CFD FAQs
General queries about trading Contracts for Difference
Trading
What contracts are available on our CFD trading platform?
We offer a wide range of global oil contracts to cater to various industries and trading strategies. These include:
- 0.5 Bge, 0.5 Sing, and related Cracks/Spreads
- EBOB, Jet CIF N.W.E., Mogas Arb, and related spreads
- Brent/Dubai, Dubai Spreads, DFLs, DFL Rolls, and Brent/Dubai Box
- Dated Brent Spreads, Sing 380/180 and Cracks/Spreads
- N.W.E. Naphtha, N.W.E. Naphtha Cracks/Spreads
- MOPJ, MOPJ Spreads, Naphtha East/West
- Sing Kero, Sing Kero vs Sing 10ppm gasoil
- FEI, FEI/MOPJ, Pro/Nap, C3 CP, C3 FEI, and C3 N.W.E. Spreads
How are the calculations different between the underlying market, CFDs and Spread Bets?
Underlying Market
- Contracts are priced in $ per MT (metric tonne) or BBL (barrel).
- Tick value: $10 per $0.01 price movement.
- Lot size: 1KT (1,000 tonnes) / 1KB (1,000 barrels).
CFDs
- Designed to resemble the underlying market closely.
- Contracts are priced in $ per MT (metric tonne) or BBL (barrel).
- Tick value: $1 per $0.01 price movement.
- Lot size: 0.1KT (100 tonnes) / 0.1KB (100 barrels).
Spread Bets
- Always denominated in USD.
- Tick value: $1 per $0.01 price movement.
- Lot size: 0.1KT (100 tonnes) / 0.1KB (100 barrels).
Standardised Lot Sizes
To simplify trading, both CFDs and Spread Bets will use a standardised lot size of 0.1KT/0.1KB. This ensures consistency across both products, with a smaller lot size than the underlying market to facilitate more accurate hedging.Are there any exceptions to the standardised lot sizes?
The only exception is the Mogas Arb contract:
- CFD lot size: 0.1KT with a tick value of $3.50.
- Spread Bet: $3.50 per point to replicate 0.1KT.
What is the minimum trade size for each market?
The minimum trade size remains the same across both CFDs and Spread Bets and depends on the specific contract. Please refer to the Contract Specifications Table for details on minimum sizes.
How do tick values work?
Tick value represents the monetary value of a single tick (price movement). For example:
- Underlying Market Example: 1 tick = $10 for a $0.01 price movement with a 1KT or 1 KB lot size.
- CFD and Spread Bet Example: 1 tick = $1 for a $0.01 price movement with a 0.1KT or 0.1 KB lot size.
How do I transition from industry experience to trading these contracts?
If you’re familiar with physical or paper oil markets, our platform’s CFD and Spread Bet contracts mirror these markets closely. However, due to the differences in lot sizes and calculations, we recommend:
- Starting with smaller trades to familiarise yourself with the mechanics.
- Consulting the Contract Specifications Table for detailed tick values and lot sizes.
What tools are available to help me trade?
Our CFD trading app provides:
- Real-time market data to track price movements.
- Risk management tools, including stop-loss and take-profit orders.
- Educational resources, such as webinars and guides.
- Access to our customer support team for any queries.
Are there risks involved in trading these contracts?
Yes. Leveraged trading carries significant risks, including the potential for losses exceeding your initial investment. Ensure you understand:
- The contract specifications.
- The impact of leverage.
- Market volatility.
Where can I find more information?
- Oil Contract Specifications Table
- Contact our Customer Support Team
What are the trading hours?
- Oil Commodity “swaps”: 08:00 – 17:30 Weekdays
- Nat Gas, FX Spot: 23:00 Sunday to 22:00 Friday
- WTI: 00:00 to 23:00 Monday to Thursday, 00:00 to 22:00 Friday
- Brent: 01:00 to 23:00 Monday to Thursday, 01:00 to 22:00 Friday
Margins, Margin Calls & Leverage
Margin is a critical concept in trading that refers to the amount of capital a trader has available in their account. Understanding margin is crucial because it determines the extent of your trading capability and influences the possibility of receiving a margin call from your broker.
