Does supply and demand in CFD trading affect the actual price of financial market?
Buying or selling a CFD only indirectly affects the underlying assets’s price through the CFD issuer’s hedging activity. The feedback effect is not deterministic and unlikely to be noticeable for relatively small trades.
The CFD represents a claim against the issuer who usually pools the resulting exposures up to a certain extend instead of directly hedging one-to-one in the underlying asset. This allows them to internalize the bid-ask spread which is often not much wider in the CFD than in the secondary market. However, this also increases the variance of their p&l. Once the net exposure in a stock, sector or other risk factor becomes too large, then the issuer will reduce it by hedging.
This approach works well if the issuer has a lot of uninformed retail traders on his platform which generate frequent trades with small and often offsetting exposures.