Free Trading software
If you have an account with CMC markets you get free access to the award winning Market Maker software. There are no account holding or software fees for receiving up to the minute news, 30 years worth of historic charts and receiving real time prices for the global markets. However, the Australian Stock Exchange (ASX) does charge a fee. *
* The ASX charges a small monthly fee of AUD $41.25 for supplying Australian share prices, this fee is paid to the Australian Stock Exchange by CMC Markets. You are able to easily switch this on or off and it is only required in order to trade Australian shares. It is important to note that the ASX feed is not required when trading the Australian Index or any other market around the world. CMC Markets will refund this fee if you make AUD$50 or more in commissions in one month, this equates to approximately five trades, assuming that each trade is the minimum commission cost of AUD$10.
Dividends and Imputation credits
A CFD mirrors the underlying asset and you will receive the cash equivalent of any dividend paid on the underlying share. The additional benefit in holding the CFD rather than the underlying share is that the dividend amount is credited to your Market Maker account on the ex-dividend date rather than having to wait for the payment date. The rules are that you must hold the CFD position coming into the ex-dividend date, i.e. the previous trading date to the ex date. If you hold a short position you will pay the dividend. This is because as soon as the stock goes ex, it is generally reflected in the share price with a downward movement. Therefore, if you hold a short position you will lose on the dividend payment, but gain that amount from the price drop. A strategy used by some traders is to take advantage of the difference between the change in share price and the dividend as the market is not always rational.
Because you get the cash equivalent of the dividend, these payments do not contain any imputation credits (also know as franking credits in Australia) and so will be treated as taxable income in the same way as any income you make from the gain in price of the CFD.
Tax implications for NZ
Tax is very dependant on individual circumstances and CMC Markets cannot provide individual tax advice. You should always seek independent tax advice before investing in any financial product.
Although CMC Markets cannot provide advice, here is some general information for investors who are New Zealand tax resident. They will be affected by New Zealand taxation rules under the NZ Tax Act 2004 ("NZ Tax Act")
Gains and losses from CFDs
The financial arrangements rules will generally apply to CFDs. This means that any gain (whether of an income or capital nature) derived from CFDs is likely to constitute assessable income and be subject to tax. The treatment of expenditure under a financial arrangement will depend on the nature and individual circumstances of the taxpayer. For example, a New Zealand resident company (other than a qualifying company) is ordinarily allowed a deduction for expenditure incurred under a financial arrangement.
Interest payments received from CMC Markets
If you hold more than NZD15,000 in your account we will pay interest on your free equity. Any interest paid by CMC Markets to you will be subject to resident withholding tax ("RWT") unless you hold a valid certificate of exemption from RWT. RWT is required to be deducted at the rate of:
- (a) 19.5%, 33% or 39% (as elected) if you provide an IRD number to CMC Markets; or
- (b) 33% (or 39% if elected) if you are a company and provide an IRD number to CMC Markets,
RWT will be deducted at the rate of 39% if no IRD number is provided. To the extent the tax rate at which RWT is deducted does not match your correct tax rate, you will be subject to an end-of-year adjustment for the underpaid or overpaid tax on your interest income.
Trading Costs
CFDs - Execution
Trading individual CFD shares costs 0.1% (minimum $10.00) for each trade in the currency of the underlying instrument. If you purchase 1000 Telecom CFDs @ $4.50 each you would pay NZD $10.00, if you bought 20 Google CFDs @ $460.00 each you would pay USD$10.00.
Trading indices, commodities, foreign exchange, treasuries and sectors attract no commission.
CFDs - Overnight
If you hold a long position overnight (past 5:00pm New York the global cut off time) you will have to pay funding costs on share and index positions, for borrowing the leveraged position from CMC Markets. It is calculated via the Central Bank Rate of the country that you are trading the CFD +2%, if you are short we pay you bank base rate of -2% for the open overnight short position. For example if the base rate in Australia is 6%, you would be charged 6%+2%=8% divided by 365 days in the year for each night that the position is held. Therefore, a AUD $10,000 position would be approximately AUD $2.19 each night.
Foreign Exchange
If you are Long the High Yielding currency you will receive interest and if you are short the high yielding currency you pay the financing and vice versa.
For Example:
You have a Short AUD/NZD position
1.1858 / 1.1870 (example rate)
Therefore - Short $100,000 AUD/NZD @ 1.1858
Interest rates (as at 14th Sep 2006) 6% Aus & 7.25% NZ
$100,000 x (0.06 / 365) = AUD $16.43
$118,580 x (0.0725 / 365) / 1.1858 = AUD $19.86
Interest paid on the short AUD/NZD overnight position $19.86 - $16.43 = $3.43 AUD (less CMC spread*)
We would pay $3.10 after spread is taken away "the financing is based upon the interest rate differential plus the CMC spread (usually around 20pips)"
*The spread added is different across all currencies so it cannot be added into the formula generically. The additional spread on financing is not particular to CMC and even institutions trading $5-10 million parcels will still get straight rates-differential. All banks will add on their own spread in much the same way as we do. This is because the base cash rate of financing (eg RBA rate of 6% in Australia) is the benchmark lending rate normally only available to Governments, whereas private institutions (such as brokers) cannot borrow funds at this same rate, it will generally be a higher rate.
Spreads
There is also a spread cost in all transactions. This is the difference between the bid price and the offer price. What someone is prepared to sell your asset at and what someone is prepared to buy it for. For example, there is a two point differential between the USD and EUR when trading currencies.
Cash transfers in
Credit card
Visa/Mastercard 2.32% of transaction
Cash no fee
Cheques no fee
Cash Transfers out
Bank transfer NZD1.50
Foreign SWIFT payments NZD30.00
