SC
CFDs push north of the border
31 January 2008
The mysterious world of contracts for difference trading and spread betting has hit Scotland, so what does it take to enter the industry?
What is it?
Though the CFD market has boomed since its emergence in the early 1990s, to the point where it now accounts for a third of the UK’s share trading activity, there’s still confusion about what it actually entails.
Essentially, it allows you to take a position on a share without actually buying it. The CFD on a firm’s shares specifies the price of the underlying share when the contract kicks off. And the contract itself is an agreement to pay out the cash difference between this value and how much it’s worth when the contract ends.
CFDs cost about 10% of the market value of shares, and any increase in value is magnified by what’s called margin trading. The problem is, so is any loss.
Getting into the industry
CMC Markets opened up a base in the Scottish capital last week, with five staff, and has plans to expand to a total of 12 people.
What sort of people does a firm like CMC look for in its traders? Anne Stevens, global head of human resources at the firm, says the young nature of the business means experience isn’t a prerequisite, and instead they look for the right personality type.
“People can come in and be offered an opportunity to be trained into the role. We look for an entrepreneurial spirit, leadership, team-players and sensible judgement, but also people who are courageous enough to take calculated risks,” she says.
And those currently carving out a niche in an investment banking role need not apply. They would be in for a bit of culture shock, says Stevens.
“It would never be suitable for people who have come from a rigid, hierarchical structure. The business is diverse, and expanding rapidly, so we need adaptable people.”
The Scottish office is the firm’s 22nd global hub, and CMC has grown from 300 employees in 2005, to around 1,000 today. Goldman Sachs took a 10% stake in the firm last year.
Will it pay?
Pay is good, but not at investment banking levels. A typical CFD trader with three years' experience can bring in between £30k and £70k. A CFD salesman, however, typically takes home a package of £100k.
