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by Stephan Haberer, Euro am Sonntag
B.When they hear the term “Corona winner”, most people will think of Biontech, Pfizer, Moderna or Curevac. And of course, online retail and IT providers are also benefiting from the pandemic, which drove many employees to work from home and forced stationary retailers to close their stores. Many have probably also heard that the Germans are discovering the stock exchange during the crisis.
But since the pandemic began, an industry that had previously suffered for years has developed practically completely unnoticed: CFD brokers.
These were regulated more and more tightly by decrees of the supervisory authorities. Private investors should be protected from the immense risk of loss that arises from unregulated CFD trading and that can exceed the capital invested many times over.
Corona as an opportunity
The result: the transaction volume and number of transactions fell significantly by 2019, and there have been hardly any new CFD traders since the regulatory interventions by ESMA and Bafin. All in all, this meant that the net income fell by 30 percent and more, depending on the CFD provider. Some providers even went bankrupt or just missed bankruptcy. Then came Corona – and the CFD broker crisis was a thing of the past.
According to the CFD Association, exactly 62,922 new CFD accounts were opened nationwide in the 2020 pandemic, an increase of 31.8 percent. The transaction volume rose by 95.1 percent to just under 2.09 trillion euros. The number of transactions even climbed 110.4 percent to 91.9 million orders. Three absolute top values that had never been achieved in Germany before.
One reason for these highs is likely to be the violent corona-related price fluctuations on the stock exchanges. Some investors prompted them to hedge share portfolios with CFDs, others saw the high volatility as an opportunity to make a lot of profit quickly with CFDs.
But the high risk of loss with CFDs was obviously not ignored by the traders: The average volume per transaction fell by seven percent to 22,684 euros. The pandemic thus apparently also has an impact on investors’ willingness to take risks, believes the CFD Association’s managing director, Rafael Neustadt: “You trade lower volumes, but more often.”
Overall, the corona pandemic seems to be an opportunity for the industry to overcome the years of weakness and to interest even more investors in CFD trading. But this is where the problems begin for the interested party: What exactly does which CFD broker offer? Who can CFD traders find the best deal with?
In order to be able to provide answers, the editors of uro also carried out the annual CFD broker test on Sunday in 2021. A total of 20 CFD brokers active in Germany were written to, of which eleven actually took part in the survey.
Who really fits
With the current test from uro am Sonntag, potential CFD investors as well as active CFD traders can easily find out which broker has the best offer for them. For this, the twelve test participants had to be divided into four main categories – trade; Costs; Security, reporting, taxes & law as well as training & technology – provide a total of around 870 entries on 72 complexes of questions (see below “This is how it was evaluated”). From the editorial office’s point of view, this considerable scope of testing is necessary because CFD trading is extremely complex and this is the only way to evaluate the individual offers with the required accuracy.
Similar to the supervisory authorities ESMA and Bafin, uro am Sonntag also attaches great importance to security: in the category Security, Reporting, Taxes & Legal, up to 330 of the 1,000 possible points could be achieved. In contrast, the cost area was only good for a maximum of 200 points. In the trade category, on the other hand, up to 450 points were possible. The remaining 20 points were reserved for information on training courses offered and on hardware and software.
One more note: The test refers specifically to offers for CFD brokerage from private investors in Germany, who are subject to ESMA and / or Bafin regulation.
These regulations have meant that the vast majority of CFD providers are completely oriented towards the maximum leverage that is permitted in each case. But there are already big differences in the base values offered: FX Flat offers CFDs on 339 base values, while CMC Markets offers 11,002 base values. The other providers range between 900 and 5,000 base values.
The offers also differ significantly in terms of the order types offered. The 33 most important order types were explicitly asked for in the survey. While eToro, according to its own information, has just ten different order types on offer – one of them only “partially” – WH Selfinvest offers all 33 requested order types and also refers to offering “hundreds more”.
The trading platforms also differ significantly, only the trading of complete positions directly from the chart, one-click trading and the monitoring of margin and overnight positions are all offered.
But even with panic closing – the simultaneous closing of all open positions – there are dropouts, for example at CMC Markets. And with Admiral Markets, CMC Markets, FX Flat, JFD Bank and WH Selfinvest, only five of the eleven providers offer automatic chart pattern recognition. In addition, the number of available technical indicators varies between 36 (Comdirect Bank, Consorsbank, Onvista Bank and S-Broker) and 300 (WH Selfinvest). Most other providers offer around 50 indicators.
Incidentally, the fact that the information provided by Comdirect Bank, Onvista Bank and S-Broker is largely identical is due to the fact that Socit Gnrale acts as the market maker for CFD transactions for this trio of German CFD brokers. In other words: The CFD trades of these providers all run through Socit Gnrale. But that doesn’t mean that the trio’s offers are completely identical.
