FX TRADING GUIDE 05/2004 Authorised and regulated by the Financial Services Authority, members of the NFA USA, and regulated by ASIC in Australia

Transcription

1 FX TRADING GUIDE 05/2004 Authorised and regulated by the Financial Services Authority, members of the NFA USA, and regulated by ASIC in Australia Copyright 2004 CMC Group Plc, 66 Prescot Street, London, England, E1 8HG. All Rights Reserved.

2 NOTICE AND RISK WARNING Notice Whilst every effort has been made to ensure the accuracy of this Trading Guide, the information given is subject to change, often without notice, and is for guidance only. Risk Warning Foreign Exchange trading carries high degree of risk to the investor, which due to fluctuations in value, the investor may not get back the amount of their original investment, and in certain circumstances be liable to pay a far greater sum. The inherent concept of margined Foreign Exchange Trading means that it is not suitable for the investor seeking income from such investments, and is only suitable for those who have the required experience and understand the market risks. It is advisable to seek independent advice if necessary. Copyright 2004 CMC Group Plc, London, England. All rights reserved. No part of this document may be reproduced by any means without the prior written consent of CMC Group Plc. Any unauthorised copying or distribution in whole or part will constitute an infringement of copyright.

3 INTRODUCTION TO CMC GROUP PLC Leading The Way When CMC Group Plc was established in 1989 as a foreign exchange market maker, our aim was to challenge the cost and service barriers that had previously made institutional styled trading inaccessible to the retail investor. We were aware that trading with large financial institutions was characterised by high trading costs, namely commission charges, account management fees, wide trading spreads and costly additional market information. Our launch of the world s first on-line, real time foreign exchange trading platform in 1996, saw us seize the opportunity to offer a service designed specifically for the retail financial market, without the high associated costs. Unique Service Our clients benefit from free use of our highly acclaimed MarketMaker R Trading software, which won the Millennium Product Award from the UK Government for outstanding innovation. Our software enables clients to trade all the major currencies 24 hours a day. CMC also offers an extensive range of cross currency combinations of all majors with highly competitive spreads. Clients can trade multiple product types including Spot FX, Forward Outright FX (Outright or broken date), FX Swaps and OTC FX Options, including Spread Strategies. Our 24-hour service includes a full on-line back office function complete with statements, position summaries, order/trade histories, news, analysis and charting. Our clients are also able to chat live direct to our Dealers or Helpdesk via our software. Our aim is to provide our clients with the most efficient and professional service with the ability to trade at the most competitive rates, permanently commission free and real-time via the Internet or telephone. Execution Only Our service is an execution-only basis and clients will only be accepted for execution-only business. As such we shall not advise or exercise any judgement on your behalf nor can you request any such advice or judgement as to the suitability of trades. This guide is designed to help you understand trading margined foreign exchange with CMC Group Plc. If you have any additional questions you can contact a member of our staff. Please read this guide thoroughly so you fully understand our service. Good luck with your trading. 3

4 CONTENTS AND INDEX SECTION 1: GENERAL DEALING / ADMINISTRATION 1. DEALING 1.1 Introduction to the Dealing Guide 1.2 Internet Based Dealing 1.3 Telephone Based Dealing 1.4 Foreign Exchange 2. OPENING THE POSITION 2.1 How to Open a Position Buying / Placing a long position Selling / Placing a short position Minimum trade Size 3. CLOSING THE POSITION 3.1 How to Close a Position Selling / Placing a short position Buying / Placing a long position Partial Closing of positions 4. ORDER TYPES 4.1 Conditional Orders Day Orders Good Till Cancelled (GTC) 4.2 Limit Orders Limit order to close an open position Limit order used to open a new position 4.3 Stop Orders 4.4 One Cancels the Other (OCO) 5. CONFIRMATIONS/ POSITIONS/ STATEMENTS 5.1 Confirmations 5.2 Positions 5.3 Statements 6. EXPIRY 6.1 Expiry 6.2 Currency Derived 7. INITIAL MARGIN 7.1 What is margin Initial margin Variation margin 7.2 Margin Requirments 7.3 Equity Balances 7.4 Shortage of Equity 7.5 Margin Calls 7.6 Liquidation / Stop Out Level 7.7 Trading Profits / Losses 8. PAYMENTS 8.1 Depositing Funds 8.2 Withdrawing Funds 8.3 Interest on Equity Balances 9. ADMINSTRATION 9.1 General 9.2 Forex Trade Confirmation 9.3 Forex Position Summary 9.4 Ledger Activity 9.5 Forex Margin Requirments 9.6 Ledger Reval 9.7 Equity Summary 9.8 Delivery of Statements and Confirmation On-line Users Services APPENDIX A: FREQUENTLY ASKED QUESTIONS APPENDIX B: CONTACT US SECTION 2: 1. FOREIGN EXCHANGE 1.1 Trading Hours 1.2 Placing a Forex Trade 1.3 Initial margin 1.4 Expiry Rollover and Settlement 1.5 Pricing 1.6 Mark to Market 1.7 Liquidations 4

