Contract for Difference (CFD) Singapore: How CFDs Work
For informational purposes only — not financial advice.
A Contract for Difference (CFD) is a derivative that lets investors speculate on asset price movements without owning the underlying asset. In Singapore, CFDs are MAS-regulated 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 — profit S$3/share without owning DBS shares. Key features: leverage (amplifies gains and losses), long and short (profit from rising or falling prices), no ownership (no voting rights, no CDP settlement), and overnight financing charges (SOFR + spread — expensive for long-term holding).
MAS Regulations for CFDs in Singapore (2026)
| Asset Class | Max Leverage (Retail) |
|---|---|
| Major forex pairs | 20:1 |
| Equity indices | 10:1 |
| Individual stocks | 5:1 |
| Cryptocurrencies | 2:1 |
MAS also requires: Customer Knowledge Assessment (CKA) before retail CFD access, negative balance protection, and prominent risk warnings. All CFD providers must hold a CMS licence. Verify via MAS Financial Institutions Directory.
CFDs vs Direct Stock and REIT Investing
| Factor | CFD | Direct Stock/REIT |
|---|---|---|
| Purpose | Short-term speculation | Long-term wealth building |
| Income | Price movement only | Dividends/REIT distributions |
| Overnight cost | Financing charges apply | None |
| CPF investible | No | Yes (CPFIS approved) |
Industry data shows 70–80% of retail CFD traders lose money. For passive income, direct S-REIT or ETF investing is far more appropriate for retail investors.
CFDs on S-REITs: What to Know
Some brokers offer S-REIT CFDs for short-selling or hedging. Key caveats: (1) No DPU distributions — only price adjustments on ex-date. (2) Financing charges at SOFR + 2–3% quickly erode any REIT yield advantage (5–7% p.a.). (3) Long-term REIT CFD positions are economically unviable for income investors. Use CFDs only for short-term hedging if experienced. Build real income with direct REIT ownership and use our free S-REIT Yield Calculator.
Frequently Asked Questions
What is a CFD in Singapore?
A Contract for Difference (CFD) is a derivative where you speculate on asset price movements without owning the asset. Leverage amplifies both gains and losses. CFDs are MAS-regulated trading instruments, not long-term investment products.
Are CFDs regulated in Singapore?
Yes. MAS regulates CFDs under the Securities and Futures Act. Licensed 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 is restricted to CPFIS-approved products, which do not include CFDs.
What leverage can I get on CFDs in Singapore?
MAS retail leverage limits: 20:1 for major forex, 10:1 for equity indices, 5:1 for individual stocks, 2:1 for cryptocurrencies. These limits apply to all MAS-licensed CFD providers.
Should long-term investors use CFDs instead of buying stocks or REITs?
No. Overnight financing makes CFDs 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.