Supplementary Product Disclosure Statement CFDs 24 January 2014

Transcription

1 Supplementary Prduct Disclsure Statement CFDs 24 January 2014 Issued by Frex Capital Trading Pty Ltd (ABN: , AFS Licence N: )

2 1. Imprtant Infrmatin 1.1 Abut this Supplementary PDS This supplementary prduct disclsure statement (CFD SPDS3) has been prepared and issued by Frex Capital Trading Pty Ltd (FrexCT). The CFD SPDS3 is an imprtant dcument and must be read in cnjunctin with and supplements the Prduct Disclsure Statement fr CFDs dated 26 May 2011 (CFD PDS) and ur previus Supplementary prduct disclsure statements fr CFDs dated 31 March 2012 (CFD SPDS2) and 8 December 2011 (CFD SPDS). Frm 23 January 2013 the FX PDS cmprises this CFD SPDS3, CFD SPDS2 and CFD SPDS. 1.2 Purpse f this FX SPDS3 The purpse f this CFD SPDS3 is t ntify yu f a change t the CFD SPDS2. 2. ASIC Benchmark 3 RG227 Bfrex Ltd is n lnger a sharehlder f Frex Capital Trading Ltd. Hwever, Bfrex Ltd cntinues t be a hedge cunterparty f FrexCT. Accrdingly, the fllwing sentence in the secnd last paragraph f RG 227 benchmark 3 in part 2 f the CFD SPDS2 shuld be ignred and deleted:... which is a majr sharehlder f Frex Capital Trading Ltd.

3 Supplementary Prduct Disclsure Statement CFDs 31 March 2012 Issued by Frex Capital Trading Pty Ltd (ABN: , AFS Licence N: )

4 1. Imprtant Infrmatin 1.1 Abut this Supplementary PDS This supplementary prduct disclsure statement (CFD SPDS2) has been prepared and issued by Frex Capital Trading Pty Ltd (FrexCT). The CFD SPDS2 is an imprtant dcument and must be read in cnjunctin with and supplements the Prduct Disclsure Statement fr CFDs dated 26 May 2011 (CFD PDS) and ur previus CFD SPDS dated 8 December Frm 31 March 2012 the CFD PDS cmprises this CFD SPDS2 and the CFD SPDS dated 8 December Purpse f this CFD SPDS2 The purpse f this CFD SPDS2 is t ntify yu f the fllwing: (a) (b) FrexCT s disclsures n an if nt, why nt basis t ASIC s seven new disclsure benchmarks as prescribed by Regulatry Guide 227 (RG 227); and Infrmatin in relatin t trading ur new Future Index CFDs which we ffer t ur clients. 2. ASIC Benchmarks RG 227 RG 227 requires CFD prviders t publish certain infrmatin addressing a range f disclsure benchmarks. ASIC has develped seven benchmarks fr OTC CFDs that can help retail investrs understand the risks assciated with these prducts, assess their ptential benefits and decide whether investment in the prducts is suitable fr them. We have addressed each f these benchmarks n an if nt, why nt basis. Benchmark Meets Details 1. Client Qualificatin Yes FrexCT assesses each prspective client s suitability t trade CFDs when they apply t pen an accunt. We will ask yu a series f questins during the applicatin prcess in rder t assess yur experience and understanding f trading CFDs. A cmpany representative may als ask yu additinal fllw-up questins. The questins will be based n the recmmendatins set ut in RG 227. Depending n yur answers t the questins we may agree t pen

5 Benchmark Meets Details an accunt r decline yur applicatin and recmmend that yu btain further educatin and experience thrugh the use f ur dem accunt. 2. Opening Cllateral N This benchmark recmmends that we nly accept cash r cash equivalents (e.g. credit cards) as pening cllateral when establishing an accunt and limit credit card payments t $1000. We cmply with the recmmendatin t nly accept cash r cash equivalents including credit/debit card, electrnic transfer, BPAY and cheque. Hwever, fr yur payment cnvenience, we d nt place any limits n credit card payments. 3. Cunterparty Risk Hedging 4. Cunterparty Risk Financial Resurces Yes Yes FrexCT maintains plicies t manage ur expsure t market risks frm client psitins. This plicy includes the factrs we take int accunt when determining if hedging cunterparties are f sufficient financial standing and it sets ut the names f the hedging cunterparties we may use frm time t time. FrexCT may enter int hedging arrangements with varius hedge cunterparties in rder t mitigate market and client risk. We take a number f factrs int cnsideratin when selecting ur hedge cunterparties. We will cnsider their financial standing and their internal prcesses fr managing risk. Other imprtant factrs fr cnsideratin include; their reputatin, cnflicts f interests, internal cmpliance arrangements and ur prir business dealings. We currently have an arrangement with Bfrex Ltd which is a majr sharehlder f Frex Capital Trading Ltd. Frex Capital Trading Ltd is the parent cmpany f FrexCT. Please cntact us if yu wuld like a cpy f ur hedging plicy. FrexCT maintains plicies t ensure the nging maintenance f adequate financial resurces. In

6 Benchmark Meets Details particular, hw we mnitr ur cmpliance with Australian financial service licence (AFSL) requirements and hw we cnduct stress testing t ensure we hld sufficient liquid funds t withstand significant adverse market mvements. FrexCT maintains a written plicy t ensure it maintains adequate financial resurces and cmplies with the financial requirements f its AFSL. The steps that are taken t ensure this include: maintaining a mnthly set f financial accunts; preparing mnthly management reprts which address ur base level financial requirements utlined in RG 166 and ur AFSL; perfrming daily client liability recnciliatin reprts t ensure that there is sufficient client mney t cver ur client liabilities; having regular mnthly cmmunicatin with independent external accuntants and legal advisers; and cnducting an independent external audit at the cnclusin f every financial year. Yu can assess FrexCT s financial ability t meet its cunterparty bligatins by reviewing its audited financial statements. 5. Client Mney Yes FrexCT has a clear client mney plicy and hlds all client mney in a segregated accunt at a tier 1 Australian bank in accrdance with Australian client mney rules under Part 7.8 f the Crpratins Act 2001 (Cth) (Client Mney Rules). Client mney is als c-mingled with ther client mney in accrdance with Client Mney Rules. It is imprtant t nte that the hlding f client mney in accrdance with the Client Mney Rules may nt affrd yu abslute prtectin. In the unlikely event that there was a deficit in the segregated accunt and

