Futures Supplementary Product Disclosure Statement

Transcription

1 Futures Supplementary Product Disclosure Statement Issued by Macquarie Equities Limited (ABN Australian Financial Services Licence No ) Date of issue 27 June 2014

2 Macquarie Private Wealth is a division of Macquarie Equities Limited (ABN ) (MEL) participant of Australian Securities Exchange Group, Australian Financial Services Licence No , 1 Shelley Street, Sydney NSW Any reference to Macquarie Private Wealth should be read as a reference to MEL. References to we, us or our in this Supplementary Product Disclosure Statement (SPDS) are references to MEL. The information contained within this SPDS is general information only and does not take into account your individual objectives, financial situation or needs. Before trading in the products referred to in this SPDS you should read the Product Disclosure Statement for Futures dated 1 May 2008 (PDS) and this SPDS and be satisfied that any trading you undertake in relation to those products is appropriate in view of your objectives, financial situation and needs. MEL is not an authorised deposit-taking institution for the purpose of the Banking Act (Cth)1959, and MEL s obligations do not represent deposits or other liabilities of Macquarie Bank Limited (ABN ) (MBL). MBL does not guarantee or provide assurance in respect of the obligations of MEL.

3 Table of Contents Name Changes 02 Section 2 Issuer Details 02 New Section 5A Execution of orders and treatment of client money 03 Section 7 Significant risks explained 06 Section 8 Fees and Charges 08 New Section 9 Privacy 09 New Section 9A Foreign currency exchange transactions 10 New Section 9B Foreign Account Tax Compliance Act (FATCA) 11 Section 10 Dispute Resolution 12 1

4 Futures Supplementary Product Disclosure Statement This Supplementary Product Disclosure Statement (SPDS) is issued by Macquarie Equities Limited (ABN ) (MEL) as issuer of Macquarie Private Wealth Futures. Macquarie Private Wealth is a division of MEL and any references to Macquarie Private Wealth should be read as a reference to MEL. MEL holds Australian Financial Service Licence No This SPDS supplements the Product Disclosure Statement for Futures dated 1 May 2008 (PDS). This SPDS must be read together with the PDS. Unless otherwise indicated, terms defined in the PDS have the same meaning in this SPDS. Investors should consider the PDS, this SPDS and all updates available on the website macquarie.com.au/personal before trading in Futures through MEL. MEL is amending the terms of the agreement pursuant to which you appoint MEL to trade Futures on your behalf ( Futures Trading Agreement ) to better reflect the processes followed in executing orders for your Futures and to address certain regulatory matters. MEL wishes to update the disclosure made in the PDS to reflect these changes. 2

5 Name changes The Sydney Futures Exchange (SFE) is now known as ASX24. Accordingly all references in the PDS to the SFE should be read as a reference to the ASX24. ASX is now operated by ASX Limited (ABN ). All references to ASX in the PDS should be read as references to the derivatives market operated by the ASX Limited (ABN ). The Clearing House for Futures traded on ASX24 is now known as ASX Clear (Futures) Pty Limited (ABN ) and the Clearing House for Futures traded on ASX is now known as ASX Clear Pty Limited (ABN ). Section 2 - Issuer Details The new contact details for MEL are: 1 Shelley Street Sydney NSW 2000 Toll free: Phone: (02) privateclient.futures@macquarie.com Web: 3

