PRODUCT DISCLOSURE STATEMENT Spot Forex, FX Options and CFDs

Transcription

1 GAIN Capital FOREX.com Australia Pty Ltd ACN Level 1, 62 Pitt Street, Sydney, NSW 2000 PRODUCT DISCLOSURE STATEMENT Spot Forex, FX Options and CFDs AUSTRALIAN FINANCIAL SERVICES LICENCE NO: ISSUE DATE: August 2014 GENERAL INFORMATION This Product Disclosure Statement is dated August 2014 was prepared by GAIN Capital FOREX.com Australia Pty Limited ( FOREX.com ) (ACN ). FOREX.com is the registered trading name of GAIN Capital FOREX.com Australia Pty Limited which is an Australian incorporated company founded in 2009 and is a wholly owned subsidiary of GAIN Capital Forex.com Holdings International, B.V.; and is part of the GAIN Capital Holding, Inc family of companies ( GAIN Capital ). FOREX.com holds an Australian Financial Services License ( AFSL ) [Number ] and is authorised to provide financial product advice, dealing and market making services in relation to derivatives and foreign exchange contracts to retail and wholesale clients. You can contact us by the following means: Address: Level 1 62 Pitt Street Sydney, NSW 2000 Australia Telephone: Australia: International: +61 (0) Fax: contact: Website: auinfo@forex.com Page 1

2 TABLE OF CONTENTS 1. IMPORTANT INFORMATION INTRODUCTION TO FOREX.COM HOW TO START TRADING CLIENT QUALIFICATION POLICY MARGIN DISPUTE RESOLUTION NO COOLING OFF PERIOD PRIVACY ANTI-MONEY LAUNDERING AND COUNTER-TERRORISM FINANCING TAX CONSIDERATIONS FEES AND COSTS PAYABLE FOR TRADING WITH FOREX.COM TRADING ELECTRONICALLY OR BY TELEPHONE TRADING HOURS COUNTERPARTY RISK CLIENT MONIES PAYMENT TO FOREX.COM ORDER TYPES SIGNIFICANT RISKS KEY BENEFITS OF SPOT FOREX & FX OPTIONS NET BASED AND POSITION BASED SPOT FOREX TRADING WORKED EXAMPLES SPOT FOREX AND FX OPTIONS KEY BENEFITS OF CONTRACTS FOR DIFFERENCE WORKED EXAMPLES FOR CFDs GLOSSARY OF TERMS Page 2

3 PDS SUMMARY This summary outlines some key questions that are answered in this PDS. However, you should ensure that you read and understand this PDS in its entirety before investing in the Spot Forex, FX Options and CFDs that we offer. Issue Summary For more information, see: Who is the issuer of this PDS? The PDS issuer is GAIN Capital FOREX.com Australia Pty Limited ( FOREX.com ) (ACN ). FOREX.com is the registered trading name of GAIN Capital FOREX.com Australia Pty Limited which is an Australian incorporated company founded in 2009 and is a wholly owned subsidiary of GAIN Capital Forex.com Holdings International, B.V.; and is part of the GAIN Capital Holding, Inc family of companies ( GAIN Capital ). FOREX.com holds an AFSL [Number ] and is authorised to provide financial product advice, dealing and market making services in relation to derivatives and foreign exchange contracts to retail and wholesale clients. Section 2 of the PDS. What is a Spot Forex? Spot Forex is essentially a contract under which the parties agree to exchange, on the expiration of the contract, the cash difference between the Opening Price and the Closing Price of an Underlying Asset, in this case Currency. Like other Derivatives, Spot Forex allow investors to participate in the returns from movements in an Underlying Asset, without the need to own it. The Spot Forex FOREX.com currently provides are Net Based Forex, Position Based Forex, FX Options and Forex Forwards. Section 19 of the PDS. What is an FX Option? An FX Option is a type of Spot Forex that gives the Option buyer the right to buy or to sell a predetermined amount of a particular Currency against another Currency at a predetermined price (rate). Section 19 of the PDS. What is a CFD? A contract for difference (CFD) is a contract with FOREX.com to exchange, on the maturity or termination of the contract, the difference between the opening and closing values of an Underlying Asset, multiplied by the number of CFDs in the contract. CFDs can be contracts with an individual equity, Stock Index, bond, interest rate, commodity or foreign currency pair as the Underlying Asset. Section 22 of the PDS. What are the costs involved with Spot Forex, FX Options and CFDs? How are Spot Forex, FX Options and CFDs priced? The costs involved in trading with FOREX.com will vary depending upon the type of account opened and product traded in. FOREX.com operates a market maker model which means FOREX.com determines the buy and sell prices of the Spot Forex, FX Options, and CFDs that it offers. There are a number of factors that will affect the prices FOREX.com determines. For example, prices of Spot Forex, FX Options and CFDs can substantially increase or decrease without notice (volatility risk) as a result of factors such as changes in interest rates, supply and demand relationships and foreign Exchange Rates. Another example of a factor which FOREX.com considers in determining the prices for Spot Forex, FX Options and CFDs is the risk of illiquidity. Section 11 of the PDS. Section 11 of the PDS. What are the risks involved in trading Spot Forex, FX Options and CFDs? What are the benefits involved in trading Spot Forex, FX Options and CFDs with FOREX.com? As with all leveraged investments, trading in Spot Forex, FX Options and CFDs can be risky and is not suitable for everyone. There are a number of types of risk that you should be aware of before beginning to trade, including the possibility of losing more money than you invest. Some of the benefits involved in trading in Spot Forex, FX Options and CFDs include: the capacity to take Long or Short Positions in most markets; the ability to Leverage; the ability hedge market Exposure; and Section 18 of the PDS. Section 19 and 22 of the PDS. Page 3

