It’s nice to see that the corporate watchpuppies from ASIC are taking time to discover more about the obscure areas of the Australian stockmarket.

In fact it’s positively uplifting, comforting even.

Those hours spent watching trading in Contracts For Difference (CFD) at the Sydney offices of market leader, CMC, can only mean that the regulator saw a need to update its knowledge base and took advantage of a kind invitation from CMC to drop in around three weeks ago and take a gander.

In fact it’s probably precautionary given that since the ban on short selling, Contracts For Difference are the only way you can sell a share short. Well, not sell a share short, because that’s banned. No it’s something that takes advantage of what a Contract For Difference is and isn’t: it’s a trick that started in London where CMC was the pioneer of CFDs, which have been used extensively on the London market in takeovers and other plays.

Because you are not trading in the physical market (the stockmarket), there’s no need for any disclosure, or so the claims go. Contracts For Difference seem to be within the letter of the law on short selling.

But the one thing we can say is that there has been considerable change in the markets since mid-September, some investors have taken a hit, others have retreated to the sidelines and there’s constant talk of restructurings and other moves to better “align” businesses with the reality of the markets.

That must be why all senior executive positions in CMC markets were relabeled with the removal of the words “Asia-Pacific”.

No doubt that talk that David Trew; the CEO who grew the business from a pool of 5-6 staff about eight years ago, has not been seen in the building is just that, talk. He’s obviously on a spot of leave to recover from the recent hectic times.

And those other stories about how all non-Sydney offices in Australia being could be closed soon (including the New Zealand office) is just idle talk among traders, and not reflective of the way CMC’s future looks here.

This is what I found on the CMC website about CFDs

“CFDs are traded using leverage. This can be a more efficient use of your trading dollars as you only allocate a small proportion of the total value of your position to secure a trade, while maintaining full exposure to the market”

Hmm, leverage … isn’t that what helped get us into the present predicament? “Profit from falling markets. CFDs give you the ability to profit when the markets fall by entering into a short CFD trade. You can also hedge your long Share positions in falling markets by shorting with CFDs. “Shorting” isn’t that a no nos in this market, especially with ASIC’s ban on shorting?

Peter Fray

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