6 Section 5A Execution of orders and treatment of client money Insert the following as new Section 5A following Section 5. 5A.1 Placing Orders You can open a Futures contract: through your Futures broker by placing orders either: over the phone; via ; or by placing an order online through an online platform made available by MEL. Phone and Orders MEL offers the Macquarie Private Wealth Futures desk which allows you to place an order to open or close-out Futures contracts with your Futures broker, either over the phone or via . Please note that where you place an order by , your order is not accepted until it has been acknowledged by MEL. You can contact the Macquarie Private Wealth Futures desk 8:00am Monday to 7:15am Saturday AEST by calling or by ing privateclient.futures@macquarie. com. MEL Provided Online Platform Alternatively, you can open a Futures contract by placing an order online through an online platform made available by MEL. MEL can provide you access to trading platforms and software packages for market data, trading and execution. These platforms ( MEL Provided Online Platforms ) are developed and maintained by external companies that specialise in market data and trading software and connect to MEL s infrastructure and allow you to place orders under your Futures account electronically. Please see clause 21 of the Futures Trading Agreement for the terms upon which MEL will make MEL Provided Online Platforms available to you. You may also contact us on the details provided in Section 2 above for further details about trading Futures through a MEL Provided Online Platform. No personal advice Please note that where you place orders through a Macquarie Private Wealth Futures broker, your broker will only provide general advice or factual information in relation to your Futures account and will not consider your financial circumstances, needs or objectives in connection with trading Futures. As an example, general advice can include information about the underlying financial markets or economic outlook. These updates, sales commentary, research reports and/or technical analysis do not constitute personal advice. Accordingly, as no personal advice is being provided, you will not receive a statement of advice from your Futures broker. Neither the PDS nor this SPDS constitute a recommendation or opinion that trading in Futures is appropriate for you. Before applying to deal in Futures you must consider your objectives, financial situation, risk appetite and the significant risks of loss associated with trading Futures. You must decide whether trading in Futures is suitable for your purposes. 5A.2 Executing Orders Pursuant to the terms of the Futures Trading Agreement you appoint MEL as your agent for the purpose of executing Futures contracts. MEL is not a Market Participant or Clearing Participant of any Derivatives Exchange. MEL appoints a Market Participant and Clearing Participant to provide execution, clearing and settlement services for all of MEL s client s Futures. Currently MEL s Market Participant and Clearing Participant is Macquarie Bank Limited (ABN ), AFSL number ( Macquarie Bank ). Macquarie Bank is a Market Participant and Clearing Participant on ASX24, ASX (and on some foreign Derivative Exchanges). Where Macquarie Bank is not a Market Participant or Clearing Participant to a particular Derivatives Exchange, Macquarie Bank will use third parties to provide such execution, clearing and settlement to that Derivatives Exchange. MEL will be responsible for paying the brokerage, exchange fees or interest owing to Macquarie Bank or any third party Market Participant and Clearing Participant. You will only be obliged to pay the brokerage, exchange fees and interest that is owing to MEL in accordance with your Futures Trading Agreement as described in section 8 of the PDS. MEL will be entitled to retain any interest paid by Macquarie Bank or any third party Market Participant and Clearing Participant on amounts held by them in relation to your Futures contracts. You will however be entitled to the interest that is payable by MEL in accordance with your Futures Trading Agreement as described section 8 of the PDS. You should note that although MEL acts as your agent in executing Futures contracts, MEL and Macquarie Bank act as principals as between themselves with regards to those Futures contracts and you have no rights whether by way of subrogation or otherwise against Macquarie Bank or any third party Market Participant and Clearing Participant appointed by it. 4

7 You should also note that any Futures contracts entered into on your behalf will be entered into by Macquarie Bank or the relevant third party Market Participant and Clearing Participant as principal, which means that Macquarie Bank or the relevant third party Market Participant and Clearing Participant incurs obligations to the Derivatives Exchange as principal. Conversely any benefit or right obtained by Macquarie Bank or a third party Market Participant or Clearing Participant upon registration of any Futures contract with a Derivatives Exchange by novation of that Futures contract under the Operating Rules of that Derivatives Exchange, or any other legal result of registration, is personal to Macquarie Bank or that third Party Market Participant or Clearing Participant (as applicable) and that benefit, right or legal result does not pass to MEL or to you. You have no rights, whether by way of subrogation or otherwise, against the Derivatives Exchange. 5A.3 Treatment of client monies Any Australian dollar amounts you pay to MEL in relation to your Futures contracts, including Initial Margin, Variation Margin, monies paid for the execution, clearing and settlement of your Futures contracts and any additional money you may pay to MEL in connection with trading in Futures, will first be paid into MEL s Futures trust account ( MEL Trust Account ). 5A.4 MEL Trust Account The MEL Trust Account is a client money account operated in accordance with the Client Money Rules. Monies paid into the MEL Trust Account are pooled with the monies of other Futures clients and MEL keeps a record of the monies paid by you or on your behalf. In accordance with the Client Money Rules, the MEL Trust Account operates in the following way: The MEL Trust Account is a bank account with an Australian deposit taking institution held in MEL s name. The MEL Trust Account is currently a deposit account with Macquarie Bank. The only monies paid into the MEL Trust Account are monies related to your Futures account and interest on such monies. MEL does not pay any of its own money into the MEL Trust Account. Payments out of the MEL Trust Account can be made only in limited circumstances, including: making payments in accordance with any directions received from you; paying us monies we are owed and defraying proper charges; and making a payment that is otherwise authorised by law or pursuant to the Client Monies Rules. MEL will pay interest to you as described in Section 8 of the PDS but any interest earned on funds paid into the MEL Trust Account is retained by MEL and is not returned to individual clients. Under your Futures Trading Agreement you direct MEL to pay all of the monies held on your behalf in the MEL Trust Account to MEL s Market Participant and Clearing Participant (Macquarie Bank), who hold the monies in a Client Segregated Account in accordance with the Client Money Rules and the ASIC Market Integrity Rules ( Macquarie Bank Segregated Account ). Where you wish to pay the amounts owing in respect of your Futures contracts in a foreign currency, MEL may direct that you pay such amounts directly to the Macquarie Bank Segregated Account. 5A.5 Macquarie Bank Segregated Account The Macquarie Bank Segregated Account is a Client Segregated Account which is operated in accordance with the requirements of the Client Money Rules and the ASIC Market Integrity Rules. Macquarie Bank will invest the monies in the Macquarie Bank Segregated Account in accordance with Client Monies Rules and ASIC Market Integrity Rules. In the event that there is a loss of any principal on any investment made by Macquarie Bank those losses will be for your account. In accordance with the Client Monies Rules, Macquarie Bank is entitled to withdraw the following amounts from its Client Segregated Account: all amounts of Initial Margin, Variation Margin and Option Premium in respect of your Futures contracts; all proper charges and expenses incurred by Macquarie Bank in respect of your Futures contracts which will include the fees of the Derivative Exchange and any amounts required to be paid to any third party Market Participant or Clearing Participant appointed by Macquarie Bank; amounts of brokerage and interest to which Macquarie Bank is entitled in terms of its agreement with MEL; and withdrawals made in accordance with MEL s directions. MEL will direct Macquarie Bank to pay amounts from the Macquarie Segregated Account as follows: Where you have requested the withdrawal of amounts standing to the credit of your Futures account, MEL will direct Macquarie Bank to withdraw such amounts (after deducting any amounts owing by you to MEL), out of the Macquarie Bank Segregated Account directly to your nominated bank account. Where you owe MEL brokerage, interest or MEL Provided Online Platform fees, or other fees in respect of your Futures contracts, MEL will direct Macquarie Bank to pay such amounts to MEL (after deducting any brokerage, interest, Derivative Exchange fees and other fees owing to Macquarie Bank). MEL will retain these amounts for its own account. 5

