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Who owns the shares in a CFD trade
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Last update : November 2011
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| When you trade shares via CFDs your broker owns the physical shares.
This is because a CFD is what they call a swap trade. You have swapped the physical shares for a paper contract which gives you the right to 100% of the profits and losses but not the full ownership of the shares.
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| This also means that the CFD trader will have no rights to vote at the company's AGM or on other company related matters. Some companies also offer shareholder perks such as reduced flight prices or discounts in their stores, and again the CFD trader will not be entitled to these.
However the CFD trader will be entitled to take up a company Rights Issue and receive dividends, or have to pay them if short the shares - see how are CFD dividends handled.
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| Interesting point re voting rights |
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Often you'll hear about certain entrepreneurs using CFDs to build a stake in a company with a view to joining the board or using their share holding to influence general company policy. Perhaps pushing for asset sales or a general company reorganisation.
In these types of situations the CFD holder will have negotiated a special deal with their broker giving them full voting rights for their CFD position. So although they don't physically own the shares they control the voting rights.
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