When you are “buying on margin,” you are essentially using borrowed funds from your broker to enter a trade. This requires opening a margin account, which is distinct from a standard trading account.
If your account’s margin drops below a specific threshold, your broker may issue a margin call.
When used appropriately and as part of a broader risk management strategy, margin trading can be a powerful tool to optimize your trading capital and seize multiple trading opportunities. However, it’s essential to remember that both margin trading and leverage can amplify profits and losses, so use them with caution and responsibility.
What is margin trading?
Margin trading allows you to use a portion of your own funds while borrowing the remaining amount from your broker, enabling you to trade various assets with greater leverage.
How does margin trading work?
Trading on margin involves borrowing money from your broker to open a position larger than what your capital alone would allow. Unlike a regular cash account, which does not support margin trading, a specific margin account is necessary to access this feature.
To open a trade on a margin account, you must meet an “initial margin” requirement — a minimum balance you must maintain to open a new position. This rate differs depending on the financial instruments you wish to trade, so always consult the product specification for the specific margin rate.
Once you place a trade on margin, the loan from your broker remains open for as long as the position is active, provided you meet all obligations, such as paying interest on the borrowed funds, we only charge this on our FX pairs, while the oil contracts have no additional charges other than the spread. When the trade is closed, the borrowed amount is returned to the broker.
What is a margin call?
A margin call is an alert that every trader hopes to avoid. We will endeavour to send an email warning that your account’s margin has fallen below the required level. A margin call occurs when the account’s value (on MT5 you must monitor your margin level) drops below the minimum threshold of 99% and then again 75% as a warning to you. At this point, we will require that you either deposit additional funds or close out positions to restore the account to the minimum maintenance margin level.
What is margin level?
Margin level indicates the amount of margin available to open new positions and is expressed as a percentage. It is calculated using the ratio of equity to the used margin:
- Margin Level = (Equity / Used Margin) * 100
What happens if you can't meet a margin call?
Failing to meet a margin call triggers a “stop-out level,” where we will begin closing out your open positions to bring the account back up to the minimum margin level.
This is done automatically, without your consent, to prevent further losses. During this process, you will be responsible for any losses incurred. The level at which your positions will be closed is when your equity / used margin falls below 50%. Your positions will be closed on the basis of your biggest loser first, followed by your second biggest loser and so on until your margin / used equity is back above 50%.
This situation represents a worst-case scenario. Regardless of your experience level, you can protect yourself by employing risk management strategies, such as setting stop-loss orders, to safeguard against market volatility. Additionally, ensuring you have sufficient funds in your account and avoiding trades that are too large relative to your account balance are prudent practices.
What are the risks involved in margin trading?
Margin trading carries significant risks, which must be understood before engaging in it. Some of the key risks associated with buying on margin include:
- Margin Calls: You may be required to deposit additional funds if your account falls below the minimum maintenance margin.
- Amplified Losses: While margin can magnify gains, it can also lead to significantly larger losses.
- Liquidation: Your positions could be automatically closed out if you cannot meet margin requirements.
Tiered margining: what does this mean and how will it affect me?
At Flux Markets, we offer a tiered margin system designed to accommodate different trading volumes. This means that smaller positions operate with lower margin requirements, while larger positions have incrementally higher margins. For detailed and up-to-date information on our margin requirements and tiered system, please refer to our Margin document or give us a call on 0203 097 5000.
Charges
We do not charge a fee to use our MT5 trader, but there are trading costs referred to as spreads.
What is a spread?
- Bid Price: The price at which you can sell an asset.
- Offer Price: The price at which you can buy an asset.
- Spread: The difference between the bid and offer prices.
What types of spreads are there?
- Fixed spread: The difference between the bid and offer prices remains constant regardless of market conditions. This can be advantageous in volatile markets, but fixed spreads can be higher than variable spreads during normal market conditions.
- Variable (Floating) Spread: The difference between the bid and offer prices changes with market conditions. During periods of high liquidity, spreads can be very tight (small), while during periods of low liquidity or high volatility, spreads can widen significantly.