8 Any other amounts which are returned by Macquarie Bank to MEL will be paid into the MEL Trust Account. Interest and other returns earned on the monies in the Macquarie Bank Segregated Account will be retained by Macquarie Bank unless otherwise agreed between Macquarie Bank and MEL. Where it is agreed that MEL will be entitled to any of the interest and other returns earned on the monies in the Macquarie Bank Segregated Account, MEL will be entitled to retain those amounts for its own account. MEL will however be obliged to pay you interest on credit balances in your Futures account as described in Section 8 of the PDS. 5A.6 Monies paid to a Market Participant and Clearing Participant in a foreign jurisdiction Money held by a Market Participant and Clearing Participant in a foreign jurisdiction will be held in accordance with the Operating Rules of the Derivatives Exchange and Clearing House in that jurisdiction and the laws of that jurisdiction and may not be subject to the same protections as afforded under the Client Monies Rules. See section 7 for additional risks associated with dealing on foreign Derivatives Exchanges. 6

9 Section 7 Significant risks explained The risk set out in section 7, paragraph (f) of the PDS is amended to read as follows: Deliverable contracts and physical delivery: Where you have a deliverable Futures Contract and you hold this to maturity, you have the obligation to make or take physical delivery of the underlying asset. Please note however that MEL is entitled to prohibit you from making or taking delivery of physical underlying assets, and as such, MEL is entitled to exercise its rights under the Futures Trading Agreement to closeout any deliverable Futures contracts before the first notice date or last trading date (whichever occurs first) of that Futures contract. In addition we wish to draw your attention to the following risks also to be inserted into section 7 of the PDS: Counterparty risk Under the terms of the Futures Trading Agreement, you will appoint MEL to open Futures contracts as your agent. MEL has in turn appointed Macquarie Bank to act as Market Participant and Clearing Participant, on its behalf. You will be exposed to counterparty risk of both MEL and Macquarie Bank (as described below). In addition, if you open a Futures contract in a foreign Derivatives Exchange you are also exposed to counterparty risk of the Market Participant or Clearing Participant used in that particular jurisdiction. No obligation of MEL under any Futures Trading Agreement or under its agreement with Macquarie Bank as Market Participant or Clearing Participant is guaranteed by the Australian Government or any other person including Macquarie Bank. Accordingly, you face the risk of losing money if MEL is unable perform its obligations under your Futures Trading Agreement or if it is unable to perform its obligations to Macquarie Bank in respect of the Futures contracts traded on your behalf or on behalf of any other client. You are also exposed to the risk that Macquarie Bank, or a third party Market Participant and Clearing Participant appointed by Macquarie Bank, may not be able to perform some or all of its obligations under the agreement in which it is appointed to trade in your Futures contracts, or under the Operating Rules of the relevant Derivatives Exchange. Macquarie Bank is an authorised deposit-taking institution regulated by the Australian Prudential Regulation Authority (APRA). As an APRA regulated entity, Macquarie Bank is required to hold capital in accordance with APRA s capital adequacy requirements and to comply with APRA s prudential standards. In complying with these requirements, Macquarie Bank also meets the financial resources requirements of its Australian Financial Services Licence. Both Macquarie Bank and MEL are members of the Macquarie group of companies, which comprises Macquarie Group Limited (ABN ) and its subsidiaries ( Macquarie Group ), however, as described above, neither Macquarie Bank nor any other member of the Macquarie Group guarantees the obligations of MEL. You must make your own assessment of the ability of MEL and Macquarie Bank to perform their obligations. You can assess the financial ability of MEL and Macquarie Bank to meet their counterparty obligations by reviewing their financial information. Information relating to the Macquarie Group structure and the Macquarie Group s risk management framework can be found in the Macquarie Group Annual Report available at Macquarie. com.au/investorrelations. We will provide a copy, free of charge, of the most recent publicly available financial reports and interim reports to any person who requests such copies by contacting MEL (see Section 2 for details). Client Monies risk The monies paid to MEL and Macquarie Bank in respect of your Futures contracts will be held on trust and separately from any monies of MEL and Macquarie Bank and will accordingly not be available to other creditors of MEL or Macquarie Bank in the event of their insolvency. However in relation to monies held in the Macquarie Bank Segregated Account you should note that: individual client accounts are not separated from each other; all clients funds are deposited into the one client segregated account; Client segregated account provisions may not insulate any individual client s funds from a default in the Macquarie Bank Segregated Account. If such a situation may arise; Macquarie Bank has the right to apply all client monies held in its Client Segregated Account to meet any default in that account; Any losses suffered as a result of the application of monies in the Macquarie Bank Segregated Account to meet obligations on any Futures contracts entered into on behalf of other clients of MEL and other clients of Macquarie Bank, will be for your account; In addition, Macquarie Bank is authorised to invest monies in the Macquarie Bank Segregated Account in accordance with Client Monies Rules. In the event that there is a loss of any principal on any investment made by Macquarie Bank those losses will be for your account. 7