5 SECTION 1: GENERAL DEALING / ADMINISTRATION 1. DEALING 1.1 Introduction to the Trading Guide This trading guide has been developed to assist clients of CMC Group Plc s FX trading service. It provides explanations of how to open and close positions, the types of trades we offer, technical terms, and financing requirements, as well as practical examples of trades and an explanation of your trading statement. The Trading Guide is aimed to provide you with all relevant information you require to open, run and maintain an FX account with CMC Group Plc. We recommend that you pay particular attention to the nature and types of trades available through CMC Group Plc, which may vary in detail from other firms. Our Frequently asked Questions Section may also help you in this respect (see Appendix A). 1.2 Internet Based Dealing Our Internet service provides clients with the capability to execute FX trades in seconds simply by clicking on our latest dealing rate. There is also a full on-line back office and position keeping service. Typically it will be quicker for clients to deal via the Internet as opposed to the telephone because the Internet service will be automatically publishing our latest dealing prices in real time. To open a trade via the Internet, simply click on the latest rate for the currencies you want to deal in. A deal ticket appears and you simply enter the trade details. Click place order and the deal is done when confirmed back by CMC Group Plc. This usually happens within seconds of the order being placed. Please Note: we recommend you take time to read the full CFD/FX Software User Guide for the On-line dealing system. This is available to all our clients as they log on. 1.3 Telephone Based Dealing If it is necsseary to conduct your dealing over the telephone there are various factors you must adhere to in order to avoid confusion or errors and minimise delay, especially in a fast moving market. Before calling the dealing room you must: Know the Currencies (e.g GBPUSD Spot) of the trade you wish to place; Decide in advance whether you want to buy (place a long position ) or sell place a short position (see paragraphs & below); Decide in advance on the size/amount of the trade (see paragraph below); Have your account number to hand; Ideally have a good idea of where the market is trading i.e. the level or exchange. This can be checked on our website, through the trading software or by requesting it from our dealers. Example: Hello, can I have a exchange rate for GBPUSD Spot for 20,000 please? 5

6 You do not at this point have to declare whether you want to buy (place a long trade) or sell (place a short trade). The dealer will then quote a price, for example / This quote represents the bid / offer spread for GBP/USD. The rate of is the rate at which you can sell (predict that sterling will weaken). The rate of is the rate at which you can buy (predict that sterling will strengthen). Continuing with this example and with the assumption that you think that GBP rate will weaken (or go down) - on hearing the dealers quote, if the price is acceptable, you would say: sell 20,000. The dealer will then confirm the trade to you: At you sell 20,000 GBP/USD spot. Please Note: It is important that you give your order immediately. Prices in the markets are changing all the time, and a price quotation has to be accepted or refused within seconds. You may refuse the quote by saying: nothing there. In a fast moving market, once the dealer has quoted a rate, you may hear: out or change, which means that the rate has changed and you can no longer deal at the original rate. You may then request a new quote. Please Note: You must always wait for the dealer to confirm your trade and not assume that you have executed your trade on giving your instructions to buy or sell. By instigating the trade in the above example, you now have an open position. You are now short 20,000 GBP/USD at If you bought GBP/USD then you would commonly be known as being long. If you wished to close this open position you simply follow the same procedure outlined above this time placing an equal and opposite trade of the same tenor as previously opened (see Section 1, paragraph 3.1 below). In the above example you would now need to instruct the dealer to buy 20,000 GBP/USD to close your open position. Please Note: You must place an equal and opposite trade with the same tenor to close your position (see Section 1, paragraph, 3. below). On closing an open position you do not need to inform the dealer that you are closing an open position, as this is your responsibility and will be shown automatically in your statement once you have performed your equal and opposite trade (see paragraph 3. below). Once a trade is executed, no cancellations, adjustments or waiving of trades will be allowed. 1.5 Foreign Exchange Our spreads are amongst the tightest offered in the Foreign Exchange market, regardless of trade size. Normal dealing spreads on world currencies are only 3-4 pips. 2. OPENING THE POSITION 2.1 How to Open a Position A position is opened by either buying (placing a long trade) or selling (placing a short trade) the first named currency of the two, that you wish you trade Buying / Placing a long trade. You can open a trade by buying or placing a long trade on the first named currency (and selling the second named-currency). To make a profit, you 6