4 the ability to trade in smaller increments and in markets otherwise not available to the traditional investor. What are Long and Short positions? An investor will take a "Long Position" where they buy something, normally with the expectation that it will increase in value, and will take a "Short Position" where they sell something, normally with the expectation that it will decrease in value. In the case of Options if you take a "Long Position" on a Call you will want the price of the underlying to rise, but if you take a "Long Position" on a Put you will want the price of the underlying to fall. Similarly, if you take a "Short Position" on a Call you will want the price of the underlying to fall, but if take a "Short Position" on a Put you will want the price of the underlying to rise. Glossary, Section 24 (pg. 33) What is Margin? Margin, also referred to as Initial Margin, is the amount of money that must be maintained as your Account Balance to ensure that you have enough money to cover against losses on all of your open contracts at any one time. You must maintain at least 26% Risk Level on your account at all times when holding Open Positions. (Risk Level = (Total Equity divided by Margin Requirement) multiplied by 100), Section 5 of the PDS. What is a Variation Margin Call? A Variation Margin Call is a claim by FOREX.com for additional good faith performance monies usually issued when your Account suffers adverse price movements. After opening a Spot Forex, FX Option or CFD position, if the market goes against you and the Risk Level of your Account reaches 25% or less, (Risk Level = (Total Equity divided by Margin Requirement) multiplied by 100), your position will be automatically closed out. Section 5 of the PDS. How do I open an Account with FOREX.com? Prior to opening an Account with FOREX.com, you should ensure that you have read this PDS, our Financial Services Guide (FSG), Client Agreement, and the Market Information Sheets, and understand the products offered through this PDS. After doing so, if you are satisfied that trading in these products is appropriate for you, you may open an Account by completing the application form available via our website Section 3 of the PDS. Page 4

5 ASIC RG 227 BENCHMARK SUMMARY ASIC Regulatory Guide 227 requires Margin FX and CFD issuers to publish certain information addressing a range of disclosure benchmarks. FOREX.com s compliance with each benchmark is addressed in the following table: Benchmark description How does FOREX.com meet this benchmark? Relevant sections of the PDS which provide further relevant information Benchmark 1: Client qualification - requires an issuer to maintain and apply a written client qualification policy that sets out minimum qualifications criteria investors need to demonstrate and outlines the process in place to ensure that investors who do not meet the minimum qualification criteria are not able to open an account/ trade. FOREX.com maintains and applies a written policy which sets out the minimum qualification criteria that prospective retail investors will need to demonstrate before we will open an Account for you. FOREX.com also maintains a written policy/procedure to ensure such criteria are properly applied, and unsuitable investors are not accepted. We also maintain records of our assessments. Section 4 Please note that we do not provide personal advice regarding the suitability of trading in our products for your personal financial circumstances, needs and objectives. However, FOREX.com does not accept retail investors unless they are able to satisfactorily answer a questionnaire in our Account application form which addresses the following criteria: - Previous trading experience in Spot Forex, FX Options and CFDs; - Understanding of leverage, margins and volatility; - Understanding of the key benefits of the product; - Understanding the trading process and relevant technology; - Ability to monitor and manage the risks of trading; - Understanding that only risk capital should be traded. If you pass the questionnaire, then you will be deemed qualified to trade through us. If a pass grade is not achieved, they you will not be deemed qualified to trade. Benchmark 2: Opening collateral - requires an issuer to only accept cash/cash equivalents from investors as opening collateral. Please note that an Account may only be opened with cleared funds (eg: a cash transfer from your bank account or with a credit card). No other financial products will be accepted as collateral to fund an Account, although we may accept such as collateral to meet subsequent Margin Calls in special agreed circumstances. Whilst the RG227 benchmark recommends that no more than $1,000 be accepted by credit card as opening collateral on a new Account, please note that FOREX.com do not always comply with this restriction, as we have a global process in place to address the suitability of credit card deposits as opening collateral. We utilise a tiered range of internal limits established with our payment processor, based on an individual client s annual income, and accordingly may accept between $1,000-25,000 as an initial deposit on credit card, depending on the size of your annual income. FOREX.com does not encourage the use of leverage products with borrowed funds and do not accept cash equivalents as opening collateral. Section 16 Page 5