10 These risks may also be present where money is paid to a third party Market Participant and Clearing Participant. See below the additional risks associated with trading in Futures contracts on a foreign Derivatives Exchange. Dealings on foreign Derivatives Exchanges Clients who deal on foreign Derivatives Exchanges should be aware of the following matters: Dealing subject to foreign rules and laws The execution and clearing of trades on foreign Derivatives Exchanges are subject to the Operating Rules of that Derivatives Exchange and Clearing House and the laws of the country in which that Derivatives Exchange or Clearing House is domiciled. These Operating Rules may differ significantly from the Operating Rules of Australian Derivatives Exchanges or Clearing Houses. Before you trade you should familiarise yourself with the foreign Operating Rules which will apply to your particular transaction. Australian regulators may not have any jurisdiction Neither ASIC nor any Australian Derivatives Exchange regulates the activities of foreign Derivatives Exchanges, nor do they have the power to compel enforcement of the Operating Rules of a foreign Derivatives Exchange or any applicable foreign laws. Generally, the foreign transaction will be governed by applicable foreign law. This is true even if the Derivatives Exchange is formally linked with a Derivatives Exchange in Australia. Protection of Clients funds Clients who trade on foreign Derivatives Exchanges may not have the benefit of protective measures provided by the Corporations Act. In particular, your funds may not have the same protection on the insolvency of a foreign Market Participant or Clearing Participant as you have where funds are paid into a trust account with the holder of an Australian Financial Services Licence. Additional risks relating to foreign Derivatives Exchanges are set out in the Risk Disclosure Statements attached to the Futures Trading Agreement. Discretionary powers of MEL and its Market Participant and Clearing Participant Under the Futures Trading Agreement you acknowledge that MEL and the Market Participant and Clearing Participant appointed to execute your trades have a number of discretionary powers which may affect your trading activities which you should understand by reading the Futures Trading Agreement. Examples of these powers include but are not limited to the following: MEL or the Market Participant and Clearing Participant can refuse to accept your instruction or impose limits on your trading which may have an effect on your trading activities. MEL or the Market Participant and Clearing Participant can also take a number of actions when certain events (e.g. default or non-compliance) occur, including closing out your Futures contracts, charging default interest or both. MEL shall not be liable to you for any loss, damage, or expense arising out of MEL or its Market Participant and Clearing Participant exercising its powers or for errors in accepting and executing orders or transmitting funds except where these arise as a result of the negligence, fraud or dishonesty of MEL or its Market Participant and Clearing Participant or their employees, agents, officers or representatives. Foreign exchange transaction risks In addition to the general risks set out above, the following risks will be relevant to you if you request MEL to enter into foreign currency exchange transactions persuant to section 9A of the PDS as amended by this SPDS. Market and volatility risk Where you instruct MEL to enter into foreign exchange transactions you will be subject to market and volitility risk of the foreign exchange market. Foreign exchange markets can be highly volatile and are subject to many influences including unforseen events or changes in political, economic and financial conditions which may result in rapid currency fluctuations which could lead to substantial loss. You will be fully exposed to movements in the currency which is the subject of the foreign exchange transaction entered into. Counterparty and settlement risk As is the case when entering into Futures contracts, where you instruct MEL to enter into foreign exchange transactions, under the terms of the Futures Trading Agreement, you appoint MEL as your agent for the purpose of executing those transactions. MEL has in turn appointed Macquarie Bank Limited to act as MEL s broker to enter into foreign currency exchange contracts. Consequently you are exposed to the counterparty risk of both MEL and Macquarie Bank. As set out above under Counterparty Risk, no obligation of MEL under any Futures Trading Agreement (including relating to foreign currency exchange contracts) or under its agreement with Macquarie Bank is guaranteed by the Australian Government or any other person including Macquarie Bank. Accordingly, you face the risk of losing money if MEL is unable perform its obligations (as they relate to foreign exchange transactions) under your Futures Trading Agreement or if it is unable to perform its obligations to Macquarie Bank in respect of the foreign currency exchange contracts entered into on your behalf. Information relating to MEL, Macquarie Bank Limited and the Macquarie Group is set out above under Counterparty Risk. 8