7 want the first-named currency to strengthen or rise against the secondnamed currency Selling / Placing a Short trade You can open a trade by selling or placing a Short trade on the first named currency (and buying the second named currency). To make a profit, you want the first-named currency to weaken or fall against the second-named currency Minimum Trade Size 3. CLOSING A POSITION The minimum deal size for a Forex trade is $10,000 USD or currency equivalent 3.1 How to Close a Position You can close your open trade position by selling or placing a Short trade or buying or placing an long trade of an equal and opposite amount of the same currency with the same tenor as you previously opened with us. Please Note: The trade must also have the same Tenor as the original open trade, in order to close your open position. Failure to do so will result in the creation a new position and therefore leave you with two open positions. Please also remember to cancel any related conditional GTC orders you have placed as failure to do so may result in that order remaining in the market at risk of execution (see Section 1, para below) Selling / Placing a Short trade You can close an open long trade by selling or placing a short trade of an equal and opposite amount of the same first named currency (and buy the second named currency) with the same tenor as you previously opened with us. Closing your position will result in a profit or loss being realised on your account Buying / Placing a Long trade You can close an open Short trade by buying or placing a long trade of an equal and opposite amount of the same first named currency (and sell the second named-currency) with the same tenor as you previously opened with us. Closing your position will result in a profit or loss being realised on your account Partial Closing of Positions You may close part of an open position by selling or placing a Short trade or buying or placing a Long trade of the first named currency with the same Tenor (as above) for a lesser or greater amount. The difference between the two amounts (opening and closing trades) will result in the creation of a new open position. This will mean that you will either have a remaining position in your original position or you have created a new long trade or Short trade as the case may be (stopped and reversed). 7

8 4. ORDER TYPES 4.1 Conditional Orders We offer you the ability to place Conditional Orders such as Limits, Stops, If done and OCOs to help you manage your risk. By using these additional order types you have the ability to effectively control potential profits as well as potential losses on your open positions. Conditional Orders can be placed either as Day Orders or Good Til Cancelled (GTC). Please Note: CMC Group Plc does not guarantee to execute your Stop loss order at the rate at which you placed it. Once your Stop loss level has been reached or breached, we will fill your order at the next available market price (which we cannot guarantee will be the same price) Day Orders Conditional Orders can be placed as Day Orders. A Day order means that if the order you place is not executed then it will be cancelled at the end of that trading day. Should you want to maintain that order in the market the next day, you will have to resubmit that order on the next trading day. Please Note: CMC Group Plc defines the end of the trading day as 2200 London Time on each given trading day. Trading hours by instrument are defined later and can be found at our website Good Til Cancelled (GTC) 4.2 Limit Orders Conditional Orders can also be placed as Good Til Cancelled. A Good Til Cancelled (GTC) order means that your order will remain in the market until it is either executed according to the terms of that order, or is cancelled by you. Please Note: Please remember to cancel any conditional GTC orders you have placed that you no longer require, as failure to do so will result in that order remaining in the market at risk of execution (and the possibility of the creation of a new open position). A Limit Order can be used to either open a new position or close an existing open position (partially or to stop and reverse, see Section 1, para ) at a predefined rate set by you, which may be more favorable than the then current price for that instrument. Limit orders are executed at the rate you specify Limit order to close an open position. Example 1: You have an existing short spot position of 20,000 GBP/USD. The exchange rate is showing / , but you believe the rate will fall to You place a GTC limit order to buy 20,000 GBP/USD spot at This Limit order will remain in the market until it is executed at (offer rate) or cancelled. Example 2: You have an existing long spot position of 20,000 GBP/USD. The exchange rate is showing / , but you believe the rate will rise to You place a GTC limit order to sell 20,000 GBP/USD spot at This Limit order will remain in the market until it is executed at (bid rate) or cancelled. 8

