Foreign Exchange Trading with CMC Group

Transcription

1 Foreign Exchange Trading with CMC Group LONDON NEW YORK SYDNEY

2 Risk Warning Trading Foreign Exchange on margin carries a high level of risk, and may not be suitable for all investors. The inherent concept of such investments means that they are not suitable for the investor seeking income from such investments, and are only suitable for those who have the required experience and understand the market risks. You should carefully consider your investment objectives, level of experience, and seek advice from an independent financial advisor if you have any doubts. The possibility exists that you could sustain a loss of some or all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading. All reasonable care has been taken to ensure that the information given is accurate and any opinions given are fair and reasonable, but no guarantee, warranty or representation express or implied whatsoever on the part of CMC Group Plc. CMC Group Plc will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. No information provided constitutes investment advice. All opinions and estimates included constitute our good faith judgement at this date, but are subject to change without notice. There are risks associated with utilising an Internet-based deal execution trading system including, but not limited to, the failure of hardware, software, and Internet connection. CMC Group Plc does not control signal power, its reception or routing via Internet, configuration of your equipment or reliability of its connection, we cannot be responsible for communication failures, distortions or delays when trading via the Internet. CMC Group Plc employs back up systems and contingency plans to minimise the possibility of system failure, and trading via telephone is always available. The information provided is only intended for distribution, or use by, any person in any country where such distribution or use would not be contrary to local law or regulation. None of the products and services referred to in this brochure are available to persons residing in any country where the provision of such services or investments would be contrary to local law or regulation. It is the responsibility of recipient to ascertain the terms of and comply with any local law or regulation to which they are subject. CMC Group Plc is authorised and regulated by the Financial Services Authority in the UK, registration number , and is a member of the NFA, (National Futures Association) registration number Registered office: 66 Prescot Street, London E1 8HG, UK. Registered in England No:

3 Contents Welcome to CMC 2 History of CMC Oldest online FX market maker 4 First online FX trading platform 4 Internationally recognised award winning service 5 Experienced and professional market maker 5 The CMC FX service The service at a glance 6 Award winning FX trading technology Marketmaker software 8 Free integrated trading tools 9 FX products Spot FX 10 Forward FX 10 OTC FX Options 10 Questions and answers 12 Opening an account 14

4 Welcome to CMC. Established in 1989 CMC Group has evolved into a world leader in real-time Internet trading. After launching the world s first real-time Internet Foreign Exchange trading platform in 1996 we have continued to evolve and now service clients in over 100 countries, offering them real-time Internet trading in thousands of products. In the last financial year, 2002/2003, we handled around 6 million orders resulting in approximately 4.3 million trades to the value of hundreds of billions of dollars. With over 95% of our business transacted over the Internet through our straight through processing system, we can keep our costs to a minimum. This has meant that we do not need to charge commission to our clients and our inter-bank dealing spreads are extremely competitive. The key to our success is our drive and dedication to Internet trading. We continue to develop our own software using our in-house team of experienced developers. Our award winning Marketmaker trading platform processes each client s trade within seconds, updating their back office and accounting details in real-time. In addition the software s real-time position keeping function enables clients to monitor their open positions, keeping them informed of their margin levels and profit and loss. Our live dealing prices are simultaneously broadcast on our Internet dealing system to all clients at the same time. Clients just have to click to trade. So if we do not charge commission, brokerage, or annual maintenance fees whilst also offering tight dealing spreads how do we provide such a competitive, cost efficient service? Simple. By creating a successful business based on three key areas software efficiency, being a market maker and flows of business. Firstly, by automating all trading through our efficient Internet dealing software we can substantially reduce processing overheads. When a client executes a trade all the trade details are immediately processed electronically through to our back office. With a real-time back office, client accounts are automatically kept up to date, with all margin calls and trading capabilities calculated and displayed electronically. Also during normal market conditions the software s auto-dealer will electronically execute all trades below a certain size against the market price. This type of order processing efficiency has allowed us to pass the associated cost savings directly back to our clients in the form of competitive spreads and no commissions. 2

5 Secondly, brokers generally look to make a commission on every deal, as this is a major source of their income. They will generally obtain a price from a market maker, or an exchange, quote the price to the customer and charge the customer a commission for executing the trade. As CMC is a market maker we remove this process by connecting customers directly to our own industry experienced and professional dealers, thereby cutting out the middleman and the associated costs. Lastly, one major difference between a market maker and a broker is that a market maker may not attempt to make a profit on every deal and generally does not expect to. Market makers look for flows of business through continual quoting of prices. Then as deals are picked up throughout the trading day the market maker starts to hedge the overall position in the market. Competitive prices, commission free trading and a dedication to the continual development of our award winning software have all helped CMC Group evolve into a world leader in real-time Internet trading. With offices on 3 continents in 3 time zones I am proud to say that I believe we have the best online trading service in the world. I hope you agree. Peter Cruddas Chief Executive As the longest standing provider of online commission free Foreign Exchange trading, CMC s extensive global client base is a reflection of the trust and quality that is associated with its name around the world. In effect, CMC pioneered Internet Foreign Exchange trading. 3

