Disabled CFD trading

[Elias]

Hi folks,

Need some help with this issue....

I've tried to place a CFD short order for a selected instrument and receive the following notice: Trading Short for selected instrument disabled.

The instrument has suffered of a major crash in it's underlying stock and that's why it has now been disabled by my broker.

If I had owned this short position in front of 'the crash', what would have happened to my CFD's? Does a broker have the right to cancel a short position or would nothing have happened since I owned the short position before my broker disabled the trading?

Thanks,
Elias

[SJCFDs]

The CFD broker would only have applied that restriction to short selling if there were a valid reason to do so.

So for example - if as you have mentioned the stock has suffered massive losses over a short preiod of time (i.e. crashed), then as so many people try to jump on the band wagon and short the stock even further - it causes real problems.

Remember, anyone who wants to short a stock technically needs to find someone to "borrow" the stock from in order to sell at the current market price, and then return the stock once the position is closed.

For very liquid stocks with relativley stable prices, the CFD brokers usually have no issues with finding stock to "borrow" to hedge their position when a client goes short.

However - as mentioned above - it is very difficult to find "borrowable" shares in markets that are crashing, there fore the "shorting disabled" function is activated on markets that the CFD brokers are unable to hedge when a client goes short.

If you are ALREADY holding a short position and the market crashes - then it's happy days. The CFD broker will have hedged your short position AT THE TIME YOU OPENED IT - and are therefore protected against the movement. If the CFD broker has failed to hedge your position for whatever reason - whether on purpose or by mistake - they CAN NOT cancel your position and must honour the trade.

After all they are professionals - if they arent hedged it's their fault, not yours!!!

[JohnsonG]

You should contact your broker, from reading your post it is your brokers responsibility to have hedged the position. But just try to find out the issue by talking to your broker, or other economic advisers.


cheers