RISK DISCLOSURE STATEMENT For Transactions in Foreign Exchange and Derivatives
(Including Contracts for Differences)
In consideration of Black Parrot LTD. (hereinafter referred to as “TradesPrime”, “we” or “us”) agreeing to enter into over-the-counter (“OTC”) contracts for differences (“CFD's”) and spot foreign exchange contracts (“Spot FX Contracts”) with the undersigned (hereinafter referred to as the “Customer”, “you”, or “your”), Customer acknowledges, understands and agrees that:
This statement, which constitutes an addition to the Retail Client Agreement and the General Terms & Conditions, cannot and does not disclose or explain all of the risks and other significant aspects involved in trading foreign exchange and derivatives. Engaging in these types of transactions can carry a high risk to your capital, potentially resulting in the total loss of such capital. Should you require a more comprehensive understanding of the risks involved, please contact TradesPrime for further information.
In consideration of the risks, you should not engage in trading in the above mentioned products unless you understand the nature of the contracts and the contractual legal relationship into which you are entering. Transactions in foreign exchange derivatives are not suitable for many members of the public. You should carefully consider whether transacting in foreign exchange is appropriate for you in light of your experience, objectives, financial position and other relevant circumstances.
If in doubt, it is advisable to seek independent financial
Foreign Exchange and Derivatives Trading Is Very Speculative and Risky
Trading CFD's and Spot FX Contracts is highly speculative, and involves a significant risk of loss; it may not be suitable for all investors but only for those customers who:
(a) Understand and are willing to assume the economic, legal
and other risks involved;
(b) Are experienced and knowledgeable about trading in derivatives and in underlying asset types; and
(c) Are financially able to assume losses significantly in excess of margin or deposits because investors may lose the total value of the contract not just the margin or the deposit.
Neither CFD's nor Spot FX Contracts are appropriate investments for retirement funds. CFD and FX transactions are among the riskiest types of investments and can result in large losses. Customer represents, warrants and agrees that Customer understands these risks, and is willing and able, financially or otherwise, to assume the risks of trading CFD's and Spot FX Contracts; and that the loss of Customer’s entire Account balance will not change Customer’s lifestyle.
Risks related to Long CFD positions, i.e. for purchasers of CFD's
Being Long in a CFD means you are buying the CFD's on the market by speculating that the market price of the underlying asset will rise between the time of the purchase and sale. As owner of a long position, you will generally make a profit if the market price of the underlying asset rises whilst your CFD long position is open. On the contrary, you will generally suffer a loss, if the market price of the underlying asset falls whilst your CFD long position is open. Your potential loss may therefore be bigger than the initial margin deposited. In addition, you might suffer a loss as a result of closing your position, in circumstances which you do not have enough liquidity for the margin on your account in order to maintain an open position.
Risks related to Short CFD positions, i.e. for sellers of CFD's
Being Short in a CFD means you are selling the CFD's on the market by speculating that the market price of the underlying asset will fall between the time of the purchase and sale. As owner of a short position, you will generally make a profit if the market price of the underlying asset falls whilst your CFD short position is open. On the contrary, you will generally suffer a loss, if the market price of the underlying asset rises whilst your CFD short position is open. Your potential loss may therefore be bigger than the initial margin deposited. In addition, you might suffer a loss as a result of closing your position, in circumstances which you do not have enough liquidity for the margin on your account in order to maintain an open position.
High Leverage And Low Margin Can Lead To Quick Losses
The high degree of “Gearing” or “Leverage” is a particular feature of both CFD's and Spot FX Contracts. The effect of leverage makes investing in CFD's riskier than investing in the underlying asset. This stems from the margining system applicable to CFD's which generally involves a small deposit relative to the of the transaction, so that a relatively small price movement in the underlying asset can have a disproportionately dramatic effect on your trade. This can be both advantageous and disadvantageous. A small price movement in your favor can provide a high return on the deposit, however, a small price movement against you may result in significant losses which could exceed the money placed on deposit. Such losses can occur quickly. The greater the leverage, the greater the risk. The of leverage therefore partly determines the result of the investment.
Effect of “Leverage” or “Gearing”
Transactions in foreign exchange and derivatives carry a high degree of risk. The high degree of “Leverage” or “Gearing” that is often obtainable in foreign exchange and derivatives trading can work against you as well as for you due to fluctuating market conditions. If the market moves against you, you may not only sustain a total loss of your initial margin deposit, and any additional funds deposited with TradesPrime to maintain your position, but you many also incur further liability to TradesPrime. You may be called upon to deposit additional funds on short notice to maintain your position. Failing to comply with a request for deposit of additional funds may result in closure of your position(s) by TradesPrime on your behalf; you will be liable for any resulting loss or deficit.
