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Exchange traded contracts for difference: Design, pricing, and effects


  • Data for this research were sourced from SIRCA ( We are grateful to Ken Chapman of the ASX, Tamas Szabo of IG Markets, Cesario Mateus, and Gonul Colak for valuable comments on an earlier draft, to seminar participants at Strathclyde University, Melbourne University, and University of Canterbury, and participants at the FMA European Conference (Turin, June 2009), the Infiniti Conference (Dublin, June 2009), and Finsia-MCFS Banking and Finance Conference (September 2009). We are also grateful for valuable comments from Yiuman Tse (the discussant at the 20th Annual Asia Pacific Futures Symposium) and other participants at the symposium. (This work was completed while Brown was at the University of Melbourne.) We are responsible for any remaining errors.


Contracts for Difference (CFDs) are a significant financial innovation in the design of futures contracts. Over-the-counter trading in the UK is significant and has created controversy, but there is no published academic research into the design, pricing, and effects of CFDs. This study analyzes CFD contract design and pricing. It uses a unique database of trades and quotes on exchange traded equity CFDs introduced by the Australian Securities Exchange to test theoretical pricing relationships, and draws out implications for successful design and trading arrangements for the introduction of new derivative contracts. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark

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