CFDs used to be a fiddly, niche product used by investors to avoid stamp tax on UK share trades. Today, so-called “contracts for difference” are commonplace. And their uses range from giving hedge funds cheap leverage to providing exposure to exotic equity sectors in emerging markets.

A CFD is not a security like a bond or equity, but a contract typically between an investor and an investment bank. At the end of the contract, the parties agree to exchange the difference between the opening and closing prices of a specified financial instrument.