2017 has seen a major shift in CFD broker regulations, placing emphasis on user security. We at Brokerchooser have long argued for prioritizing security over price when selecting the best CFD broker.
In our 2017 review, we unveil the best CFD brokers and also provide a CFD broker 101 for investors.
Best CFD brokers in 2017
The criteria for being listed as one of the best CFD broker at Brokerchooser includes:
CFDs are in the offered products (duh), but not necessarily only CFDs,
Robust security provided by a bank or presence on a stock exchange,
Willingness to comply and adapt to changing EU regulation,
Serving clients through STP/ECN business model (see explanation later).
Please note that we do not prioritize based on price. This might seem odd, but we are convinced that having a secure broker pays off in the long run. Security comes at higher prices, but if you do not want to gamble we recommend considering secure brokers only.
Top picks for the best CFD brokers
In our primary recommendations we listed brokers we tested thoroughly, e.g. we have a live account and tested trading with real money. Additionally, we see security as the most important factor in 2017, so the best CFD brokers must be either listed on a stock exchange or be part of a banking group.
Note that our list is not in preferential order as finding the best CFD broker is more about finding the best tool for a task than finding a silver bullet.
Recommended if you want low fees and can deal with a complicated trading platform.
Interactive Brokers is one of the biggest US based discount brokers. They are often overlooked when thinking about CFDs, but they do offer them as well.
Interactive has very competitive trading and margin fees. They provide access to almost all of the biggest financial markets around the world. Its CFD product range varies from indices to single stock CFDs. Additionally, it offers stocks and the more sophisticated options and futures. If you prefer to invest in funds, Interactive can handle that as well. The customer service is helpful and they speak English, German, French, Italian, Spanish and Russian.
Competitive fees mean that some compromise had to be made, which is on the user experience side. The platform is rather basic and requires some practice, but provides many trading opportunities and order types. The company offers several independent research reports for additional fees.
Recommended for traders who want to use leverage via CFDs and spread betting.
IG is primarily a CFD brokerage company, considered to be the biggest in the UK, and also a market leader internationally.
They offer thousands of CFDs for equities, bonds, forex and commodity underlying. IG started to expand its product portfolio towards more traditional products by providing real equity (not CFD) trading for citizens of certain countries (e.g. UK).
If you already understand CFD trading, IG’s trading platform is simple and user-friendly. Its mobile app has a good design and is easy to use. The customer service is helpful, but they really try to push you to place funds into your account.
Recommended if you want CFDs, stocks, forex and derivatives all at one place on a well-designed platform.
Saxo is a Danish investment bank focusing on retail clients across Europe. They provide services to several other brokers as a white label derivative platform (e.g. TD International also uses Saxo for derivatives).
As a plus, Saxo has relatively competitive prices, although not the cheapest on the market. It also has a proprietary research team constantly giving trading ideas through their newsletter and blog.
Unfortunately, they require a 10,000 USD minimum initial investment to open an account. Their sales team can also be pushy when it comes to account opening, funding accounts, etc.
Recommended if you want to have a one stop shop for CFDs and almost all other investment products.
Swissquote is the leading Swiss online broker with a banking background.
You can also trade FX and CFDs, and they offer great customer service. They have a wide range of investment products (e.g. online trading opportunity of corporate bonds). Swissquote also provides investment ideas based on investment themes (similar to motifinvesting.com in the US). Its customer service is helpful and available in English, German and French.
Swissquote provides CFD trading only for 20 indices and commodities through a separate platform. E.g. you need one account for stocks, ETFs, funds, bonds and another for CFD and FX. They are not the cheapest, but margins and fees are openly communicated.
Great CFD brokers, not part of a banking group or listed on exchanges
Although they do not meet our security criteria, we recommend three additional brokers offering excellent service. These platforms are from successful fintech companies which specialise in either social trading (eToro) or competitive FX trading (Oanda & Degiro).
Recommended for traders interested in social trading, e.g. following others.