9 4.2.2 Limit order used to open a new position. Example 1: Whilst the market is showing GBP/USD /14, you place a Day Limit order to buy 20,000 at (offer rate). This Limit order will remain in the market until it is executed at or cancelled at the end of its trading day. Example 2: Whilst the market is showing GBP/USD /14, you place a Day Limit order to sell 20,000 at (bid rate). This Limit order will remain in the market until it is executed at or cancelled at the end of its trading day. 4.3 Stop Orders A Stop or stop loss order is an order normally placed to limit the loss on an open position. It is therefore good practice to place this type of Conditional order to control any potential losses of your open position(s) should the market move against you. A Stop Order can also be used to enter the market at an inferior rate, allowing you to enter the market on a breakout of the current trading range. Example 1: You have an existing short spot FX position of 20,000 GBP/USD. The exchange rate is showing /14, but you believe the rate will weaken, however, want to stop your losses if GBP/USD spot rose to or above. You place a GTC stop order to buy 20,000 GBP/USD spot at This stop order will remain in the market until it is executed at (offer rate) or cancelled. Example 2: You have an existing long spot FX position of 20,000 GBP/USD. The exchange rate is showing /14, but you believe the rate will rise, however, want to stop your losses if GBP/USD spot falls to or below. You place a GTC stop order to sell 20,000 GBP/USD spot at This stop order will remain in the market until it is executed at (bid rate) or cancelled. Please Note: We do not guarantee execution of any Stop order(s) at the rate the order is set. The placing of a Stop order indicates the level at which you wish to execute that order. Once this level has been reached or breached, we will fill your order at the next available market rate (which may or may not be at the rate placed). 4.4 One Cancels the Other (OCO) This is the combination of both a Limit and a Stop Order. It is an order that can be used to take a profit if the market moves favorably to the open position or to stop the loss if the market moves against the open position. The execution of one order will automatically cancel the other order. Example: Using the above Limit and Stop orders as examples. You are long 20,000 GBP/USD, and place a sell O.C.O with a Limit Order at , and a Stop Loss at (both rates are the bid rate as you are selling). If either the Limit or the Stop Loss order is triggered, the other order is automatically cancelled. 9

10 5. CONFIRMATIONS / POSITIONS / STATEMENTS 5.1 Confirmations All telephone trades are confirmed back to the client verbally on execution, and executed transactions are listed on the statement that is sent daily. For users of the dealing software clients will have an electronic ticket confirming on execution of all orders. In addition you will also receive a statement with the day s trades. Please refer to the CFD/FX Software User Guide for system-based confirmations and Section 1, paragraph 9 of this dealing guide for further details. 5.2 Positions Clients are able to view their positions at any point in real-time, as well as all trades, orders, and pending orders. 5.3 Statements Clients may view their statement on-line at any time throughout the day. Please refer to the CFD/FX Software User Guide for system-based confirmations. 6. EXPIRY AND ROLLOVERS 6.1 Expiry Spot FX positions expire at the end of each trading day, but are rolled into the next trading day. Forward FX and Option positions expire as per the terms agreed at the time of the trade. Once a forward FX position goes T+2 (two business days before the forward expiry) it becomes a spot position and will roll tom/next as usual. 6.2 FX Rolls FX positions that are rolled over will incur or receive financing based upon the interest rate differential of the two currencies. The rate applied is TomNext which is an abbreviation for tomorrow/next. The first value date is tomorrow (tom) and maturity falls on the next working day (spot/ next ). The TomNext price is adjusted for the interest differential in that short period. From 22:00, UK time, each day CMC Group plc will settle all FX positions by closing the trade at the current market rate and reopening it for the following days spot date, at a rate that will reflect the interest rate differential. Example: USD/JPY: Trade date: 18 th January You BUY: 500,000 USD (value date 20 th January) You SELL: 58,500,000 JPY (value date 20 th January) At settlement on the 18 th January (22:00) the USD/JPY has moved to , realising a profit of 250,000 yen. CMC Group Plc will automatically execute the following trades on your behalf: SELL: 500,00 USD (value date 20 th January) BUY: 58,750,000 JPY (value date 20 th January) You BUY: 500,000 USD (value date 21 st January) You SELL: 58,751,200 JPY (value date 21 st January) 10

