Equity Contract For Difference In Riverside
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The Riverside Company is a global private equity firm focused on making control and non-control investments in growing businesses valued at up to US$400 million. Since its founding in 1988, Riverside has invested in more than 480 transactions and has an international portfolio including more than 80 companies.
The primary reasons for the ban are concerns over the lack of transparency and the risks associated with leveraged trading. CFDs are over-the-counter (OTC) products, meaning they are traded directly between parties without going through a regulated exchange.
Equity is very risky for the investor and they need the potential for a 10x or greater return of their investment to justify the risks involved. Debt is less risky for the investor, so does not require a huge exit to justify the investment.
Broad Range of Investment Opportunities With investment strategies that include an array of geographies and approaches, Riverside considers a broad cadre of investment opportunities ranging from under $1 million to more than $400 million in enterprise value.
Contract for differences are derivative assets that a trader uses to speculate on the movement of underlying assets, like stock. If one believes the underlying asset will rise, the investor will choose a long position. Conversely, investors will chose a short position if they believe the value of the asset will fall.
While CFDs can be renewed with the agreement of both parties, that's not the case with equity swaps. Equity swaps expire at an agreed date and can't be extended or renewed, which limits their potential outcome. If you trade CFDs with shares involved, there's a fair chance that you can obtain dividends.
The main reason why CFD trading is not available to US traders is because it is against US securities law. Over the counter financial instruments, such as CFDs, are heavily regulated through legislation like the Dodd Frank Act and enforced by the SEC (Securities and Exchange Commission).
CFDs enable you to increase your purchasing power because you can trade them on leverage. This means you only need to put up a fraction of the full value of your trade–the "margin"–to gain full exposure. On most stocks, brokers offer leverage up to 5x (and up to 20x on stock indices).
