodities?
IBKR does not currently offer Commodity CFDs.
How do you determine your Index CFD quotes?
IBKR Index CFDs track the related future, adjusted for fair value. It is in effect a synthetic index level that is very close to the cash index but may differ somewhat as explained below.
In the futures market fair value is the equilibrium price for a futures contract. It is the price at which an investor effectively pays the appropriate rate of interest and is compensated for the dividends he forgoes by holding the future rather than the underlying shares.
The fair value is determined by adjusting the cash index as follows, taking into account the time remaining to expiry:
Cash Index Value + Interest - Dividends = Future at Fair Value
To determine the value of our Index CFD, we reverse the process:
Actual Futures Price - Interest + Dividends = our Index CFD Value
The result is not necessarily the same value as the cash index. This is because the starting point is the actual price of the future, and the future may trade above or below its fair value.
Having established the level for the synthetic index, the actual CFD quotes show spreads and ticks that reflect those of the underlying future. IBKR charges a commission rather than widening the spread, enabling a transparent comparison between the returns of the Index CFD and the related future.
How do you determine margins for Index CFDs?
The margins are the same as for the related future, adjusted for size, including lower rates intraday. Please refer to CFD Margin Requirements for more detail. Retail clients are subject to regulatory minimum initial margins of 5% or 10% depending on the index. Please see ESMA CFD Rules Implementation at IBKR for additional detail.
Are short Index CFDs subject to forced buy-in?
No. As the reference instrument is a future, the index CFD is not affected by stock loan availability.
How do you handle dividends and corporate actions?
The index level itself is adjusted for corporate actions, and no direct adjustments to the CFD are
necessary. Index CFDs are however adjusted for dividends as the underlying future is typically based on a price index. The only exception among the currently available IB Index CFDs is Germany 40 (IBDE40), which is based on a total return index.
For an overview, please see CFD Corporate Actions.
Can anyone trade our CFDs?
All clients can trade IBKR CFDs, except residents of the USA, Canada, Hong Kong, New Zealand and Israel. There are no exemptions based on investor type to the residency-based exclusions.
What do I need to do to start trading CFDs with IBKR?
You need to set up trading permission for CFDs in Client Portal and agree to the relevant trading disclosures. If your account is with IBKR (UK) or with IBKR LLC, IBKR will then set up a new account segment (identified with your existing account number plus the suffix “F”). Once the set-up is confirmed you can begin to trade. You do not need to fund the F-account separately, funds will be automatically transferred to meet CFD margin requirements from your main account.
If your account is with another IBKR entity, only the permission is required; an additional account segment is not necessary.
Are there any market data requirements?
The market data for IB Index CFDs is free, but you need to subscribe to it for system reasons. It is a global permission (like FX), so you only need to subscribe once. To do this, log into Client Portal and click the User menu (head and shoulders icon in the top right corner) followed by User Settings. Under Trading Platforms select the Configure (gear) icon next to Market Data Subscriptions. Click the Configure (gear) icon next to Current GFIS Subscriptions to review what other services you may be interested in. Alternatively, you can set up an Index CFD in your TWS quote monitor and click the “Market Data Subscription Manager” button that appears on the quote line.
How are my CFD trades and positions reflected in my statements?
If you are a client of IBKR (U.K.) or IBKR LLC, your CFD positions are held in a separate account segment identified by your primary account number with the suffix “F”. You can choose to view Activity Statements for the F-segment either separately or consolidated with your main account. You can make the choice in the statement window in Client Portal.
If you are a client of other IBKR entities, there is no separate segment. You can view your positions normally alongside your non-CFD positions.
Can I transfer in CFD positions from another broker?
IB does not currently have a facility for transferring Index CFD positions.
In what type of IBKR accounts can I trade CFDs e.g., Individual, Friends and Family,
Institutional, etc.?
All margin and cash accounts are eligible for CFD trading.
What are the maximum positions I can have in a specific Index CFD?
There is no pre-set limit for position size, but please be aware that trade-size restrictions apply to Index CFDs. Please see the table at the beginning of this document for more detail.
Can I trade CFDs over the phone?
No. In exceptional cases we may agree to process closing orders over the phone, but never opening orders.