7 Benchmark Meets Details we became inslvent, yu will be an unsecured creditr. Please refer t Sectin 2 f the CFD SPDS fr mre details. 6. Suspended r halted underlying assets Yes Trading halts r suspensins f trading in underlying assets n which a particular CFD is based may arise (such as when a cmpany suspends trading pending an imprtant annuncement). In these circumstances, FrexCT des nt permit any trading in the relevant CFD prduct. If there is a halt r suspensin in the trading in the underlying asset, FrexCT, acting reasnably, may exercise the fllwing discretins (withut limitatin): suspend trading in such CFD prduct; vary, reject, vid r cancel any rder; vary margin requirements; clse ut sme r all pen psitins; amend the CFD prduct ffering; and d anything it reasnably believes is necessary t prtect it and its ther clients. The current paragraphs 3 and 4 in Sectin f the PDS shuld be ignred and deleted. Accrdingly, we wuld like t clarify that we will nt allw any trading in any CFD where the underlying asset t which it relates has been halted r suspended. 7. Margin Calls Yes FrexCT maintains a clear plicy detailing ur margining practices. In particular, FrexCT is unique in that the maximum amunt that yu can lse when trading CFD prducts with us is an amunt equal t yur Balance. Yur Balance is typically the funds that yu have depsited with us plus r minus any Clsed P&L and any ther debits and credits.

8 Benchmark Meets Details In summary: Yu are required t maintain the requisite margin requirements (including initial and variatin margin) at all times in rder t pen and maintain psitins Yu are slely respnsible t mnitr yur psitins at all times and t ensure that yu satisfy all margin requirements FrexCT is nt required t mnitr yur psitins r margin levels, thugh we may d s as a curtesy If yu d nt have sufficient margin in yur accunt then sme r all f yur psitins may be autmatically clsed ut withut ntice t yu. Please refer t Sectins 2.4 and 5.6 f the CFD PDS fr mre details.

9 3. Future Index CFDs 3.1 Intrductin FrexCT nw ffers a number f future index CFD prducts where the relevant underlying asset expires. It is imprtant t remember when trading future index CFDs that the price will nt nrmally be the same as the underlying cash index. This is because future index CFDs trade at a fair value premium and tend t respnd t news and change f sentiment mre quickly than the underlying cash index that are nt up t date until every cnstituent share has traded. 3.2 Expiry Date Each future index CFD prduct has an expiry date. The expiry date is made clear n the trading platfrm. If yu d nt clse yur psitin in a future index CFD befre the expiry date, FrexCT will clse this psitin in accrdance with the terms belw in paragraph 3.3. Yu will nt be able t pen a new psitin in a future index CFD after the expiry date. 3.3 Trading Terms The fllwing set uts the additinal terms and cnditins fr future index CFDs and shuld be read in cnjunctin with the FrexCT terms and cnditins. (a) (b) (c) (d) (e) (f) A psitin in a future index CFD that has nt been clsed by the expiry date r therwise in accrdance with the FrexCT terms and cnditins will autmatically be clsed by us at a price reasnably determined by FrexCT. A psitin in a future index CFD will nt be rlled ver int the next cntract mnth fr that prduct. All pending rders including entry rders, stp lss rders and take prfit rders will be cancelled when a future index CFD psitin is clsed at expiry by FrexCT r therwise. If an exchange r underlying asset t which yur CFD relates is suspended, FrexCT may increase the margin requirement t the extent cnsidered by FrexCT t be fair and reasnable in the circumstances. If such underlying asset remains suspended fr a time that we think is unacceptable t us in ur sle discretin, we may clse the psitin at a price reasnably determined by FrexCT. If an exchange n which an underlying asset t which yur CFD relates is principally traded annunces that pursuant t the rules f such exchange an underlying asset has ceased (r will cease) t be listed, traded r publicly quted fr any reasn we will clse that psitin at a price that FrexCT reasnably determines. The executin f an rder fr a future index CFD is nt guaranteed and is subject t slippage. In such instances, the rder will be executed at a price based n what

10 FrexCT wuld reasnably be able t btain in the relevant underlying asset at the relevant time. Fr the avidance f dubt, stp lss rders are nt guaranteed. (g) Any trading r purprted trading by yu t explit errrs in prices r misqutes including withut limitatin: (i) taking advantage r attempting t take advantage f pricing errrs r misqutes r trading utside market hurs; and (ii) engaging in any frms f abusive trading determined in ur sle and abslute discretin, then we are entitled, in ur sle discretin, t take ne r mre f the fllwing measures (withut limitatin): - adjust the qute, trade size and spreads; - adjust r clse any and all psitins; - restrict access t the trading platfrm; - recver frm yur trading accunt r therwise any histric trading prfits that have been gained thrugh r reasnably appear t have been gained frm such actin as determined by us in gd faith; and - terminate yur agreement with us in accrdance with the FrexCT terms and cnditins. (h) Due t the nature f nline trading systems and the ptential unreliability f exchange and liquidity prvider price feeds, we may in ur sle and abslute discretin amend, remve r delete rders and any assciated psitins which have been made n the trading platfrm r therwise which, in the reasnable pinin f FrexCT, d nt reflect the actual underlying asset, exchange r market prices t which the psitin relates at the time the rder was executed.

