CFD Brokers In India

CFD brokers in India offer contracts for difference on popular financial markets, from forex to stocks and cryptocurrencies. But with a variety of providers on the market, picking the right broker can be difficult. In this guide, we explain what contracts for difference are and how to find the best CFD brokers in India.

What Is A CFD?

A contract for difference (CFD) is a type of financial derivative that represents a contract between a trader and a broker. The agreement is to exchange the difference between the buy and sell price. For example, if the closing price is higher than the entry price, the buyer makes a profit. The broker profits when the closing price is lower than the entry price, i.e the trader makes a loss. The opposite would be true if an investor took a short position.

The parties do not own the securities involved but simply speculate on price changes, which is why CFDs are a derivative – their value is derived from the performance of an underlying asset.

History Of CFDs

CFDs were created by a financial services firm in London in the early 1990s. Their invention is largely credited to Brian Keelan and Jon Wood. They were developed as a type of equity swap that was traded on margin and was used to offset the risk of losses on the London Stock Exchange. They were primarily used for hedging institutional trades, but CFD brokers in India and worldwide now offer this type of investment to retail clients.

Top CFD brokers in India

Popularity Of CFDs In India

There are a few reasons why CFDs are popular in India. Firstly, many brokers do not charge commission or fees to enter or close a trade. Instead, brokers earn money through the spreads. Plus, CFD brokers in India offer the option of either a rolling contract or one with an expiry. This flexibility is popular compared to futures and options that come with a fixed expiry.

CFDs are also available on a diverse range of assets, including forex, stocks and commodities. In addition, CFDs can be leveraged, meaning the results of a trade can be multiplied beyond what the deposit amount would normally allow.

How Do CFD Brokers In India Work?

There are different ways CFD brokers in India can operate. A ‘no dealing desk’ broker works by providing direct access to the interbank market and sends orders to liquidity providers while acting as an intermediary. These can either be a ‘Straight-Through-Processing’ (STP) broker or an ‘Electronic Communication Network’ (ECN) broker. An STP broker does not execute orders but simply runs trades to external liquidity providers.

ECN CFD brokers in India compile buy and sell orders from a number of liquidity providers onto an electronic trading system. Simply put, they connect market participants together so they can trade with each other. These types of CFD brokers in India profit from volume or commission. However, they can be expensive to trade with, having large minimum lot sizes and a costly commission structure.

A dealing desk broker, on the other hand, acts as a ‘market maker’ meaning they create liquidity for their traders by taking the other side of a trade. As a result, market maker CFD brokers in India earn money from client losses, which arguably creates a conflict of interest. They’re often more accessible to traders with less capital, with low minimum deposits and competitive fees. However, they tend to be less transparent and can offer inconsistent prices. Therefore, no dealing desk brokers are sometimes preferred by experienced traders.

How To Compare CFD Brokers In India

When choosing the right CFD brokers in India for you, traders should consider their individual needs. Start by understanding your preferred investment style and level of knowledge. CFDs are a risky product, particularly when leveraged, so you should also check it fits with your risk tolerance.

Top online CFD brokers in India

The following factors are also important to consider:

Fees

CFD brokers in India will have varying commission and spread structures which is an important consideration. Commission is charged per lot while spreads are a broker’s markup on the market price. If you plan to trade frequently, fees can add up. Therefore it’s important to pick a broker with tight spreads and low commissions.

Leverage

CFDs are a leveraged product, meaning you can open positions that are larger than your available balance would usually afford you. The higher the leverage offered by CFD brokers in India, the larger the trade you can open. Leverage limits depend on the regulatory status of the broker.

Range Of Markets

The best CFD brokers in India offer a variety of markets to speculate on. Some of the most popular are forex, commodities, cryptocurrencies and Indian market indices. For FX traders, in particular, it could be worth checking the platform offers currency pairs with INR.

