BJM PCS creates new option for its clients

LEADING wealth manager Barnard Jacobs Mellet Private Client Services (BJM PCS) today [Monday, July 30] announced an extension of its service offering to high net worth investors with the launch Contracts For Difference (CFDs).

This over-the-counter instrument has achieved huge market acceptance in Australia and Britain. CFDs today account for half the daily traded volumes on the London market.

Hobs Mpho Mojalefa, head of dealing at BJM PCS, noted: "The CFD launch is in response to growing demand by our clients for cost-efficient geared products.

"CFDs are targeted at the aggressive trader with a known appetite for risk who seeks out leveraged opportunities and already trades online or through a stock-broker. The product is also suitable for sophisticated investors who can use the CFD market to balance certain portfolio positions.

"Geared products magnify risk as well as opportunity. We will therefore market this service in a responsible manner while ensuring all clients are fully informed of the special characteristics of CFD instruments."

A CFD is an over-the-counter equity trading product that gives leveraged exposure to JSE-listed securities at a lower cost than direct share dealings. The two parties to the contract exchange the difference between the opening and closing value of the underlying equity instrument.

In this way, CFDs allow investors to speculate on the rise and fall of JSE-listed securities without direct ownership of the shares.

For a relatively small amount of capital, the investor buys a proxy for the underlying security and magnifies profit or loss in line with the level of gearing. The margin may vary from 8% to 20%.

The most common CFD strategies are long and short positions, hedging and pairs trading. Unlike that other geared product, single stock futures, long-strategy CFDs can receive dividends and the contract has no expiry date.

BJM PCS will offer clients a free CFD trading platform, allowing them to view live CFD prices, their current profits or losses, the cash available in their portfolios and their overall positions.