CFDs and FX Trading. Putting you in control

Transcription

1 CFDs and FX Trading Putting you in control

2 Risk Warning For the purpose of you trading in Contracts for Difference (CFDs) NatWest Stockbrokers Limited (NWS) introduce you to CMC Markets UK Plc trading as NatWest Index ( NatWest Index ). All dealing, administration and settlement will be undertaken by CMC Markets UK Plc who is authorised and regulated by the Financial Services Authority ( FSA ). CFDs are leveraged products. They carry a high level of risk to your capital and may not be suitable for all investors. You should only speculate with money you can afford to lose. Prices may move rapidly against your interests and you may sustain a loss of part or all of your original investment. In certain circumstances you may be liable to pay for margin to maintain your position and you may lose an amount over and above your initial investment. Before placing a bet, you should ensure that you fully understand the risks involved and that you consider carefully whether or not this product is suitable for you in light of your circumstances and financial position. If in doubt, you should seek independent advice. 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. NatWest Index does not control signal power, its reception or routing via the Internet, configuration of your equipment nor reliability of its connection, and we do not therefore accept any responsibility whatsoever for communication failures, distortions or delays that are out of our control when trading takes place via the Internet. NatWest Index employs back up systems and contingency plans to minimise the possibility of system failure, and trading via telephone is available as an alternative. Telephone calls may be recorded. All reasonable care has been taken to ensure that the information provided in this brochure is accurate and complete and any opinions expressed are fair and reasonable, but no guarantee, warranty or representation whatsoever to that effect, whether express or implied, is given on the part of NatWest Index. This brochure contains general information and is provided for guidance only. It isn t tailored to specific circumstances. NatWest Index will not accept liability for any loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on this information. No information provided constitutes investment advice. All opinions and estimates included constitute our good faith judgement at the date of this publication, but are subject to change without notice. The information provided is only intended for distribution, or use by, any person in any country where such distribution or use is not 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 is contrary to local law or regulation. It is the responsibility of the recipient to ascertain the terms of and comply with any local law or regulation to which they are subject. Stamp duty is currently not levied on CFD trades but tax laws can change. If you would like to speak to one of our sales team, please call Why not visit our website? 2

3 Introduction to CMC Markets UK Plc For the purposes of you trading in Contracts for Difference, NatWest Stockbrokers Limited will introduce you to CMC Markets UK Plc (trading as NatWest Index), with whom you will form a contractual relationship. All customer transactions, dealing, administration and monitoring of account margin will be carried out by CMC Markets UK Plc. CMC Markets UK Plc was established in 1989 and is a market-leading financial CFD provider. In 1996 CMC introduced their groundbreaking software platform which has evolved into its world leading and award-winning Marketmaker trading platform. CMC continue to invest heavily in technology and are at the forefront in terms of technology, product innovation and service. 3

4 Contents Welcome to NatWest Index... 5 What are Contracts for Difference?... 6 How do they work?... 7 Margin explained... 9 Financing explained Hedging explained What types of CFDs do NatWest Index offer? What is FX Trading? What type of FX Trading does NatWest Index offer? Margin explained Financing explained Over a thousand instruments offered across 18 Global Markets Risk management with NatWest Index Understanding the risks Risks explained Limiting your risk The benefits of trading CFDs and FX Trading technology to suit you Integrated professional analytic suite Making sense of it all Getting started Next steps Apply for an account today How to fund your account

5 Welcome Contracts for Difference (CFDs) first entered the UK retail market in the late 1990s and have since become a regular feature within many active investors investment portfolios. While traditional share dealing continues to be popular with many investors, the inability to go short (particularly during volatile markets) has proven to be a real disadvantage for some active private investors. At NatWest Index, customers are able to trade in Foreign Exchange (FX Trading) by opening a CFD account. FX Trading has always traditionally been an institutional or inter-bank market. However, online services now offer simple and easy access for retail investors. As the number of providers offering CFDs and FX Trading at competitive prices increases, so too does their prevalence within individual investors portfolios. Many active traders trade CFDs for portfolio protection. As more and more active traders embrace the increased flexibility that these products can offer, their inclusion in investment portfolios is becoming more the norm and perhaps their exclusion a missed opportunity! NatWest Stockbrokers Limited (NWS) has recognised this shift in trading behaviour and has teamed up with CMC Markets UK Plc. CMC have years of experience and success in providing CFDs and FX Trading and have made a considerable investment in their trading technology in recent years. Is it now time for you to start trading with NatWest Index? 5

