[The Trading Edition] Episode 21: A Trap Set by a London Banker?! The Sweet Temptation and the Hidden Side of CFDs (Contract for Difference)???

Last time (the 20th edition), we peeked behind the scenes of the cruel options market where professionals push “hope” onto beginners. A buyer with overwhelming disadvantage and a seller who has the overwhelming advantage of time (time decay). Some of you may have felt a chill as to how brutal the “battlefield” we fight on truly is.
Now, as I warned last time, I will guide you into the world of CFDs (Contract for Difference), which have become extremely popular in Japan in recent years through smartphone apps and the like. They are advertised as a convenient tool to trade stocks or stock indices from a small amount, but once you understand how they originated, your perspective will change a bit.
In fact, CFDs were not created for our sake. Their origins trace back to the 1990s in London.
1. The day when professional “tax-saving tools” transformed into a mass-market “leverage product”
How CFDs were born and why they spread so widely is hidden behind savvy marketing by the financial industry.
Birth in 1990s London:CFDs were developed in the 1990s by employees of a securities firm in London (UBS Warburg).
Originally a backdoor tool for institutional investors:Initially, it was a “professional-only tool” used by institutions to hedge stock price fluctuations or save on taxes.
Liberation and temptation for individual traders:However, by the late 1990s, several firms marketed CFDs for their “leverage effect” and (in the UK) “tax exemptions,” starting to sell to individual traders.
Expansion worldwide:Subsequently, the range of tradable assets expanded from London-listed stocks to global equities, commodities, bonds, and currencies. Notably, CFDs based on major stock indices like the Dow Jones and the S&P 500 quickly became extremely popular products.

2. The true nature of CFDs: there is no “physical asset,” just a “gamble”
CFD stands for Contract For Difference. Translating this into Japanese means “差金決済取引.” It is essential to clearly understand what this implies.