11 Section 8 Fees and charges Section 8 of the PDS is amended as follows: The rate at which interest will be charged on debit balances will be as follows: Australian dollar denominated negative balances will be charged Debit Interest at the 11 am Cash Rate plus 2%. All other foreign denominated negative balances will be charged Debit Interest at their respective short-term Cash Rate plus 1%. Contact your Futures broker for a full listing of the relevant Cash Rates. In addition, if all of your Futures contracts are closed out and, following that close out, the balance of your Futures account is less than zero (i.e. because the net loss on the close-out exceeds the balance of your Futures account), MEL may charge you interest on the shortfall ( Default Interest ). Default Interest will be calculated in the following manner: Australian dollar denominated negative balances will be charged Debit Interest at the 11 am Cash Rate plus 4%. All other foreign denominated negative balances will be charged Debit Interest at their respective short-term Cash Rate plus 4%. Default Interest may be charged in addition to any debit interest described above. 9

12 New Section 9 Privacy Section 9 is replaced with the following. We may collect, hold, use and disclose personal information about you to process your application, administer and manage the products and services we provide to you, monitor, audit and evaluate those products and services, model and test data, communicate with you and deal with any complaints or enquiries. We collect and record personal information through our interactions with you and your nominated adviser(s), including by telephone, or online. We may also collect personal information from public sources and third parties including information brokers and our service providers. Without this information, we may not be able to process your application or provide you with an appropriate level of service. We are required or authorised to collect your personal information under various laws including AML/ CTF Laws, the Superannuation Industry (Supervision) Act 1993 (Cth), the Taxation Administration Act 1953 (Cth), the Income Tax Assessment Act 1936 (Cth) and the Income Tax Assessment Act 1997 (Cth), the Corporations Act 2001 (Cth), Life Insurance Act 1995 (Cth), Insurance Contracts Act 1984 (Cth), the Foreign Account Tax Compliance Act (US), and any similar law of any country, and any related laws designed to implement those laws in Australia as well as any associated regulations or Rules. Where you provide us with personal information about someone else you must first ensure that you have obtained their consent to provide their personal information to us based on this Privacy Statement. We may exchange your personal information with other companies in the Macquarie Group as well as our service providers which are described further in our Privacy Policy. We will supply the adviser(s) nominated on your application form or in a subsequent written communication to us, and their Australian financial services licensee if applicable, with information about your account. We may also disclose personal information to regulatory authorities (e.g. tax authorities in Australia and overseas) in connection with their lawful information requests or to meet our legal obligations in any relevant jurisdiction. The third parties with whom we exchange personal information may operate outside of Australia (this includes locations in the Philippines, India, the United Kingdom, United States of America and other countries specified in our Privacy Policy). You agree that while those parties will often be subject to confidentiality or privacy obligations they may not always follow the particular requirements of Australian privacy laws. We and other companies in the Macquarie Group may use your personal information to contact you on an ongoing basis by telephone, electronic messages (like ), online and other means to offer you products or services that may be of interest to you, including offers of banking, financial, advisory, investment, insurance and funds management services, unless you change your marketing preferences by telephoning us as set out below or visiting optout-bfs. Under the Privacy Act, you may request access to your personal information that we hold. You can contact us to make such a request or for any other reason relating to the privacy of your personal information by telephoning us on or ing privacy@macquarie.com. Please mark communications to the attention of our Privacy Officer. You may also request a copy of our Privacy Policy which contains further details about our handling of personal information, including how you may access or update your personal information and how we deal with your concerns. The Privacy Policy can also be found via You can change your marketing preferences by telephoning us on or visiting 10