6 What are CFDs? CFDs offer the private investor another way to trade the world s financial markets and involves predicting the direction that the price of a specific financial instrument will move in. The CFD is structured as an agreement between two parties the investor/trader (which would be you as a customer) and the CFD provider (which, in this instance, would be NatWest Index). The agreement put in place is to simply exchange (at the close of the contract) the difference between the opening price and the closing price of the contract, multiplied by the number of CFDs that were specified at the start. However, there are two key differences between CFDs and share dealing: (1) With CFDs, the investor is speculating on what direction the price of a particular financial instrument will move in and therefore he or she can profit not only when a market is rising but also when it is falling. The investor can also make a loss. In practice, for you to trade in CFDs (and enter into this contract), you will have to decide what direction the price will move for a particular financial instrument (for example, Equities). You would then deposit money into your trading account, which is used as margin. When you close out your position, the profit or loss you make will depend on whether you have been accurate with your chosen price direction and the number of CFDs that you traded. Equity CFDs are contracts that mirror the performance of the underlying market. At NatWest Index, we offer a choice of trading instruments; Equity CFDs as well as Stock Indices, Sectors, Bullion, Treasuries and Commodities. CFDs are leveraged products. Trading CFDs carries a high degree of risk to the investor s capital and due to fluctuations in value, the investor may not get back the amount of their original investment and in certain circumstances may be liable to pay a far greater sum. (2) Unlike share dealing, investors don t actually own the underlying instrument. CFD trading involves initially depositing only a small percentage of the total trade value and leveraging this amount. 6

7 How do they work? Trading in CFDs is all about judging how a particular financial market will perform. You are making a prediction about its future movements. 7

8 You decide to buy ABC Corporation and you are quoted the prices noted in the box below and decide to buy a CFD on 4,000 Share CFDs at 161p. Due to the current tax position, you do not pay any Stamp Duty on this purchase. sell price buy price Opening trade: 5 May Price of ABC Corporation 161p Number of Share CFDs purchased 4,000 Value of Share CFDs 6,440 Stamp Duty 0 Commission 20 Initial margin required (10%) 644 As you wish to hold this position overnight (and possibly longer), you will be charged a finance cost. This financing cost is calculated on 100% of the value of the position. You are charged interest at the official overnight LIBOR* rate (5% in this example) +2.5%.** This is multiplied by your total market exposure and divided by 365 days in the year to give you the daily overnight rate. 4 days later, CFD position sold to close out trade: 9 May The price for ABC Corporation is quoted as 185p (selling price)/ p (buying price). You decide to sell a CFD on 4,000 Share CFDs at this quoted price: Price of ABC Corporation 185p Number of Share CFDs sold 4,000 Value of Share CFDs 7,400 Stamp Duty 0 Commission 20 Closing value of Share CFDs 7,400 Opening value of Share CFDs 6,440 Profit on trade 960 Total commission ( 40) Financing (4 days) ( 5.28) Overall profit on trade * LIBOR (London Interbank Offered Rate). When you trade using margin, NatWest Index is effectively loaning you money to cover the cost of your trading position. NatWest Index make a charge for this. ** NatWest Index reserve the right to amend this rate with prior notice. 5%* + 2.5%** = 7.5% 6,440 x 7.5% = = 1.32 This amount will be debited from your account for every night you hold the position open. 8

9 Margin explained Trading in CFDs allows flexibility to trade as you do not need to pay the full underlying value of a trade. However, before you trade, you are asked to deposit money into your account. This is what is called initial margin. The rate of initial margin varies depending on which instrument you are trading. Typically, the margin is calculated as a percentage of the overall value of the trade, usually between 1% and 10%. If, for example, all your trades are eligible for a 5% margin, you can hold positions worth a total of 100,000, having only deposited 5,000. Therefore, you could potentially gain twenty times leverage on your deposit. However, it is important to remember that the full value of any running losses are met every day. Therefore, you may be required to place more funds in your account to keep your positions open and this is what is referred to as variation margin. Please note that it is your responsibility to monitor your account. How to calculate margin a Share CFD example You wish to buy 3,000 Share CFDs at 150p. The Share CFD has a margin requirement of 5%. 3,000 x 150p = 4,500 (this is the value of the position) 4,500 x 5% = 225 To hold the position you are required to deposit 225 as initial margin. 9