Example
Importance of the spread
Cost of Trading: The spread represents a direct cost to the trader. To make a profit, the price of the currency pair must move enough to cover the spread. For example, if you buy EUR/USD at 1.20006, the price must rise above 1.20006 for you to profit after selling it.
Liquidity Indicator: Tight (small) spreads typically indicate high liquidity and efficient markets, while wide spreads can indicate low liquidity or high market volatility.
What is Forex Overnight Funding?
Overnight fees are also known as “overnight financing” or “swap rates.” They are calculated based on the value of the open position and are typically applied to positions held past a specified cut-off time, often at the close of the trading day.
- Forex overnight funding charge = Trade size x (tom next rate + ((Annual admin fee)/365))
Overnight charges
- Long Positions (Buy): When you hold a long position overnight, you typically incur a financing cost. This cost is usually calculated as a percentage of the notional value of the position and is based on the interbank rate (such as LIBOR) plus a markup set by the broker.
- Short Positions (Sell): When you hold a short position overnight, you might either incur a financing cost or earn interest. This depends on the interbank rate and the broker’s terms.
Factors Affecting Overnight Charges
- Interbank Rates: The primary rate used is often the LIBOR (London Interbank Offered Rate), but with LIBOR being phased out, other rates like SOFR (Secured Overnight Financing Rate) are becoming more common.
- Asset Type: Different assets may have different financing costs. For example, forex might have different rates compared to commodities or indices.
- Currency: The currency in which the asset is traded can affect the overnight rate, as different currencies have different interest rates.
Calculation Example
Suppose you hold a long CFD FX position with a notional value of £10,000 subject to a tom next charge of 0.5% and an admin fee of 1% per annum. The daily overnight charge would be:
Overnight Charge = £10,000 × (0.5%+1%)/365 = £10,000 x (0.00137% + 0.00274%) = £0.41
The tom next rate will vary depending on whether you are long or short, as it reflects the interest rate differential between the two currencies, meaning you will either pay or receive. Whereas the admin fee will apply regardless.
How do overnight funding charges work?
These are fees charged when you hold leveraged positions overnight on FX pairs. They cover the cost of borrowing capital and can vary based on the interest rate and position size.
What is margin trading, and how does it work?
It involves borrowing funds to trade larger positions with a fraction of the capital. Margin acts as collateral, and if the position moves against you, additional funds may be required.
How are spreads determined for different markets?
Spreads (the difference between buy and sell prices) are determined by market liquidity, volatility, and the broker’s pricing model. More liquid markets typically have tighter spreads.
What are guaranteed stop-loss orders, and how do they work?
A type of stop-loss that guarantees execution at the set price, regardless of market volatility. It protects you from slippage but involves a premium charge.
What happens if my account balance falls below the margin requirement?
If your balance drops below the required margin, you may receive a margin call or your position could be automatically closed to prevent further losses.
What is a currency conversion, and how does it affect my trading?
When trading assets in different currencies, profits and losses are converted to your account’s base currency. Exchange rates can affect your overall returns.
How does the platform handle overnight positions?
The platform typically charges an overnight funding fee for positions held past the market close, and it adjusts the margin requirements accordingly.
How do you calculate funding charges?
Funding Charges depend on the asset you are trading.
- Forex: We charge the next rate plus an admin fee (0.00278%)
- Spreadbet Long: Bet Size x (Offer Tom Next + Admin Fee)
- Spreadbet Short: Bet size x (Bid Tom Next + Admin Fee)
- CFD Long: Number of contracts x value of contract x (Offer Tom Next + Admin Fee)
- CFD Short: Short: Number of contracts x value of contract x (Bid Tom Next + Admin Fee)
- Commodities: Price Consideration – Front Month Future (F0) is the nearest/most liquid future price Next Future (F1) is the next month’s future price.
