CFD Trading in Canada: How Contracts for Difference Work and Who Offers Them

Contracts for difference (CFDs) let you speculate on the price of an index, commodity, currency or share without owning it. They're popular with short-term traders in Canada, Europe and Australia — and they're not available to residents of the United States, which is why Canadians sometimes assume they're illegal here. They aren't.

How a CFD works

You and the dealer agree to exchange the difference between the price when you open the position and the price when you close it. Buy a CFD on the S&P/TSX 60 at 1,500 and close at 1,520, and you receive the 20-point difference multiplied by your position size; if it falls, you pay the difference.

Key features:

• Leverage: you post margin rather than the full value.
• Long or short: shorting is as easy as buying.
• No ownership: no voting rights, no shares in your name — just price exposure. (Share CFDs usually pass through dividend adjustments.)

What CFDs cost

1. Spread — the difference between bid and ask; on many CFDs this is the main fee.
2. Commission — on some dealers' share CFDs.
3. Financing — leveraged positions held overnight incur a daily charge, usually based on a benchmark rate plus a markup. Over weeks or months this adds up; CFDs are expensive for long-term holding.
4. Currency conversion — if the CFD is priced in USD and your account is in CAD.

Provincial wrinkles

• Alberta: CFDs are treated as both securities and derivatives. Dealers typically distribute them under a prospectus exemption, so some accept only accredited investors for CFDs; OANDA doesn't accept Albertans at all. See forex brokers in Alberta.
• Québec: derivatives dealers must also satisfy the AMF under Québec's Derivatives Act. Some dealers (for example Plus500CA) don't serve Québec. See forex in Québec.

Registered CFD providers

The risks, plainly

CFDs combine leverage, fast markets and ongoing costs. Gaps over weekends or on earnings announcements can jump past stops. In markets where disclosure is mandatory, a majority of retail CFD accounts lose money. Use small sizes, stops, and the position size calculator; never hold CFDs where a TFSA ETF would do the job better.

A worked example in Canadian dollars

Say you think the S&P/TSX 60 will rise after a strong jobs report. Your dealer quotes the index CFD at 1,500.0 / 1,500.8 and you buy 2 contracts at C$10 per point.

• Position value: 2 × 1,500.8 × C$10 = about C$30,000.
• Margin at a 5% rate: about C$1,500.
• Spread cost: 0.8 points × C$20 per point = C$16, paid the moment you open.
• If the index rises 15 points and you close at 1,515.8 bid: gain of 15 × C$20 = C$300 before financing.
• If it falls 15 points: loss of C$300 — 20% of your margin from a 1% index move.
• Holding overnight adds a financing charge on roughly C$30,000 of exposure every night.

The same maths applies to commodity, share and currency CFDs; only the contract size and margin rates change. Use the margin calculator to see how different margin rates change the picture.

CFDs vs the alternatives