Investors beat tax by using CFDs

HALF of all equities traded in the UK last year were traded as contracts for difference (CFD), as investors looked to evade stamp duty.

A total of €1.3 trillion (£1.1 trillion) worth of shares were traded through CFDs, according to data compiled by US research house Tabb Group.

CFD, a form of equity derivative that allows investors to speculate on share price movements without the need for ownership of the underlying shares, do not incur stamp duty as an attractive alternative to cash equity.

The new research found that 35 per cent of the €3.9 trillion exchanged in equities in the UK last year across all products could be written off, due to reprints of already-conducted trades artificially boosting the figure, putting the true value of executable shares at €2.5bn.

The Tabb research also found trading in dark pools was higher in the UK than it was across Europe as a whole last year.

It found trading in broker crossing systems (BCS), electronic off-exchange trading platforms, accounted for eight per cent of executible liquity last year.

Europe-wide data provided by Thomson Reuters showed that trading in dark pools, including BCS activity, ran at around four per cent of overall market activity in December last year.