Etoro is an Israeli CFD brokerage firm established in 2006 with a trading platform that is simple and easy-to-use. They have two legal entities: one serves UK clients and is regulated by the FCA; the other is registered in Cyprus and regulated by the Cypriot watchdog, CySEC providing service for non-UK clients.
eToro has an enjoyable web and mobile platform that is clear even for beginners. Their social trading feature lets you follow other traders and automatically copy their trading strategy. You can also invest in thematic strategies (CopyFunds) like Warren Buffett’s public portfolio or a portfolio of the biggest tech companies, which is a superb feature for beginners. The account opening process is seamless and quick: you can trade with your account within a day.
eToro is not the cheapest CFD provider. Its nice social trading features come with a relatively high spread and overnight fees, but at least there are no extra trading costs. The company provides broker recommendations and hedge fund manager sentiment index for some popular stocks, but deeper research is missing in all investment categories. A desktop trading platform is also missing, and customer service could only answer very general questions.
Recommended for traders with a forex focus but want to trade CFDs as well.
Oanda is a US based online broker that provides forex, index and commodity CFD trading. In Europe, it is regulated by the FCA. It is neither listed nor has a banking background, but it is considered a successful fintech company.
Oanda has very competitive forex spreads and does not apply trading commissions. It also provides powerful tools for technical analysis and charting. Opening an account is quick and easy, and its mobile platform is well-designed and user-friendly.
Oanda’s customer service is not always helpful and communication is sometimes misleading. The web platform is hard to find and is only available after opening a sub-account. Fundamental and macro researches are not provided. Money withdrawal is quite pricey (20-35 EUR) if you do it via bank transfer.
Recommend for price sensitive equity and option traders focusing on Europe and the US.
Degiro is a Dutch discount broker that was established in 2012 and has been on the up since. All accounts up to EUR 20k are secured by the Dutch investor protection scheme.
Their trading platform is easy-to-use even for beginners, and they offer a wide range of products. Their US and European trading fees are very competitive for equities and options. Degiro provides access to almost all of the world’s biggest financial markets. Products range from CFDs and stocks to the more sophisticated options and futures. The company’s customer service is helpful, and the account opening process is fast and straightforward. You don’t need to have a minimum balance.
On the other hand, Degiro does not provide any research as it is an execution only broker. Their product range doesn’t include forex, and its mutual fund fees are high compared to other brokers.
Honorable mentions, not yet tested
As mentioned, we see that broker security will be the most important factor when choosing your provider in 2017. There are a few companies who we have not yet tested, but meet our requirement of either having a banking background or being listed on an exchange. These are listed below to serve as a starting point for you to investigate additional secure brokers. Sign up for our mailing list to receive our reviews once we tested them.
Comdirect: largest German online brokerage firm, providing service for international customers.
Barclays: largest UK online brokerage firm, providing service for UK customers.
Dukascopy: a Swiss brokerage with a banking license.
Forex.com and CityIndex: both have a NYSE listed parent, Gain Capital.
CMC Markets: a UK based derivative dealer, listed in London.
XTB: listed on the Warsaw stock exchange.
Now that we gave you our best bets, we would recommend reading through our CFD broker 101. CFDs are a special kind of derivatives with a lot of pros, but also a few dangers worth considering.
CFD broker 101
If you could pinpoint one subset of the financial industry that has to face constant reputational meltdown and harsh critiques, then it would be online retail trading, including binary options, forex and CFDs. For example, a recent damaging event resulted in FXCM having banned from operating in the US, with an attached fine of $7 million due to taking a position against clients.
Due to the latest industry scams, a very rational first question is if it makes sense to invest in derivatives at all? Second, is there a set of decent online brokers or the entire industry is a frivolous playground for naiv adventurers?
CFDs are derivatives: you bet on price movements
With CFDs, you can gamble on whether asset prices will go up or down without buying the stock. It is just like a bet with CFD brokers being the bookies. Let’s say you want to profit from Microsoft's stock price going up. At an online stockbroker, you would buy the Microsoft stock. At a CFD broker, you can instead bet directly on the stock price going up. However, CFDs are much like knives: could be very useful, but if no idea how to use one, you can cut yourself.
