Prospective clients should study the following risk warnings very carefully. Please note that we do not explore or explain all the risks involved when dealing in Financial Instruments (including Contracts for Difference “the CFDs” and Equities). We outline the general nature of the risks of dealing in Financial Instruments on a fair and non-misleading basis.
In particular, Contracts for Difference ('CFDs') are complex financial products and not suitable for all investors. CFDs, are leveraged products that mature when you choose to close an existing open position. By investing in CFDs, you assume a high level of risk and can result in the loss of all of your invested capital.
Unless a client knows and fully understands the risks involved in each Financial Instrument, they should not engage in any trading activity. You should not risk more than you are prepared to lose. FXTM will not provide clients with any investment advice in relation to investments, possible transactions in investments, or Financial Instruments, neither will we make any investment recommendations. Clients should consider which Financial Instrument is suitable for them according to their financial status and goals before opening an account with FXTM. If a client is unclear about the risks involved in trading in Financial Instruments, then they should consult an independent financial advisor. If the client still doesn't understand these risks after consulting an independent financial advisor, then they should refrain from trading at all. Purchasing and selling Financial Instruments comes with a significant risk of losses and damages and each client must understand that the investment value can both increase and decrease, clients they are liable for all these losses and damages, which could result in more than the initial invested capital once they make the decision has been made to trade.
Although forex and derivative instruments can be used for the management of investment risk, some of these products are unsuitable for many investors. You should not engage in any dealings directly or indirectly in derivative products unless you know and understand the risks involved in them and that you may lose entirely all of your money. Different instruments involve different levels of exposure to risk and in deciding whether to trade in such instruments you should be aware of the following points:
It is highly recommended that the Client maintains a Margin Level (percentage Equity to Necessary Margin ratio which is calculated as Equity / Necessary Margin * 100%) of not lower than 1,000%. It is also recommended to place Stop Loss to limit potential losses, and Take Profit to collect profits, when it is not possible for the Client to manage the Client's Open Positions.
The Client shall be responsible for all financial losses caused by the opening of the position using temporary excess Free Margin on the Trading Account gained as a result of a profitable position (cancelled by the Company afterwards) opened at an Error Quote (Spike) or at a Quote received as a result of a Manifest Error.
The Client acknowledges and accepts that, regardless of any information which may be offered by the Company, the value of Instruments may fluctuate downwards or upwards and it is even probable that the investment may become of no value. This is owed to the margining system applicable to such trades, which generally involves a comparatively modest deposit or margin in terms of the overall contract value, so that a relatively small movement in the underlying market can have a disproportionately dramatic effect on the Client's trade. If the underlying market movement is in the Client's favour, the Client may achieve a good profit, but an equally small adverse market movement can not only quickly result in the loss of the Client’s entire deposit, but may also expose the Client to a large additional loss.
Buying options involves less risk than selling options because, if the price of the underlying asset moves against you, you can simply allow the option to lapse. The maximum loss is limited to the premium, plus any commission or other transaction charges. However, if you buy a call option on a futures contract and you later exercise the option, you will acquire the future. This will expose you to the risks described under futures' and contingent liability investment transactions.
If you write an option, the risk involved is considerably greater than buying options. You may be liable for margin to maintain your position and a loss may be sustained well in excess of the premium received. By writing an option, you accept a legal obligation to purchase or sell the underlying asset if the option is exercised against you, however far the market price has moved away from the exercise price. If you already own the underlying asset which you have contracted to sell (when the options will be known as covered call options) the risk is reduced. If you do not own the underlying asset (uncovered call options) the risk can be unlimited. Only experienced persons should contemplate writing uncovered options, and then only after securing full details of the applicable conditions and potential risk exposure.
Investing in a Contract for Differences carries the same risks as investing in a future or an option and you should be aware of these as set out above. Transactions in Contracts for Differences may also have a contingent liability and you should be aware of the implications of this as set out below.
Shares are bought and sold on stock exchanges and their values can go down. In respect of shares in smaller companies, there is an extra risk of losing money when such shares are bought or sold. There can be a big difference between the buying and selling price of these shares.
If they have to be sold immediately, the Clients may get back much less than they paid for them. Shares in companies incorporated in emerging markets may be harder to buy and sell than those shares in companies in more developed markets and such companies may also not be regulated as strictly.
All Equities offered are listed on an exchange, which means that the prices are not set by the Company. The Company will act on any instruction that the Client provides to buy or sell an instrument on his/her behalf in accordance with the Company’s obligation to provide best execution as set out in the order execution policy, to act reasonably and in accordance with the applicable Client Agreement and other Operative Agreements.
The Company may place the Clients instructions to deal outside of an exchange if this is in line with the order execution policy.
The Company will arrange for the custody of the Clients instruments.
All equities purchased for the Client or transferred to the Company by the Client, will be purchased in the name of the nominee company or FXTM, and/or held by a nominee company selected by FXTM, for the benefit of the Client.
As investments will be held in the name of a nominee company, the Client may not have voting rights which he/she would have had if he/she held the investment in his/her own name.
All financial investments involve an element of risk. The value of any investment the Client makes through may fall as well as rise and the Client may get back less than his/her initial investment. Past performance is not an indication of future performance.
The risks that the Clients are exposed to will vary according to the instruments they instruct the Company to buy and sell on their behalf.
The Clients should be aware that physical shares admitted to trading on a regulated market are not high risk financial products.
The Company’s services are provided on an execution only basis. The Company does not provide investment advice in relation to Equities. The Company might provide factual information or research recommendations about a market, information about transaction procedures and information about the potential risks involved and how those risks may be minimized. However, any decision to use the products or services is made by the Client.
Collateral risks (professional/elective professionals only)
When Clients enter into the Collateral Agreement with the Company, it is agreed to take security over the assets in the Share Account in place of cash for payment of margin on their linked CFD Account. The value of shares and CFDs will rise and fall. If the collateral value of the assets in Clients Share Account, together with any cash on Client’s linked CFD Account, falls below the amount required to maintain the open positions, Client may be closed out of the CFD positions on that linked account, and the Company will have the right to sell the assets in the Client’s Share Account in order to pay for any resulting deficit.
As the value of the assets in the Clients Share Account ﬂuctuates the value of the collateral that the Client can utilise as margin will also ﬂuctuate. The Client will need to monitor his/her Share Account and the linked CFD Account to ensure that the collateral value and any cash he/she has deposited on his/her linked CFD Account is sufficient to fund his/her open positions on that account.
The Client will only be able to use his/her collateral services to cover margin requirements on open positions on his/her linked CFD Account and he/she will need to cover any running losses using the available cash in his/her linked CFD Account.
In regards to transactions in CFDs, forex and precious metals with the Company, the Company is using a trading platform for transactions in CFDs which does not fall into the definition of a recognized exchange as this is not a Multilateral Trading Facility and so do not have the same protection.
If you trade in futures, Contracts for Differences or sell options, you may sustain a total loss of the funds you have deposited to open and maintain a position. If the market moves against you, you may be called upon to pay substantial additional funds at short notice to maintain the position. If you fail to do so within the time required, your position may be liquidated at a loss and you will be responsible for the resulting deficit. It is noted that the Company will not have a duty to notify the Client for any Margin Call to sustain a loss-making position.
Even if a transaction is not margined, it may still carry an obligation to make further payments in certain circumstances over and above any amount paid when you entered the contract.
Contingent liability investment transactions which are not traded on or under the rules of a recognised or designated investment exchange may expose you to substantially greater risks.
This notice is provided to you in accordance with applicable legislation.