Risk-reducing Orders or Strategies
The placing of certain orders (e.g. “stop-loss” orders or “stop-limit” orders), which are intended to limit losses to certain amounts, may not be adequate given that market conditions or technological limitations that may make it impossible to execute such orders, e.g. due to illiquidity in the market. It should be noted that strategies using combinations of positions, such as “Spread” and “Straddle” positions may be as risky as taking simple “long” or “short” positions.
Customer must maintain the minimum margin requirement on their open positions at all times. It is Customer’s responsibility to monitor his/her Account balance. Customer may receive a margin call to deposit additional cash if the margin in the account concerned is too low. TradesPrime has the right to liquidate any or all open positions whenever the minimum margin requirement is not maintained. This may result in Customer’s CFD's or Spot FX Contracts being closed at a loss for which you will be liable.
The difference between Our Bid Price and Our Ask Price is “Our Spread”. Our Spreads are set in our absolute discretion, since we are acting as market maker, and any changes are effective immediately
Customer understands that CFD and Spot FX Contracts can only be settled in cash, and the difference between the buying and selling price partly determines the result of the investment.
Conflicts of Interest
TradesPrime is the counterparty to all Transactions entered into under the Customer Agreement and, as such, TradesPrime’s interests may be in conflict with yours. Our conflicts of interest policy is available at TradesPrime’s website.
When trading CFD's or Spot FX Contracts with us, such Transactions will not be executed on a recognized or designated investment exchange and are known as OTC (Over The Counter) transactions. All positions entered into with us must be closed with us and cannot be closed with any other entity. OTC transactions may involve greater risk than investing in on-exchange contracts because there is no exchange market on which to close out an open position. It may be impossible to liquidate an existing position, to assess the value of the position arising from an OTC transaction, or to assess the exposure to risk. Bid Prices and Ask Prices may not be quoted by us, based on best execution policies applicable in the market and even when they are, TradesPrime may find it difficult to establish a fair price particularly when the relevant exchange or market for the underlying asset is closed or suspended. There is no central clearing and no guarantee by any other party of TradesPrime’s payment obligations to the Customer. Thus the Customer is exposed to credit risk with TradesPrime. The customer must look only to TradesPrime for performance of all contracts in the Customer’s Account and for return of any Margin or Collateral.
Suspension of Trading
Under certain market conditions, it may be difficult or
impossible to liquidate a position, increasing the risk of loss. This may
occur, for example, at times of rapid price movement if the price for the
underlying asset rises or falls in one trading session to such an extent that
trading in the underlying asset is restricted or suspended.
Prices, Margin And Valuations Are Set By TradesPrime And May Be Different From Prices Reported Elsewhere
TradesPrime will provide prices to be used in trading, valuation of Customer positions and determination of Margin Requirements in accordance with its Trading Policies and Procedures and Market Information Sheets. The performance of your CFD or Spot FX Contract will depend on the prices set by TradesPrime and market fluctuations in the underlying asset to which your contract relates. Each underlying asset therefore carries specific risks that affect the result of the CFD concerned.
Our prices for a given market are calculated by reference to the price of the relevant underlying asset which we obtain from third party external reference source\s or exchange\s. For our CFD and Spot FX Contracts, we obtain price data from wholesale market participants. Although TradesPrime expects that these prices will be reasonably related to prices available in the market, TradesPrime’s prices may vary from prices available to banks and other market participants. TradesPrime has considerable discretion in setting and collecting Margin. TradesPrime is authorized to convert funds in Customer’s Account for Margin into and from such foreign currency at a rate of exchange determined by TradesPrime in its sole discretion on the basis of then-prevailing money market rates.
Rights to Underlying Assets
You have no rights or obligations in respect of the underlying instruments or assets relating to your CFD's or Spot FX Contracts. The Customer understands that CFD's can have different underlying assets, such as stocks, indices, currencies and commodities.
Investing in Spot FX Contracts and CFD's with an underlying
asset listed in a currency other than your base currency entails a currency
risk, due to the fact that when the CFD or Spot FX Contract is settled in a
currency other than your base currency, the value of your return may be
affected by its conversion into the base currency.
TradesPrime Is Not An Adviser Or A Fiduciary To Customer
Where TradesPrime provides generic market recommendations, such generic recommendations do not constitute a personal recommendation or investment advice and have not considered any of your personal circumstances or your investment objectives, nor is it an offer to buy or sell, or the solicitation of an offer to buy or sell, any Foreign Exchange Contracts or Cross Currency Contracts. Each decision by Customer to enter into a CFD or Spot FX Contract with TradesPrime and each decision as to whether a transaction is appropriate or proper for Customer, is an independent decision made by the Customer. TradesPrime is not acting as an advisor or serving as a fiduciary to Customer. Customer agrees that TradesPrime has no fiduciary duty to Customer and no liability in connection with and is not responsible for any liabilities, claims, damages, costs and expenses, including attorneys’ fees, incurred in connection with Customer following TradesPrime’s generic trading recommendations or taking or not taking any action based upon any generic recommendation or information provided by TradesPrime.
