Direct Stocks vs CFDs vs Perpetual Futures

Updated: October 12, 2026

The comparison of stock CFDs vs direct stocks begins with ownership. A direct stock position represents an interest backed by real company shares, while a stock CFD and a stock perpetual are derivative contracts that follow price movements without transferring ownership of the underlying shares. Explore eligible instruments in Bybit Stocks.

Bybit gives eligible users access to different stock-related products, so the label must be checked before every trade. Investors exploring U.S. Stocks and ETFs through Bybit should separate ownership products from leveraged derivatives. The NVIDIA stock page provides a practical example of the instrument details investors can review before ordering.

The Bybit Stock Launch Carnival highlights the current stock campaign and provides a direct route to its live terms, eligibility details and participation information.

This article is educational and not financial, legal or tax advice. Derivatives can involve leverage and liquidation risk. Stock prices can also fall. Confirm product terms and eligibility before trading.

The Three Products: Definitions

Each of the three products represents a different legal and financial arrangement, and those differences matter before you place a trade.

What Is a Direct Stock (Cash Equity)?

A direct stock (also called a cash equity) gives you legal ownership of shares in a publicly listed company. When you buy a direct stock, you acquire title to those shares, held either directly in your name or through a nominee account operated by your broker.

Direct stocks trade on regulated exchanges such as the NYSE, NASDAQ, or London Stock Exchange, during defined market hours. Your broker acts as your agent, executing the order on the exchange on your behalf. The broker does not take the other side of your trade.

Costs consist of commission (zero on many modern platforms), the bid-ask spread on the exchange, and in the UK a 0.5% Stamp Duty Reserve Tax (SDRT) on purchases of UK-listed shares. There is no inherent leverage. Ownership confers rights: actual dividends, shareholder votes, and entitlement to participate in rights issues. US market trades settle on T+1 (since May 2024); some other markets still use T+2.

What Is a Stock CFD (Contract for Difference)?

A stock CFD (Contract for Difference) is a financial contract between a trader and a broker to exchange the difference in a stock's price from the time the contract opens to the time it closes, with no transfer of share ownership.

Stock CFDs are over-the-counter (OTC) instruments, meaning traded directly between the trader and the broker, not on a regulated exchange. The CFD broker typically acts as principal (market-maker), taking the other side of your trade.

Leverage is available. You deposit initial margin (the capital required to open the position) and control a position larger than your deposit. Under FCA rules in the UK and equivalent ESMA product intervention rules for EEA markets, the retail leverage cap for individual stock CFDs is 5:1. Professional clients may access higher ratios.

Overnight financing (also called the swap rate, rollover fee, or holding cost) is the daily charge a CFD broker applies for keeping a leveraged position open past the daily rollover time, typically 10pm UK time. Stock CFDs allow native short selling without borrowing shares. CFD traders receive a dividend adjustment on ex-dividend dates: a cash credit for long positions, a cash debit for short positions. This is not a dividend for legal or tax purposes.

Advantages of stock CFDs over direct stocks:

• Access to leverage with a fraction of the full position capital
• Go short on a stock with a single sell order
• Exempt from UK Stamp Duty Reserve Tax
• Extended trading hours on some platforms
• Can hedge a direct stock portfolio using short CFD positions

Disadvantages of stock CFDs:

• No ownership of the underlying shares
• Daily overnight financing costs accumulate on held positions
• Losses can exceed your deposit if negative balance protection does not apply
• Counterparty risk: you hold a contract with the broker, not shares in custody
• No actual dividends or shareholder rights

[X]% of retail investor accounts lose money when trading CFDs with this provider.

What Is a Perpetual Future (Stock Perpetual Contract)?

A stock perpetual is a derivative contract that tracks the price of an underlying stock without an expiry date, meaning you can hold the position indefinitely as long as you maintain the required margin. Unlike traditional futures contracts, which carry a fixed expiry date on which the contract must be closed or rolled, perpetual futures have no expiry.

Perpetual futures maintain price alignment with the spot price through the funding rate: a periodic payment exchanged between long and short position holders. When the perpetual contract price trades above the spot price, the funding rate turns positive and long holders pay short holders. When the perpetual price trades below spot, the rate turns negative and short holders pay long holders. Funding is typically exchanged every 8 hours on most platforms, though intervals vary. (Note: stock perpetual mechanics may differ from crypto perpetual futures in funding rate frequency, magnitude, and dividend treatment.)