11 Supplementary Prduct Disclsure Statement CFDs 8 December 2011

12 1. Imprtant Infrmatin 1.1 Abut this Supplementary PDS This supplementary prduct disclsure statement (SPDS) has been prepared and issued by Frex Capital Trading Pty Ltd (FrexCT). The Supplementary PDS is an imprtant dcument and must be read in cnjunctin with and supplements the Prduct Disclsure Statement fr CFDs (CFD PDS) dated 26 May 2011 fr FrexCT. Frm 8 December 2011 the CFD PDS cmprises the SPDS. 1.2 Purpse f this Supplementary PDS The purpse f this SPDS is t ntify yu f a number f clarificatins t the client mney prvisins f the CFD PDS and remval f free guaranteed stp lss rders. 2. The client mney prvisins 2.1 We wish t clarify the fllwing matters that are addressed in sectins 2.4, 5.7 and 5.8 f the CFD PDS: We are nt bligated t credit unrealised prfits t yur accunt in the event yu have aggregate unrealised prfit acrss yur pen psitins. We are entitled t deduct an amunt equal t the variatin margin (i.e.net unrealised lss) yu we t us in respect t yur pen psitins frm the client mney accunt at the end f each business day. Where amunts are deducted frm the client trust accunt fr hedging r ther purpses (i.e. fr the purpse f paying unrealised lsses t FrexCT), yu becme an unsecured creditr in relatin t thse amunts and there is a risk that yu may nt be able t recver sme r all f thse amunts in the event f default by FrexCT and/r its hedging cunterparty. 2.2 The fllwing sentence in Part 5.8 f the CFD PDS shuld be ignred and is deleted: Hwever, even where FrexCT des hedge its expsure t clients, it des nt use mney held in the client trust accunt t meet its wn bligatins. This is an added prtectin t client mnies. 2.3 We wish t clarify that in relatin t day 5 f the cash flw example in sectin 5.8 f the CFD PDS, we are entitled t deduct an amunt equal t the variatin margin frm the client mney accunt. In this example, the amunt is US$4300.

13 3. Stp lss rders 3.1 We wish t clarify the fllwing matters that are addressed in sectins 2.6, 2.7, 2.8, 3.1 and 5.1 f the CFD PDS: We n lnger ffer free guaranteed stp lss rders n CFDs (i.e. share CFDs and index CFDs). All references t the wrds guarantee and guaranteed shuld be ignred and deleted. 3.2 Insert the fllwing paragraph as a new sectin 5.10 in the CFD PDS: Slippage While we endeavur t execute yur stp lss rder at the specified rder rate, in sme circumstances this may nt be pssible. In particular, this may ccur during exceptinal market cnditins including perids f vlatility r lss f liquidity in any relevant market. Accrdingly, yur stp lss rder may be executed at a rate that is inferir t yur specified rder rate. In such circumstances, we will use all reasnable endeavurs t execute the stp lss rder at a price based n what we wuld be able t btain in the relevant underlying market.

14 PRODUCT DISCLOSURE STATEMENT ("PDS") CONTRACTS FOR DIFFERENCE ( CFDs ) Prduct Issuer: Frex Capital Trading Pty Ltd ACN: Address: Level 8, 499 St. Kilda Rad, Melburne, Victria , Australia License N: Issue Date: 26 May 2011 The infrmatin in this PDS is subject t change frm time t time and is up t date as at the date stated at the tp f the page. Where new infrmatin is materially different t that cntained in this PDS, we will either issue a new PDS r a supplementary PDS setting ut the updated infrmatin. Where the new infrmatin is nt materially different, we will nt issue a new PDS r supplementary PDS t yu, but yu will be able t find the updated infrmatin n ur web site r yu can call If yu ask us t, we will send yu a paper cpy f the new infrmatin free f charge. We d nt and will nt give yu persnal financial prduct advice and this PDS des nt cnstitute a recmmendatin r pinin that the prducts referred t in this PDS are apprpriate t yu. The infrmatin and any general advice in this PDS d nt take int accunt yur persnal bjectives, financial situatin and needs and, unless yu are familiar with Cntracts Fr Difference (CFDs) and prducts f these types, then these prducts may nt be suitable fr yu. Befre entering int CFD trades referred t in this PDS yu shuld give cnsideratin t yur bjectives, financial situatin and needs and take all reasnable steps t fully understand the pssible utcmes f trades and strategies that can be emplyed using ur trading platfrms. Yu shuld als be aware f the risks invlved and be satisfied that trading in CFDs via ur trading platfrms is suitable fr yu in view f yur financial circumstances. We therefre recmmend that yu cnsult yur investment adviser r btain ther apprpriate independent advice. This PDS is nt an ffer r invitatin in relatin t ur prducts in any place in which, r t any persn t whm, it wuld nt be lawful t make that ffer r invitatin. This PDS is nly intended fr Australian residents. If yu reside utside Australia, then yu are nt permitted t register with Frex Capital Trading Pty Ltd. If yu have any questins in relatin t this PDS, please d nt hesitate t cntact us. Telephne: Mail : P.O Bx 7509 St. Kilda Rad inf@frexct.cm

15 Visit us : Level St. Kilda Rad, Melburne, Victria Suite 605, Level Gerge Street, Sydney, New Suth Wales

16 1. INTRODUCTION 1.1 Wh is Frex Capital Trading Pty Ltd? Frex Capital Trading Pty Ltd ( FrexCT, us, r we ) is a subsidiary f Frex Capital Trading Limited, which is a cmpany based in Vanuatu. FrexCT was funded by an experienced mix f bankers, venture capitalists, internet experts and freign exchange ( FX r Frex ) specialists. The catalysts fr frming this cmpany were the prevalent discrepancies between clients needs and the services ffered by mst cmpanies. FrexCT s missin is t prvide ur custmers with an nline trading experience which is superir t any f ur cmpetitrs. FrexCT ffers an pprtunity t all traders frm nvice t experienced, t start trading leveraged margin FX and cmmdities via ur trading platfrms (which are accessed via the internet) within minutes f registering with us and with an amunt as lw as $ Purpse f a PDS Under the Crpratins Act 2001, a retail client must receive a PDS frm an AFS licensee befre acquiring a financial prduct. The PDS is the dcument that sets ut the significant features f a financial prduct, including its risks, benefits and csts. The purpse f this PDS is t prvide yu with sufficient infrmatin abut FX and cmmdities t help yu make an infrmed decisin in relatin t the acquisitin f ur financial prducts. This PDS als helps yu t cmpare ur prducts with thers yu may be cnsidering. This PDS has been prepared by FrexCT as the issuer f CFD cntracts described in this PDS. This PDS is available n the internet at Paper cpies f this PDS will be sent by FrexCT t any persn n request, free f charge. T btain a paper cpy, please cntact us. This PDS is an imprtant dcument and prvides yu with key infrmatin abut ur CFD prducts. 1.3 Over the Cunter Prducts Our trading platfrms ffer yu the pprtunity t enter int Over the Cunter ( OTC ) CFD cntracts with us, using ur nline facilities (trading platfrms) r by instructing us. An OTC CFD is a cntract between yu and FrexCT. Yu cannt trade OTC CFDs thrugh an exchange; rather it is a private cntract between yu and FrexCT as yur cunterparty. Please refer t sectin 5.3 f this PDS fr mre infrmatin abut Cunterparty Risk. Accrdingly, yu can nly enter int a CFD trade by pening a trade n FrexCT s trading platfrms r instructing us t pen a trade n yur behalf. Once an OTC CFD is entered int with us, it can nly be clsed

