I have recently started to trade CFDs via Westpac (rebranded MFG).
The margin on nearly all the stocks that I've taken positions on is 100%, which means that I have to pay the full price of the security.
I've noticed that I get charged an interest which looks a bit excessive to me. I have inquired as to how the interest is calculated and got the following reply:
section 5.4.3 states that interest ‘is calculated as the number of underlying instruments or securities to which a CFD applies multiplied by the closing price multiplied by the applicable funding rate divided by 365’.
The interpretation of the above clause was given to me as:
"the interest is not charged on the amount of funds that you actually borrow to make up the full value but on the full face value of your open positions based on the closing price"
This means that if I open a CFD position with 100% margin for, say, 10,000 (which I have to fork out without borrowing any money from the provider) they charge me interest on my 10,000...
Does this make sense? I thought there would be no interest as I haven't borrowed anything from them (i.e. there's no leverage).