A contract such as a forward, a futures, or an option whose payoff is based on the difference between two prices or rates. It is a derivative product whose value is linked to an agreement between a buyer and seller (a provider, known as CFD provider, and a client) to exchange the price difference of of underlying asset (a stock, bond, commodity, or other asset) between the dates that the contract is entered into and closed (opening date and closing date).

An example is a cash-settled total return swap (TRS) or forward whereby the parties exchange the difference between the opening price and the closing price of an underlying. For a buyer or long, if the price is higher at the close date, profits are made.

This exchange (settlement) takes place on the maturity of the contract.