XTB zero commission CFDs
Unlike Spread Bets, which are often priced as that futures contracts. That is, with the cost of carry, spreads and other factors included at the outset.
CFDs have typically been priced at the spot, or cash market levels, with any commission and daily funding charges, treated as separate items.
However, XTB’s new offering does way with commission charges altogether, with the company appearing to waive dealing fees entirely, though daily funding charges will still apply.
Read our full XTB review here
How do XTB’s new CFD terms compare with those at other brokers?
XTB’s commission-free CFDs are the latest move in what amounts to an arms race between margin trading and multi-asset brokers.
For example, eToro charges 9 basis points (9/100ths of a per cent) for its equity CFDs, however, those charges are wrapped up in its bid-offer spread.
Italy’s largest online broker, Fineco charges no commission on CFDs over FTSE 100, EU and US shares, but it does charge 6 basis points per side, on CFDs in FTSE 250 companies.
Whilst the largest UK based CFD broker IG Group, charges 10 basis points per side, on CFDs in UK shares subject to a minimum ticket charge of £10.00, for an online trade.
As we have noted before when a service is offered for free it’s usually because you, the client, are the end product.
Commission-free share trading was popularised by Trading 212 in 2017, initially launched as a marketing exercise, it grew into a flourishing business, which opened up a new, and highly competitive battleground between online brokers.
How is XTB able to offer commission-free CFD trading?
Is not clear if XTB is making a similar “land grab” and is using marketing spending to subsidise its CFD operations, in the hopes of growing its client base further.
Or, if they are monetising their order flow through systematic internalization and order matching. Or indeed, through soft commissions from a third-party provider.
Who, for example, receives the XTB order flow in exchange for the payment of clearing fees or other charges.
However this has been achieved, for now, at least, it seems that CFD traders are the beneficiaries.