Exchanges hate CFD’s, it goes against their business model of having centralized transactions. These are all traded OTC and not on the exchange.
CFDs are mostly closed loop platforms. Which means when you take a trade, the platform is the counter party to your trade mostly. Which means there is no underlying exchange to which your orders are sent. So the platform earns, if you lose (in addition to the trading costs).
Since they aren’t regulated, they continuously try to push leverage to ensure you lose faster, and generally since the platform is incentivized to make you lose, best stay away.
CFD’s are popular in many countries as one platform can give them access to trade almost everything that moves around the world. But as you would have guessed by now, they will never be offered by the exchanges.
My friend is doing code as freelancer for one of the binary trading app.
He was working on a module where they will create false spike in the price to hit the stoploss of the clients who are in profits.
These apps are big scam and its not regulated. You can never will them.
Why isn’t trading binary option or CFD in these brokers termed as gambling or casino app.
Also what’s the major difference between contracts such as Credit default swaps and these CFDs . I think that big banks and Hedge funds actively trade in them. Is it because they are regulated and covered by ISDA.
The most important objective as a regulator is to keep retail investors interest in mind, not let them get tempted and trapped into something they don’t understand. When it comes to Hedge funds, Banks, etc, I guess they assume that people will trade in products they understand.
It may not be correct to say that they are only for gamblers.
Compared to plain-vanilla call and put options which have a variable payout, binary options provide a fixed payout, and are far better for offering hedging and better capital management.
Exchange is a destination where buyer and seller meet and transact. In case of CFD and Binary options, there aren’t two people, one side is the company offering the product and other side is the client. So this doesn’t fit into an exchange structure.
There is no real use for it other than making the platform you trade on some money. Binary options is lying playing the roulette or buying a lottery ticket. Atleast in lotteries your payoffs are extremely high, so if you get lucky once, you can end up making money.
In case of Binary, you have to keep getting lucky as the payoffs are never huge for being right once.