In consideration of iPromarkets (“iPromarkets”) agreeing to enter into over-the-counter (“OTC”) contracts for differences (“CFDs”) and foreign exchange contracts (“FX Contracts”) with the undersigned (hereinafter referred to as the “Customer”, “you”, “your”), Customer acknowledges, understands and agrees that: Trading Is Very Speculative and Risky. Trading CFDs and FX Contracts is highly speculative, involves a significant risk of loss and is not suitable for all investors but only for those customers who:
- understand and are willing to assume the economic, legal and other risks involved;
- are experienced and knowledgeable about trading in derivatives and in underlying asset types;
- 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.
Risks Related to Long CFD positions, i.e. for Purchasers of CFDsBeing long in CFD means you are buying the CFDs on the market by speculating that the market price of the underlying 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 rises whilst your CFD long position is open. On the contrary, you will generally suffer a loss, if the market price of the underlying 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 due to the closing of your position, in case you do not have enough liquidity for the margin on your account in order to maintain your position open.
Risks Related to short CFD positions, i.e. for sellers of CFDsBeing short in CFD means you are selling the CFDs on the market by speculating that the market price of the underlying 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 falls whilst your CFD short position is open. On the contrary, you will generally suffer a loss, if the market price of the underlying 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 due to the closing of your position, in case you do not have enough liquidity for the margin on your account in order to maintain your position open.
High Leverage And Low Margin Can Lead To Quick Losses
- The high degree of “gearing” or “leverage” is a particular feature of both CFDs and FX Contracts. The effect of leverage makes investing in CFDs riskier than investing in the underlying asset. This stems from the margining system applicable to CFDs which generally involves a small deposit relative to the size 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 favour can provide a high return on the deposit, however, a small price movement against you may result in significant losses. Your losses will never exceed the balance of your account, which is balanced to zero, if the losses are higher than the amount deposited. Such losses can occur quickly. The greater the leverage, the greater the risk. The size of leverage therefore partly determines the result of the investment.
Margin RequirementsCustomer 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. iPromarkets has the right to liquidate any or all open positions whenever the minimum margin requirement is not maintained and this may result in Customer’s CFDs or 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.
- Information in relation to Our Spread, leverage, rollover fees and trading hours for each market is stated in CFD Trading Conditions and FX Trading Conditions pages of iPromarkets’s website.
Cash SettlementCustomer understands that CFD and 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 InterestiPromarkets is counterparty to all Transactions entered into under the Customer Agreement and, as such, iPromarkets’s interests may be in conflict with yours. Our Conflicts of Interest Policy is available at iPromarkets’s website.
OTC TransactionsWhen trading CFDs or FX Contracts with us, such transactions will not be executed on a recognized or designated investment exchange and are known as OTC 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. There is no central clearing and no guarantee by any other party of iPromarkets’s payment obligations to the Customer, thus Customer is exposed to credit risk with iPromarkets. Customer must look only to iPromarkets’s for performance of all contracts in Customer’s account and for return of any margin or collateral.
Prices, Margin And Valuations Are Set By iPromarkets And May Be Different From Prices Reported Elsewhere
- iPromarkets 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 FX Contract will depend on the prices set by iPromarkets 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 sources or exchanges. For our CFD and FX Contracts, we obtain price data from wholesale market participants. Although iPromarkets expects that these prices will be reasonably related to prices available in the market, iPromarkets’s prices may vary from prices available to banks and other market participants. iPromarkets has considerable discretion in setting and collecting margin. iPromarkets is authorized to convert funds in Customer’s account for margin into and from such foreign currency at a rate of exchange determined by iPromarkets in its sole discretion on the basis of then-prevailing money market rates.