Wide range of fees
The fees for CFD trades, for example, differ significantly depending on the provider. For example, Comdirect and its subsidiary, Onvista Bank, charge 8.55 euros per round turn for a precisely specified example trade on the euro-dollar exchange rate, while the savings bank broker can have exactly the same trade for 6.41 euros .
The price differences are even greater if you look at all providers: Consorsbank offers the same trade for 0.65 euros. The same applies to the differences in example trades on the DAX: Here, depending on the provider, between 0.40 euros and 4.00 euros per round turn are due.
And which CFD broker now has the best overall offer? Also this year, WH Selfinvest was able to win the overall rating in the CFD test with the top grade “Very good +” (see also the results tables below). The fifth overall victory in a row – respect! Silver went to Consorsbank with the grade “very good”. However, the offers from Onvista Bank, Comdirect Bank, FX Flat and S-Broker were also rated “Very Good” (for the assessment, see the box “This is how it was rated”). The grade “good” was given five times.
The following picture emerged in the sub-categories: WH Selfinvest offered the best trading offer overall, followed by Admiral Markets. Traders who value the lowest possible costs are best placed at JFD Bank. In the area of security, reporting, taxes and law – this involved aspects such as deposit protection, regulations for phishing and mistrades, application of German law in the event of a dispute, place of jurisdiction, responsible ombudsman, German tax reporting and regulations on withholding tax – Onvista Bank came in first , followed by Comdirect Bank, Consorsbank and S-Broker all also with the grade “Very good +”.
However, there is still enough room for improvement with all CFD brokers that have been tested. So not a single provider achieved a “Very good +” in all sub-areas. On the other hand, there is no such thing as the only true CFD broker. Each provider has different strengths and weaknesses.
This is how it was scored:
Test: uro am Sonntag evaluated the offer of nationwide active CFD brokers by means of a written survey. Eleven out of 20 CFD brokers that were contacted took part in the assessment. Their details were randomly checked for correctness using their CFD price-performance lists, the terms and conditions, the CFD special conditions, the CFD basic and risk information.
Rating: There were a maximum of 1,000 points. For this purpose, around 870 entries had to be made in four categories with 72 sets of questions, which were converted into points in the course of the evaluation. In the case of metric numbers (e.g. costs in euros, interest rates in percent), points were awarded relationally, sometimes also inversely proportional.
Category 1: trade There were up to 450 points here. This category was again divided into five sub-categories. In the sub-category Underlyings (maximum 75 points) the range of base values, trade guarantees, the minimum / maximum order size per CFD class and special features of CFDs with a term restriction were evaluated. In the area Quotation & order placement a maximum of 100 points could be achieved. Quotes, spreads, price guarantees, requotes, slipage, dealing desk, STP and DMA courses were queried here. At Order & trading hours (75 points) it was about order types, order routes, order validity, security order, prioritization, partial closings and trading times. With the quality of the Trading platform were another 75 points to get. In addition to the features of the trading platform, the support offered, as well as the news and research offering, were rated here. At the Trading account (125 points) it then dealt with questions about margin, margin call, leverage, overnight positions and forced closeouts.
Category 2: costs A maximum of 200 points could be achieved here. This not only includes costs for the CFD trading and clearing account and trading platform, but also the costs that arise from round turns in the individual CFD classes. The spreads were also evaluated. In addition, the costs of five sample orders were included in the evaluation, as well as the costs for overnight financing and securities lending and the costs for longer inactivity of the customer.
Category 3: Security, reporting, taxes and law This category was good for up to 330 points: In the sub-category security (220 points) it was about risk limitation, deposit protection, reference account principle, market and trade trends and mistrades. At Reporting, Taxes & Legal (110 points) were questions about in-day and end-of-day reporting, German tax reporting, withholding tax, financial supervision, validity of German law, place of jurisdiction, legal position and claims for damages.
Category 4: Training & technology (maximum 20 points, not printed for reasons of space), it was about the training offer (webinars, seminars, etc.), about information on CFD trading as well as about requirements for hardware and the use of special software.
Grading: The best in the overall ranking received the grade “Very good +”. The number of points he achieved was also the benchmark for the other providers. Anyone who achieved more than 95.00 percent of the points of the best also received a “Very good +”; down to 85.001 percent there was a “very good”; up to 70.001 percent: “good”; up to 50.001 percent: “satisfactory”; up to 25.001 percent: “sufficient”; up to 10 percent: “poor”; if less than 10.00 percent: “insufficient”. The grades were awarded in the same way in the individual categories.
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