10 Financing explained Financing If you carry a CFD position over night, it will incur a financing cost. Finance is calculated on 100% of the value of the position. If you buy (long), you ll have to pay interest to NatWest Index; if you sell (short), you may receive interest. How to calculate financing using a Share CFD example: Long position You wish to buy 3,000 Share CFDs of a particular UK stock at 150p. You decide to hold the position overnight 3,000 x 150p = 4,500 (this figure is the value of your position) You are then charged interest at the official overnight LIBOR rate + 2.5%. This is then multiplied by your total market exposure and divided by 365 days in the year to give the daily overnight rate. Short position You wish to sell 3,000 Share CFDs of a UK stock at 150p and decide to hold the position overnight 3,000 x 150p = 4,500 (this figure is the value of your position) You are then credited an amount calculated by using the official LIBOR* rate 2.5%. This is then multiplied by your total market exposure and divided by 365 to determine the daily overnight rate paid to you. 5%* - 2.5%** = 2.5% 4,500 x 2.5% = = 31p Approximately 31p will be paid to you for every night you hold the position open. 5%* + 2.5%** = 7.5% 4,500 x 7.5% = = 92p Approximately 92p will be debited from your account for every night you hold the position open. Although a typical broker would not charge you financing, your outlay would be 100% of the value of the trade ( 4,500), which is 4,275 more than you are required to hold the CFD position with NatWest Index. By holding this position with a physical stock you would lose out on the interest you could earn on the capital that the margined trade has freed up. 10

11 Hedging explained When trading CFDs you can also help protect your portfolio. This is often referred to as hedging/price protection and can work as follows: The ability to hedge against market volatility and provide a degree of portfolio protection is another (and often overlooked) benefit of trading CFDs. This benefit, however, is best explained by way of a short example. In this example, our investor has a substantial portfolio that contains a broad selection of UK Stocks. With a UK economic update days away, he or she is concerned about how this might affect the shortterm value of his Stocks. He or she, however, is more confident in their long-term prospects. In order to ease any concerns and protect the value of his portfolio, he or she decides to sell (or rather with CFDs short ) the FTSE 100. Therefore: l If the FTSE falls, the UK Stocks within his or her portfolio may lose some of their value. The CFD positions he or she has taken will, however, make a profit (as he or she made a speculative bid that the market will fall). l The FTSE rises, the UK Stocks within his or her portfolio may increase in value and these gains will offset the loss he or she has made with the CFD position he or she has taken. So, by using CFDs an investor can arrange to protect their portfolio from volatile price swings in the market. ** Rates are based on the official LIBOR rate. This rate is subject to daily market fluctuations. ** NatWest Index reserve the right to amend this rate with prior notice. 11

12 What types of CFDs do NatWest Index offer? l l Share CFDs NatWest Index customers can trade over 1,000 global shares on all major markets all from one single account. Index CFDs An Index CFD allows you to speculate on the movement of an index taking either a long or short position. We quote all major global indices. If you believe the UK stock market will rise, you can buy the UK100 CFD contract: l You buy 50 USCrude Dec CFDs at You make this purchase as you believe the price of oil will rise You decide to sell 50 USCrude Dec CFDs at to close out your position. The tick movement therefore for this contract is This means you have made a profit of 190 ticks x 50 CFDs = $9,500 profit Treasury CFDs We currently quote a number of Treasury products including the T-Bond, T-Note, Gilt and Eurobund. All Treasury products trade with a tick value of A customer s profit or loss can be worked out by looking at the Treasury s tick value. You buy 5 CFD contracts at 4800 Each CFD contract is worth 4,800 and requires a minimum of 1% margin which = CFD contracts at 4,800 is worth 24,000 and therefore will require a margin of 240. Each time the index moves 1 index point, 5 CFD contracts will give you a profit or loss of 5. You sell your long position at This is a movement of 50 points against you. 50 x 5 CFD contracts = 250 loss You buy 10 TNOTE 10yr Dec CFDs at You believe the price will rise. Instead, the market falls. You decide to sell 10TNOTE 10yr Dec CFDs at to close your position. The tick movement for this contract is This means you have made a loss of 50 ticks x 10 CFDs = $500 loss. l Commodity CFDs Our commodity CFD service gives you the opportunity to trade on popular instruments such as oil, gold and agriculture. Unlike Futures, CFD trading allows you to access commodities whilst accommodating small contract sizes and reduced margin requirements. The profit or loss that a customer incurs can be worked out by looking at the commodity s tick value. Please note that we may not offer Commodity CFDs in all countries. Note: All profit or losses from trades will be settled in the currency that the instrument is denominated in. Customers have the right to have the currency balances converted at any time to their base currency (or any other currency) at the NatWest Index exchange rate. For this figure, please contact our dealing desk on