6 History of CMC Experienced, professional and award winning, CMC is the original online FX trading service. Experienced FX market maker In 1989 when CMC started trading as a Foreign Exchange market maker, its vision was to make the Foreign Exchange markets accessible to the non-institutional trader. CMC aimed to achieve this by challenging the high costs and poor service levels that had previously been associated with institutional style trading. First online FX trading platform This vision, combined with the Internet, enabled CMC to offer the world s first online, real-time Foreign Exchange trading platform in CMC seized the opportunity to offer a service focusing on real-time execution, the tightest dealing spreads, and one of the most advanced online trading platforms in the market. CMC seized the opportunity to offer a service focusing on real-time execution, the tightest dealing spreads, and one of the most advanced online trading platforms in the market CMC established as a Foreign Exchange market maker CMC Futures offers Futures trading and becomes authorised and regulated in the UK by the AFBD, later the SFA, and subsequently the Financial Services Authority CMC launches world s first online, commission free real-time FX trading platform CMC receives Millennium Product Award from the UK Government for innovation in the 1990s, honouring its trading technology. 4

7 Internationally recognised award winning service As pioneers of online FX trading, CMC continues to offer the most competitive and innovative trading service available in the global market place. Since the launch of the revolutionary Marketmaker platform in 1996, CMC s service has continued evolving to suit the needs of trading clients. CMC s commitment to online trading was recognised by the UK Government with the Millennium Product Award for outstanding innovation in the 1990s, as well as by the Finance industry in the form of the Euromoney Magazines Award for Best Independent Non-Bank FX Platform. Fast, reliable Price Driven Service When you log onto CMC s Marketmaker trading system you receive continuous real-time prices that you can trade on within seconds. These prices are supplied online by CMC s experienced dealers, cutting out any unnecessary time delays in asking for a quotation. This is CMC s Price Driven Service (PDS). As pioneers of online FX trading, CMC continues its commitment to offering the most competitive and innovative trading services available CMC s Marketmaker trading software receives top award from Euromoney Magazine for the Best Independent Non-Bank FX Platform globally CMC Asia-Pacific office opens in Sydney. Regulated by ASIC CMC US office opens in New York and becomes a member of the NFA. 5

8 The CMC FX service The CMC FX service at a glance. Price Driven Service (PDS) Clients are able to execute trades within seconds on the displayed prices without requesting a quotation. CMC s open, Price Driven Service ensures that dealers do not read or shade or quote prices based upon a particular client s position as the software provides complete price transparency. Commission free FX trading CMC does not charge its customers commission on any Forex trade, no matter what the trade size. Tight inter-bank spreads CMC spreads are amongst the tightest to be had in the FX market, regardless of trade size, and aims to provide these on a consistent basis. Wide product range, 24 hour market Clients can trade all the major currencies 24 hours a day. CMC also offers an extensive range of cross currency combinations of all majors with highly competitive spreads. Trade multiple product types including Spot FX, Forward Outright FX (Outright or Broken-Date), FX Swaps and OTC FX Options, including Spread-Strategies. Competitive margins and small minimum trade sizes CMC s commitment is to offer the most competitive margins available. Generally margins are as low as 1% of the deal amount (100-to-1 leverage). You can deal in lot sizes as small as USD10,000 (or equivalent), and on inter-bank spreads typically quoted on larger deals. Clients can trade all major currencies 24 hours a day at the click of a mouse. CMC does not charge its customers commission on any Forex trade, regardless of trade size. 6

9 24 hour dealer, back office and technical support CMC Group is a global company with offices on 3 continents in 3 time zones. As a result of this, CMC s clients can expect 24 hour dealing support with full technical and back office (phone and Internet) support. Free award winning software with integrated trading tools The Marketmaker platform includes a breaking news service from Dow Jones, fundamental market analysis from IDEAglobal and a tick-by-tick charting facility. Interest paid on deposits You receive interest on available funds over the interest qualification level at competitive rates. Regulated on 3 continents For the integrity of trading and to protect customers rights, CMC is authorised and regulated in the UK by the Financial Services Authority, in Australia by ASIC and is a member firm of the NFA in the US. Investor Protection Fund Customers who open accounts with CMC may be covered by the Financial Services Compensation Scheme. Should you require additional information on this subject, you can discuss this with our FX Sales desk. CMC is committed to offering its customers the most competitive dealing spreads available in the market. 7