17 by yu giving instructins t that effect thrugh ur trading platfrms r instructing us t clse it n yur behalf. It is nt pssible t clse CFD cntracts entered int with us by giving instructins t anther CFD prvider r Australian financial services licensee. 2. Key features f trading CFDs with FrexCT 2.1 What are CFDs? A CFD is an agreement t exchange the difference in value f a particular underlying asset between the time at which the CFD cntract is pened and the time at which it is clsed. This agreement allws yu t make a prfit r a lss frm the fluctuatins in the price f the underlying asset f the CFD withut actually wning that underlying asset. The price f the CFD is based upn and with reference t the price f the underlying asset (i.e. in the case f CFDs ffered by FrexCT the asset is a share r share index). A CFD is a derivative prduct because the value f the CFD is derived frm the value r price f the underlying asset. 2.2 Types f CFD cntracts yu can trade FrexCT ffers CFDs n internatinal listed shares (refer t the relevant trading platfrm fr the current internatinal shares) and varius share indices (such as the Dw Jnes and the Nikkei but refer t ur trading platfrms fr the current share indicies in which we ffer CFDs). Refer t sectin 2.7 f this PDS fr additinal infrmatin. Shuld FrexCT ffer additinal CFDs we may amend this PDS r we may decide t ntify clients f the additinal CFD cntracts and prvide a descriptin f such CFD cntracts n ur website. Alternatively, clients are able t see the CFDs we ffer via ur trading platfrms. FrexCT s trading platfrms allw yu t carry ut market rders and entry rders in all CFDs displayed n each f its trading platfrms. Market Order and Entry Order A market rder allws yu t pen a CFD cntract at the current market price quted by us n the relevant trading platfrm. Fr example, if the current ABCXYZ Ltd (example cmpany) CFD price we are quting is $5.50/$5.51, then pening an immediate trade at this price wuld be a market rder. In cntrast, an entry rder is where yu request t buy r sell a CFD at a specified price, which may be sme distance frm the current market price. Cntinuing n frm the abve example, let s assume the price we are quting is currently $5.50/$5.51, but yu d nt want t pen a trade at thse current rates. Yu may elect t set a different entry price (a lwer price f say, $5.20 at which yu wish t buy a CFD cntract) using an entry rder. S if the price falls t $5.20, a buy trade in ABCXYZ Ltd CFDs will be autmatically pened by the relevant trading

18 platfrm at yur entry rder price. All entry rder prices must be entered at a minimum distance frm the current price. The exact distance may differ accrding t the CFD. 2.3 Using leverage t trade CFDs Our trading platfrms allw yu t utilise leverage t pen a CFD cntract with a minimal initial margin requirement. Beginner accunts have a default leverage f 1:200 (0.25%), whilst ur prfessinal and VIP accunts have default leverages f 1:400 (0.5%). This means that yu can pen a trade with an initial margin utlay f 0.25% and 0.5% f the face value r nminal value f the CFD cntracts. Upn request we are able t change yur leverage rate at ur discretin t a maximum f 2%. 2.4 Margin Requirements An initial margin is payable when yu enter r pen a CFD cntract. This amunt represents cllateral fr yur expsure under the trade and cvers the risk t FrexCT. Yu must maintain margin in such amunts and in such frms as we require in ur sle discretin subject t the alternatives available t yu t either tp-up yur accunt r clse ut any pen psitins. We refer yu t sectin 2.6 fr additinal infrmatin with respect t the alternatives available t yu. T enter int a trade, the initial margin required t be held in yur accunt is between 0.25% t 2% f the face value f the trade, depending n the margin leverage set fr yur accunt. In ur sle discretin we will determine the amunt f the margin required. Margin requirements are n a per trade basis. Once yur margin leverage is set, the relevant trading platfrm will nt be able t pen a psitin beynd thse limits. The full value f the initial margin is payable t FrexCT immediately upn entering the trade. This means that sufficient cleared funds must be depsited in yur accunt with us befre yu can trade. Due t changing market cnditins, the required margin t enable yu t cntinue t hld a CFD cntract may differ ver a perid f time. This is cmmnly referred t as variatin margin r additinal margin. In rder t calculate the required margin t pen a trade and cntinue t hld an pen psitin, yu must lk at several different factrs: Trade size; Yur accunt leverage; and The price f the CFD n a daily basis (this is the unrealized prfit r lss r variatin margin ). Fr example, let s assume yu wish t purchase 10,000 ABCXYZ Ltd CFDs at a price f $5.00. Yur accunt leverage is 0.5% (r 200:1). The required initial margin calculatin wuld be as fllws:

19 (Number f cntracts * $5.00) / 200 = (10,000 * $5.00) / 200 = $50,000 / 200 = $250 The variatin margin is the unrealised prfit r lss n yur pen psitins which is equal t the dllar value mvement f yur pen trades calculated frm the price at which yu entered the CFD cmpared against the current price quted by us. We will nt prvide yu with specific ntice f the variatin margin required t cntinue t hld an pen psitin. Yu must lg int the relevant trading platfrms regularly when yu have pen psitins t mnitr the level f equity in yur accunt. If yu d nt maintain the margin requirements (by tpping-up the balance f yur accunt) immediately by depsiting the amunt f funds that is required t maintain the pen psitin t cver bth initial and variatin margin, all f yur pen psitins will be clsed ut by us withut further reference t yu. If yu d nt pay any additinal amunts int yur accunt fllwing adverse market mvements t maintain the minimum required margin, then as sn as the value f the equity in yur accunt falls t zer, FrexCT will clse ut all f yur pen psitins immediately and yur lss will be limited t the amunt which has been depsited in yur accunt. Fr example, let s assume yu purchased 10,000 ABCXYZ Ltd CFDs at a price f $5.00 and yu have ldged $1,500 in yur accunt with FrexCT. An initial margin f $250 (as calculated abve) means the equity in yur accunt is $1,250 (being $1,500 less $250). Let s assume the price f ABCXYZ Ltd CFDs falls t $4.95. The required variatin margin calculatin wuld be as fllws: Initial value f CFDs is 10,000 * $5.00 = $50,000 Current value f CFDs is 10,000 * $4.90= $49,000 i.e. $1,000 unrealised lss The variatin margin which must be held in yur accunt t cntinue t hld that CFD is $1,000 being $50,000 less $49,000. Yu had equity in yur accunt t the value f $1,250 and thus, yu had sufficient funds t cver the variatin margin leaving $250 in accunt equity. Yu are nt able t fund margin requirements with unrealized prfits frm anther trade. Yu are nly allwed t deal in and maintain psitins n the basis f cleared funds being prvided fr yur ttal margin bligatins. We have the right t limit the size f yur pen psitins under any circumstances as determined by us. Generally, such limitatin f the size f yur pen psitins will be dependent n the value f funds ldged in yur accunt.

20 We als have the right t refuse any request made by yu t place an rder t establish a psitin at any time at ur discretin withut having t give a reasn r ntice. 2.5 Rll ver interest n CFDs CFD cntracts that are nt clsed ut prir t at 12:00 AM Greenwich Mean Time ( GMT ) are held vernight ( rlled ver ) and will result in yu paying interest n the face value f the CFD cntracts. This is knwn as rll ver interest. Rll ver refers t the interest yu will be charged daily n yur pen psitins. This interest charge will be incurred regardless f whether yu have bught r sld the CFD psitin. Fr infrmatin abut hw rll ver is calculated, please refer t the example belw in sectin 2.7. Yu are able t view ur rll ver rates fr each CFD thrugh the PROfit trading platfrm. If yu perate a Meta Trader 4 accunt r ur iphne Applicatin, then please cntact us directly fr current rll ver rates. 2.6 Ptential Lss Yur ptential lss can be limited t the amunt depsited int yur accunt with us if yu: chse t clse ut yur pen psitins at any time befre the ttal lss is the same as the balance in yur accunt; r d nt pay any additinal amunts int yur accunt fllwing adverse market mvements against yur pen CFD psitins (i.e. meet adverse variatin margins), in which case, nce the value f the equity in yur accunt falls t zer, then FrexCT will clse ut all f yur pen psitins immediately and yur lss will be limited t the amunt which has been depsited in yur accunt. Hwever, if yu chse t tp-up the amunt in yur accunt by depsiting additinal funds with us, then the risk f lss will be the initial amunt depsited plus any additinal amunt(s) depsited int the accunt. Accrdingly, at all times the ptential lss will be limited t the amunt depsited int yur accunt. We guarantee this t be the case n the basis that we have implemented systems (within and, as additinal prtectin, utside the nline trading platfrms) that will autmatically clse ut a psitin when the value f yur accunt declines t zer. In the unlikely event f a cmplete system failure (including ur backup systems) then FrexCT has implemented manual prcedures which will ensure that any lss which may be generated which is in excess f the amunt depsited by yu will be brne by FrexCT and will nt be passed n t yu in any circumstances. If yu want t limit the ptential lss t less than the amunt depsited int yur accunt with us, yu can emply the use f guaranteed stp lss rders at n cst. This means yu can eliminate dwnside risk. If yu use a stp lss rder, we will guarantee that yur psitin will be clsed ut if the exchange rate r cmmdity price reaches the level specified by yu in advance by using a stp lss rder.

21 Furthermre, if yu wish t predefine a specified take prfit amunt r rate/price, then we als guarantee this. Please nte that the predefined stp lss/take prfit rate r price must be a minimum and maximum distance frm the market rate. This distance may vary accrding t the FX pair r cmmdity. Yu are able t see these minimum and maximum rates via the trading platfrms r alternatively, please cntact us fr mre infrmatin. T further illustrate hw a guaranteed stp lss rder will be executed by FrexCT, yu shuld refer t the CFD trading examples in sectin 2.7 belw. 2.7 The different types f CFDs yu can trade with FrexCT FrexCT ffers its clients the ability t trade share CFDs (internatinal shares nly) and share index CFDs. Belw we explain these tw types f CFDs and prvide sme examples f different trading scenaris: Share CFDs FrexCT ffers CFDs n shares listed n internatinal exchanges (refer t ur platfrms fr the current internatinal shares). As described in sectin 2.1 abve, a CFD is an agreement t exchange the difference in value f a particular underlying asset between the time at which the CFD cntract is pened and the time at which it is clsed. In the case f share CFDs ffered by FrexCT the underlying asset is an internatinal share. In the event that the underlying share f a CFD cntract ffered by us is nt able t be traded (i.e. the relevant exchange is clsed r there is a trading halt impsed with respect t the individual share), then the CFD will generally nt be able t be traded. Hwever, in sme circumstances, in ur abslute discretin, we may nt suspend trading in that share CFD. In the event that the underlying share f a CFD cntract ffered by us is nt able t be traded (i.e. the relevant exchange is clsed r there is a trading halt impsed with respect t the individual share), then the CFD will generally nt be able t be traded. Hwever, in sme circumstances, in ur abslute discretin, we may nt suspend trading in that share CFD. Trading share CFDs allws yu t gain expsure t an individual cmpany s share withut actually having t pay the full value f the actual shares. Thrugh the use f leverage (discussed abve in sectins 2.3 & 2.4 and illustrated belw in Opening a Market Order share CFD trade ), yu are able t pen a share CFD cntract with a minimal initial margin utlay, but at the same time, yu can ptentially benefit thrugh either the rising r falling value f the cmpany s share price. In rder t benefit thrugh a rising share price, yu wuld pen a buy share CFD cntract. Inversely, a fall in price means that yu wuld ptentially incur a lss. In rder t benefit thrugh a falling share price, yu wuld pen a sell share CFD