11 7. INITIAL MARGIN 7.1 What is Margin Margin is a term derived from the futures market, and provides for leveraged trading in financial products. In its most simple format, if you offered the trading of an instrument at 1% margin, you are in fact saying that you need to only deposit 1% of the total purchase cost of that deal to open that position Initial Margin Initial Margin is the initial deposit required to open a position on an instrument with us once you have opened your account. There is a minimum account opening margin deposit of USD500 or the equivalent there of. Our margin rate on all Exchange Rates is 1%. With a USD 500 initial deposit you can technically trade up to USD 50,000 notional value Variation Margin Variation Margin is the difference in margin requirement once you have opened a position, and provides for trading profits and losses. Example: You buy 40,000 of GBP/USD, at FX positions are margined at 1% so you would need at least 400 Initial Margin to hold this position. If the GBP/USD rate goes down to , you would now show a loss on your account of $56 ( points lost at 40,000) This loss (known as variation margin) is subtracted from the Initial Margin of 400. However, you still hold 40,000 GBP against USD at You would still need a minimum of 400 Initial Margin to cover this position. As your Initial Margin has dropped you are in deficit margin by ($56 valued to at 1/1.8100). This shortfall or deficit is known as Shortage in Equity (refer to Paragraph 7.4), and you will be required to add additional funds to maintain the position. 7.2 Margin Requirements We retain the right to modify Initial Margin Rates with no notice to clients, (Please refer to our Terms of Business and Section 2 of the Trading Guide). 7.3 Equity Balances The equity (or balance) on your account will fluctuate according to the money you have deposited in your account, according to the trading conducted on your account and positions held. During the trading day your account balance(s), including all open positions, are valued against the prevailing market rate. Therefore your equity balance is constantly calculated in-line with market movements. This equity balance is calculated at the end of the day using the mid-closing rates. This equity balance is used to assess your available margin against current positions, and potential new positions you may wish to take. The balance is used to establish if there is a requirement for additional margin deposits on your account. Once a position is opened both Initial Margin and Variation Margin requirements must always be maintained for the open position(s). It is your responsibility to ensure 11

12 that your account is sufficiently margined at all times, especially during volatile trading periods. To assist you to monitor your equity we summarise your equity together with your margin requirements in your daily confirmation and our Help Desk can provide you with your open position(s) and equity report on-line. Please Note: You will only be allowed to trade and maintain open positions on the basis of cleared funds on your account, not on promised funds or funds in transit. 7.4 Shortage of Equity A shortage in equity occurs when the Equity Balance falls below the required Initial Margin deposit. If your account has a shortage in equity you should only reduce your open positions, at least until the Equity Balance in your account is in excess of the required Initial Margin deposit. 7.5 Margin Calls If the market moves against you and your Equity Balance falls below your Initial Margin requirement you have the option to: i) Close or reduce one or more of your open position(s), in order to reduce your Initial Margin requirement to the required level; and/or ii) remit further funds to your account as deposit in order to maintain the Initial Margin requirements. We may or may not make a margin call in these circumstances, (which is a request for you to deposit additional cleared funds on your account to maintain your open positions). In any event if you fail to maintain sufficient margin on your account or sufficient funds on your account to meet the margin requirement then we may close your open position(s) or take any action that we deem necessary. Please refer to clauses 4, 5 and 32 of the Terms of Business. Once your equity falls below your initial margin requirement, it is advisable that you place a stop loss order with us to try and avoid a deficit balance on your account. Our policy is not to provide credit facilities on any accounts. Details of Stop Orders can be found in paragraph 4.2 of this section 1 of this guide. 7.6 Liquidation / Stop Out Level We may place Stop loss orders for your open position(s), at a level where the total Equity Balance falls below our minimum required Initial Margin requirement. This level is referred to as the stop-out level, below which your open positions may be automatically closed out or liquidated. All liquidations on your account will be undertaken at a reasonable and fair valuation. You will be liable for any loss in the account as a result of any such liquidation. Definitions of liquidation price calculations can be found within the individual instrument areas in Section 2 of this Dealing Guide. Once the stop-out level has been triggered, you will not be allowed to trade on your account until the Equity Balance is restored to the required Initial Margin level. Margin calls can be made at any time during the day and alternative payment arrangements must be made if you cannot be contacted or if you are travelling. Please refer to our Terms of Business, which addresses the non-payment of margin calls and change in margin requirements. 7.7 Trading Profits / Losses Profits made on your trading activities increase the Equity Balance on your account. Any surplus equity may be withdrawn from your account, on request. Losses made 12