10 FX trading technology Advanced FX trading technology. Since its ground breaking introduction in 1996, CMC s Marketmaker software has evolved into a world leading financial trading platform. Last year its customers executed over 4.3 million trades online through Marketmaker, a testament to the strength and reliability of the software. Marketmaker v5.0 is CMC s most advanced, flexible and comprehensive trading platform to date giving you customisable access to thousands of real-time prices and the power to trade global markets from one account, 24 hours a day. Marketmaker v5.0 features at a glance: Live real-time tradeable prices on all major currency pairs. Multiple online order types; including Market, Stop, Limits, OCO and Contingent or If-Done orders. Real-time position updates to help you track your portfolio, allowing you to instantly see account equity, open, pending or closed orders and check available margin. Customisable trading platform which allows the user to create an unlimited number of individual trading pages. The unique pop-out window allows specific windows to be viewed while using alternative software applications or the Internet. Free real-time Dow Jones breaking newswire, free expert fundamental market analysis from IDEAglobal, and free historical charting across the full range of instruments. Marketmaker v5.0 is CMC s most advanced, flexible and comprehensive trading platform to date. 8

11 Free integrated trading tools As part of CMC s continued drive to offer the most comprehensive trading platform in the market, the Marketmaker v5.0 software also offers users access to a number of free trading tools. 1. Customisable trading platform IDEAglobal FX analysis IDEAglobal is a valued source of market intelligence with an 11 year track record of offering insightful analysis on financial markets 24 hours a day. Previously accessible only to institutional trading desks throughout the world, IDEAglobal is now dedicated to bringing CMC customers objective, independent research and actionable analysis. 2. The unique pop-out window Real-time Dow Jones news Founded in 1882, and now the leader in financial markets news services, Dow Jones newswire has access to a combined total of more than 3,650 reporters and editors in more than 230 news bureaus around the globe. Dow Jones is the world s largest news-gathering network and you can access it free of charge on the Marketmaker trading platform. 3. Real-time position updates Reuters Company Fundamentals For more than twenty years, Reuters Fundamentals (formerly Multex Fundamentals) has been recognised as the premier source of highest quality client-focused financial information on companies worldwide. Used by professionals in every market segment, Reuters products provide unique insight into a company s health and performance, giving you a real competitive edge. Real-time charting and analytics 4. Multiple online order types To complement the trading capabilities of the Marketmaker software platform there is a new, improved real-time charting package that includes numerous charting indicators such as Candle Sticks, Bollinger Bands and Fast and Slow Stochastics. The software also includes , audio and visual price alerts. 9

12 FX products Products offered. Spot FX CMC s customers are offered competitive prices on the world s major currency pairs with bid-ask spreads typically accessible only to the inter-bank Spot market. CMC offers margin rates as low as 1% and available trade sizes which, depending upon the traded currency pair, can be as low as USD10,000 (or equivalent) and as high as USD1 Billion. All clients are offered the most professional service irrespective of trade size or frequency of dealing. Forward FX CMC also provides access to FX Swaps for customers interested in addressing the interest rate component implicit in the Forward FX markets. To cater to the needs of a diverse customer base, CMC quotes both Outright and Broken-Date Forward FX prices so that CMC clients are able to trade FX for a future settlement date, be it a standard time-frame or a specific date. As per Spot transactions, margin rates are as low as 1% with minimum trade sizes which, depending upon the traded currency pair, can be as low as USD10,000 (or equivalent) and as high as USD1 Billion. The ability to quote Broken-Date Forwards means that clients are able to tailor their FX trades to meet their specific cash-flow, hedging, trading or speculative requirements. OTC FX Options CMC operates a 24 hour order driven service for Options, providing clients with the guidance they need from the pricing of the Option through to the execution of the deal. Clients receive OTC currency Options comparable with inter-bank prices in deal sizes as small as USD10,000. Options can be placed by telephone or via the online platform. Prices are available on 1 week, 30 day, 60, 90, 180 and 365 day options. Bespoke Options or Option Spread-Strategies are available upon request, where you can select a date and style that suits your requirements. Clients are able to trade all the major currencies that are commonly traded globally, 24 hours a day. 10

