CFD vs Futures: how the two derivatives differ

CFD or futures: the short answer

With a CFD you agree with your broker to settle the price difference; the broker sets the terms and is usually your counterparty. A futures contract trades on a public exchange such as CME, has fixed sizes and a set expiry, and goes through a clearing house.

Neither gives you the underlying asset. A perpetual contract is closer to a future without an expiry date, kept near the market price by funding payments.

CFDs vs Futures: the numbers

Key differences between CFDs and futures

• Transparency: futures prices are public on the exchange; CFD prices come from the broker.
• Expiry: futures expire; CFDs do not.
• Access: CFDs suit small accounts; futures often need more margin per contract.
• Perpetuals like BRVX's: no expiry like a CFD, a funding rate instead of financing, margin in crypto.

CFDs: pros and cons

• Pros: Small, flexible sizes.
• Pros: One account for many markets.
• Cons: Broker sets prices and financing.
• Cons: Not available everywhere.

Futures: pros and cons

• Pros: Exchange-traded, public prices.
• Pros: Clear, standardized terms.
• Cons: Expiry and roll to manage.
• Cons: Large contract sizes.

CFD vs Futures: when to pick which

Small accounts trading many markets often use CFDs where allowed. Traders who want exchange pricing use futures. Perpetuals combine no expiry with a transparent funding rate; on BRVX the rate and fees for each market are published in the live tariff.

How a CFD works between you and a broker

A CFD, or contract for difference, is an agreement between you and a broker. You pick a market, a direction and a size. When you close, the broker pays you the price difference, or you pay it. Nothing is ever delivered.

The broker writes the terms. It sets the quote, the spread (the gap between the buy and sell price), the financing rate and the margin you need. Many brokers take the other side of your trade or pass it on to another firm. That is why a CFD is only as good as the broker behind it.

How a futures contract works: margin, clearing and expiry

A futures contract is a standard agreement, listed on an exchange, to buy or sell a fixed amount of something on a set date at a price agreed today. The exchange decides the size, the tick (the smallest price step) and the expiry months. Every buyer and seller trades the same contract.

After each trade, a clearing house stands between the two sides. You post initial margin, a deposit set by the exchange. Each day, profits and losses move between accounts in cash. This is called marking to market. If your account falls too low, your broker asks for more money.

At expiry, the contract is settled in cash or, for some commodities, by physical delivery. Most traders close or roll before that date.

What moves the price of a CFD vs a futures contract

A CFD usually follows the current price of the underlying market, plus the broker's spread. Some index and commodity CFDs are priced from the futures market instead, adjusted by the broker. Either way, the quote you see comes from one firm.

A futures price is set by buyers and sellers on the exchange. It is usually close to the current market price, but not equal. The gap is called the basis. It comes from interest rates and, for commodities, storage costs until expiry, plus demand for the contract itself. As expiry comes closer, the basis shrinks toward zero.

So a futures price already includes the cost of time. A CFD charges that cost separately, through financing each night.

CFD vs futures: a worked example of keeping a trade open for a month

Here is an example with round, illustrative numbers. It is not a quote from any real broker or exchange. Say you want a long position worth $10,000 on a stock index for about one month.

The point is not which total is smaller. It is when and how the cost appears. Short trades barely feel financing; trades kept open for weeks feel it every night.

• CFD: the broker charges financing each night. At an example rate of 6% a year, that is about $50 for the month, plus the spread to open and close.
• Futures: there is no nightly charge. The cost of time is already in the futures price, which in this example starts a little above the index.
• Futures roll: if the contract expires mid-month, you close it and open the next one. You pay fees twice and trade at the new contract's price.
• Perpetual on BRVX: no expiry and no roll. Funding is charged each period while the position is open.

Common mistakes when trading CFDs or futures

Both products use leverage, so small errors grow quickly. These are the ones traders make most often.

• Treating a CFD quote as the exchange price, without checking the spread.
• Forgetting that CFD financing is charged every night and adds up over weeks.
• Missing a futures expiry date and getting an unplanned roll or settlement.
• Ignoring contract size: one futures contract can be far larger than the account.
• Comparing a futures price with the current market price and calling the gap an error, when it is the basis.
• Using high leverage with a wide stop-loss, so the position is closed out first.
• Choosing a broker or venue without checking who regulates it.

How CFD vs futures ideas apply to perps on BRVX

A BRVX perpetual contract borrows from both. Like a CFD, it has no expiry and you can open small sizes. Like a future, it tracks a market price and has a clear, published cost of time: funding, charged every hour on most markets and every 3 hours on the Nasdaq-100 tracker XYZ100. Long and short both pay it.

Contracts are quoted in USDT. You trade the price only, with no dividends and no voting rights. Margin can be posted in USDT, USDC, BTC, ETH, SOL or BNB.

BRVX lists 41 markets, with leverage from 5x up to 150x on some and fees from 0.05% per side. You open with a market order and can set take-profit and stop-loss. Leveraged trading can lose all of your margin, so keep size small. BRVX is not available to US persons.