Does anybody know the difference between these. Fundamentally they seem like the same thing but are there differences?
CFD: http://en.wikipedia.org/wiki/Contract_for_difference TRS: http://en.wikipedia.org/wiki/Total_return_swap Equity Swap: http://en.wikipedia.org/wiki/Equity_swap
I have read all of those and they seem like the same thing In each case you swap the return on the security for some kind of financing charge but I can’t seem to find any notable differences. So assuming the reference asset for each of these was the same equity (can you have an equity TRS?) then what would the difference be?
A equity swap is a type of TRS.
In my experience CFDs are used mostly for short term speculation by retail investors as a form of tax-advantaged spread betting whereas swaps are much more widely used across the industry for a large range of purposes. I imagine CFDs are used for other things such as hedging etc, but I’m not sure how common that is.
So basically the same thing. Thanks.
They are mostly the same, but major difference is CFD can involve different type of instruments where as Equity swaps mostly be on Equity underlying andin CFD dividends would be accountable (either dividend expense on short and dividend receivable on long).