13 What is FX Trading? FX Trading is the exchange of one country s currency for another. All FX Trading is determined by a rate of exchange, largely influenced by global economic and political factors. FX traders simultaneously buy one currency and sell the other with the hope of making a profit when the value of the currencies change. FX Trading has always traditionally been an institutional or inter-bank market. However, online services now offer simple and easy access for retail investors who wish to trade in far smaller sums. 13

14 What type of FX Trading does NatWest Index offer? At NatWest Index, we offer rolling Spot FX contracts. For Spot FX Trading, we offer customers competitive prices on the world s major currency pairs with bid-offer spreads that were typically only available to the inter-bank spot market. We offer margin rates as low as 1% and all customers are offered the most professional service irrespective of trade size or frequency of dealing. FX Trading is a leveraged product. FX Trading carries a high degree of risk to the investor s capital and due to fluctuations in value, the investor may not get back the amount of their original investment and in certain circumstances may be liable to pay a far greater sum. 14

15 Margin explained Financing explained When you open an FX position, you are not required to pay the full value of the trade. We trade Spot FX on a 1% margin, meaning that you would be required to deposit collateral of only 1% of the position value known as initial margin. 1% margin gives you leverage of 100 times on your account balance. Any profit you make on your trades is paid to your account on a daily basis, however any losses must also be met on a daily basis. This may result in you being required to pay additional funds to support a position. This is known as variation margin. It is important to remember that margin trading increases your exposure to risk and losses can be significantly higher than the funds deposited. Spot positions that are rolled over will incur a financing cost based upon the interest rate differential of the two currencies. The interest rate applied is TomNext which is an abbreviation for tomorrow/next. The first value date is tomorrow (Tom) and maturity falls on the next working day (Spot/Next). The TomNext price is adjusted for the interest rate differential in that short period. At 22:00 each day, we 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. How to calculate margin: You buy e 100,000 spot You are required to have a minimum of 1% margin in your account, calculated as follows: 0.5% of e 100,000 primary currency = e % of $120,000 secondary currency = $600 (or e 500) To hold the position you are required to deposit e 1,000 as initial margin. Example: USD/JPY: Trade date: 18 January You buy: 500,000 USD (value date You sell: 55,500,000 JPY (value date At settlement on 18 January (22.00), the USD/JPY has moved to , realising a profit of 250,000 yen. Should you decide to roll the position over night, NatWest Index will automatically execute the following trades on your behalf: Sell: 500,000 USD (value date Buy: ,000 JPY (value date You buy: 500,000 USD (value date You sell: 55,746,100 JPY (value date Of course based on this example, if the USD/JPY rate moved against you, you would lose money on this trade. 15

16 Over a thousand instruments offered across 18 Global Markets Commodities Softs Metals Energy Agriculture 16

17 Our experienced dealers update our prices 24 hours a day in over a thousand instruments, including UK, European, US and Asian Shares and Indices, Major Currencies, Commodities, Treasuries and Bullion. When you open an account for CFD and/or FX trading, you can trade various instruments from one account, 24 hours a day for 5 days a week. Equities Indices Foreign Exchange Sectors Treasuries 17

18 Risk management with NatWest Index Understanding the risks Before you start trading, it is extremely important that you understand the high level of risk CFDs carry for you as an investor. The potential for large gains must be balanced alongside prudent risk management. CFDs have the potential for generating significant losses over a very short period of time. You must therefore understand the risks relating to your account s activity and have sufficient funds to cover any potential losses you may incur. At NatWest Index, we provide a number of tools to assist you in managing your risk. We also offer customers Guaranteed Stop Loss trades, which allow you to limit your losses. Please remember that you should only speculate with money that you could afford to lose. Leverage As the money you are investing is only a fraction of the total value of the underlying financial instrument, your losses (or gains) will be magnified. If the market moves against you, any losses could be significant. For example, a 2% movement in the underlying financial instrument could be translated into a resulting % loss on your initial investment. You can quickly lose more than your initial deposit. An example of this can be found in the table on the page opposite. 18