Recommendations Are Not Guaranteed
The generic market recommendations provided by TradesPrime are based solely on the judgment of TradesPrime’s personnel and should be considered as such. Customer acknowledges that he/she enters into any Transactions relying on their own judgment. Any market recommendations provided are generic only and may or may not be consistent with the market positions or intentions of TradesPrime and/or its affiliates.
The generic market recommendations of TradesPrime are based upon information believed to be reliable, but TradesPrime cannot and does not guarantee its accuracy or completeness. Therefore, following such generic recommendations will not reduce or eliminate the risk inherent in trading CFD's and/or Spot FX Contracts.
No Guarantees Of Profit
There are no guarantees of profit nor of avoiding losses when trading CFD's and Spot FX Contracts.
Customer has received no such guarantees from TradesPrime or from any of its representatives. Customer is aware of the risks inherent in trading CFD's and Spot FX Contracts and is financially able to bear such risks and withstand any losses incurred.
Customer May Not Be Able To Close Open Positions
Due to market conditions which may cause any unusual and rapid market price fluctuations, or other circumstances, v may be unable to close out Customer’s position at the price specified by Customer and the risk controls imposed by TradesPrime might not work. Customer agrees that TradesPrime will bear no liability for a failure to do so.
Trading through TradesPrime’s trading system may differ from trading on other electronic trading systems as well as from trading in a conventional or open market. Trading on an electronic trading system will expose you to risks associated with the system including the failure of hardware and software, system downtime, in relation to either TradesPrime’s trading system or the individual customer’s system and the communications infrastructure (e.g. the internet) connecting TradesPrime’s platform with TradesPrime’s customers. The result of any system failure may be that your order is either not executed according to your instructions or is not executed at all and a lack of capability to keep you informed continuously about your positions and fulfillment of the margin requirements.
When Customer trades online (via the internet), TradesPrime shall not be liable for any claims, losses, damages, costs or expenses, caused, directly or indirectly, by any malfunction, disruption or failure of any transmission, communication system, computer facility or trading software, whether belonging to TradesPrime, Customer, any exchange or any settlement or clearing system.
Should a quoting error occur (including responses to Customer requests), TradesPrime is not liable for any resulting errors in Account balances and reserves the right to make necessary corrections or adjustments to the relevant Account. Any dispute arising from such quoting errors will be resolved on the basis of the fair market value, as determined by TradesPrime in its sole discretion and acting in good faith, from the relevant market at the time such an error occurred.
In cases where the prevailing market represents prices different from the prices TradesPrime has posted on our screen, v will attempt, on a best efforts basis, to execute Transactions on or close to the prevailing market prices. These prevailing market prices will be the prices, which are ultimately reflected on the Customer statements. This may or may not adversely affect the Customer’s realized and unrealized gains and losses.
Terms and Conditions of Contracts
You have the responsibility to fully understand the trading rules and/or terms and conditions of the transactions to be undertaken and/or the Retail client Agreement, including, but without limitation any terms describing risk factors, such as volatility, liquidity, and so on.
Various situations may arise over a weekend (Friday 22:00 CET – Sunday 23:30 CET), or during a holiday when the financial markets generally close for trading, that may cause the markets to open at a significantly different price from where they closed. TradesPrime customers will not be able to use the TradesPrime trading system to place or change orders over the weekend, on market holidays or and at other times when the markets are generally closed. There is a substantial risk that stop-loss orders left to protect open positions held during these periods will be executed at levels significantly worse than their specified price.
Charges and Commissions
Before you begin to trade, you should obtain from us details of all commissions and other charges for which you will be liable. These charges will affect your net profit or loss.
Money and Collateral
You acknowledge that you can afford to lose the sums that you remit to TradesPrime as deposit. When you deposit money with us, this will generally be held in a segregated client’s account held with one or more authorized credit and/or banking institution/s situated in Europe and/or in an EEA member state as shall be indicated on the TradesPrime website from time to time. The companies set rules pertaining to client money and Safeguarding of Client Assets will apply. You acknowledge that the holding of money in a segregated client’s account may not provide complete protection, particularly in the event of the insolvency of any third party institution/s entrusted by TradesPrime to hold client assets.
Specific risks to Asset Management and Advisory Services
Black Parrot LTD. has no obligation to cease entering into transactions when the assets on the Account decrease, even substantially. Therefore, the client undertakes to control the development of his/her account so as to be able to terminate the asset management service if s/he is of the opinion that the results do not conform to his/her expectations or needs.
TradesPrime Leveraged Trading Example
Leveraging a position is an expression in Forex trading; whereby collateral (often referred to as margin) is put down to cover a position significantly larger than the funded value. It is common for brokers to offer clients 300 effectively allowing the trade value to be multiplied 300 times of the balance in the account.
I / WE HAVE READ, UNDERSTOOD AND AGREE TO THE RISK DISCLOSURE STATEMENT AND THE TRADING POLICIES AND PROCEDURES SET OUT ABOVE