22 cntract. Inversely, a rise in price means that yu wuld ptentially incur a lss. If yu have pened a buy share CFD, yu will nt earn any dividends payable t sharehlders wh actually wn the share. This is because yu will nt wn the share. FrexCT des nt pay the value f dividends declared by the cmpany n its share CFDs. The main similarities between a share CFD and an actual share is that the price at which yu deal is based n r with reference t the buy r sell price f the underlying share n the relevant share market and the mvement in prices f CFDs fllw the mvement in prices f the underlying share. It is imprtant t nte that the price quted by us is based n r with reference t the underlying share and will nt be exactly the same as the price the share is quted n the relevant exchange. Unlike actual share trading hwever, instead f paying the whle value f the trade, yu nly have t pay a small percentage (i.e. initial margin and ptentially variatin margin) f the CFD cntract value. The margin applicable t any given share CFD will be determined by the factrs set ut in sectin 2.4 abve. Yur prfit r lss will be determined accrding t the difference between the price at which yu pen the share CFD and the price at which yu clse it, less any applicable rll ver interest charges incurred. This will be illustrated further in the examples set ut later in the sectin. Hw is the price f a share CFD determined? The price f listed shares traded n a stck exchange is influenced by a wide variety f factrs; including supply and demand but als ther factrs such as dividends, financial psitin f the cmpany, prspects f the cmpany generating future prfits and the general ecnmic climate. The changes in price in the actual share will be factred int the value f yur CFD psitins as the prices which we qute are based n r with reference t the underlying share n which the CFD is based. It is the underlying market which influences the price f yur share CFD. As a market maker, it is FrexCT that determines share CFD prices. As described abve, the prices quted by us will be based n r with reference t the underlying share and will nt be exactly the same as the price the share is quted n the relevant exchange. In rder t have a better understanding f hw yu can pen and clse a share CFD, we will take yu thrugh CFD market rder and CFD entry rder examples. Opening a Market Order share CFD Yu have just pened a trading accunt with FrexCT and yu are interested in trading share CFDs. T start ff with, yu depsit $5,000 int yur trading accunt. This trading accunt has its leverage set at 200:1. ABCXYZ Ltd is a cmpany that has caught yur attentin. In recent mnths, its share price has risen steadily. Currently, FrexCT is quting ABCXYZ Ltd CFDs at $5.50/$5.51. Yu are f the belief that ABCXYZ Ltd s annual financial reprt t be released tmrrw will shw psitive results fr the cmpany and the price will

23 increase significantly. Accrdingly, yu decide t buy 5,000 share CFDs at $5.51 i.e. ur ffer price. The initial margin requirement fr pening this trade wuld be calculated as fllws: (Number f cntracts * Price f 1 share CFD) / Leverage = (5,000 * $5.51) / 200 = $27,550 / 200 = $ In rder t pen this trade, yu require a minimum amunt f $ depsited in yur trading accunt. Since yu have a $5,000 balance, then this will nt be a prblem. Yu pen the CFD cntracts. When the CFD cntacts have been pened, the available usable margin (r equity) in yur accunt is reduced t $4, ($5,000 - $137.75). Nw that yu have pened these CFD cntacts, let s lk at the different utcmes when they are clsed at different prices: Outcme 1: Yu make a prfit Let s assume that yur view was crrect and after 1 day the price f the share CFD has increased t $6.51/$6.52. Yu decide t clse ut yur pen psitins at $6.51 i.e. ur bid price. This will result in a $1 prfit per cntract. T illustrate hw rll ver interest affects yur prfit, we shuld lk at a wrked example. Let s assume that the rll ver interest rate charge applicable t this share CFD was -0.01% f the trade expsure. Let s als assume that when rll ver ccurred at 12:00 AM GMT, the price f the CFD was $5.45. Cnsidering all f the abve, the rll ver interest payable wuld be calculated as fllws: (Rll ver rate * Face Value f the Cntract) / 100 (-0.01 * 5000 * $5.45) / 100 =-$272.5 / 100 = - $2.72 In this case, yu wuld have made a $5,000 prfit (5000 cntracts * $1 prfit per cntract), less $2.72 rll ver interest charge incurred. Therefre, the final net prfit wuld be $4, This example disclses the rll ver interest where yu have nly held the pen psitin fr ne day and thus, the financial impact n the result in small. If yu hld an pen psitin fr a lenghthy perid f time, the financial

24 impact n the result f the trade will be much greater i.e. the prfit will be less r the lss will be greater. Outcme 2: Yu lse yur initial investment Let s assume that yur view was incrrect and n the same day that yu pened the trade, the price f the share CFDs decreased t $4.51/$4.52. Yu decide t clse ut yur pen psitins at $4.51 i.e. ur bid price. This results in a $1 lss per cntract, r a ttal lss f $5,000 (yur whle accunt). We nte that even if yu had nt decided t clse ut yur pen psitins, FrexCT wuld have autmatically dne s as described in sectin 2.4 abve. Since we have already illustrated hw rll ver is calculated in the previus example, we will assume that this trade was pened after 12 AM GMT and clsed befre 12 AM GMT the fllwing day, thus n rll ver interest charge was incurred by yu. The ther examples belw are als exclusive f rll ver charges. Outcme 3: Yu limit yur lss with a stp lss rder Let s assume that yu wanted t limit yur ptential lsses, s yu entered a guaranteed stp lss rder price f $5.21. In this utcme we will assume that the price fell just as it did in Outcme 2. Hwever, in this instance yur stp lss rder wuld be triggered and the trade clsed ut at $5.21 being a lss f $0.30 per cntract ($ $5.21). The ttal lss in this instance wuld be $1,500 (5000 cntracts * $0.30). Outcme 4: Yu make a prfit with a take prfit rder Let s assume that when yu pened the trade at $5.51, yu set a take prfit rder at a price at $6. We will als assume that n the same day the price spiked frm yur share CFD price f $5.51 t $6.05, then back t $5.65. As yu had yur take prfit rder price set, this wuld have autmatically been triggered by the trading platfrm and yur pen share CFDs wuld have been clsed ut at $6, fr a prfit f $0.54 per cntract. This wuld mean that yu made a ttal prfit f $2,700 (5000 cntracts * $0.54). Opening an Entry Order share CFD Yu als have the ptin f setting an entry rder t establish a psitin. Yu may nt believe that buying r selling a share CFD at current prices is the right thing t d. Therefre, yu can utilise the entry rder trade functin t set an entry price which yu think is mre suitable. Once the price hits yur predefined entry price, the entry rder will trigger and pen the share CFD cntracts fr yu. The best way t understand hw entry rders wrk is t lk at an example. Let s assume yu have a balance f $500 in yur trading accunt and that the ABCXYZ Ltd CFD is quted by us at $5.51/$5.52. Yu are nt cnfident that pening a trade at the current market price is the best thing t d. Yu are f the belief that by the end

