CFD Trading In Canada

With the demand for CFD trading in Canada increasing, many online platforms have emerged. But are CFDs even legal in Canada, and if so, what are the tax considerations? In answering both questions, we’ll explain why Canada offers one of the most secure trading environments, due in part, to the relatively low leverage options.

Best CFD Brokers in Canada

Forex.com boast a global reputation. Regulated in the UK, US and Canada they offer a huge range of markets, not just forex, and offer very tight spreads and a cutting edge platform.
Leading forex and CFD broker regulated in Ireland, Australia, Canada and South Africa. Avatrade are particularly strong in integration, including MT4
Fusion Markets are delivering low cost forex and CFD trading via low spreads and trading costs. Their message is - Stop paying too much to trade
BDSwiss offer 250+ Shares, Indices, Forex, Commodities and Cryptocurrencies markets via CFDs. With spreads from 1 pip and an award winning app, they offer a great package.
AxiTrader offers competitive spreads on a large range of Forex and CFD markets, integrated into the MetaTrader 4 platform. FCA and ASIC regulated.
69.6% of retail investor accounts lose money when trading CFDs with this provider
Global brand offering exceptional execution, low deposit requirements and advanced charting and trading platform features.
A regulated bank, Saxobank offer CFD, Stocks and Forex trading on 35,000+ markets via the SaxoTrader Pro and SaxoTrader Go platforms
Binary.com are the established pioneers of binary options. The choice of the advanced trader, Binary.com offer the greatest flexibility of any binary broker. They also offer Forex and CFD via the MT5 platform.
CMC Markets is headquartered in London and listed on the LSE. They offer competitive spreads on a global range of assets.
Zulutrade provide multiple automation and copy trading options across forex, indices, stocks, cryptocurrency and commodities markets
New Forex broker Videforex can accept US clients and accounts can be funded in a range of cryptocurrencies. Payouts reach 95% per trade.
IB Boast a huge market share of global trading. With a minimum deposit of $10,000 however, they remain an option for larger traders only.
Show All Brokers ⇩

What Is CFD Trading?

A contract for difference (CFD) is a derivative instrument, meaning you don’t buy or sell the underlying asset. Instead, you buy a number of units on a particular market, such as FX, and exchange the difference in value between the open and close of a position. Returns are calculated by multiplying the number of CFDs bought by each point of price movement.

Online CFDs are available on an array of markets, from stocks and shares through to forex, commodities, and cryptocurrencies. Also part of the CFD appeal is the ability to trade on leverage. Traders put down a deposit, called margin, then brokers extend capital so investors can take out larger contracts, which can lead to greater profits and losses. But as we’ll explain below, the leverage available for trading CFDs in Canada is limited due to strict regulatory oversight.

For further guidance on day trading CFDs, see here.

CFD trading in Canada is legal but heavily regulated. All brokers operating in Canada or opening accounts for Canadian citizens must conform to the regulations set out by the Investment Industry Regulatory Organisation of Canada (IIROC). The IIROC is governed by The Financial Institutions Supervisory Committee (FISC).

At a local level, three other agencies oversee financial markets:

  • The Ontario Securities Commission
  • The Autorité des Marchés Financiers
  • The British Columbia Securities Commission

Before opening a trading account with a broker, check for the IIROC’s risk disclosure on the bottom of the provider’s website. Alternatively, the IIROC’s ‘Dealers we regulate’ page lists all regulated brokers. Accounts with regulated Canadian brokers will receive cash protection of up to C$1 million in the event of the brokerage going bust.

Another requirement before you can start CFD trading in Canada is the verification of a range of information, including:

  • ID & address
  • Age & occupation
  • Social insurance number
  • Marital status & dependants
  • Investment experience & knowledge
  • Income & investment goals
  • Source of account funds
  • Risk appetite

Leverage Limits

A key distinction when CFD trading in Canada vs other countries is the restriction on using leverage. To reduce the risk exposure for traders, the Rule 100 document from the IIROC lays out limits on margin requirements. Those limits mean you may struggle to borrow as much in Canada as you can in Australia or the UK, for example.

Trading Platforms

The best online CFD trading platform in Canada will change depending on who you ask. With that said, top providers offer easy-to-use desktop and mobile apps. Traders should be able to test strategies, construct charts, and perform technical analysis. The best CFD day trading software also delivers comprehensive historical data and risk management tools. Regularly featuring in the top 10 CFD platforms are the MetaTrader 4 (MT4) and MetaTrader 5 (MT5) systems.

Choosing a Broker

Brokers offer different services and assets, so opt for the one that provides the best account support for the CFD markets you’re interested in. Also check for competitive fees. Most DMA and ECN brokers make money through the spread, but some charge commissions and additional fees. Keeping transaction costs low is particularly important for active short-term CFD traders.

The best online CFD brokers in Canada ensure prompt deposits and withdrawals. It’s worth exploring the additional education tools available too. Many providers have a social trader environment where other users explain how best to make CFD trades in Canada. Customer support during your usual trading hours should also be available.

Check out our complete list of top CFD brokers here.

Tax

Make sure you’re aware of your tax obligations before you start day trading CFDs in Canada. You’ll need to keep a record of profits and losses, as well as details on; instrument, purchase and sale date, price, size, plus entry and exit points. With that information, you should be able to ascertain which activity bracket your trading falls into and therefore, whether returns should be recorded as business income or capital gains and losses.

The Canada Revenue Agency (CRA) requires taxes to be paid by the end of the tax year – 31st December. Late or non-payments can result in an audit from the CRA, who can issue fines and in worst-case scenarios, jail terms of up to five years.

For more information on day trading taxes in Canada, see here.

Final Word

CFD trading in Canada opens the door to a range of markets and platforms. Not only are CFDs legal, but the trader environment is one of the most secure and regulated in the world. However, while a relatively safe market, CFD trading in Canada may prove challenging if your strategy uses high leverage ratios.

FAQ

What is a CFD in trading?

A contract for difference is a derivative instrument that allows you to speculate on price movements without owning the underlying security. If the market moves in your favour, the broker will pay you the difference in price between the open and close of your position. If the market moves against you, you’ll owe the broker the difference.

Yes – CFD trading is legal in Canada. Regulatory oversight by the Investment Industry Regulatory Organisation of Canada (IIROC) is among the strictest in the world.

Is CFD trading a con?

CFD trading is not a con, however, it is risky. It’s therefore important to sign up with a broker that is licensed with the Investment Industry Regulatory Organisation of Canada (IIROC).

How much money do I need to trade CFDs?

Although minimum account deposits vary between brokers, you can start day trading CFDs in Canada with C$250. It is worth shopping around for the best account as some brokers offer more attractive leverage options and trading tools the more you invest.

Can you make a living from CFD trading in Canada?

While it is possible to make a living CFD trading in Canada, the majority of traders will lose money. It’s important traders open accounts with their eyes open to the risks.