To find the best low-cost CFD broker in Australia, I have done the research to show you the different costs that you will incur as part of your trading with CFD brokers.

Also, if you are trading from a country other than Australia the Commissions and interest rates will be different from what you see below.

I have narrowed down to the top 5 low-cost brokers from all possible providers. I have gone through the process of elimination based on their platform, instruments available to trade and their cost.

1. INVAST GLOBAL
2. IG MARKETS
3. INTERACTIVE BROKERS
4. TRADE DIRECT 365
5. CMC MARKETS

As you can see from the list above I am biased towards DMA brokers, for multiple reasons.

DMA is Direct Market Access as defined in the name, it allows traders to place Buy or Sell orders directly with the exchange order book.

With Market Maker, ECN and  STP brokers can manipulate the market and add spread on the underlying share price. Your broker source of revenue also includes Spread.

So I have personally opened accounts with these brokers in the past with the intention of trading, I have moved on as either I found a cheaper broker or the broker has some shortcoming.

Not all brokers will offer complete functionality that we need as a trader, there will always be some level of compromise irrespective of the broker we choose. 

As part of this analysis I will compare the top 5 low-cost brokers. I will also explain the broker I use and what is the 2nd best alternative.

We will look at how much it costs by trading a certain volume of trades between brokers.

Interactive Brokers is the cheapest broker but is not for everyone, I will explain to you the reasons why it’s not for everyone and what is your 2nd best alternative.

Your brokers primary source of income is from Base Commission, Overnight Finance and Spread.

Base Commission

Most of the brokers charge Commission rate and minimum commission charge.

For instance, IG markets charge a Commission rate of 0.08% and minimum commission charge 7 dollars. If your order size generates less than $7 commission then you have to pay a minimum of $7.

Overnight Finance

Overnight Finance is the amount of interest charged to your trades that are kept open overnight.

If you are a day trader this doesn’t apply to you as you will be closing your trades during the day or before the market closes for the day.

If you are a swing trader like me where open positions run for few weeks then this is something that I would suggest you pay very close attention to.

So basically when we place a CFD trade we are using leverage this means someone on the other side is lending us the money required to trade.

Also one thing that annoys me here is that brokers don’t deduct the deposit we gave for the trade, they charge interest for the whole position.

This overnight financing rate has two components in it one is currency spread itself and the other is the interbank rate.

Currency spread is the leaver brokers use to pass on their costs and  is also an additional source of revenue for them.

Interbank rate is the interest rate charged between banks for short-term loans.

Further, below you can see how the base rate or currency spread plays a significant role in deciding the cost of trading.

ASX Data Fee

Some brokers offer live share data through derived pricing for most exchanges. This allows us to view real-time share prices without paying for it.

Subscribing to official live share prices data from an ASX exchange, whether that’s to trade share CFDs or view price, incurs a monthly fee.

Spread

On top of bid and ask price brokers apply additional spread, this is not done in DMA account.

For TD365 the spread type is fixed to 7bps and for CMS it is variable based on the instrument and market conditions etc.

Platform Fee/ Min Brokerage

Brokers build or purchase their own platforms while some brokers tie-up with 3rd party providers, for instance if you look at INVAST the platform they provide is IRESS this is the same platform you can access if you trade with commsec pro.

Also the platform fee is quite high compared to other brokers.

Trade without Data fee Subscription

Some brokers will refund Data Fee and Platform/account fee on a minimum trades or commission generated.

So how much does it cost to trade with these brokers in a year?

So basically with all this information how much does it cost to trade with each of these brokers.

I have done my calculations using two scenarios one where your average trade size is $5,000 and another scenario the average trade size is $15,000.

Account size $50,000

Scenario Parameters
Total Trades	600
Account Size	$50,000
Average Trade Size	$5,000

And for the sake of simplicity lets assume that we are fully invested for 365 days in a year.

I have assumed that the average trade size is $5,000 dollars

Who is the low-cost CFD broker?

As you can see from the list below Interactive brokers turns out to the cheapest of all. There are some pros and cons of trading with interactive brokers that I will explain later.

If you are a serious trader and hold your position overnight then you need to give more weightage to interest rate considering as its 3 to 4 times more expensive than the commission itself.

	IG MARKETS	INVAST GLOBAL	INTERACTIVE BROKERS	TRADE  DIRECT 365	CMC MARKETS
Broker Commission	$7	$6	$5	$5	$7
Interest Rates	2.69%	2.19%	1.50%	2.75%	2.75%
Total Interest Charged	$4,200	$3,600	$3,000	$3,000	$4,200
Commission Charged	$1,375	$1,095	$750	$1,375	$1,375
Total Cost	$5,575	$4,695	$3,750	$4,375	$5,575
Additional Cost	-$1,825	-$945	$0	-$625	-$1,825
	49%	25%	0	17%	49%

The second cheapest broker seems to be TradeDirect 365 with 17% more expensive than Interactive brokers.

This could be deceiving as I have not accounted for the fixed spread of 7 bps, if you include that spread in your cost Trade direct 365 may no longer be the second cheapest broker.

INVAST which is also a DMA broker will be your second best alternative for a low-cost broker.

It might be an achievable task to know the cost with Trade Direct 365 but with CMC its impossible to know your trading costs before hand because of the variable spread that the broker charges.

That is why I prefer to trade with DMA brokers.

Let’s test it with $15,000 trade size

Let’s test these brokers with our other scenario where the average trade size is $15000 thereby enforcing the percentage commission model with these CFD brokers.

As you can see that Interactive Brokers still holds its place where as the TradeDirect365 is no longer in second place even with out considering the spread value.

It’s obvious that the interest rate and .01% commission difference has made this INVAST more lucrative than Trade Direct 365.

	IG MARKETS	INVAST GLOBAL	INTERACTIVE BROKERS	TRADE  DIRECT 365	CMC MARKETS
Broker Commission	0.08%	0.06%	0.05%	0.07%	0.09%
Interest Rates	2.75%	2.19%	1.50%	2.75%	2.75%
Total Interest Charged	$7,200	$5,400	$4,500	$6,300	$8,100
Commission Charged	$1,375	$1,095	$750	$1,375	$1,375
Total Cost	$8,575	$6,495	$5,250	$7,675	$9,475
Additional Cost	-$3,225	-$1,245	$0	-$2,425	-$4,225
	63%	24%	0%	46%	80%

Even in this scenario, CMC markets continue to take the most expensive position before including the spread.

Closing thoughts

To conclude Interactive Brokers comes as the winner for a low-cost broker.

I currently trade with Interactive brokers, as I was mentioning in the beginning not all brokers offer everything that we need as a trader same applies with interactive brokers.

What I have found is that the number of ASX shares available to short with this broker is less than TradeDirect 365 or IG. This is something that you need to consider based on your trading strategy.

If you leave your choice of broker in the comments below I will include that broker in my future comparison.