6 Benchmark description How does FOREX.com meet this benchmark? Relevant sections of the PDS which provide further relevant information Benchmark 3: Counterparty risk Hedging - requires an issuer to maintain and apply a policy to manage its exposure to market risk from client positions, which includes the factors it takes into account when determining if hedging counterparties are of sufficient financial standing and sets out the names of hedging counterparties as they stand from time to time. FOREX.com maintains and applies a written policy to manage our exposure to market risk from client positions. This includes strict risk management controls to monitor and manage (hedge) our trading exposures on an intraday basis, and includes a process for assessing our hedging counterparties (to ensure they are of sufficient financial standing, are licensed by a comparable regulator, and are of sound reputation). Sections 14 and 18 A summary of our policy, which notes our current approved hedging counterparties, is available on our website (and may be updated from time to time as counterparties change). FOREX.com ensures all hedging counterparties meet the following criteria: must have a good reputation and be a leader in the industry; must have a detailed understanding of the foreign exchange business; must have financial resources sufficient to offer the requisite margin and leveraging supports; must have sufficient front and back office systems; must be regulated by the relevant authority in the countries that it operates. Benchmark 4: Counterparty risk Capital - requires an issuer to maintain and apply a written policy addressing how the issuer monitors its compliance with AFSL financial requirements and how the issuer conducts stress testing to ensure it holds sufficient liquid funds to withstand significant adverse market movements. This is to minimise the risk that an issuer holds insufficient capital to address its exposure to risk and ensure that the issuer has sufficient resources to meet its liabilities without needing to have recourse to client monies. Benchmark 5: Client money - maintain and apply a policy on its use of client money, including whether it relies on funds deposited by one investor to meet the margin or settlement requirements of another. FOREX.com maintains and applies a written policy to ensure the ongoing maintenance of adequate financial resources. We further maintain a detailed risk register, in which the key risks of our business are addressed and reviewed. Part of this process involves considering the effect of various scenarios on liquidity and credit risk of a severe market rise or a severe market fall to determine the stress that FOREX.com can withstand. Please note that we have a designated compliance officer who monitors our compliance with our AFSL conditions and ASIC RG 166 (financial) obligations, as well as review and input from our independent external legal and accounting advisers. Further, our external independent auditor conducts an audit at the conclusion of every financial year, a copy of which can be provided to you upon written request. We can provide recent information regarding our paid-up capital, assets and liabilities. Please note we do not undertake stress testing in relation to unhedged market exposures, as we fully hedge all transactions with clients, with our parent company who fully hedges transactions with reputable licensed third party financial services providers. FOREX.com maintains and applies a clear policy with regard to the use of client money and does not use client money for hedging with counterparties. Please note that money you deposit into your Account is co-mingled with other client money in our client trust account. Such monies are only applied in line with the Corporations Act requirement.. Sections 14 and 18 Sections 15 Page 6

7 Benchmark description How does FOREX.com meet this benchmark? Relevant sections of the PDS which provide further relevant information Benchmark 6: Halted or suspended underlying assets - when trading on the underlying asset is halted or otherwise suspended, requires that the issuer should not allow new CFD positions to be opened. Benchmark 7: Variation Margin Calls - requires issuer to have written policy about its variation margining practices, including details on how the issuer will monitor client accounts, what rights the issuer may exercise in relation to client accounts, when the issuer will exercise these rights and what factors it will take into account in deciding whether to exercise these rights. This benchmark also requires issuers to take reasonable steps to notify investors before closing out positions. An underlying financial product may be placed in a trading halt on the relevant exchange in various circumstances. Additionally, it may be suspended or delisted in certain circumstances. FOREX.com may, in its absolute discretion, cancel your order in respect of a transaction which has not yet been opened, or close any open transaction, where the Underlying Asset is the subject of a trading halt, suspension or delisting. When you place an Order for a transaction with us, it is likely that we will place a