Stock perpetual holders do not own the underlying shares. Leverage is available and typically higher than retail CFD caps, though the specific maximum varies by platform and jurisdiction. The account balance is continuously mark-to-market (the continuous revaluation of your open position at current market prices, with gains and losses reflected in your account balance in real time). When margin falls below the maintenance margin threshold, the platform executes forced position liquidation automatically.

Stock perpetuals are primarily offered on crypto-native derivatives exchanges that have expanded into equities, such as platforms offering a stock perpetual futures guide for equity names alongside crypto contracts. Traders evaluating perpetual markets should check open interest alongside volume: high open interest indicates active markets with tighter spreads.

Risk note: Stock perpetual futures carry a risk of total loss of deposited margin due to automatic liquidation. Leverage amplifies both gains and losses. Perpetual futures on crypto-native platforms may not be subject to the same investor protections as FCA/ESMA-regulated products.

Why Does Your Platform Show Three Different Products for the Same Stock?

Modern multi-product trading platforms list direct stocks, stock CFDs, and stock perpetuals side by side because they serve different trader needs, not because they are interchangeable versions of the same thing.

You might see "Apple Inc. (Stock)", "Apple Inc. (CFD)", and "Apple Inc. (Perpetual)" as three separate entries, all reflecting the same Apple share price. Each carries a different contractual relationship, a different cost structure, and a different risk profile. Some traders want ownership (direct stock), some want short-term leveraged exposure (CFD), and some want 24-hour access at higher leverage (perpetual).

Platforms that have expanded from crypto derivatives into equities now list familiar equity names alongside their traditional instruments, which is why you may see Visa stock via perpetual futures or Sony stock via perpetual futures on the same screen as a standard stock buy button. This trips up a lot of traders. A trader who intends to buy shares but accidentally opens a leveraged CFD position has entered a fundamentally different financial arrangement: one with daily holding costs, potential losses beyond the deposit, and no shareholder rights.

Tip: Before you place a trade, check your order ticket or account statement to confirm which product type you have selected.

Direct Stocks vs Stock CFDs vs Perpetual Futures: The Full Comparison

The following table summarises the key structural differences across the dimensions that matter most to traders.

Direct Stocks vs Stock CFDs vs Perpetual Futures: At a Glance

The sections below examine each dimension in depth.

Ownership and Shareholder Rights

Ownership is the most fundamental structural difference between direct stocks and the two derivative instruments.

Do You Own the Underlying Shares?

When you buy a direct stock, you hold legal title to shares in the company. Those shares sit in your broker's nominee account or are directly registered. If your broker fails, the shares remain your property because they are held separately from the broker's own assets.

Trading a stock CFD gives you zero legal title to the underlying shares. You hold a contract with your broker whose value derives from the stock price, but you have no claim on the shares themselves. If your broker fails, the CFD contract may have no value. The same position applies to stock perpetual futures: the holder has no legal claim on the underlying shares.

Dividend Treatment

CFD traders do not receive dividends in the traditional sense. When a stock goes ex-dividend (the date on which the stock trades without entitlement to the declared dividend), the broker credits the CFD trader's account with a dividend adjustment: a cash payment equal to the net dividend per share multiplied by the number of contracts held. For short CFD positions, the adjustment is debited.

Example: If you hold 100 long CFDs on a stock paying a $1 dividend, your account receives a $100 cash adjustment on the ex-dividend date. This cash credit is not legally a dividend and is treated as trading income for tax purposes in most jurisdictions, which means it falls outside the UK dividend allowance.

The treatment of dividends in stock perpetual futures varies by platform. Some adjust the funding rate or contract price on the ex-dividend date. Others make no adjustment, meaning long perpetual holders absorb the full price drop. Check your platform's dividend treatment policy before trading stock perpetuals around scheduled dividend dates.

Shareholder Rights and Voting

Direct stock holders have voting rights at AGMs, entitlement to participate in rights issues, and a claim on company assets in liquidation. Only direct shareholders can vote on corporate resolutions; CFD traders and stock perpetual holders have none of these rights. Some fractional share platforms offer pass-through voting as a feature, but this is platform-specific and not the default.

Leverage and Margin

Leverage is the primary structural advantage of stock CFDs and perpetual futures over direct stocks, and the primary source of their additional risk.

How Leverage Works

Leverage is the ability to control a position larger than your deposited capital. A leverage ratio of 5:1 means $1 of margin controls $5 of market exposure.

Example: You deposit $1,000 and open a $5,000 long position on a stock CFD using 5:1 leverage.

Stock rises 10%: your position gains $500. That is a 50% return on your $1,000 deposit.

Stock falls 10%: your position loses $500. That is 50% of your deposit lost.

Leverage amplifies both outcomes symmetrically.

