How does CFDs Work? Phillip Capital All Rights Reserved

Transcription

1 How does CFDs Work? Phillip Capital All Rights Reserved

2 What will we cover today? lacing a Trade rocessing a Trade

3

4 Placing a Trade Going contract Long in a BUY

5 Placing a Trade SELL Going a contract Short in

6 Placing a Trade BID Long SELL ASK BUY

7

8 Client TRADES Brokerage House YOU

9 Processes

10 Placing a Trade BID ASK

11 1.005

12 Account Status Fund Sufficiency Etc CHECKS

13 CFD Hedging

14 Risk Management Checks CFD Hedging

15 BID/ASK matches SELL/BUY CFD Hedging

16 1. Two methods of trades in CFD i.e. BUY and SELL 2. BUY at ASK 3. SELL at BID 4. Process of an order

17

18 Disclaimer These presentation slides are provided to you for general information only and does not constitute a recommendation or an offer or solicitation to purchase or sell the product mentioned. They do not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of you acting based on this information. Investments are subject to investment risks. The risk of loss in leveraged CFD trading can be substantial. You may sustain losses in excess of your initial funds and may be called upon to deposit additional margin funds at short notice. If the required funds are not provided within the prescribed time, your positions may be liquidated. You should also consider the commission and finance costs involved for trading CFDs. The resulting deficits in your account are subject to penalty charges. The value of investments denominated in foreign currencies may diminish or increase due to changes in the rates of exchange. You are advised to read the Terms and Conditions of CFD Trading and CFD Information Sheet before undertaking transactions in CFDs. The Terms and Conditions of CFD Trading and CFD Information Sheet can be obtained online at or from Phillip Securities Pte Ltd. You may wish to obtain advice from a qualified financial adviser, pursuant to a separate engagement, before making a commitment to purchase any of the investment products mentioned herein. In the event that you choose not to obtain advice from a qualified financial adviser, you should assess and consider whether the investment product is suitable for you before proceeding to invest and we do not offer any advice in this regard unless mandated to do so by way of a separate engagement.

19 CFDs may not be suitable for clients whose investment objective is preservation of capital and/or whose risk tolerance is low. Clients are advised to understand the nature and risks involved in margin trading. You are advised to read carefully and understand the Risk Disclosure Statement from before undertaking transactions in CFDs. Any CFD offered is not approved or endorsed by the issuer or originator of the underlying security and that the issuer or originator is not privy to the CFD contract. Phillip Securities Pte Ltd reserves the right to amend the information presented without prior notice. The Straits Times Index CFD (the Securities ) are not in any way sponsored, endorsed, sold, or promoted by FTSE International Limited, The London Stock Exchange Plc, The Financial Times Limited, SPH Data Services Pte Ltd, Singapore Press Holdings Ltd or Singapore Exchange Securities Trading Limited (collectively, the Index Sponsor ), and the Index Sponsor bears no liability in connection with the administration, marketing or trading of the Securities. No warranty or representation or guarantee of any kind whatsoever relating to the Straits Times Index (the ST Index ) or the Securities is given by the Index Sponsor. Singapore Press Holdings Ltd is entitled to all intellectual property rights in the ST Index. Some information in this presentation as been obtained from public sources which PSPL has no reason to believe are unreliable. PSPL has not verified such information and no representation or warranty, expressed or implied, is made that such information is accurate, complete or verified or should be relied upon as such.

20 This Risk Disclosure Statement does not disclose all the risks and other significant aspects of trading in Leverage Instruments. In light of the risks, you should undertake such transactions only if you understand the nature of the contracts (and contractual relationships) into which you are entering and the extent of your exposure to the risks. Trading in Leveraged Instruments may not be suitable for many members of the public. You should carefully consider whether such trading is appropriate for you in the light of your experience, objectives, financial resources and other relevant circumstances. In considering whether to trade, you should be aware of the following: (a) LEVERAGED INSTRUMENTS TRADING (1) Effect of Leverage or Gearing Transactions in Leveraged Instruments carry a high degree of risk The amount of initial margin is small relative to the value of the futures contract or leveraged foreign exchange transaction so that the transaction is highly 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 the initial margin funds and any additional funds deposited with the firm to maintain your position. If the market moves against your position or margin levels are increased, you may be called upon to pay 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 specified time, your position may be liquidated at a loss and you will be liable for any resulting deficit in your account.

21 2) Risk-Reducing Orders or Strategies The placing of certain orders (e.g. stop-loss orders, where permitted under local law, or stop-limit orders) which 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 is also difficult or impossible to liquidate a position without incurring substantial losses. (b) LIQUIDITY OTC Leveraged Instruments may be very illiquid and may not have any secondary market, meaning that such instruments may be difficult to be sold within a reasonable time (if at all) or at a price which reflects its objectively perceived "fair" value. For some of such instruments it may even be difficult to get any reliable independent information about the value and risks associated with such instruments

22 (c) ADDITIONAL RISKS COMMON TO OTC LEVERAGED INSTRUMENTS TRADING (i) Form 13 Risk Disclosure Before undertaking transaction in Leverage Instruments, you should also carefully read the risks stated in the Risk Disclosure Statement [required to be provided to you pursuant to section 128 (1) of the Securities and Futures Act (Cap 289)] as common to Futures, Options and Leveraged Foreign Exchange are also risks common to OTC Leveraged Instruments. (ii) Off-Exchange Transactions Without detracting from the generality of (i) above, you should particularly note that OTC Leveraged Instruments are traded on an off-exchange basis and the firm with which you conduct your transactions (which may be ourselves or another firm if we act as your broker to effect a transaction with such firm) may be acting 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. For these reasons, these transactions may involve increased risks. Off-exchange transactions may be less regulated or subject to a separate regulatory regime.

23 You should also note that where we act as your counterparty that this prima facie means that your loss is our gain and as such we will not in such transactions be acting as your fiduciary but in our own interests. (1) Leveraged instrument - Risk of loss can be substantial (2) Profits and Losses magnified - Depending on nature of trade, losses may be unlimited (3) Suitability - CFD may not be suitable for you if your:- a) Investment Objective is CAPITAL PRESERVATION and/or b) Risk Tolerance is LOW (4) Execution of Orders When a client places a CFD order, pre-execution checks are performed on account status, fund sufficiency, credit limit, etc. In addition, CFD orders are subject to certain risk management checks, including the ability of PSPL to hedge its own exposure under CFD positions with clients. This means that a client s CFD order may not be filled immediately or it may not be filled at all.

24 (5) Force-closure of CFD Contracts PSPL may hedge its own exposure ( Hedge Position ) under a CFD position with the client. Where PSPL s counterparty in a hedge position unwinds or closes out the Hedge Position or for any other reason PSPL is no longer able to maintain the Hedge Position, PSPL may in its absolute discretion with or without notice to the client close any or all open positions, refuse any trades, cancel any orders and fill any orders in each case at such level as PSPL may consider in good faith to be appropriate in all circumstances.