corresponding order to purchase or sell the relevant product to hedge our market risk. FOREX.com has the discretion as to when and if it will accept an order. Without limiting this discretion, it is likely that we will elect not to accept an Order in circumstances where our corresponding order cannot be filled. Accordingly, FOREX.com may at any time determine, in our absolute discretion, that we will not permit the entry into transactions over one or more underlying financial products. FOREX.com maintains and applies a written policy detailing our margining practices. This details how we monitor client accounts to ensure you receive as much notice as possible regarding Margin Calls, our rights regarding the levying of Margin Calls and closing out of positions when such calls are not met in a timely manner, and what factors we consider when exercising such Close- Out rights. All open positions are monitored on a real-time basis intraday, to ensure changing Margin requirements are identified in a timely manner. FOREX.com seek to provide you with timely and sufficient notice of Margin Calls, to facilitate your ability to meet them. However, please note that certain market conditions or events may trigger extreme volatility, requiring urgent funds to be applied to retain your open positions. Please note that all Margin Calls will be communicated to you via and it is your obligation to ensure you are always available to receive and action such Margin Calls when you have Open Positions with us. However, we reserve our full rights to immediately Close Out positions in relation to which Margin Calls have not been met, in order to protect against exposure to further losses in the Open Positions. We reiterate that trading in our products carries a high level of risk and returns are volatile. The risk of loss in trading can be substantial, and you can incur losses in excess of the capital you have invested. Accordingly, you should only trade with risk capital i.e. money you can afford to lose, and which is excess to your financial needs/obligations. Section 18 Section 5 and 18 Page 7

8 1. IMPORTANT INFORMATION Disclaimer We are required to provide you with a Product Disclosure Statement ( PDS ) under the Corporations Act This Product Disclosure Statement has been prepared and issued, by GAIN Capital FOREX.COM Australia Pty Ltd ACN AFSL ( FOREX.com, we, our or us ). Please note that the information contained in this PDS does not constitute a recommendation, advice or opinion and does not take into account your individual objectives, financial situation, needs or circumstances. This is an important document and should be read in its entirety. Before entering into a Spot Forex, FX Options, and CFDs transaction, you should obtain independent advice to ensure this is appropriate for your particular financial objectives, needs and circumstances. To the extent permitted by law, neither FOREX.com nor its affiliates accepts any responsibility for errors or misstatements, negligent or otherwise, nor for any direct, indirect, consequential or other loss arising from any use of these documents and or/further communication in relation to them. We recommend that you also obtain independent taxation and accounting advice in relation to the impact of gains and losses on your particular financial situation. The taxation consequences of Spot Forex, FX Options, or CFDs transactions can be complex and will differ for each individual s financial circumstances, and your tax adviser should be consulted prior to entering into a Spot Forex, FX Options, or CFDs transaction. FOREX.com does not guarantee the investment performance of Spot Forex, FX Options, or CFDs products nor the investment performance of the underlying markets or instruments. Past performance is no indication or guarantee of future performance. Applications The PDS and Financial Services Guide ( FSG ) are subject to the Client Agreement. You must carefully read the PDS, FSG, and the Client Agreement. A copy of the Client Agreement, which sets out the basis of our ongoing relationship with you including the basis upon which transactions will take place and the obligations of both FOREX.com and the client, can be downloaded from our website: You must confirm via the online application that you have read the PDS and FSG and that you accept the terms and conditions set out in the Client Agreement before you can trade with us and enter into transactions. These documents contain important information about the financial services and products we offer, including information about the associated risks and costs and details of other fees and charges which may apply. Currency of PDS All clients shall be bound by the contents of this PDS. The information in the PDS and FSG is current as at August 2014 and may be updated from time to time where that information is not materially adverse to clients. Updated information shall be provided on our website FOREX.com may issue a supplementary or replacement PDS and FSG as a result of certain changes, which shall be available on our website or shall be distributed in electronic form as required.. If you ask us, we will send you a paper copy of the information. Restrictions of the Distribution of Documentation The offer to which the PDS and FSG relates is available only to persons receiving the PDS and FSG in Australia or New Zealand. This PDS does not constitute