Launched in November 2007 on the Australian stock exchange these Exchange traded contracts are a relatively new and a fresh form of contract for difference. What makes them unique and different is the trading mechanism involved with them. These exchange traded CFDs are traded by means of an exchange based mechanism. Making them popular and attractive are the benefits of reduced transaction costs while retaining the traditional benefits of leverages. The basic ground aim of this exchange traded CFDs is to streamline the market of CFDs and to make the process all the more regulated and transparent. The exchange manages to achieve this aim as there is in place an authorized government body which keeps a check on all individual trades. The working of this exchange traded CFDs can be simply stated by saying that here the broker or the trader replicates every transaction of a CFD by simply placing a stock order for the same in the corresponding underlying market. This act in turn facilitates easy and effective synchronization between the CFD traders and the price movements in the underlying exchange markets.

As in the case of Over the counter CFDs here too in the case of Exchange traded CFDs the financing costs are payable for owners of long position and are paid to the holders of short position. The advantages associated with these exchange traded CFDs include the following:

• In the case of exchange traded CFDs the upfront capital required is very less as compared to that required to take the same position in the underlying physical product market.
• The financing charges associated with exchange traded CFDs is less in comparison to that associated with over the counter CFDs because of the presence of a central counter party clearing model.
• Exchange traded CFDs provide the investor with the opportunity to short sell securities not owned by them.
• Exchange traded CFDs include a cash flow which represents the value of any applicable franking credit.
• The trades involved with exchange traded CFDs will be effectively backed by the Exchange Clearing Guarantee Fund which will subsequently work by negating creditworthy exposure that presently exists under non exchange CFDs.
• Only accredited brokers will be allowed to offer the facility of exchange traded CFDs.
• The trades will be carried out by the SFE Clearing Corporation and not with the original party of the trade.
• The traders will have the facility of converting their Exchange CFD equity into shareholding at any point of time. Facilitating this conversion will be the Exchange for physical facility.

As of now the progress of ASX CFDs coming under AXA Limited which is a result of a merger between the Australian Stock Exchange and SFE Corporation can be charted as follows:

• It includes top 50 stocks listed on ASX.
• Major global indices are also included within ASX CFDs.
• Also within its kitty is a whole wide range of major foreign exchange currency rates.

Some few selected commodities too have made its place in the list included within ASX CFDs.