CFD Example:
- (F0) October future price $70.00
- (F1) November future price $71.00
- Trade Size = 1 lot (100 barrels ($1 per 0.01))
- Overnight fee => $1 /30days= $0.03333 daily adjustment + Flux Markets fee (0.00833% daily)
- Overnight Charge = 1 lot (100 Barrels) *($0.03333 + (0.00833% *$70.50)
- Overnight Charge = 100 * ($0.039)
- Overnight cost = $3.92
- Converted to £ = £3.02
How do you manage the risks of trading on margin?
Effective risk management includes setting stop-loss orders, using proper leverage, and ensuring enough funds in your account to cover margin calls. Also keeping an eye on when volatility driving data releases are out.
Financial FAQs
Segregated clients
The money of retail clients is automatically held in a segregated Client bank account, independent to the firm’s own money.
- Your funds are not co-mingled with Flux Markets’ own assets and money
- Money and funds are ring-fenced from creditors in the unlikely situation of Flux Markets’ being liquidated
- We do not use your money for our own business activities such as hedging trades or as margin for our own hedging activities
What happens to the funds I deposit with Flux Markets?
If you are a retail client, or a professional client who has opted for your funds to be segregated, your funds are safeguarded in ringfenced client bank accounts under trustee arrangements, ensuring they remain your property at all times. This guarantees that your money is identified as client funds, protected from any claims, charges, liens, or rights of set-off by us or our creditors.
What happens if Flux Markets / Onyx Capital Group goes into liquidation?
In the unlikely event of liquidation, all clients would be entitled to their share of segregated funds, minus the costs incurred by administrators in handling and distributing these funds.
Additionally, any shortfall of funds up to £85,000 may be eligible for compensation under the Financial Services Compensation Scheme (FSCS). This scheme, established by the UK government, serves as a safety net for customers of authorised financial services firms, typically covering investors (retail clients) and small businesses in cases of insolvency.
What happens to my money if Onyx's bank used to hold client money goes into liquidation?
In the event of a bank or a third party where the firm holds your money goes into liquidation (known as secondary pooling), any losses would be shared among clients in proportion to the funds held with the failed bank or a third party.
These losses may be eligible for compensation under the Financial Services Compensation Scheme (FSCS), up to a limit of £85,000 per person, per institution, subject to other balances held with the same bank.
For more information on FSCS coverage and eligibility, visit their website at www.fscs.org.uk.
If you have any further questions, please contact us at trading@flux.live or call us directly at 0203 097 5000
Segregated clients
Non-segregated funds refer to client money that is not held separately from the company’s own funds. This means that such funds are pooled with the company’s operational or proprietary accounts and are not protected under the same rules as segregated client funds.
In the event of Flux Markets’ liquidation, non-segregated funds would be treated as part of the company’s general assets, and clients with such funds would be classified as general creditors. This means they would have no specific claim over their deposited money and would share in any remaining assets of the company only after other secured creditors have been paid.
Why would anyone want funds to be non-segregated?
Brokers ask for margin as insurance against adverse mark to market movements on leveraged positions. For certain larger or institutional clients, the broker may be able to employ the client’s margin against its own requirement on corresponding hedge positions.
This is generally necessary for larger sizes, as it prevents client positions from becoming a drain on the brokerage firm’s capital and ensures execution costs can be kept low.
Individual and Corporate clients who are categorised as Professionals can sign a Title Transfer Collateral Agreement. This means their funds can be posted as collateral against the margin requirement their positions incur. This enables Onyx to offer extremely competitive margins even on much larger positions.
Please be aware you are sacrificing protection of your money and in the event of insolvency of the firm, you will ranked as a general creditor
How do I apply to be non-segregated?
Eligible clients will be able to opt into a Title Transfer Collateral Agreement as part of the onboarding journey or after the account is opened.
You can also find out more details on the website, or by speaking to our sales team at: trading@flux.live or call 0203 097 5000.
Can a retail client be non-segregated
No, they cannot. To reiterate, Retail clients are not eligible to opt into a Title Transfer Collateral Agreement.
Segregation measures are designed to afford additional protections to smaller clients. Consequently, client margin will start to rise quite steeply for larger positions, as the broker is effectively lending the client the money to cover for exchange margin, and the initial transaction cost may not adequately cover the cost of this.