an offer or invitation in any place outside Australia or New Zealand where or to any person to whom it would be unlawful to make such an offer or invitation. The distribution of this PDS (electronically or otherwise) in any jurisdiction outside Australia may be restricted by law and persons who come into possession of this PDS should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable law. If you received the PDS and FSG electronically, you should ensure that you download and read the entire PDS and FSG. We can provide a paper copy free of charge upon request. For information regarding our full range of products and services, please read our FSG and visit our website. If you have any queries regarding this PDS & FSG, please contact FOREX.com. Warning Spot Forex, FX Options, and CFD products are considered speculative products which are highly leveraged and carry significantly greater risks than non-geared investments, such as shares. Potential investors and traders should be experienced in foreign exchange contracts and derivative products or understand and accept the risks of investing in OTC contracts. You should not invest in Spot Forex, FX Options, or CFDs products unless you properly understand the nature of Spot Forex, FX Options, or CFDs products, and are comfortable with the attendant risks. You should obtain financial, legal, taxation and other professional advice prior to entering into a Spot Forex, FX Options, or CFDs transaction to ensure this is appropriate for your objectives, needs and circumstances. Potential investors and traders should be experienced in foreign exchange contracts and derivative products or understand and accept the risks of investing in OTC contracts. Page 8

9 2. INTRODUCTION TO FOREX.COM The issuer of this product is GAIN Capital FOREX.COM Australia Pty Ltd ACN AFSL FOREX.com holds an AFSL Number and is authorised to provide financial product advice, deal and make a market in derivatives and foreign exchange contracts to retail and wholesale clients. Under its AFSL, FOREX.com is authorised to give you general financial product advice. FOREX.com will not give you personal financial product advice. Personal financial product advice is advice that takes into account your personal financial objectives, situation and needs. No part of this PDS constitutes a recommendation or opinion that takes into account your financial objectives, situation or needs in providing information in relation to the products detailed in this PDS. No persons have been authorised by FOREX.com (other than its employees and/or authorised representatives) to give any information or to make any representations not contained in this document and, if given or made, such information or representations may not be relied upon in making a decision to use FOREX.com's facilities or to trade in its financial products. Neither the contents of this document nor any prior or subsequent communications from FOREX.com or any of its officers, agents, representatives and/or directors, should be construed as constituting personal financial, legal, tax or any other advice. While FOREX.com believes the advice and information we provide is accurate and reliable, neither FOREX.com nor its directors, officers, employees, contractors or associates assume any responsibility for the accuracy and completeness or currency of that advice and information. Prospective investors should consult an independent adviser as to financial, legal, tax and/or other related consequences of investing in the products offered pursuant to this PDS. Warning The investments detailed in this PDS involve a high degree of risk and the risk of loss in trading such products can be substantial. You should carefully review this document and make any necessary inquiries prior to investing. If you do not fully understand the products being offered under this PDS you should not trade in these products. In considering whether to invest, you should also take into account that a high degree of Leverage is often associated with trading the products offered pursuant to this PDS. This means that you are able to outlay a relatively small amount of Capital to secure an Exposure to the Underlying Asset. While the use of Leverage can be advantageous, it may also expose you to substantial financial losses. Accordingly, you should carefully consider your financial objectives, situation and needs and whether such investments are suitable for you in light of your financial ability to take such risk. You should also consider the risks involved in trading in light of your age, experience, financial objectives and resources, dependence upon liquid assets, and other relevant circumstances. FOREX.com does not provide personal advice. Any advice FOREX.com may provide to you is general advice only. FOREX.com does not take into consideration your personal financial objectives, situations or needs. You should consult your professional advisers before considering trading in any of the products offered under this PDS. FOREX.com does not guarantee that you will receive any return on your investments or that you will not lose some, all or additional sums of your capital. FOREX.com considers that all funds used for, and added to, your Account for Spot Forex, FX Options or CFD trading, should derive from capital that has been set aside strictly for speculative investment purposes. All such funds