CFDs are an easy way to reach a lot of markets with leverage
Why on earth is this good for you? Well, there are three advantages:
Firstly, you can make bets on all kinds of products. E.g. if you wanted to trade with Turkish stocks, go ahead. This might not be possible with an online stockbroker. It is easier for a broker to provide a CFD than have access to the Turkish stock exchange.
The second advantage is leverage. The odds of your bet will be much larger than with buying the actual stock. It also comes with greater risk, therefore we recommend you to fully understand leverage before you invest.
Lastly, with CFDs you can easily have a short position. That is a plus indeed.
To understand these advantages better, you can read more here.
Not owning the underlying asset exposes you to additional risks
If you do not own the stock (or any other underlying asset), you are running a whole different risk which you need to understand before trading CFDs.
Let’s say Bob has a Siemens stock and Janet is in a long Siemens CFD position, both with broker “Bust Broker Co.”. Bust Broker Co. goes bust. Bob’s Siemens stock is in custody with his custody service provider, sooner or later he will be able to access it. Janet was in a long position, therefore she will be compensated only up to the investor protection scheme of the country. In most cases, this is up to 20.000 euros.
CFD regulations and security
European regulators recently started to pay closer attention to the gloomy side of the European retail brokerage industry. Let’s face it, most of the people are losing money with their online trading accounts and in many cases not purely due to their fault. Luckily, major European regulators recently discovered some of these misconducts and malpractices, and are willing to take steps against them.
Dealing desk brokers - playing against clients: Certainly the future of such brokers seems to be less bright under EU regulations, especially after FXCM having banned from operating in the US. A Financemagnates article explains very well the dealing desk model versus others such as STP or ECN, but the core of the problem is that such brokers are gaining profit when their clients lose. There is a major conflict of interest, while they are also more aggressive in their sales and marketing operations.
The end of high-leverage trading: In some countries like the US or Belgium, CFD trading is banned completely due to the enormous risk and percentage of failure stemming from highly leveraged positions. Realising this clear connection between leverage and loss, regulators across the EU are implementing restrictions on leverage. This ranges from direct limitations - UK watchdog proposal to cap the level for beginner traders to 1:25 - and marketing related ones - like the advertising ban in France.
Change in the acquisition of new clients: As the wild wild west era of retail trading in Europe is coming to an end, so is the limitless and uncontrolled marketing of deposit bonuses, cheap prices and messages promising easy ways of getting rich. Current market trends suggest that purely the acquisition of clients will not be beneficial for the brokers if the clients are below a certain level of wealth.
Summing up, do the stricter regulations mean that trading CFDs will become a nothing but a bedtime story for our kids? Absolutely not, but change is inevitably needed for the sake of European traders. Introduction of leverage caps and banning certain marketing activities will lead to a much awaited purification of the European retail trading space. No doubt, smaller firms will find loopholes, like turning to less vigilant jurisdictions such as Belize or the Bahamas. But with your picked up knowledge these should not fool you anymore.
Being part of a banking group or listed on an exchange should be your primary compass for the best CFD brokers
Once you digested the bitter pill of the online traders' daily reality and you agree that there is a brighter future, it is time to discuss how to make a well established choice in today's changing landscape of CFD brokers.
Under FCA and Cysec regulations - the two most common ones - over 230 firms offer CFDs to clients. Besides the increasingly popular aggregator sites (some of them are simply advertising sites of the online brokers and are based on marketing agreements) a more conservative but pragmatic overview of CFD brokers comes handy.
Following this thought, we prefer exchange listed and/or banking licensed brokers. Why?
Being listed on any developed exchange means additional regulations, strict and frequent audits and also the need for constant communication between the shareholders and other stakeholders. No wonder that only a small portion of retail brokers decides to exchange money for transparency.
Banks are indisputably crucial building stones of any economy. Strict capital requirements, regulations and need for transparency is a must. Therefore any broker with a bank behind its back can be considered more reliable than the rest of the competition.
After attaining a short list of solid brokers you should focus on attributes that affect you the most. For more help on these points check out our online brokers' comparison table.
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