Contract for Difference (CFD) Singapore: How CFDs Work
This page is for informational purposes only and does not constitute financial advice.
A Contract for Difference (CFD) is a financial derivative that lets investors speculate on asset price movements without owning the underlying asset. In Singapore, CFDs are regulated by MAS and are trading instruments — not long-term investment products — due to high leverage, overnight financing costs, and the absence of dividends for CFD holders.
How CFDs Work in Singapore
A CFD is a contract to exchange the price difference of an asset between opening and closing. Buy a DBS CFD at S$30, sell at S$33 — you profit S$3/share without owning DBS shares. Key features: leverage (amplifies gains and losses), long and short capability (profit from rising or falling prices), no ownership (no voting rights, no SGX settlement), and overnight financing charges (SOFR + spread, making long holding expensive).
MAS Regulations for CFDs (2026)
| Asset Class | Max Leverage (Retail) |
|---|---|
| Major forex pairs | 20:1 |
| Equity indices | 10:1 |
| Individual stocks | 5:1 |
| Cryptocurrencies | 2:1 |
MAS requires: Customer Knowledge Assessment (CKA) before retail CFD trading, negative balance protection, and prominent risk warnings. All CFD providers must hold a Capital Markets Services (CMS) licence. Verify on the MAS Financial Institutions Directory.
CFDs vs Direct Investing: Comparison
| Factor | CFD | Direct Stock/REIT |
|---|---|---|
| Purpose | Short-term speculation | Long-term wealth building |
| Income | Price movement only | Dividends/REIT distributions |
| Leverage | Yes (amplified risk) | No (unless margin account) |
| CPF investible | No | Yes (CPFIS approved) |
Industry data shows 70–80% of retail CFD traders lose money over time. For passive income, direct investment in S-REITs or ETFs is far more appropriate.
CFDs on S-REITs: What to Know
Some brokers offer S-REIT CFDs for short-selling or hedging. Important caveats: CFD holders receive no DPU distributions (only price adjustments). Overnight financing charges at SOFR + 2–3% quickly erode any S-REIT yield advantage (5–7% p.a.). For most retail investors, the financing cost makes long-term REIT CFD positions economically unviable. Use CFDs only for short-term hedging if you have the expertise. Build real income with direct REIT ownership. See our S-REIT Yield Calculator.
Frequently Asked Questions
What is a CFD in Singapore?
A Contract for Difference (CFD) is a financial derivative where you speculate on asset price movements without owning the asset. You profit if the price moves in your predicted direction, and lose if it moves against you. CFDs use leverage, amplifying both outcomes.
Are CFDs regulated in Singapore?
Yes. MAS regulates CFDs under the Securities and Futures Act. Licensed CFD providers must conduct customer knowledge assessments, apply leverage limits, and provide negative balance protection for retail investors.
Can I use CPF to trade CFDs?
No. CPF funds cannot be used for CFD trading. CPF investments are restricted to CPFIS-approved products, which do not include CFDs.
What leverage can I get on CFDs in Singapore?
MAS sets retail leverage limits: 20:1 for major forex, 10:1 for equity indices, 5:1 for individual stocks, and 2:1 for cryptocurrencies. These limits apply to all MAS-licensed CFD providers.
Should long-term investors use CFDs instead of stocks or REITs?
No. CFDs are trading instruments. Overnight financing charges make them expensive to hold long-term, and you receive no dividends. For passive income, direct investment in S-REITs, dividend stocks, or ETFs is strongly preferred.
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