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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
 Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

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Off book definition

What is an off-book trade?

An ‘off-book’ trade refers to the process of trading shares away from an exchange or regulated body. They are usually executed via the over-the-counter (OTC) market. Off-book transactions are made directly between two parties, outside or ‘off’ of the order books.

Once a price has been agreed between the two parties, it is typical for one of the participants to report the trade and its parameters to the exchange – and wider market – in order to bring the execution 'on exchange'.

When you trade on exchange, the trade takes place directly onto the order book and is seen as increasing visibility for wider market participants.

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Example of an off-book trade

Let’s say that you want to buy shares in company ABC, and another party wants to sell the same number of ABC shares. Neither of your brokers have direct access to the order book, so the transaction is executed away from the exchange. This trade was ‘off-book’.

But you both decide to make a trade report, bringing the transaction ‘on exchange’ and creating a public record of the transaction.

If your broker had direct market access (DMA), you could have instructed them to place a buy or sell order directly onto the order book.

Pros and cons of off-book trades

Pros of off-book trades

Off-book orders are not as reliant upon the rules of an exchange or trading system. This means that they can provide a lot more freedom and flexibility for participants to choose their own prices and outline the parameters of their own trade. The counterparties can create a private agreement that suits both of their needs and goals.

Cons of off-book trades

Off-book trades can have a higher risk of counterparty default, as there are very few rules or contractual obligations.

For some off-book trades, there is no official record kept at all. The drawback of this, is that off-book trading is often used by individuals looking to conceal their behaviour from others.

The lack of official regulation can also be a cause for concern, as there is no obligation for either party to report the trade to an exchange or publicise the orders to a governing body. And even when off-book trades are reported, so that they are executed ‘on exchange’, the process can be time consuming and experience significant delays. This is because the exchange doesn’t have to record the trade immediately.

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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. 

Professional clients trading spread bets and CFDs can lose more than they deposit.

Options and futures are complex instruments which come with a high risk of losing money rapidly due to leverage. They’re not suitable for most investors. Before you invest, you should consider whether you understand how options and futures work, the risks of trading these instruments and whether you can afford to lose more than your original investment.

Trading stocks and shares ‘on margin’ within a US options and futures account – meaning that you only finance part of the cost of acquiring a position in a security – carries additional risks over buying securities on a fully funded basis and may result in losses exceeding your original investment. Trading on margin will also result in additional costs to you as the investor and any securities purchased using margin may be held as collateral by the lender, restricting both your rights as shareholder, and your ability to use the securities until the margin trade is closed. You should familiarise yourself with these risks before trading on margin.

The value of shares, ETFs and other ETPs bought through a share dealing account, a US options and futures account, a stocks and shares ISA or a SIPP can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results. Some ETPs carry additional risks depending on how they’re structured, investors should ensure they familiarise themselves with the differences before investing.

Share dealing and IG Smart Portfolio accounts provided by IG Trading and Investments Ltd, CFD accounts and US options and futures accounts are provided by IG Markets Ltd, spread betting provided by IG Index Ltd.   

IG is a trading name of IG Trading and Investments Ltd (a company registered in England and Wales under number 11628764), IG Markets Ltd (a company registered in England and Wales under number 04008957) and IG Index Ltd (a company registered in England and Wales under number 01190902). Registered address at Cannon Bridge House, 25 Dowgate Hill, London EC4R 2YA. IG Markets Ltd (Register number 195355), IG Trading and Investments Ltd (Register Number 944492) and IG Index Ltd (Register number 114059) are authorised and regulated by the Financial Conduct Authority.   

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