Leverage availability across the three products:

• Direct stock: No inherent leverage. Position size equals capital deployed.
• Stock CFD: Leverage available. The FCA retail cap for individual stock CFDs in the UK is 5:1, with equivalent ESMA rules applying in the EEA. Professional clients may access higher ratios.
• Stock perpetual: Leverage typically higher than retail CFD caps; varies by platform and jurisdiction.

Margin Requirements Across Products

Initial margin is the capital required to open a leveraged position, expressed as a percentage of the full position value. A 5:1 leverage ratio corresponds to a 20% initial margin requirement. Maintenance margin is the minimum balance required to keep the position open, set at a lower threshold than initial margin.

When losses reduce your account balance below the maintenance margin level, your broker issues a margin call: a notification that you must deposit additional funds or close positions. If you do not respond, the broker closes the position automatically.

Example: You open a $10,000 CFD position with a 10% initial margin requirement, depositing $1,000. Losses reduce your equity to $300. The broker's maintenance threshold is $400. The broker issues a margin call. If you do not top up, the broker closes the position.

For stock perpetuals, margin levels are platform-determined and typically managed by automated liquidation systems that act within seconds in volatile conditions.

A trader accustomed to direct stock position sizing who moves to CFDs without adjusting their approach will control a position far larger than intended, with proportionally larger risk on every percentage move.

Costs: What Does Each Product Actually Cost to Hold?

Direct stocks carry no ongoing holding cost beyond standard custody fees. Stock CFDs and stock perpetuals both charge ongoing costs for holding leveraged positions, but the mechanism differs.

CFD Overnight Financing

Overnight financing is the daily cost a CFD broker charges for keeping a leveraged position open past the daily rollover time, typically 10pm UK time. The calculation formula is:

Daily fee = Position Value x (Interbank Rate + Broker Markup) / 365

Example: $10,000 long CFD position at an illustrative annualised rate of 5%. $10,000 x 0.05 / 365 = approximately $1.37 per day. Over 30 days: approximately $41.

Long CFD positions are charged overnight financing. Short positions may receive a credit if the interbank rate exceeds the broker markup. The cost compounds daily and becomes a substantial drag on positions held for weeks or months.

Perpetual Futures Funding Rate

The funding rate is a periodic payment exchanged between long and short perpetual futures holders to keep the contract price aligned with the spot price. When the perpetual price trades above spot, the rate turns positive and long holders pay shorts. When below spot, the rate turns negative and short holders pay longs.

Funding is typically exchanged every 8 hours on most platforms (three events per day). Stock perpetuals may use different intervals than crypto perpetuals; check the platform documentation.

Example: $10,000 long stock perpetual position at an illustrative funding rate of 0.01% per 8-hour interval. $10,000 x 0.0001 = $1 per interval. Three intervals per day = $3 per day. Over 30 days: $90.

These figures are illustrative only. Actual funding rates vary by platform and market conditions.

A key difference from CFD overnight financing: the funding rate can go negative. When the perpetual trades below spot, long holders receive funding income rather than paying a cost. For a practical walkthrough of how funding applies to specific stock contracts, the trading stocks via crypto perpetual futures guide covers the mechanics in context.

How the Costs Compare: A 30-Day Worked Example

Example: Holding $10,000 of exposure to a large-cap stock for 30 days

These figures are illustrative only. Actual costs vary by broker, platform, and market conditions.

The bid-ask spread on liquid direct stock positions is typically narrow; many retail brokers now offer zero-commission trading. Stock CFDs have a wider spread and a daily financing charge. Stock perpetuals have variable spreads and a funding rate that can be higher, lower, or negative.

Mark-to-market applies to both CFDs and perpetual futures: unrealised losses erode the margin balance in real time, potentially triggering a margin call before the position would otherwise be worth closing. Direct stock positions are not marked to market during the holding period: unrealised gains and losses exist on paper until you sell.

Risk Profile: What Can Go Wrong?

All three products carry risk, but the risks differ significantly across them.

Leverage Risk and Maximum Loss

Yes. Because CFDs are leveraged products, your losses can exceed your initial deposit.

Example: You deposit $1,000 and use 10:1 leverage to open a $10,000 CFD position. The stock falls 10%. Your position loses $1,000. Your entire deposit is wiped out. Without negative balance protection, you could owe the broker additional funds.

Negative balance protection is a regulatory requirement for retail clients of FCA-authorised CFD brokers in the UK and ESMA-regulated brokers in the EEA. It caps your loss at the funds in your account. This protection applies to retail clients on regulated platforms; it does not apply to professional clients, non-regulated providers, or perpetual futures platforms.

