Different Types of CFDs

There are basically two kinds of CFDs that exist in the market. One is called the Direct Market Access or DMA and the other is called Market Maker or MM. There are advantages and disadvantages of each of the CFDs and one should understand them before one decides the one that should be picked.

In the Direct Market Access, the CFD order is placed in an order book. This order book is the place where the buyers and sellers get prices for asks and bids. When CFDs are bought and sold in this manner, the trade affects the underlying value of the asset. This is the system in which complete transparency is a by-product since there is no middle man involved.

You can also place orders for CFDs via a market maker. It is believed that the prices that are quoted by the market make are slightly higher than those that are available directly in the market. If you want the convenience of dabbling in CFDs via a middle man, you will need to be ready to pay this amount. While the rates quoted for CFDs in this manner also are based on the market value, there is a personal element of price that the middle man adds to the CFDs.

The speed of transaction in the case of  CFDs ordered in the direct method is faster. There is no intervention of the middle person. However, you may find that you are limited to some of the top stocks when using this method.