13 8 PAYMENTS on your trading activities decrease the Equity Balance on your account, and therefore the margin available for trading or holding positions. 8.1 Depositing Funds Clients may deposit funds through approved Credit Card and approved Debit Card payment, Funds Transfer, Telex Transfer or by cheque. All funds must be cleared funds on your account before they are made available for your equity balance. Please ensure that any cheque or transfer that you effect is made from a bank account in your name and not from that of another party. Any remittances from third party accounts may be returned in certain circumstances and we would advise you to contact the Help Desk before remitting funds if you are considering this. 8.2 Withdrawing Funds Funds may normally be withdrawn from your account at any time, by giving 24 hours notice, provided however that they are not being utilised for Margin purposes (please refer to clause 12 of the Terms of Business). CMC Group Plc will not transfer funds to a bank account other than that of the account holder(s). 8.3 Interest on Equity Balances Interest will be paid on equity balances above the interest qualification level after all respective margins have been deducted at such rates as CMC Group Plc may determine from time to time. The rate of interest receivable is available from CMC Group Plc on request. 9. ADMINISTRATION 9.1 General Every day, provided you have dealt or have an open position, we shall send you a daily confirmation of your trading and positions. The confirmation is made up of four main sections: 1. Forex Trade Confirmations 2. Forex Position Summary 3. Ledger Activity 4. Forex Margin Requirements 5. Equity Summary At the end of each month, we shall send you your monthly statement detailing all of the above plus: 1. Forex Trade Confirmations 2. Open FX Positions 3. Ledger Activity 4. Ledger Reval 5. Equity Summary Please Note: It is very important that you check all the contents in detail and contact us immediately if you disagree with any of its contents. Also if you view your statements online, at the bottom you will see a link that opens a statement Explanied web page, which you may find very useful. 9.2 Forex Trade confirmation 13

14 This section of the statement confirms all of the trades transacted within the business day. Deal Time: This is the time in GMT that the trade was executed on your account. Trade ID: This is the unique trade identification number generated by Marketmaker for every executed trade. Order ID: This is the unique trade identification number generated by Marketmaker. This is a very important number, which you should quote whenever you wish to query a particular trade. Value Date: A spot forex position will always have a value date of two working days ahead of the transaction date. Ccy: This column displays the instrument that was traded. You Bought (Sold): This amount of the instument that you bought or sold. All sold positions will be shown in brackets ( ). Exchange Rate: This is the rate that the trade was executed at. 9.3 Forex Position Summary This section displays the Forex positions rolled over from one business day to the next and also the profit and loss from all Forex positions on your account. B/Fwd: This is the amount of a currency brought into the rollover. Rollover: This shows the rate at which the spot position was rolled into the next business day. After trading: This shows the overall net position of the trades throughout the day, with the average price and the total valuation of the contracts. Mark to Market: Open positions will be marked to market on an ongoing basis for the purpose of calculating your margin requirement using the mid price of the CMC group PLC price, quoted for the relevant instruments at that time. >Net Profit: This shows the profit and loss of the position in a given instrument for that business day, in forex positions this will always be re-valued into USD. Margin: This shows the margin required to hold the position. Rollover Profit: This shows the profit or loss on your account from rolling the position from one day to the next. A loss will always be shown in brackets. Trading Profit: Traded profit shows the profit and loss earnt on your positions during the trading day. A loss will always be shown in brackets. 9.4 Ledger Activity This section shows all adjustments to the balance of your account, for example, credits and debits to your account including payments. In addition to this different currency balances that you have on your account are displayed in this area. B/Fwd: This is the amount of a given currency carried forward from the previous trading day. Total Mark to Market: This is the profit and loss in each currency on the business day that has been credited or debited to your ledger balances. Please note that if you open a trade denominated in a currency that is different from your reporting currency, you will open a different ledger balance in this currency as well. CFwd: This is the total which will be carried forward into the next trading day after the rollover rate has been enforced. Margin: This shows the margin required to hold the position. 9.5 Forex Margin Requirements This section displays the margin required to hold open FX positions. The Grand Total is the cumulative margin required for all open FX positions (in your base currency). 9.6 Ledger Reval This section displays the balance of the currency s that you hold and the rate that it uses to covert back to your base currency. Balance: Of the currencies that you may have on your account. Rate: The rate used to give you your bas currency equivalent. 14