used for speculative investing should be considered as disposable income by you and any loss of this money should not affect your lifestyle. Monetary amounts All monetary amounts expressed in this PDS are, unless specifically expressed to the contrary, in USD. For the purposes of calculating your Account Balance, and all other relevant matters, we will convert any relevant currencies into your Base Currency. Any calculation affecting your Account will be made in your Base Currency. All amounts payable to us must be made in your Base Currency or may be subject to a conversion charge as discussed in Section 11 below. Fee Schedule A Fee Schedule is listed in Section 11 of this PDS. The information regarding the Market Information Sheets attached as Annexure A to this PDS provides a summary of the financial markets which form the basis for the Underlying Asset or Instrument upon which the financial products offered in this PDS are based. The Fee Schedule and Market Information Sheets attached to this PDS are accurate as of the date of this PDS. The information in the Fee Schedule and the Market Information Sheets are subject to change from time to time. Governing law By entering into the Terms, you agree that all contracts and transactions and any dispute directly or indirectly related to that agreement, the trading (including Orders) of financial products offered by FOREX.com will be governed and construed in accordance with the laws of Australia. For Australian Page 9

10 investors, FOREX.com's dispute resolution procedure is set out in Section 6 of this PDS. The Offer made in this PDS is only available to persons receiving it (electronically or otherwise) in Australia. Should you receive any part of this PDS outside Australia it does not constitute an Offer or Invitation in relation to trading contracts in any place which, or to any person to whom, it would not be lawful to make such an Offer or Invitation. Distribution of any part of this PDS in jurisdictions outside Australia may be restricted by law. Persons outside Australia in possession of any part of this PDS should seek further advice as it may be unlawful for such persons to participate in the Offer which is the subject of this PDS. FOREX.com reserves the right to reject investors whom it considers cannot participate in the Offer the subject of this PDS or that it may be unlawful for it to accept this investor. Phone Calls All calls may be recorded for training, regulatory and customer service reasons. 3. HOW TO START TRADING Opening an account To start trading Spot Forex, FX Options or CFDs with FOREX.com, you must first open one or more Accounts with FOREX.com. To open an Account with FOREX.com, you must complete the application form on-line or submit the completed PDF version of the application which can be found on FOREX.com s website By completing and submitting the application form you will also have agreed to be bound by the Terms. You will only have an Account once FOREX.com accepts your application form. However FOREX.com, in its absolute discretion and acting reasonably, may determine whether to accept or reject your application form. If we accept your application, and where permitted, we will generally allocate you a default account, that will not operate on a First In First Out (FIFO) basis, and will enable you to place attached orders. You can open an Account individually or as joint account holders. Where there are Joint Account Holders: Each Joint Holder is jointly and severally liable for the Account; With the exception of funds withdrawals which will require confirmation from each Joint Holder, FOREX.com may act upon instructions received from a Joint Holder or any person who is authorised to provide instructions to FOREX.com by a Joint Holder and in doing so, it is deemed that such instructions have been provided to or given by all the Joint Holders; and Any notice or other communication provided by FOREX.com to a Joint Holder, or person authorised to receive such instructions on behalf of, or as if they were a Joint Holder, will be deemed to have been given to all Joint Holders. FOREX.com will purchase and sell Spot Forex, FX Options and CFD Contracts at your request in accordance with oral or instructions received from you or your designated agents via the Online Platform and pursuant to the Terms. FOREX.com will employ, at its reasonable discretion, any counterparty including, but not limited to, itself as your agent in connection with the execution, carrying, clearance, delivery and settlement of any purchase or sale of Foreign Exchange Contracts entered into on your account. Opening a Contract Prior to the execution of a CFD, Spot Forex, or FX Option, you must deposit and maintain with FOREX.com the amount of Margin required by FOREX.com during the period that the contract is outstanding. Margin requirements may be changed from time to time. Further, a change may occur during the existence of an ongoing trade. Yet, notwithstanding any action you may take to correct a Margin deficiency, FOREX.com may take any trading action concerning the Account it deems necessary to protect its interests. You are the key to your trading with FOREX.com, as you will rely solely on your own informed judgment in executing all CFDs, Spot Forex or FX Options. You are responsible for any losses which result from transactions entered into on your behalf. Profit will