25 f the week, the price may rise t $6 and then may fall sharply. Yu decide t pen a sell entry rder at $6 fr 1000 ABCXYZ Ltd CFD cntracts, with an accunt leverage f 1:200. The initial margin required fr this trade wuld be calculated in the same way as the market rder. The calculatin is as fllws: (Number f cntracts * Price f 1 share CFD) / Leverage = (1000 * $6) / 200 = $6000 / 200 = $30 In rder wrds, yu wuld require $30 in available margin in rder fr this entry rder t be triggered. This margin is currently available t yu as yu have a balance f $500 in yur accunt and n ther pen psitins. It is imprtant t pint ut that the used margin is nt reduced frm yur available margin until an entry rder is actually triggered and the CFD cntracts are pened. Let s lk at several different utcmes fr this entry rder example. Outcme 1: Yu make a prfit Let s assume yur view was crrect and the price f the share CFD has increased t $6.00/$6.01. Once the price hit $6, yur sell entry rder wuld have been triggered and wuld nw appear in yur pen psitins i.e sld ABCXYZ Ltd CFDs at $6.00. Over the next few hurs, the price cntinued t rise t $6.15, but just befre the clse f trading fr the day, the price fell back dwn t $5.69/$5.70. Yu decide t clse the pen psitins. In this instance, yu wuld have made a prfit f $0.30 ($6.00 sld price less $5.70 bught price) per cntract r a ttal f $300 (1000 cntracts * $0.30 prfit per cntract). Outcme 2: The entry rder is nt triggered Let s assume that ABCXYZ Ltd s CFD price did nt rise t $6 and in fact fell sharply ver the next few weeks t $4.20. Yu are prepared t keep yur entry rder pen fr nw and see where the price mves ver the cming weeks. After 2 weeks the price falls t $4. At this stage, yur pinin changes and yu see little prspect f a rise $6. Yu subsequently decide t cancel r clse yur entry rder. As the trade was never triggered, yu incur n prfit r lss and incur n fees. Outcme 3: Yu lse yur initial investment Let s assume yur view was incrrect. The price f the share CFD hits $6.00/$6.01. Yur entry rder is triggered and appears in yur pen psitins i.e sld ABCXYZ Ltd CFDs at $6.00. Hwever, n the same day the CFD price cntinues t rise and reaches a price f $6.50. Yur psitin is then autmatically clsed ut by the trading platfrm. The reasn it is clsed is because yu have insufficient accunt

26 equity (i.e. $0 in accunt equity). The lss n this trade was $500 (1000 cntracts * $0.50 lss per cntract) and yu nly had a balance f $500 in yur accunt t start ff with. Outcme 4: Yu limit yur lss with a stp lss rder Let s assume in this instance yu are cautius and enter a guaranteed stp lss rder t buy at a price f $6.15 at the same time as when yu set the entry rder. In this instance, the $6.00 entry price rder will be triggered and the 1000 share CFD cntracts are pened at $6.00. Hwever, the price cntinues t rise and yur $6.15 stp lss rder is triggered i.e share CFD cntracts are pened at $6.15. This trade then autmatically clses ut the pen CFD cntracts generating a lss f $150 (1000 cntracts * $0.15 lss per cntract). By cmparing this utcme t the previus ne, yu can see that by entering a stp lss rder, yu are able t limit yur ptential lsses. Outcme 5: Yu make a prfit with a take prfit rder Let s assume that in this instance yu enter a take prfit rder at a price f $5.30 when yu enter the entry rder. In this instance, the $6.00 entry price is triggered and the trade is pened. Yur view prved t be crrect and the price fell dwn t $5.30 autmatically triggering the take prfit rder i.e share CFD cntracts at $5.30 which are clsed against the pen sell psitins generating a prfit f $700 (1000 cntracts * $0.70 prfit per cntract). Yu shuld take int cnsideratin any rll ver interest charges yu incur (as illustrated in the Opening a Market Order share CFD trade example) when calculating yur ttal prfit r lss n share CFD trades Share Index CFDs Trading share index CFDs allws yu t gain expsure t a large number f different shares in ne single trade. They can be used t take psitins n the directin f a whle market withut taking a view n the prspects fr any individual cmpany s shares. A shrt (sell) psitin in a share index CFD can be used as a lw-cst hedge t prtect a diversified share prtfli against market falls. A share index CFD wrks in the same way as a share CFD in that the prduct allws yu t make a prfit r lss by reference t fluctuatins in the value f the underlying index, such as the Dw Jnes, NASDAQ r Nikkei indexes. Fr a full list f share index CFDs ffered by FrexCT, please refer directly t ur trading platfrms r cntact us. 2.8 Clsing a CFD cntract A CFD cntract can be clsed in ne f the fllwing events: Yu clse it by prviding instructins t that effect i.e. entering an equal and ppsite CFD cntract t match against (clse ut) an existing pen psitin.

