Mobile phone tool keeps tabs on CFD portfolios

Investors now trade shares using their mobile phones with a service launched by online brokerage company CMC Markets.

UK-based CMC - which specialises in trading shares by contracts for difference (CFD) - opened an office in New Zealand in May.

The service, called Mobile Marketmaker, can be used to trade shares and allows investors to take advantage of small movements in the marketplace, said CMC general manager Sargon Elias.

"Basically it allows people to monitor and trade shares on their CFD portfolio using their mobile phone."

Elias has found the New Zealand trader to be"very open-minded", trading on quite a few different stock exchanges by mobile phone, compared to customers in the UK and Australia who tend to be more conservative.

Using CFDs, an investor buys exposure to a large amount of shares for a relatively small outlay.

"You could, say, put $100 in, and get a $10,000 position, even if the price moves one point in the market it has a big effect," said Elias. "The danger there is you will lose more than you invest."

In a normal share-trading situation shares are bought low with the hope that they will rise, to be sold again at a higher price.

To mitigate against risk, CMC has put in place stop-loss orders, so if the stock goes down, the system automatically closes the investor out.

Elias says CFD is not gambling.

"It's taking advantage of moves in the market but it's not gambling in the sense that you go to a casino and someone takes a cut. It doesn't work like that for markets."

CMC Markets has grown its business to become the largest online CFD provider in Australia, with about 6000 individual trades per day, worth between $3 million and $30 million.

Originally used by large institutions to cover equity exposures, CFDs are now a commonplace trading tool used by retail investors around the world.

The company uses the UK Government spy centre GSHQ to protect the security of the system run online.

"We get regular tests done by GSHQ, who try to hack into the system. They are all certified Government security standards," Elias said

Mobile Marketmaker does not work on Telecom phones.


Contracts for difference

* Allow investors to make a profit or loss from fluctuations in the price of an underlying share or index without owning that security.

* With CFDs investors can make money in a rising or falling market.

* Investors can sell a CFD they don't own and profit if the security falls.