15 Base currency Equiv: This figure represents the equity balance on the account in your reporting currency. 9.7 Equity Summary This section shows the Total Equity in the account displayed in your reporting currency as well as the Free Margin that you have on your account available to open further positions. Total Cash: This shows the equity you would have in the statemented day should all of your positions have been closed. Open Equity: This should always read zero and is purely for CMC administration. Total Equity: This figure represents the equity on the account in your reporting currency should all positions be closed. Total Margin Required: This is the amount of Margin required to sustain your open positions. Total Free Equity: This is the Total Equity less the margin required to hold your open positions, therefore this is the amount that you have available to open new positions. Please Note: It is very important that you are aware of your daily equity balance, your margin requirement for your open position(s), and any free equity available. This report will provide you with your margin position, and will indicate to you whether you are approaching your maximum facility (Initial Margin) level, or your margin requirement level. It will also highlight excess funds available that you may either utilise to increase your open positions or withdraw some of your funds. 9.8 Delivery of Statements and Confirmations On-line Users Clients who use the on-line / Internet trading system have direct electronic delivery and/or access to their; Orders for trading day Trades for trading day Positions Deal confirmations Statements Services CMC Group Plc will send all communications, including contract confirmations, daily and monthly statements, margin call etc. in electronic form to all on-line customers. Please Note: You must ensure that you notify CMC promptly of any changes to the contact details that you initially provide which affect your , telephone number or address. Our primary point of contact with clients is via . As stated in our Terms of Business, it is your responsibility to ensure that CMC has your correct address at all times. Failures of delivery, by , due to poor quality service providers may result in you not receiving important notifications or information, which require remedial action to be taken by you. 15

16 APPENDIX A - FREQUENTLY ASKED QUESTIONS Q. How do I open an account with CMC Group Plc? A. All you need to do is complete an application form and an Intermediate Customer Notice form, either online or in hard copy format, the original being required to be signed and sent to us. In order to open your account you will need to deposit an initial 2,000 or equivalent and we shall then send you your logon details and account number. At the present time CMC Group Plc does not allow its customers to open a credit account nor does it offer any type of credit facility. Q. Can CMC Group Plc give me trading advice? A. No. CMC Group Plc will not offer trading advice to its clients. Clients are responsible for all their own trading decisions and positions. Q. Does CMC Group Plc charge commission? A. No. Furthermore with CMC Group Plc there are no additional charges added to your dealing spread when you open a trade. Q. If I open a position can I roll this position over for another day? A. Yes, in fact this is done automatically for you with CMC Group Plc. The cost of rolling over your position is cheaper than closing the original position and opening another at a spread. Q. How can I view my open positions and statement of account balance? A. CMC Group Plc will clients their daily statement. Alternatively all open positions can be viewed from our award-winning MarketMaker R software. Clients also have direct telephone access to our Helpdesk. Q. What is the minimum amount I can trade on each instrument in each financial market? A. Minimum stake to open a Foreign Exchange position is $10,000 or equivalent. Q. What are the advantages of trading Foreign Exchange with CMC? A. The advantages of trading FX with CMC include the ability to go long and short, the ability to place long and short term trades, fast execution, no commissions, leverage and tight spreads. CMC Group Plc provides extremely tight spreads, the ability to roll forex positions at very competitive rates. The service is open 24 hours a day, offering dealing in a range of currencys. This is coupled with our award-winning MarketMaker TM software providing instant execution, on-line BackOffice, news and technical analysis. Q. How are the margin requirements calculated? A. Simply multiply the rate by the amount of your stake. Multiply this by the initial margin (1%) and this is the amount of margin required to hold your position. Q. What is the difference between a deposit requirement and a margin requirement? A. A deposit requirement and a margin requirement is essentially the same thing the amount of equity you need to open or hold a position. Q. Will CMC Group Plc contact me for margin calls? A. CMC Group Plc will endeavor to contact its clients by for more margin when the need arises, however, it is always the responsibility of the client to make sure they have enough free equity to hold their open positions. Should a clients position prove untenable then liquidation or stop loss orders may be placed on the account to close positions automatically. Q. What markets can I trade on? A. CMC Group Plc provides trades on a huge variety of currencys. A full list of all the these can be found in Section 2 of this Trading Guide. 16