19 Example: Time Monday, 8.35 am Monday, am Tuesday, 7.05 am Tuesday, 8.00 am Tuesday, 1.05 pm Market activity 3 The Share price of ABC Corp is 100p. You decide to open a long position in ABC Corp. 3 You decide to buy p 3 Your initial margin deposit will be 10% of this trade = The trade does not have any stop or guaranteed stop loss orders in place 3 Your maximum risk, therefore, on this position could be a drop in value of the Shares to zero 3 Therefore, your potential loss is: 2000 CFDs x (100p) = 2,000 3 You have done your research on this company and their results are due out tomorrow. You are confident that the Shares will not drop by this amount. 3 The results are in line with the market expectations but at the same time, the company makes a negative comment about the growth prospects for the year ahead. 3 The Market opens. The Shares drop 10p in value (equivalent to a 10% drop) generating a loss of 200 for you (100% loss on your initial margin value). 3 Negative economic news results in a large sell off in the Equity markets. This results in a further 12p drop in ABC Corp s Share value. Tuesday, 4.30 pm 3 The Share price of ABC Corp closes at 78p. 3 Your CFD trade has lost 440 in one day (220% loss on your initial 200 investment). 3 A margin call will be triggered on your CFD account requiring an immediate payment of at least 240. Note: Customers are responsible for monitoring their own accounts. Margin calls are not guaranteed and customers must not rely on NatWest Index to make these. 19

20 Risks explained Volatility Financial markets fluctuate in value throughout the day as price movements are determined by demand and supply which is affected by a number of factors including the availability of market information and speculation. At times these movements can be exaggerated due to uncertainty within the markets which in turn creates a higher potential risk for CFDs. If we look at the previous example of ABC Corp but also consider that you have a further 2 CFD trade positions in place that day. These are: (1) A long position (buy) of 5 CFDs on the FTSE100 (2) A short position (sell) of 10 CFDs on the value of gold Time Market activity Monday, 8.35 am 3 You decide to buy (go long) 5 CFDs on the FTSE100 3 You decide to sell (go short) 10 CFDs on the value of gold Tuesday, 7.05 am Tuesday, 1.05 pm 3 ABC Corporation announce their results but also make a negative comment about the growth prospects for the year ahead 3 The results do not affect your long position on the FTSE100 or your short position on gold 3 Negative economic news results in a large sell off in the Equity markets 3 This impacts both the positions you hold 3 The FTSE100 falls 114 points generating a 570 loss 3 Value of gold increases by $4 generating a further loss of $400 Tuesday, 4.30 pm 3 The market closes. In one day, you have generated losses* of 1,010 and $400 in losses which require additional funding to cover your margin requirements. Of course, based on these examples, if ABC Corporation Share price and the FTSE100 risen AND the price of gold had fallen, you would have made money on these trades. *Losses do not include any commission charges. 20

21 Limiting your risk At NatWest Index we offer a number of risk and reward management tools which can help you to trade responsibly. Our online trading platform allows you to take control and set your own risk and reward parameters by using a number of different online order types. l Guaranteed stops We also offer a guaranteed stop-loss facility, which allows you to limit your risk exposure. This means that your position will be closed at a level pre-selected by you, despite dramatic market movements. Guaranteed stops carry a small premium. Example of a guaranteed stop: 3 You believe ABC Corporation will strengthen from its current level of , but you want to be sure of your maximum downside on the trade. 3 You place a guaranteed stop order to sell 1,000 ABC Corporation CFDs at To do so, you will need to pay a small premium of 2 points.* 3 So to buy, the price of ABC Corporation is The market begins trading lower and deals at , then gaps which means that the next available bid price you can sell at is In the case of a standard stop, the order would be executed at However, because you have guaranteed your stop loss, despite the gap in the market, NatWest Index will execute the order at *The premium paid will depend upon the instrument you trade upon. Please refer to our Rates Schedule. l Limit orders A limit order allows you to predetermine either a price higher than the current price at which you wish to sell or a level below at which you wish to buy. This means you can predefine the level at which you want to sell to take a profit, or the level at which you want to buy below the current price of an instrument. Example of a limit order: 3 You have bought a long position of 1,000 BP CFDs at an opening price of You believe BP will strengthen to You therefore place a limit order to sell 1,000 BP CFDs at Limits can also be used to open positions

22 l Stop loss orders Stop loss orders can be used to limit your trading risk and are an essential part of disciplined trading. Using stops means you are automatically taken out of a position if the market moves against you, effectively limiting your loss. Stop losses can also be used to lock in profit. If the market moves in your favour you can move your stop order with the prevailing price, helping to protect your profit if the market suddenly moves against you. Example of a stop loss order: 3 You have bought a long position of 1,000 BP CFDs at an opening price of You believe BP will strengthen. However, you want to limit any potential loss and place a stop order to sell 1,000 BP CFDs at This would limit your loss should BP fall to or below. Note: these orders are not guaranteed and therefore you could be stopped out at a worse price. l One cancels other (OCO) order An OCO order has a number of advantages if you want to get in and out of the market without having to watch it constantly. It is the combination of both a limit and a stop order and can be used to take a profit if the market moves in your favour or to limit losses if the market moves against you. Example of an OCO order: 3 ABC is trading at , you have an open long position which you opened at You wish to exit your position (at a profit) if the price rises to or if the market moves against you, you want to be stopped out at (at a loss). 3 You would place a stop sell at and a limit sell at Whichever order is executed first, the other is automatically cancelled. l If-done order An if-done order is a combination of two orders and can be used if you are unable to continually monitor the market but want to participate in market movements in your favour and/or exit a move against you. Example of an if-done order: 3 ABC is trading and you wish to buy if the price falls to but exit if the price continues to fall to You would place a limit order to buy ABC at and a stop loss order to sell at The stop loss order is only activated once the limit order is filled hence if-done. 22