13 New Section 9A Foreign currency exchange transactions Insert the following as new Section 9A following Section 9. Where you trade, or wish to trade Futures contracts on foreign Derivative Exchanges, MEL can, on your request, facilitate a foreign currency exchange within your Futures account. MEL does not operate on foreign currency exchange markets, therefore MEL has appointed a third party broker, currently Macquarie Bank Limited, to enter into foreign currency exchange transactions. This transaction will be affected and the funds held within the Macquarie Bank Client Segregated account. You should note that this foreign currency exchange facility is offered to facilitate trading in Futures contracts on foreign Derivative Exchanges and you cannot use this feature for speculative trading purposes. Execution of foreign exchange transactions As in the case when entering into Futures contracts, where you instruct MEL to enter into foreign exchange transactions, under the terms of the Futures Trading Agreement, you appoint MEL as your agent to enter into these transactions with a broker. You can only exchange funds in your Futures account in excess of any Initial Margin or Variation Margin requirements and are only able to do so by placing an order through a Futures broker. You are not able to enter into foreign exchange transaction through a MEL Provided Online Platform. Your order will not be accepted until it has been confirmed by MEL. Where you place a foreign currency exchange for an amount of the equivalent of less than A$25,000 MEL will, on your behalf, enter into a same day foreign exchange transaction which will normally settle on the same day that MEL enters into the foreign exchange transaction. Where you place a foreign currency exchange for an amount of the equivalent of greater than A$25,000 MEL will, on your behalf, enter into a spot foreign exchange transaction which will normally settle two business days after MEL enters into the foreign exchange transaction. Calculation of exchange rate and fees For both same day and spot transactions, the exchange rate will be calculated by the broker, not MEL, at the prevailing market rate at the time MEL enters into the transaction on your behalf. This exchange rate will not be disclosed to you until after the exchange settled. The exchange rate achieved by the broker will fluctuate with underlying market exchange rates. Factors which may affect the exchange rate can include; the current spot inter bank exchange rates; the amount of currency you wish to exchange; and prevailing market conditions (such as volatility and liquidity) at the time of the transaction. MEL does not charge you fees or commissions to enter into a foreign currency exchange. However the broker MEL engages to enter into the foreign currency exchange contract will earn revenue from the spread between the wholesale price achieved by the broker and the exchange price you receive. Risks In addition to the general risks associated with Futures contracts, risks specific to foreign exchange transactions are set out at Section 7 of this PDS. 11

14 New Section 9B Foreign Account Tax Compliance Act (FATCA) Insert the following as new Section 9B following Section 9A. FATCA is United States (US) tax legislation that assists the US Internal Revenue Service (IRS) to identify and collect tax from US residents for tax purposes that invest in certain financial accounts through non-us entities. If you are a US resident for tax purposes, you should note that MEL is a Foreign Financial Institution under FATCA. MEL intends to comply with its FATCA obligations, as determined by either the FATCA regulations or any inter-governmental agreement (IGA) entered into by Australia and the US for the purposes of implementing FATCA and any Australian laws and regulations relating to the IGA. As at the date of this document it is expected that Australia will enter into an IGA with the US. It is expected that under these obligations, MEL will have to obtain and disclose information about certain investors to the ATO or IRS. In order for MEL to comply with its obligations, we will also request that you provide certain information about yourself, including your US Taxpayer Identification Number (if applicable). 12

15 Section 10 Dispute Resolution Section 10 is replaced with the following We have procedures for dispute resolution, and they are available to you free of charge. You may make a complaint relating to your Futures account directly to us verbally or in writing. We will always acknowledge any complaint promptly and provide a substantive response within no more than 45 days. If the outcome is unsatisfactory, you may be entitled to refer your complaint to the Financial Ombudsman Service (FOS) at: Financial Ombudsman Service GPO Box 3 Melbourne VIC 3001 Telephone: Fax: (03) info@fos.org.au Web: fos.org.au The Financial Ombudsman Service s jurisdiction to hear your complaint will be subject to its rules (please refer to the service s website for more details). Nothing in this PDS is intended to prevent Macquarie from objecting to the referral of a complaint to the service, where appropriate. 13

16 For more information about Futures call us on You can also visit macquarie.com.au or 1 Shelley Street Sydney NSW 2000 GPO Box 526 Sydney NSW 2001 Tel Fax /14

17 Futures Product Disclosure Statement Macquarie Private Wealth A world of opportunities Issued by Macquarie Equities Limited ABN Australian Financial Services Licence No Participant of the Australian Securities Exchange Group Date of Issue: 1 May 2008

18 Sections 01 Introduction 02 Issuer details 03 Futures trading agreement and application booklet 04 Key features of Futures 05 Financial aspects of Futures trading 06 Significant benefits explained 07 Significant risks explained 08 Fees and charges 09 Other significant characteristics of Futures contracts 10 Dispute resolution 11 Taxation implications 12 Cooling-off arrangements 13 Other considerations 14 Glossary of terms Macquarie Equities Limited ABN (MEL) is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL s obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of MEL.