13 Forex trading an example The Spread Imagine the USD/JPY rate is quoted at /03. This quote represents the bid/offer spread for USD vs JPY. The Offer The offer rate of is the rate at which you can exchange your JPY for USD or, in other words, purchase USD with JPY, or BUY USD and SELL JPY. The Bid The bid rate of is the rate at which you can SELL USD to BUY JPY. Going long You believe that the US Dollar will strengthen against the Japanese Yen, and decide to BUY or go long (the offer price). Opening Buy Customer BUYS Quote (bid/offer) /03 Buy price Trade size Initial outlay (using 1% margin) Trade size USD500,000 USD5,000 Later Your prediction is correct and the US Dollar appreciates against the Japanese Yen. The quote on USD/JPY is now /68. To close your position, you decide to SELL (the bid price). Closing Sell Customer SELLS Quote (bid/offer) /68 Sell price Profit/loss USD500,000 Profit/loss Calculation Size of trade x (sell price buy price) = profit & loss in JPY 500,000 x ( ) = JPY310,000 profit JPY310,000 profit Or, converting the JPY310,000 back to USD at a rate of (Profit/loss USD rate) = profit & loss USD (310, ) = USD2, profit By closing your position to realise a gross profit of USD2, Had you misread the market direction and sold USD/JPY at and later bought USD/JPY at a loss of USD2, would have resulted. 11

14 Questions and answers Frequently asked questions. How is financing charged and calculated? Spot positions that are rolled over will incur financing based upon the interest rate differential between the two applicable currencies. The interest rate applied is TomNext which is an abbreviation for Tomorrow or the Next business day because the first value date is tomorrow or the next business day. The TomNext price reflects the applicable interest rate between Tomorrow/Next and the Spot value date. Dependent upon that differential, interest may be charged to or received by the trader. At 10pm (22.00) London time each day, CMC will settle all Spot positions by closing the trade at the current market rate and re-opening it for the following day s Spot date at a rate that will reflect the interest rate differential. Example USD/JPY: Trade date: 18th January You buy: 500,000 USD (value date 20th January) at You sell: 58,500,000 JPY (value date 20th January) At close of business on 18th January (17.00) the USD/JPY has moved to , realising a profit of USD2,128 (JPY250, ). If the position has not been closed by 17.00, CMC will automatically execute the following roll over trades on your behalf: You sell: 500,000 USD (value date 20th January) at You buy: 58,750,000 JPY (value date 20th January) You buy: 500,000 USD (value date 21st January) at You sell: 58,747,750 JPY (value date 21st January) i.e swap rate 0.45* *the swap rate is based upon the inter-bank swap market rates which reflect the interest rate differential between the two applicable currencies. In the above example a client benefits from the rollover by JPY2,250. What other charges are involved in trading FX with CMC? With CMC, there are no commission charges. This is irrespective of how often you trade FX or the size of your trade. Only financing on positions held overnight is applied to customer accounts (see above). 12

15 Can anyone trade FX with CMC? Previous experience in FX trading is required. All Foreign Exchange customers must be classified as Intermediate Customers due the level of risk involved in trading margined products. By classifying clients as professionals we are assuring that they have the knowledge and depth of experience to trade margined FX on an execution only basis. Does CMC pay interest on available free equity? Yes, please refer to the Rates Schedule for the current interest qualification level and relevant interest rates. Contact CMC for the most recent Rates Schedule. What is the minimum deal size? Depending upon the traded currency pair as low as USD10,000 (or equivalent). What are the margin requirements? Spot FX and FX Forwards are margined at as low as 1% both intraday and overnight. Does CMC give trading advice? CMC provides an execution only service. It is able to provide factual information upon request but does not give direct or indirect trading advice. CMC does however offer access to world leading research and analysis through advanced charting and analytical tools, real-time news and analysis, and IDEAglobal market research and commentary. What is the minimum deposit to open an account? The minimum deposit to open an account is USD500 or the equivalent thereof. CMC provides excellent dealing support facilities for professional FX traders. Full technical and back office (phone and Internet) support staff can answer any questions you have 24 hours a day. 13

16 Opening an account How to open an FX account with CMC. CMC offers a number of convenient ways to submit an application: Online Complete an application via our website, at Upon completion of the online form you will be required to sign and submit the Intermediate Customer Notice along with some additional documentation (details of which can be found within the application form). Hard copy application Simply complete the relevant application form and Intermediate Customer Notice enclosed with this brochure and return them in the pre-paid envelope with the additional documentation as requested. Funding your CMC account The minimum deposit to open a Forex account with CMC is USD500 (or currency equivalent). CMC can accept initial account deposits in any currency including USD, CAD, JPY, EUR, CHF, GBP, AUD and NZD. Clients can fund their accounts via cheque, money order, bank draft, Electronic Bank Wire Transfer or a number of credit/debit cards. CMC offers a number of convenient ways to submit an application. 14

17 Competitive spreads, commission free trading and a dedication to the continual development of our award winning software have all helped CMC evolve into a world leader in real-time Internet FX trading. 15

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19 CMC Group Plc 66 Prescot Street London E1 8HG United Kingdom Freephone T +44 (0) F +44 (0) E info@cmcforex.co.uk Registered office as above Registered in England No Authorised and regulated by the Financial Services Authority, registration No PBFXUK03v1