23 The benefits of trading CFDs and FX 1. Flexibility go long or short With CFDs and FX Trading, you can choose to place both long (buy) and short (sell) trades with equal ease. By going long, you benefit from a rise in the markets, and lose if the markets fall. However, if you take out a short position, you profit from a fall in the markets, and lose if the market rises. 2. An efficient use of your capital When trading CFDs and FX, due to leverage you benefit from being able to take on larger positions and as a result, the potential return (or loss) on investment is magnified. 3. Competitive margin Trading CFDs and FX means that you do not have to pay the full value of the position. However, before you trade, you are required to deposit money into your trading account. This is what is called initial margin. Initial margin rates do vary between instruments. These are calculated as a percentage of the overall value of the trade, typically between 1% and 10%. We strive to offer the most competitive margins available and typically margins are 10% or lower for individual Shares. Margin for all Indices, Foreign Exchange, Bullion and Treasury trades is 1%. The margin for Commodity trades is 3%. Margin rates can, however, change. 4. Extended hours trading and customer support Financial markets trade around the clock, so why not you too? Our extended hours trading means you can trade 24 hours a day. This flexibility will allow you to trade key financial markets when you want to even though the underlying exchange may be closed. And, if you do trade around the clock, you can be assured that our dedicated support teams are on hand when needed. As well as offering a 24 hour trading service, from 9pm on Sunday until 10pm on Friday we provide a dedicated 24 hour helpdesk during the same times and in addition between 9am 5pm on Saturdays and Sundays. For example, a trade that requires a 10% margin, having deposited only 10,000 you can hold positions worth a total of 100,000. You would therefore gain ten times leverage on the money deposited in your account. However, it s important to remember that the full value of any running losses must be met daily. This may result in you being required to deposit additional funds to support a position. This is known as variation margin. 23

24 5. Access to a flexible and comprehensive trading platform You will have access to one of the most advanced, flexible and comprehensive trading platforms available. Marketmaker delivers real-time position updates, helps you track your portfolio and allows you to instantly see account equity, open, pending or closed orders and check available margin. The platform also lets you fund your account online. With access to thousands of real-time prices, our software gives you the power to trade global markets from one account, 24 hours a day all at the click of a button. 7. Mobile telephone trading An excellent innovation! Our Mobile Marketmaker means you can really take control of your trading whether at work, on the move or even on holiday. By simply downloading our Marketmaker trading platform onto your mobile phone, you can trade, monitor your positions, and place stops and limits or just keep a track of the markets. 6. Telephone trading At NatWest Index we are committed to providing the best level of service and support to our customers. We understand that sometimes it might not be convenient for you to gain access to our dealing platform. Therefore, our dedicated team on our dealing desk are on hand to provide instant trading and quotes. In addition, their experience, knowledge and understanding of trading gives you, the customer, excellent support to ensure that you get the best out of your trading with us. 24

25 NatWest Index is committed to providing tools to help customers trade in a secure way. Don t delay. Access our comprehensive and easy to use website and see our trading platform in action. Trading technology to suit you Marketmaker trading software has evolved into a world leading financial trading platform. At home, at work or on the move, with technological innovation, we are delighted to be able to offer our customers access to this platform in 2 ways: 1. Desktop Marketmaker 2. Mobile Marketmaker 23 25

26 Desktop Marketmaker We have invested heavily in technological innovation and this has led to us being able to offer you access to one of the most advanced, flexible and comprehensive trading platforms in the market. Real-time position updates help you track your portfolio, allowing you to instantly see account equity open, pending or closed orders and check available margin. 3 One-click dealing is a powerful feature for active traders, especially in fast moving or volatile markets. By setting up a series of defaults your trades can be managed in just one-click, which means less time to place a trade, and faster access to the tight spreads you want. 3 An integrated professional analytic suite providing company fundamental information, pro-charting containing 42 different indicators and a real-time breaking news feed. 3 Customisable trading platform that allows the user to create an unlimited number of trading pages to suit their trading needs. A unique pop-out window permits specific windows to be permanently viewed whilst using alternative software applications or the Internet. Mobile Marketmaker Our mobile trading software is easy to install and is compatible with the majority of modern mobile phones, allowing you to trade on the move, keep track of your positions and view your full order history. All you have to do for access is visit our website and follow the easy on screen instructions. 26

