Shares CFDs

A share is a unit of ownership in a company. A shares CFD is not that. It is a separate agreement, written between a client and a broker, whose only subject is the price the share trades at somewhere else. The distinction sounds pedantic until the first corporate action, the first dividend and the first overnight charge, at which point it explains all three. This guide covers what the underlying is, where its price is made, who deals in it, what moves it, when it can be dealt and how the contract ends.

What the contract references 

A listed company divides its ownership into shares, and a stock exchange admits those shares to trading. From that moment the shares have a continuously published price, made by buyers and sellers meeting in the exchange's order book. That published price is the underlying of a shares CFD. The contract reads it and contributes nothing to it: two parties writing a contract on its price do not add a share to the market, remove one from it, or appear on the company's register.

The instrument is identified the way the exchange identifies it, by a ticker plus a venue. Apple Inc. is quoted on a United States venue, SAP SE on a German one, HSBC Holdings on a British one, Toyota Motor Corp. on a Japanese one, Saudi Aramco on a Gulf one. The set of single company contracts a broker carries is a matter of record: YAL publishes 900+ across the shares market page, quoted through MetaTrader 5.

Where the price is made 

Unlike a currency pair, which has no single home and is quoted continuously by banks around the world, a share has an address. Its primary listing venue runs a central limit order book: every resting bid and offer is queued by price and then by the time it arrived, and a trade happens when the two sides cross. The best bid and the best offer at any instant are the market, and the distance between them is the spread. Depth behind that top level is what determines whether a large order can be filled without walking the book upward or downward.

That structure has two consequences a CFD inherits whole. The first is that a share's price is only continuous while its venue is open, so the instrument has hard edges to its trading day in a way a currency pair does not. The second is that the price is denominated in the venue's currency: a German listing prints in euros, a British one in pence or pounds, a Japanese one in yen, a Saudi one in riyals. A contract quoted in one currency and funded in another carries a conversion when the result is booked.

Who trades single shares 

The order book of a large listed company is a crowd with very different mandates. Index tracking funds hold the share because it is in the benchmark they replicate, and they deal when the benchmark changes or when money flows into and out of the fund, not because of a view on the company. Active managers hold or avoid it on a judgement about the business. Pension and insurance portfolios hold it for a horizon measured in years and rebalance on a calendar. Market makers and electronic liquidity providers quote both sides continuously and expect to end the day close to flat. Corporate treasuries appear as buyers of their own stock under a repurchase programme, and company insiders appear on a disclosed and restricted basis.

The mix explains the rhythm of a share's day: the mechanical flows cluster at the open and the close, the judgement flows spread across the session, and the quoting flows are present throughout but withdraw when uncertainty rises.

What moves a single share 

Three layers of information reach a single share price, and they operate on different clocks. Company specific news is the fastest and the most violent: results, guidance, a change of chief executive, a regulatory decision, a bid. Sector information moves a share with its peers, because a shift in the oil price, in interest rates or in semiconductor demand lands on every company exposed to it at once. Market wide information moves everything together, which is why a share can fall on a day its own news was good.

A fourth mover is not information at all. Index inclusion and exclusion, an index rebalance, a lock up expiry, a large repurchase programme and a forced liquidation all change the supply of stock available at a given price without changing anything about the business. Prices made by an order book respond to imbalance regardless of its cause, which is why supply events are visible in the tape. The separate guide on what moves a share price takes each of these apart.

When shares trade 

A share trades when its venue is open, and every venue keeps its own calendar, its own session and its own holidays. Most run the same three part day: an opening call auction that gathers orders and strikes a single opening price, a continuous session in which the order book matches trades one at a time, and a closing auction that strikes the official closing price used for valuations and index calculations. Some Asian venues insert a lunch break. Some venues run pre and post market sessions in which trading continues on thinner interest and wider quotes.

A CFD written on the share is dealable while the underlying is dealable, and that window is the venue's, not the broker's. It also means the instrument gaps. A share that closed on one price and reopens after fifteen hours of news arrives at the opening auction with all of that news in it at once, and the first print of the new day can sit some distance from the last print of the old one. Regional detail is covered in the guides on US shares, European and UK shares and Asia Pacific shares.

How the contract settles 

A shares CFD is written on a stated number of shares and settles in cash. When the position closes, the difference between the closing price and the opening price is multiplied by that number of shares, and the resulting amount passes between the two parties. Nothing is delivered and no entry is made in a share register, so there is no settlement cycle to wait out. Closing a contract means entering the equal and opposite contract with the same firm so the two net to nothing.

A contract on a spot share carries no expiry date. It stays open until it is closed by either party or until the margin held against it fails its requirement, and for every night it stays open past the daily cut off it carries a financing adjustment, because the full contract value was never funded. That adjustment is a cost of holding rather than a cost of dealing, and it accumulates with time rather than with size of move.

When the company acts on its own shares 

A share is issued by a company that keeps doing things to it, and a contract written on the price has to answer for each of them. On the date a share trades without entitlement to a declared dividend, its price mechanically drops by roughly the dividend amount, because the buyer no longer receives it. That drop is not a market move, so a CFD position is adjusted for it: the side that would have received the dividend on an outright holding is credited an equivalent amount, and the side that would have paid it is debited. The adjustment restores the position to where it was, rather than delivering an income.

A share split multiplies the number of shares and divides the price by the same factor, leaving the value of a holding unchanged. Open contracts are restated on the same basis, so the number of shares the contract covers and the price it references both change and the exposure does not. Rights issues, consolidations, spin offs and takeovers are each handled by a published corporate actions policy, and the honest summary is that a CFD is adjusted to preserve the economic position rather than to reproduce the rights of a holder. It never reproduces the rights: the guide on share CFDs compared with owning shares sets out exactly what is and is not carried across.