This brief statement does not disclose all of the risks and other significant aspects of trading Forex, CFD, equities, futures, OTC, and exchange traded financial products (“Contracts”). In light of the risks, you should undertake such transactions only if you understand the nature of the financial instruments you are trading and the contractual relationships into which you are entering and the extent of your exposure to risk. Trading in Contracts and any other complex financial products may not be suitable for many members of the public. You should carefully consider whether trading such Contracts and complex financial products is appropriate for you in light of your age, experience, objectives, financial resources and other relevant circumstances. In considering whether to trade such complex financial products, you should be aware of the following:
1. Effect of “Leverage” or “Gearing”: Transactions in Contracts and other complex financial products carries a high degree of risk. With leveraging, the amount of initial margin is small relative to the value of the Contract so that transactions are “leveraged” or “geared”. A relatively small market movement will have a proportionately larger impact on the funds you have deposited or will have to deposit; this may work against you as well as for you. You may sustain a total loss of initial margin funds and any additional funds you deposit with the form to maintain your position. If the market moves against your position or margin levels are increased, you may be called upon to deposit substantial additional funds on short notice in order to maintain your position. If you fail to comply with a request for additional funds within the time prescribed, your position may be liquidated at a loss and you will be liable for any resulting deficit in your account. It is important to remember that it is your responsibility to monitor your account at all times to ensure that you have sufficient margin. Zero Spread FX does not make margin calls via phone, email or other communication means.
2. Risk-Reducing Orders or Strategies: Placing certain orders (e.g. “stop-loss” orders, where permitted under local law, or “stop-limit” orders) that are intended to limit losses to certain amounts may not be effective because market conditions may make it impossible to execute such orders. At times, it may also be difficult or impossible to liquidate a position without incurring substantial losses. Strategies using combinations of positions, such as “spread” and “straddle” positions, may be as risky as taking simple “long” or “short” positions.
3. Suspension or Restriction of Trading and Pricing Relationships: Market conditions (e.g. illiquidity) and/or the operation of the rules of certain markets (e.g. the suspension of trading in any contract or contract month because of price limits, government intervention or reasons beyond a counterparty’s control) may increase the risk of loss by making it difficult or impossible to effect transactions or liquidate/offset positions.
4. Deposited Cash and Property: You should familiarize yourself with the protections accorded money or other property you deposit for trading, particularly in the event of your counterparty’s insolvency or bankruptcy. The extent to which you may recover your money or property may be governed by specific legislation or local rules. In some jurisdictions, property that had been specifically identifiable as your own will be prorated in the same manner as cash for purposes of distribution in the event of a shortfall.
5. Commission and Other Charges: Before you begin to trade, you should obtain a clear explanation of all commission, fees, markups, markdowns and other charges for which you will be responsible. These charges will affect your net profit (if any) or increase your loss.
6. Price Risks: The profit or loss in trading will be affected by fluctuations in price which can be extreme.
7. Principal’s Market: CFDs and other OTC Contracts are not traded on a regulated exchange market (unlike futures and equities). Instead, these complex instruments are traded in the over-the-counter (OTC) dealer market. Our broker dealer is a dealer in CFDs and spot market complex products and, as such, may be a counterparty to your transactions. You will therefore transact at prices established by our broker dealer. Even though our broker dealers quotations and prices are assisted by many computer-based component systems, its quotations and prices may vary due to market liquidity and may not be as favorable as those of other dealers. Our broker dealers trading facilities are supported by computer-based component systems for the order-routing, execution or trade matching. As with all electronic facilities and systems, they are vulnerable to temporary disruption or failure. Your ability to recover certain losses is subject to limits on liability set forth in the Client Agreement and the Electronic Trading Agreement and the agreements of other dealers, banks or financial institutions which may at times act as your counterparty.
8. Electronic Trading: Trading on an electronic trading system may differ not only from trading in the open outcry market, but also from trading on other electronic trading systems. If you undertake transactions on an electronic trading system you will be exposed to risks associated with the system including the failure of hardware and software. 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.
9. Off-Exchange Transactions: In CFD and other OTC transactions, firms are not restricted in effecting off-exchange transactions. Our broker dealer will generally act as your counterparty to the transaction. It may be difficult or impossible to liquidate an existing position, to assess the value, to determine a fair price or to assess the exposure to risk of a CFD or other OTC position. For these reasons, these transactions may involve increased risks. Before you undertake CFD or other OTC transactions, you should familiarize yourself with applicable rules and attendant risks and the policies, procedures and agreements to which your account will be subject.