17 Q. Does CMC Group Plc execute my deals in the market? A. CMC Group Plc is a market maker and is the counterpart to your deals, we may not immediately execute all deals into the market since it is more practical and effective to control the position as a whole. Q. Where do CMC Group Plc get their prices from? A. CMC Group Plc has dealing relationships with several major global banks and access to electronic dealing systems providing us with constant real-time Interbank prices in all traded currencies. Q. Can CMC Group dealers advise me on positions? A. CMC Group Plc will only accept execution only business and as such we shall not advise or exercise any judgement on your behalf, nor can you request any such advice or judgement as to the suitability of trades. Q. Can I view my position on line? A. Yes, MarketMaker R allows client access through its Back Office facility. Q. Can I retrieve my Statement on-line? A. Yes, using the MarketMaker R software it is possible to access all orders and trades on the system, as well as positions, and statements. Other questions may be directed in the first instance to either our Sales team for account opening information, or our Backoffice Department for all other queries. Q. Do I need to cancel stop and limit orders after I close out of my positions? A. Yes, if you have closed out your positions and do not wish to enter into any new ones by the means of stop or limit entry orders it is your responsibility, the client, to make sure all pending orders are cancelled. 17

18 + APPENDIX B - CONTACT US Registered Office: 66 Prescot Street London E1 8HG England Registered in England Telephone Numbers CMC Group Plc CFD Dealing Line FX Dealing Line Sales Help desk Fax Numbers Fax General Number Addresses Information Help Desk info@cmcplc.com helpdesk@cmcplc.com 18

19 TRADING GUIDE SECTION 2 19

20 SECTION 2: INSTRUMENT TABLES AND RATES 1. FOREIGN EXCHANGE CMC Group Plc provides access for clients wishing to place trades in a range of Foreign Exchange rates through one common service. Trades are available on a range of spot and cross currencies, as well as Gold and Silver. All trades are placed on the basis of a minimum $10,000 Buy (long) or Sell (short), regardless of the underlying currency the bet is placed on. 1.1 Trading Hours CMC Group Plc will accept tardes on all currencies offered on a 24-hour continuous basis during normal market hours for currency trading. Therefore trades can be placed from 22:00 hours Sunday night, through to 21:00 hours Friday night London time. CMC Group Plc may reserve the right not to quote any instrument even if the underlying market is deemed to be open. Please Note: Trading hours may vary due to the implementation of daylight savings time throughout the world. 1.2 Placing a Forex Trade When trading on a currency, the client places a $10,000 trade on the per pip movement of the of currency rate. Subject always to the available balance or credit limit on your account, there is currently no maximum trade amount. CMC Group Plc displays all currency quotes as normally displayed and quoted in the Forex market, including decimal points. Therefore our GBP/USD rate will be shown /14, where the Selling price is , and the Buying price is The pip movement relates to the very last figure of the displayed quote, in this case 0 for the Sell rate and 4 for the Buy rate. 1.3 Initial Margin Forex positions are margined on at 1%. 1.4 Expiry, Rollover and Settlement Spot FX positions expire at the end of each trading day, but are rolled into the next trading day. Forward FX and Option positions expire as per the terms agreed at the time of the trade. 1.5 Pricing CMC Group Plc generates its own rates by taking into account the rate of the underlying currency, market condition, liquidity of the currency, the size of any one trade, and the term of the trade. 1.6 Mark to Market Your open positions will be marked to market on an ongoing basis for the purpose of calculating your Margin Requirement, using the mid-price of the CMC Group Plc rates quoted for the relevant currencys at that time. 1.7 Liquidations All liquidations on Forex (i.e. where we exercise our rights to close a position) can be executed at the then current CMC Group Plc price. All rates are based on the current inter-bank market rates taking into consideration the size of the position 20

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