19 1. Introduction Under the Corporations Act, a retail client must receive a Product Disclosure Statement (PDS) from a financial services licensee at or before the time a personal advice recommendation to acquire the financial product is made. Where no personal advice is given, the PDS should be given to the retail client before the offer to acquire the product is made. The PDS sets out the significant features of a financial product, including its risks, benefits and cost. This document is the PDS for exchange traded derivatives known as Futures, a type of financial product. Futures traded on a derivatives market are more commonly known as: Futures contracts (both deliverable and cash-settled); Futures options (which are options over a Futures contract); and Options over the underlying (which are options over commodities or cash adjustments based on stock indices). These products are known as derivatives under the Corporations Act. However for the purpose of this PDS, these products are collectively referred to as Futures. They are defined further in section 4. You should read all sections of this PDS before making a decision to trade Futures and you should retain this PDS for future reference. The information in this PDS does not take account of your particular financial circumstances and before you trade Futures you should, in conjunction with your adviser, give consideration to your objectives, financial situation and needs. You should also be aware of the risks involved and be satisfied that trading in Futures is suitable for you in view of your financial circumstances. Although the information in this PDS is up to date as at the Date of Issue specified on the front cover, it is subject to change from time to time. Where such information is not materially adverse, we may provide updates on our website at The updated information can be found out at any time and a paper copy will also be made available to you upon request and at no charge. We may also be required to issue a new PDS or a supplementary PDS as a result of certain changes, in particular where the changes are materially adverse to retail clients considering whether to invest in Futures. Any supplementary PDS will be posted on our website at If you cannot access the document from our website, please contact us (see section 2) and we will send a copy to you. 1

20 2. Issuer details Macquarie Equities Limited (MEL) ABN is the issuer of the Futures products that are the subject of this PDS. MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. Macquarie Private Wealth is a division of MEL and any references to Macquarie Private Wealth should be read as a reference to MEL. References to we, us or our in this PDS are references to MEL. How to contact us Sydney Level 18, 20 Bond Street Sydney NSW 2000 Tel: Fax: Toll Free: Melbourne Level 26, 101 Collins Street Melbourne VIC 3000 Tel: Fax: Toll Free: privateclient.futures@macquarie.com Web: 2

21 3. Futures trading agreement and application booklet Before trading Futures, you will need to read the Futures Trading Agreement and Application Booklet (Booklet). This Booklet includes the Futures Trading Agreement (Agreement) and Futures Trading Application Form you will be required to sign prior to any Futures trading. By signing the Futures Trading Application Form, you agree to be bound by the Agreement. The Booklet is available at or in paper copy upon request. Summary of the Agreement The Agreement sets out the terms and conditions of Futures contracts between you (and your guarantor, if relevant) and Macquarie. The Agreement governs the following matters: Dealing by Macquarie as your agent. How Macquarie may execute your orders. How and when Macquarie may clear your trades (including limitations). Principal trading. Although Macquarie will act on your instructions, Macquarie will be trading as principal. Macquarie may also trade for itself as principal on its own account and its directors, employees or related bodies corporate may trade on their own account. This may include taking an opposite position to your trade(s). Electronic recording of telephone conversations. Deposits and margins you must provide. If you fail to pay a deposit or meet a call, Macquarie may close out your contracts without notice to you. Your liability is not limited to the amount you deposit with Macquarie. Events of default include, but are not limited to: your or your guarantors bankruptcy, liquidation or other compromise or arrangement with creditors; an incorrect or misleading representation by you or your guarantor that may cause loss or damage to Macquarie; any guarantee or security being withdrawn or becoming insufficient; failure to meet a call for deposit or margin or failure to meet any other obligation under the Agreement; you are not contactable to provide instructions for more than 24 hours; you impose a moratorium on payments to creditors or cease to carry on business; conduct that indicates you will be unable to comply with your obligations; a Clearing House declines to allocate a trade to you or a Clearing Participant refuses to accept a trade you allocate to them; or you or your guarantor dies or becomes of unsound mind. Commissions, fees, expenses. Exchange rate risk. You bear all exchange rate risk. Clients Segregated accounts operation and risks. Deposits will be paid into the segregated account and will be co-mingled with deposits of other clients. Appointment of attorneys to trade on the Sydney Futures Exchange and ASX Futures Exchange. Rights of Macquarie to impose limits and refuse to deal on your behalf. Indemnities. You indemnify Macquarie (and various related parties, officers, agents and employees) for a range of conduct, including but not limited to your default under the Agreement. Please refer to clause 17 of the Agreement. Effects of termination. Transaction confirmations. General provisions governing the operation of the Agreement. The effect of revised terms declared by a licensed market operator. Risk Disclosure Statement to confirm your understanding of the key risks. Please refer to Annexure A of the Agreement. These risks are also detailed in this PDS You should note that the above is a summary only of the provisions of the Agreement. You should read the Agreement carefully and if you are uncertain about any part of the Agreement, you should obtain independent legal and/or financial advice before proceeding. 3