For direct stocks, maximum loss is limited to the capital invested. A direct stock position can only reach zero if the company becomes worthless.

Liquidation Risk

Liquidation is the forced closure of a leveraged position when the margin balance falls below the maintenance threshold, executed automatically by the broker or platform. A margin call is the warning that precedes liquidation; liquidation is the forced closure that follows if the margin call is not met.

Example: You open a $10,000 stock perpetual position with $500 initial margin (20x leverage). The stock falls 3%. The position loses $300, consuming 60% of your margin. A further 2% decline triggers automatic liquidation. Your remaining $200 margin is lost.

Risk warning: Perpetual futures liquidation can occur rapidly in volatile markets. Automated liquidation engines close positions within seconds when the threshold is crossed.

Stock CFDs carry liquidation risk too, but the 5:1 retail leverage cap provides a larger margin buffer. A 5:1 leveraged position requires a 20% adverse move to wipe out the initial margin, compared to 5% on a 20:1 position. Direct stocks carry no liquidation risk at all.

Counterparty Risk

Counterparty risk is the risk that the other party to a financial contract fails to meet its obligations.

Direct stocks carry near-zero counterparty risk. Shares sit in a segregated nominee account, separate from the broker's own assets. If the broker fails, the shares remain your property.

Stock CFDs carry significant counterparty risk. The CFD is a bilateral OTC contract between you and the broker. If the broker becomes insolvent, the CFD contract may become worthless. The Financial Services Compensation Scheme (FSCS) in the UK covers eligible cash deposits up to £85,000 per person per firm, but this applies to uninvested cash, not to the value of outstanding CFD contracts.

When you buy a direct stock, your broker finds a seller on the exchange and connects you. When you trade a CFD, your broker takes the other side of your trade.

Stock perpetuals: counterparty risk depends on the platform model. Exchange-traded perpetuals cleared through a central clearing house carry reduced bilateral risk. CFDs, as OTC instruments, are not cleared. Perpetual futures on crypto-native platforms may carry counterparty risk equivalent to or exceeding OTC CFDs. Slippage (the difference between expected and actual execution price) is typically most severe in perpetual futures during rapid market moves, because automated liquidation cascades can consume order book liquidity faster than new orders arrive.

Risk Matrix

[X]% of retail investor accounts lose money when trading CFDs with this provider.

Regulation and Investor Protection

The regulatory framework governing each product differs significantly, and jurisdiction matters.

How Direct Stocks Are Regulated

Direct stocks trade on regulated exchanges under well-established securities regulation globally. In the US, securities markets are regulated by the SEC. In the UK, exchange-traded securities fall under FCA oversight. In the EU, ESMA and national competent authorities apply. Custody rules ensure shares are held separately from broker assets.

How Stock CFDs Are Regulated

In most major jurisdictions, stock CFDs are regulated financial instruments subject to specific retail investor protections.

In the UK, CFD providers must be authorised by the Financial Conduct Authority (FCA). The UK retained equivalent rules post-Brexit under domestic law; the EU's MiFID II framework applies to EEA markets, not directly to UK firms.

In the EU, CFDs are regulated under MiFID II and ESMA product intervention rules, which set maximum retail leverage for individual stock CFDs at 5:1, require mandatory negative balance protection, and mandate standardised risk warnings.

In Australia, CFDs are regulated by ASIC. In the United States, retail CFD trading is prohibited. The SEC and CFTC prohibit off-exchange OTC derivative products for retail US persons. US-based traders seeking leveraged equity exposure can access listed options and exchange-traded futures regulated by the CFTC.

How Perpetual Futures Are Regulated

The regulatory treatment of stock perpetual futures varies significantly by platform and jurisdiction. Exchange-traded perpetuals on regulated venues benefit from stronger oversight and clearing house protection. Perpetual futures on crypto-native platforms may operate in regulatory grey areas with no equivalent of the FSCS or ESMA leverage caps. Stock perpetual futures are a newer product category; regulatory frameworks are still developing in many jurisdictions. In the US, stock perpetuals on crypto platforms are subject to ongoing regulatory uncertainty.

Jurisdiction Summary

This table is for educational reference only. Regulatory status is subject to change. Verify the status of any platform with the relevant authority in your jurisdiction.

Tax Treatment

Tax disclaimer: The tax information in this section is for educational purposes only and does not constitute tax advice. Tax treatment depends on your individual circumstances and may be subject to change. Consult a qualified tax professional for advice specific to your situation.

Tax treatment differs across all three instruments and across jurisdictions.

