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A-BookBroker - Risk Disclosure
Note: The English version of this agreement is the governing version and shall prevail whenever there is any discrepancy between the English version and the other versions. This client agreement, together with any Schedule(s) and accompanying documents, as amended from time to time (hereafter the "Agreement"), sets out the terms of the contract between you, the customer (also referred to as the "client") and us, the Company. By signing this agreement (or accepting “terms and conditions”), it is assumed that you have read, understand and agree with all the terms of this Agreement.
Risks Disclosure for operations with foreign Currency and Derivates
This short warning, being an addition to the General Business Terms, is not intended to mention all risks and other essential aspects of operations with foreign currency and derivatives. Considering the risks, you should not settle transactions of the products as mentioned above if you are not aware of the nature of the contracts you enter into, the legal aspects of such relations within the context of such agreements, or the degree of your risk exposure. Operations with foreign currency and derivatives are connected with a high level of risk. Therefore it is not suitable for many people. You must thoroughly evaluate to what extent such operations are ideal for you, considering your experience, aims, financial resources and other essential factors.
Operations with foreign Currency and Derivates
Leveraged trading means that potential profits are magnified; it also means that losses are magnified. The lower the margin requirement, the higher the risk of possible losses if the market moves against you. Sometimes the margins required can be as little as 0.5%.
Be aware that when trading using margin, your losses can exceed your initial payment, and it is possible to lose much more money than you initially invested. The initial margin amount may seem small compared to the value of the foreign currency contracts or derivatives since the "leverage" or "gearing" effect is used therein in the course of trade. Relatively inconsiderable market movements will substantially impact the amounts deposited or intended to be deposited by you.
This circumstance may work either for you or against you. When supporting your position, you may incur losses to the extent of the initial margin and any additional.
Sums of money deposited in the Company. If the market started moving in the
In the opposite direction of your position, and the amount of the required margin increased, the Company may require you to deposit additional sums of money to support the work urgently. Failure to meet the requirement to deposit other sums of money may result in the closing of your position/s by the Company, and you will bear the responsibility for any losses or lack of funds connected in addition to that.
Orders and Strategies reducing the risk
Placement of specific orders (for example, "stop-loss" orders, if this is allowed by local legislation or "stop-limit" orders), which restrict the maximum amount of losses, may turn out to be inefficient if the market situation makes the execution of such orders impossible (for example, upon illiquidity of the market). Any strategies using combinations of positions, for instance, "spread" and "straddle", may not be less risky than those connected with standard "long" and "short" positions.
Additional risks specific to Transactions with foreign Currency and Derivates
Conditions for entering into contracts
You need to obtain from your broker detailed information about the conditions for entering into contracts and any obligations connected in addition to that (for example, about the circumstances wherein you may accrue the responsibility to carry out or accept delivery of any asset within the framework of a futures contract, or, in the case of an option, information about the expiration dates and the time limitations for executing opportunities). Under some circumstances, a stock exchange or clearinghouse may change the requirements of unsettled contracts (including the strike price) to reflect changes in the market of the respective asset.
Suspension or restriction of trade. Price correlation
Certain market situations (for example, illiquidity) and the operating rules of some markets (for example, suspension of trade concerning contracts or months of contracts due to excess in the limits of price changes) may increase the risk of losses incurred since executing transactions or squaring/netting positions becomes difficult or impossible. Losses could increase if you sell options. A well-grounded interconnection does not always exist between the asset's prices and the derivative purchase. The absence of a benchmark price for investment may make a "fair value" estimation difficult.
Deposited funds and property
You should familiarise yourself with protective instruments within the limits of the Security deposit by you in the form of cash or any other assets when executing an operation either inside the country or abroad, especially if insolvency or bankruptcy of a dealing firm could be an issue. The legislation regulates the extent to which you can return your cash or other assets and local country standards wherein the Counterparty carries out its activities.
Commission fees and other charges
Before participating in any trades, you should get precise details on all commission fees, remunerations and other charges that will need to be paid by you. These expenses will affect your net financial result (profit or loss).
Transactions in the other jurisdictions
Executing transactions on markets in other jurisdictions, including demands formally connected with your internal market, may result in additional risks for you. Regulation of the markets as mentioned above may differ from yours in the degree of investor protection (including a lower degree of protection). Your local regulatory authority cannot ensure compulsory compliance to the rules determined by regulatory authorities or markets in other jurisdictions where you execute transactions.
Profits and losses of transactions with contracts re-denominated in a foreign currency that differs from the currency of your account are affected by exchange rate fluctuations when converted from the contract currency to the account currency.
Liquidity risk affects your ability to trade. It is the risk that your CFD or asset cannot be changed when you want to sell (to prevent a loss or make a profit). In addition, the margin you need to maintain as a deposit with the CFD provider is recalculated daily following changes in the value of the underlying assets of the CFDs you hold. Suppose this recalculation (revaluation) reduces weight compared with the valuation on the previous day. In that case, you will be required to pay cash to the CFD provider immediately to restore the margin position and cover the loss. If you cannot make the payment, the CFD provider may close your work whether or not you agree with this action. You will have to meet the loss, even if the underlying asset's price subsequently recovers. Some CFD providers liquidate all your CFD positions if you do not have the required margin, even if one of those positions is showing a profit for you at that stage. To keep your position open, you may have to agree to allow the CFD provider to take additional payments (usually from your credit card) at their discretion when required to meet relevant margin calls. In a fast-moving, volatile market, you can quickly run up a large credit card bill in this way.
CFD providers allow you to choose ‘stop-loss limits’ to limit losses. This automatically closes your position when it reaches a price limit of your choice. There are some circumstances in which a ‘stop-loss limit is ineffective, for example, where there are rapid price movements or market closure.
It cannot always protect you from losses.
Execution risk is associated with the fact that trades may not take place immediately. For example, there might be a time lag between when you place your order and when it is executed. In this period, the market might have moved against you. That is, your order is not completed at the price you expected. Some CFD providers allow you to trade even when the market is closed. Be aware that the prices for these trades can differ widely from the closing price of the underlying asset. In many cases, the spread can be more comprehensive than it is when the market is open.
Counterparty risk is when the provider issuing the CFD (i.e. your counterparty) defaults and cannot meet its financial obligations. If your funds are not adequately segregated from the CFD provider’s funds and the CFD provider faces financial difficulties, then there is a risk that you may not receive back any monies due to you.
Most usual "voice" and electronic trading systems use computer devices for routing orders, balancing operations, and registering and clearing transactions. As with other electronic devices and systems, these are subject to temporary failure and faulty operation. Your chances for reimbursement depend on limits of liability determined by the supplier of trading systems, markets, clearinghouses, and dealing firms. You must get detailed information from your broker on this matter.
Trading executed using any Electronic Communications network may differ from trading on any usual "open-outcry" market and from trading where other electronic trading systems are used. Suppose you execute any transactions on an Electronic Communications Network. In that case, you bear the risks specific to such a plan, including the risk of a failure in operating the hardware or software. System failure may result in the following: Your order may not be carried out following instructions; an order may not be executed at all; it may be impossible to receive information on your positions continually or to meet margin requirements.
In several jurisdictions, firms are allowed to carry out over-the-counter operations. Your broker may act as the counterparty for such operations. The unique feature of such operations lies in the complexity or impossibility of closing positions, estimating values, or determining the fair price or exposure to risk. For the above reasons, these operations may be connected with increased risks. The regulation governing over-the-counter operations may be less strict or provide a particular regulatory mode. You will need to become familiar with the rules and dangers connected in addition to that before executing such operations.