22 4. Key features of Futures What are Futures? A Futures contract is an agreement to buy or sell something (the underlying asset) at a specified time in the future. The underlying asset may be, for example: a specified amount of a security, such as shares in a company or government bond; a financial instrument, such as a bank bill; a stock index, such as the SFE SPI 200 ; or a commodity of a given grade or quality, such as greasy wool. The parties to a Futures contract may be required to deliver or take delivery of the underlying asset at the time specified in the contract, where the contract provides for this. Alternatively, the contract may provide for a cash adjustment to be made, based on a change in the price of the underlying asset. Types of Futures There are two main types of Futures contracts. Deliverable contracts where the seller agrees to deliver to the buyer, and the buyer agrees to take delivery of, the quantity of the commodity described in the contract. Cash settled contracts where the two parties make a cash adjustment between them according to whether the price of a commodity, financial instrument or index has risen or fallen since the time the arrangement was made. Unless you plan to make or take delivery of the commodity underlying the Futures contract, it is not advisable to enter into deliverable contracts in the last weeks before maturity. If you intend to make or take delivery, first check with your broker. A Futures contract s terms are generally set out in the Operating Rules of the exchange on which the contract was made, which might be in Australia or overseas. This Document is intended to apply to any Futures contracts traded on a computer based exchange unless otherwise indicated. There may, however, be differences in procedure and regulation of markets from one country to another and one exchange to another. Duration of Futures Futures contracts may be made for periods of up to several years in the future. Part of the standardisation of Futures contracts is that the contract maturity dates follow a predetermined cycle (standardisation is discussed in the next section). For example, in the SPI-200 contract traded on the SFE, contracts can be made for settlement only in March, June, September or December, but for up to 18 months from the time of the trade. Futures are standardised Futures traded on an exchange are standardised and interchangeable, meaning that futures contracts of a particular class are perfect substitutes for each other. A consequence of contract standardisation is that the price is the only factor that remains to be determined in the marketplace. On the SFE and ASX, Futures are quoted and traded on an electronic trading platform, which provides a system of continuous price discovery. This means that the price at which trades take place may continually change throughout a trading session. Most international Derivatives Exchanges also provide electronic trading platforms for Futures trading. Since all Futures contracts for a given future month in the same market are interchangeable, they can be closed out against an opposite position in the same contract. A trader who has bought a given Futures contract can cancel the position by selling the same contract. The net result is that the trader no longer holds a position. Similarly, a trader who has sold a given Futures contract can cancel the position by buying the same contract. In each case there will be a profit or loss equal to the difference between the buying and selling prices multiplied by the standard contract amount minus any transaction costs. In practice, the vast majority of Futures contracts are offset in this manner ahead of the contract maturity date, the remainder being fulfilled by delivery or cash settlement at maturity. 4

23 The role of the clearing house Derivatives Exchanges will generally have a Clearing House. Clearing Houses clear and settle Futures contracts executed on the exchange. The primary role of the Clearing House is to guarantee the settlement of obligations arising under the Futures contracts registered with it. This means that when your broker buys or sells a Futures contract on your behalf, neither you nor your broker needs to be concerned with the credit worthiness of the broker taking the other side of the contract. See below for further discussion on the novation process that occurs at the Clearing House. The Clearing House will never deal directly with you, rather the Clearing House will only ever deal with clearing participants that is your broker (where your broker is a clearing participant), or where your broker is not a clearing broker, your broker s clearing broker. The SFE s Clearing House is SFE Clearing Corporation. The ASX s Clearing House is Australian Clearing House (ACH). When a Futures contract is registered with the Clearing House, it is novated. This means that the contract between the two brokers who made the trade is replaced by one contract between the buying broker (or its Clearing Participant) and the Clearing House as seller; and one contract between the selling broker (or its Clearing Participant) and the Clearing House as buyer. In simple terms, the Clearing House becomes the buyer to the selling broker, and the seller to the buying broker. Buyer Buyer Clearing House as Seller Original trade (Novation) Clearing House as Buyer Seller Seller The Clearing House ensures that it is able to meet its obligation to Clearing Participants by calling Initial Margin 1 and Variation Margin 2 to cover any unrealised losses in the market. See section 5 for further information on margins. Generally your Futures contracts (and those of other clients) will be held separately from Futures contracts entered into by your broker on its own account. If your broker were to default on its obligations to the Clearing House in respect of its own Futures contracts, your Futures contracts will not be used to meet the broker s default. Rather the Clearing House will either close out your contracts or attempt to transfer them to another broker. Closing out Because of the system of registration and novation referred to above, closing out can be achieved without going back to the original party with whom the Futures contract was traded. When an existing buyer sells to close out their position, the sale transaction is registered with the Clearing House in the manner described above. Example First trade Novation Second trade Novation Resulting Positions A sells to B at $100 per unit Clearing House is now buyer to A and seller to B B sells to C at $120 per unit Clearing House is now buyer to B and seller to C A has an open sold position C has an open bought position B no longer has a position and has realised a profit of $20 per unit (ignoring transaction costs) The contracts which B held (one to buy and one to sell) have been settled in cash between B and the Clearing House; B simply receives the net profit. Any profit due to B is paid out by the Clearing House in cash, even though the original seller (A) remains in the market. 1 Also known as a deposit. 2 Sometimes referred to as additional deposit or additional margin. 5