27 The stp lss rder r take prfit rder yu entered at a predefined price is triggered as the price has been reached. A frce majeure event r ther event which prevents the perfrmance f the trade ccurs. If the accunt equity reaches zer dllars, all pen trades are autmatically clsed by the trading platfrm. 2.9 Hw d yu place CFD rders with FrexCT? Yu may place rders t trade in CFD cntracts in tw ways: By using ur nline trading platfrm(s); r By calling ur ffice. FrexCT will nt accept rders via r via ur nline chat facility. If ur representatives are unable t execute yur rders fr any reasn, then FrexCT will nt be held liable fr any actual lss r pprtunity lss yu incur N physical delivery There is n physical delivery f a CFD cntract. Psitins will always be clsed and yur accunt(s) will be either credited r debited accrding t the prfit r lss f the trade. 3. Trading Platfrms 3.1 Hw d ur Online Trading Platfrms wrk? We prvide nline trading platfrms, enabling yu t enter int CFD cntracts. We prvide direct access t CFD prices via the internet. FrexCT prvides yu with its trading services via several different trading platfrms including PROfit, iphne Applicatin and MetaTrader 4 ( MT 4"). Yu are permitted t pen multiple accunts using the varius trading platfrms (i.e. yu can fund ne accunt n the PROfit trading platfrm and anther accunt n the MT 4 trading platfrm). Hwever, since these are tw separate trading platfrms, yu will nt be able t mnitr the trading activity n bth trading platfrms at the same time. Fr example, trading activity n PROfit will nt be visible n MT 4. Als, any excess funds in ne accunt cannt be used t meet margin requirements n the ther accunt. Each trading platfrm may have slightly different features (such as lt sizes, ability t implement trailing stp lsses, charting and news services). This PDS prvides a brief verview f all f the trading platfrms currently ffered by FrexCT and explains the main differences between them.

28 Distinct Features f Trading Platfrms Platfrm Minimum initial funding Requirement Base Currencies Available Cmmissins CFDs Available Guaranteed Stp Lss/Take Prfit Trailing Stp Lss Margin Call Warning PROfit $500* AUD r USD Nne 31** Yes N When equity has reached 95% f expsure iphne App. $500* AUD r USD Nne 31** Yes N When equity has reached 95% f expsure MT 4 $500* USD Nne 31** Yes Yes When equity has reached 70% f Used Margin *This will differ accrding t accunt type chsen **This is subject t change 3.2 The calculatin f CFD prices will include a spread in ur favur The calculatin f the CFD prices quted by us will include a spread in favur f FrexCT. The prices ffered t clients will differ frm prices available in the underlying markets where the underlying assets n which the CFDs are based are traded. This is due t the spread favuring FrexCT in the price calculatin. FrexCT acts as a market maker (and nt a brker) and generates its incme frm the spreads that are embedded in the CFD prices which are quted by us. The spread is the difference between the price at which we buy r sell CFD prducts with ur hedging cunterparties (where applicable) (r the price at which we can buy r sell the underlying asset) and the rate at which we buy and sell CFD prducts with ur clients. Different spreads may als be applied depending n the value f the trade and the underlying prevailing market cnditins. This spread is factred int the prices quted t clients i.e. they are nt an additinal charge t the client. Fr example, ABCXYZ Ltd may be trading in the underlying market at the fllwing price: ABCXYZ Ltd $5.50/$5.52 We may add ur spread such that the price ffered t yu by us is $5.49/$5.53. Due t the difference in the buying and selling price, the CFD price we qute n yur psitin must mve favurably befre yu can be in a break even psitin. In ther wrds, if the CFD price des nt mve at all and yu clse ut yur psitin, yu will make a lss t the extent f FrexCT s spread and any rll ver interest charges which apply t the psitin. The qutes we ffer are subject t ur right t make crrectins in the event f mispriced r typgraphically incrrect data. We d nt prvide a market amngst r between clients fr investment r speculatin. Each CFD trade yu enter int is an individual agreement made between us and yu as a principal and is nt transferable, negtiable r assignable t any third party.

29 4. SIGNIFICANT BENEFITS OF OUR ONLINE TRADING SERVICE The significant benefits f trading CFDs as ffered by us via ur trading platfrms are: 4.1 Risk Management Tl By agreeing t a price nw fr a time in the future yu will determine the exact cst f the underlying share, thereby giving certainty ver yur flw f funds. Fr example, if yu ultimately wish t hld ABCXYZ Ltd in yur investment prtfli but yur nt sure if nw is the right time t utlay the full value fr say 10,000 shares which are currently trading in the underlying market at $5.50 i.e. $55,000. Instead yu may chse t buy a ABCXYZ Ltd with a smaller utlay (being the initial margin). Assuming yu were crrect and the value f ABCXYZ Ltd increased then s wuld the value f yur ABCXYZ Ltd CFDs. Thus, yu culd clse ut yur pen psitins and buy the 10,000 ABCXYZ Ltd shares and use the prfit generated t ffset the higher purchase price. Thus, any prfit (r lss) yu make using trading ur ABCXYZ Ltd CFDs wuld be ffset against the higher (r lwer) price yu physically have t pay fr the freign currency r cmmdity at the future date. 4.2 Speculatin In additin t using CFD trading as a risk management tl as described in sectin 4.1 abve, yu can benefit by using CFD trading ffered by us t speculate n changing CFD price mvements. Yu may take a view f a particular share r the relevant share market in general and therefre, invest in CFDs accrding t this belief. 4.3 Trade in small amunts FrexCT enables yu t make trades in small amunts. Yu can start using ur trading platfrms fr transactins f at least 1 cntract size fr CFDS. When trading in a CFD prduct ffered by us, yu may depsit a minimum amunt f $500, r the amunt which is in line with the amunt yu are willing t risk. There is a minimal withdrawal amunt f $ n all accunts with us. 4.4 Access t the mvements in prices f underlying shares and share markets When using ur trading platfrms, yu gain access t systems which are active and being updated 24 hurs a day, 5 days a week. Hwever, yur ability t pen r clse an individual CFD cntract will depend n the trading hurs f the relevant exchange where the underlying share (r index) is traded. The CFDs available n ur trading platfrms are based n shares and indexes frm different exchanges in many different cuntries (i.e. different time znes). Each exchange will have different trading hurs fr its markets. Fr mre infrmatin abut the trading hurs pertaining t an individual CFD, then please cntact us directly.