Contract for Difference Law and Legal Definition

Contract for Difference (CFD) is an agreement to exchange the difference between the opening and closing price of the position under the contract on various financial instruments. CFD trading is an effective and convenient speculative instrument for trading shares, indices, futures and commodities. Contracts for differences allow investors to take long or short positions, and unlike futures contracts have no fixed expiry date or contract size. CFDs are not permitted in the United States, due to restrictions by the U.S. Securities and Exchange Commission on over-the-counter (OTC) financial instruments.