27 Integrated professional analytic suite As part of our drive to offer the most comprehensive trading platform in the market, Marketmaker software gives you access to a number of free trading tools. 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 will bring NatWest Index s customers objective, independent research and actionable analysis. 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 bureaux around the globe. Dow Jones is the world s largest newsgathering network and you can access it free on the Marketmaker trading platform. Reuters company fundamentals For more than 20 years, Reuters 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. 27

28 Pro Real-Time Charting and Analytics To complement the trading capabilities of the Marketmaker software platform, we also offer an integrated real-time charting package. This charting tool includes 42 different indicators and overlays, the ability to create your own indicators, a range of new charting styles including Points, Histogram and Mountain, as well as Market Highs, Lows and Open information. We have also developed the new charting solution in conjunction with IT-Finance, Europe s leading provider of real-time interactive technical analysis. Making sense of it all It is important for all new and existing customers to fully understand CFDs and FX Trading and how they can use our trading platform and technology in the most beneficial way for them. We regularly run introductory courses on CFD and FX Trading, technical analysis and risk management to help add to our customers understanding of financial markets and trading in general. We run a number of free seminars up and down the country. The easy to use back testing and money management module allows you to create and test trading strategies with just the click of a few buttons. You can test the profitability of your trading system using 20 years+ of historical data and pre-defined money management parameters. Back-testing and money management tools allow you to: 3 Back-test local and global stocks using 20 years plus of historical data. 3 Measure the profit and loss of your system. 3 Create systems using a combination of any of Marketmaker indicators. 3 Create your own indicators. 3 Pre-define stop loss orders (including profit and inactivity stops). 3 Pre-define your capital outlay. Come and meet us! Visit our website at: and sign up for one of our seminars. 28

29 Getting started QYour questions answered? Do you have a trading support team on hand to help me?? Are there any trading tools available? Yes. Marketmaker has a professional charting package available with back-testing functionality, Dow Jones newswires, price alerts and market analysis. These are all provided to our customers at no extra cost.? Do NatWest Index advise customers on how to trade in CFDs and FX? No. We only provide customers with an execution only service. Yes. Both our dealing desk and helpdesk are available 24 hours a day, Monday to Friday. You can contact both desks by telephone, or chat through our Marketmaker trading platform. The helpdesk is also open between 9am and 5pm on Saturday and Sunday. We do however, run seminars on how to trade CFDs, on how to analyse the markets and on a number of other topics. These are offered to customers (and potential customers) free of charge and are run regularly throughout the United Kingdom. 29

30 ? What are the charges for trading CFDs and FX with NatWest Index? NatWest Index charge a minimum of 20 commission for each CFD traded. However, for FX, we do not charge any commission. Also financing on equity positions held overnight is charged, and this may be paid or received dependent upon the position. All charges are contained within our Rates Schedule which can found within the application pack.? What type of accounts do NatWest Index offer? For simplicity, we offer our customers one type of account for both CFDs and FX a deposit account. To trade in FX, however, you must open a CFD account with us. We do not offer credit facilities.? What type of orders can I place? We offer market stop, limit, one cancels other and if-done orders. These are available to place free of charge on our Marketmaker platform or over the telephone. We also offer guaranteed stop orders which are available for a small premium.? Do I have to pay tax on my profits? Yes. Most individuals will be subject to capitals gains tax on the net amount of capital gain or loss made, after taking account of payments equivalent to interest, dividends and commission. In some cases, profits or losses are taxed as trading income. Individuals should seek their own professional advice based on their own facts and circumstances. You do not, however, have to pay UK Stamp Duty*. *Tax laws can change.? Are there any risks involved in trading CFDs? Yes. CFD trading carries a high level of risk to your capital and you can lose more than your initial stake. CFDs may not be suitable for all customers, therefore please ensure you fully understand the risks involved and seek independent advice, if necessary, before you apply to open an account.? Can I receive dividends with CFDs? A CFD trader does not physically own the Share and therefore does not receive the actual dividend. However, he or she can take part in Corporate Actions and the equivalent of any dividend will be credited (for a long position) or debited (for a short position) to his or her account. As the CFD trader does not own the share itself, he or she is not entitled to any voting rights. 30