Direct stocks: Profits are typically subject to Capital Gains Tax (CGT). Dividends are subject to dividend income tax. In the UK, purchases of UK-listed shares are subject to 0.5% Stamp Duty Reserve Tax (SDRT).

Stock CFDs: Profits are typically subject to CGT or trading income tax depending on jurisdiction and trading frequency. Dividend adjustments on CFDs are typically treated as trading income rather than dividend income, which means they fall outside the UK dividend allowance. CFD losses can generally be offset against CFD gains. Stock CFDs are exempt from UK SDRT.

Stock perpetuals: Tax treatment is less settled than for CFDs and varies by jurisdiction. Always consult a tax professional on perpetual futures positions.

Rules are subject to change. Consult HMRC for UK guidance, your national tax authority for EU guidance, or the ATO for Australian guidance.

Which Product Should You Use? A Decision Framework

If you plan to hold for weeks or longer, buy the direct stock. If you want short-term leveraged exposure, use a stock CFD. If you need higher leverage or 24-hour access on a platform where perpetuals are the primary equity product, a stock perpetual may suit your strategy. The structured framework below sets out the specific conditions for each choice.

Choose a Direct Stock if:

• You want legal ownership of shares in the company
• You plan to hold the position for weeks, months, or years
• You want to receive actual dividends, not a cash adjustment
• You want shareholder voting rights
• You want no ongoing daily holding cost
• You are new to trading and have not used leverage before
• You want near-zero counterparty risk with your broker

Choose a Stock CFD if:

• You want short-term leveraged exposure to stock price movement
• You want to go short on a stock without borrowing shares
• You plan to hold for days to a few weeks
• You are trading on an FCA or ESMA-regulated platform and want negative balance protection
• You want to hedge an existing direct stock portfolio using a short position
• You accept overnight financing as a quantifiable cost and have factored it into your P&L

Choose a Stock Perpetual if:

• The funding rate is currently negative, meaning you receive income for holding a long position
• You need leverage beyond the 5:1 retail cap under ESMA/FCA CFD rules (note: higher leverage means higher liquidation risk)
• You are trading on a platform where stock perpetuals are the primary equity product, such as one offering a stock perpetual futures guide for equity names
• You want 24-hour equity price exposure without the rollover constraints of dated futures
• You are an experienced derivatives trader who understands mark-to-market settlement and automated liquidation mechanics

Bottom line: For positions held longer than a few weeks, direct stocks are almost always the more cost-effective choice. CFD overnight financing compounds daily: at a 5% annualised rate, a 12-month hold adds approximately 5% to your cost basis before any other fees. Perpetual futures funding rates are variable and can go negative, but under normal positive-funding conditions they typically represent a higher-cost, higher-risk profile than direct stocks for equivalent exposure.

If you are new to financial products and have not used leverage before, direct stocks carry no liquidation risk and no daily holding cost. Building familiarity with equity markets before introducing leverage is a sensible sequence. If you already trade CFDs and are evaluating stock perpetuals as an alternative, the key comparison for your decision is the funding rate against overnight financing for your typical holding period, set against the difference in leverage availability and regulatory protection.

Disclaimer: This article is for educational and informational purposes only. It does not constitute financial advice or a recommendation to trade any specific financial instrument. All trading and investing involves risk. Conduct your own research and consider seeking independent financial advice before making investment or trading decisions.

Common Product-Comparison Searches

Readers looking for CFD trading explained, CFD vs share trading guidance or stock trading for beginners should begin with ownership and leverage. A direct share, CFD and perpetual may reference the same company, but they create different rights, costs and loss scenarios.

Frequently Asked Questions: Stock CFDs vs Direct Stocks

Is a stock CFD a real share?

No. It is a contract linked to the share price.

Does a perpetual future provide ownership?

No. It is a derivative position.

Can direct shares pay dividends?

Eligible direct positions can receive declared dividends under the product terms.

Which product has liquidation risk?

Leveraged CFDs and perpetuals can be liquidated when margin requirements are not met.

Can direct stocks lose value?

Yes. Ownership does not prevent market losses.

Related Bybit Resources

• Learn how stock dividends work
• Compare direct stocks, CFDs and perpetual futures
• Review market, limit and TPSL orders
• Read the international U.S. stock investing guide
• Understand why crypto platforms add real stocks
• Choose between stocks, CFDs and perpetuals
• Start trading U.S. stocks
• Learn about fractional shares
• Review beneficial stock ownership

Final Decision Checklist

Confirm ownership, leverage, costs, dividend treatment, holding period and maximum loss. U.S. Stocks and ETFs provide direct-market access; CFDs and perpetuals provide different contractual exposure.