Regulation In India

The Securities and Exchange Board of India (SEBI) prohibits CFD brokers in India. Despite this, there are a number of platforms brokers advertising illegal or unregulated services to traders. If you are based in India and are eager to trade CFDs, you can open an account with brokers based in other countries, such as Australia or Europe.

We’d recommend selecting CFD brokers in India that are licensed and regulated with a trusted global regulator, such as the UK’s Financial Conduct Authority (FCA), the Australian Securities and Investments Commission (ASIC), or the Cyprus Securities and Exchange Commission (CySEC).

SEBI logo

Bonuses

CFD brokers in India may reward traders for choosing their services by offering a welcome no deposit bonus. These promotions can be attractive offers, but check the terms and conditions before you get started.

Account Types

Accounts types may differ in fees, minimum deposit requirements, leverage limits and markets. Ensure you pick one that fits with your budget. The top CFD brokers in India also offer free demo accounts so you can try before you buy.

Platforms

Platforms offered by CFD brokers in India provide varying functionality and usability. Some platforms are more suited to advanced traders, offering customisable indicators, graphs and charts. The same information and tools can be overwhelming for a beginner, therefore, you may want to use a paper trading account to try the platform before investing.

Mobile Apps

The best online CFD brokers in India offer a mobile version of their platform. This enables better access to the markets without being tied to your desk. Most platforms are available on both Android and iOS devices.

Tools

The tools provided by CFD brokers in India can greatly enhance your experience. For example, beginners may benefit from educational resources while experts require a solid selection of analytical tools. Select a broker that offers the right tools for your experience level.

Customer Support

A matter of seconds or minutes can make the difference when investing. Therefore, a responsive and reliable customer support team is crucial when choosing between CFD brokers in India. The support team should be available during the hours that you trade and offer a number of ways that you can contact them, such as a toll-free telephone number, email or live chat.

Payment Methods

Popular payment methods include bank wire transfer, credit/debit card and PayPal. Look for CFD brokers in India that offer instant deposits that are free of charge.

Accounts with lower minimum deposit requirements are more accessible for beginners or those with less capital. Spot trading forex and stocks often have high minimum thresholds, as there are minimum trade sizes on exchanges. For example, you’ll need to buy a whole share in a company. In general, CFD brokers in India do not require large minimum deposits as they are leveraged products with smaller order sizes.

Final Word On CFD Brokers In India

Since CFD brokers are banned in India, there are a number of firms operating illegally, with no regulation. Therefore, the best online CFD brokers for Indian traders operate out of other jurisdictions. Take your unique trading requirements into account when selecting a broker, in particular, consider your strategy, capital and risk strategy before looking at bonuses. See our list of the top providers to get started.

FAQs

CFD brokers are prohibited by The Securities and Exchange Board of India (SEBI) who do not have a robust set of rules to regulate them. However, some offshore brokers, or those regulated in other jurisdictions, do permit Indian traders. See our table of the best CFD brokers in India.

How Much Capital Do I Need To Trade With CFD Brokers In India?

As CFDs are a leveraged product, you do not need a lot of capital to place larger trades. The higher the leverage ratio offered by the broker, the larger trades you can place beyond the balance in your account. Each broker will have varying minimum deposit requirements, but these are usually small. Consider what you can afford to lose before depositing.

Will I Be Taxed For Investing With CFD Brokers In India?

Any profits or losses on your trades may be subject to capital gains tax. It could be worth consulting a tax professional to ensure you meet your responsibilities.

How Do I Find The Best CFD Brokers In India?

The best CFD brokers in India will depend on your personal trading style, volume and other individual factors. We’ve compiled a list of the top brokers for you to select from.

What Are The Different Types Of CFD Brokers In India?

There are two main types of CFD brokers in India, ‘no dealing desk’ or ‘dealing desk’ brokers. No dealing desk brokers are market makers that create their own liquidity by taking the other side of a trade. Dealing desk brokers connect directly with exchanges. There are pros and cons to each. Dealing desk brokers tend to have high minimum deposits while some prefer the transparency of a direct exchange approach.