31 Next steps Apply for an account today There are a number of ways in which you can apply for a CFD Account with NatWest Index. 31

32 3 Apply today You can apply for an account today by visiting our website: Simply complete the application form enclosed at the back of this brochure, then send it in the freepost envelope provided, or fax it to , marked for the attention of NatWest Index Sales. Please note: When applying for an account, we will need to carry out identification checks. In addition, you must also be aware that by applying for an account you will be authorising us to make enquiries relating to your credit status. In order for us to open your account it may be necessary for you to supply us with supporting documentation for details of what is required please refer to the relevant section opposite. 3 UK Residents If you are a UK resident and have lived at your current residential address for three years or more, you do not need to supply supporting documents at this stage. If you are a UK resident and have lived at your current UK residential address for less than three years, each completed and signed application form must be accompanied by a clear and readable photocopy of your valid photocard Driving Licence along with a copy of the full counterpart. If this cannot be provided then please send a clear and readable photocopy of one document from List A and one document from List B (please see page 33 for full details). 3 EU Residents (non-uk) All non-uk EU residents must send a clear and readable photocopy of one document from List A and one document from List B (please see page 33 for full details). 32

33 3 Non-EU Residents 3 List A and List B documents Non-EU residents If you are not an EU resident, each completed and signed application form must be accompanied by one document from List A and one document from List B. Important note for Non-EU Residents: We will accept a photocopy of your identity documents if they are officially stamped and signed together with the following statement: Certified as a true copy of the original by your lawyer, embassy or consulate. List A l Valid Passport l Valid photocard Driving Licence or full paper Driving Licence l Valid national ID card List B l Utility bill l Local authority tax bill l Valid Driving Licence, either part (if not used for List A) l Bank, Building Society or credit union statement l Most recent mortgage statement With the exception of a valid Driving Licence, List B documents should be dated from within the last six months. Please note that mobile phone, Internet bills or final demand and reminder letters will not be accepted. We do not recommend that you send original documents. However, if you do, please send them by registered post. We will return all original documents to customers by registered post. We aim to do this on the same (business) day we receive them. These documents can also be included in the freepost envelope, which can be found in the pocket at the back of this brochure. Upon receipt of the above documentation and once your application has been approved, you will be contacted to arrange the funding of your account. 33

34 How to fund your account There are a number of ways in which you can fund your account 1. Online You can fund your account from your Marketmaker platform. Simply click on the sign to visit our secure online payment page. Alternatively, you can visit our website and click on Funding your Account. Please note that we only accept payments from credit or debit cards in your own name. Third party payments will not be accepted. Card payments will take a minimum of 30 minutes to clear. There is no charge for using a UK debit card. NatWest Index will levy a minimum charge of 1.8% against all credit card and non-uk debit card transactions. Your credit card provider may levy additional charges. Please check this with them. 2. Telephone Online is the quickest and easiest way to fund your account. However, if you are in a position where you cannot access the Internet, please contact us on Please have your debit or credit card to hand to make the payment and note that we will need to ask you some security questions. 3. Cheque Cheques should be made payable to NatWest Index and posted to: NatWest Index, PO Box 57349, London E1 8YW. Please note that it takes at least five working days from receipt for cheques to clear. 4. Electronic transfer Please visit our website and click on Funding your Account for details of how to arrange a bank transfer. Alternatively, you can contact our helpdesk on If you have any questions in relation to our service or our account opening process, please contact our sales team on or Transfer from your NatWest BrokerLine Share Dealing Account If you have a NatWest BrokerLine Share Dealing Account with a Cash Management facility, you can transfer funds directly to your CFD Trading Account. Simply call BrokerLine on to arrange a transfer. When we have received your application Once we have received your completed application (including any supporting documents) and it has been approved, we will then provide you with: 3 An easy to follow guide on how to start trading. 3 Our Marketmaker software. 3 Your personal login details for Marketmaker. 34

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36 If you would like this document in Braille, large print or audio tape, please call Services relating to Contracts for Difference are provided by CMC Markets UK Plc (trading as NatWest Index), to whom you have been introduced by NatWest Stockbrokers Limited. All dealing, administration and settlement in relation to these services is undertaken by CMC Markets UK Plc who are authorised and regulated by the Financial Services Authority (FSA registration number ). CMC Markets UK Plc is registered in England and Wales with company number and its registered office is at 66 Prescot Street, London E1 8HG. NatWest Index PO Box London E1 8YW Telephone: NWB CFDBroch 04/07 NW9