be made on a transaction when Buy Contracts are sold to close at a higher price than when they were originally purchased, or Sell Contracts are bought to close at a lower price than they were sold. For you to recognize a gain from a profitable transaction, the profits from the transaction must exceed the costs of fees and other charges payable by you for the execution of the trades. Please refer to Sections 21 and 23 for worked examples of Spot Forex, FX Options and CFD trading. Losses will be incurred on a transaction where Buy Contracts are sold to close at a lower price than when they were originally purchased, or Sell Contracts are bought to close at a higher price than they were sold. You must cover all losses incurred on transactions which may include, but may not be limited to, any Variation Margin Calls, the asset value of your Account, or any combination of these. FX Option Expiration & Exercise/Assignment FX Options traded with FOREX.com may settle in cash or the Underlying Instrument. Spot settled Page 10

11 Options that expire in the money will be exercised automatically and result in a spot position that is subject to the risks and Margin associated with spot currency positions. 4. CLIENT QUALIFICATION POLICY Forex Contracts, Forex Options and CFDs are considered high-risk financial products and are not suitable for all investors because of the significant risks involved. These products are subject to a mandatory client qualification assessment required by ASIC. FOREX.com meets its obligation to ensure that clients have the necessary experience and knowledge in order to understand the risks involved in relation to its Forex Contracts, Forex Options and CFDs through the information you supply in the application form and by requiring prospective customers to complete an Appropriateness Assessment. Each prospective client must answer the questionnaire, which includes questions on trading experience and educational and professional qualifications and the financial information questions, included in the application. If after review of the questionnaire, OTC derivative trading is not deemed wholly appropriate for the prospective client by FOREX.com but upon review of the Financial Information questions, FOREX.com deems OTC derivative trading appropriate, you may be able to open an Account that is subject to a deposit limitation. FOREX.com also reserves the right to reject certain account applicants if OTC derivative trading is not deemed wholly appropriate for a prospective client for any reason. Please note that FOREX.com will retain details of any applicant who undertakes the Investor Knowledge Assessment irrespective of how they perform in the test and whether they subsequently access FOREX.com's products or services. This information will be retained for a period of seven years. The questionnaire consists of questions from the following sections: whether you have experience in trading in Spot Forex, FX Options and CFDs, securities or other derivatives; whether you understand the terms of Spot Forex, FX Options and CFDs and how they work; whether you are aware of the high degree of risk inherent in Spot Forex, FX Options and CFDs; whether you can monitor your investments in Spot Forex, FX Options and CFDs and manage them in a volatile market; whether you have financial resources to provide more Margin or Margin Requirement, especially on little or no notice; and whether you can bear substantial losses that might arise from trading in Spot Forex, FX Options and CFDs, especially the potential for unlimited losses, a risk which is present in trading all of the above. Our assessment of Appropriateness is based on your information and any other information we ask for and you give us. You should always make your own assessment as to whether OTC derivatives such as Spot Forex, FX Options and CFDs are appropriate for you. You should carefully consider the benefits of Spot Forex, FX Options and CFDs and their significant risks before investing in them. To the extent permitted by law we do not accept liability for your choice to invest in FOREX.com's Spot Forex, FX Options and/or CFDs. In addition, FOREX.com is not authorised under its AFSL to, and will not, provide you with personal financial product advice that takes into account your objectives, financial situation and needs, so you should read all of this PDS carefully, consider your own needs and objectives for investing in Spot Forex, FX Options and/or CFDs and take independent advice as you see fit. 5. MARGIN Initial Margin Before FOREX.com executes your instructions, you must deposit the Initial Margin with FOREX.com. However the minimum deposit payable to open an Account will be taken into account in determining whether you have sufficient funds in your Account to meet the Initial Margin. Your Initial Margin Requirement is the initial amount that is required to be in your account to cover all of your open trading positions. How much is required to be in your account is based upon the IM Factor, which is determined by FOREX.com as disclosed in the Market Information Sheets. IM Factor works so that you are only required to deposit a percentage of the overall value of your trading contract position instead of having to deposit the entire value of your position if you were to purchase the Underlying Asset or trading instrument. Below is an example: XYZ shares (which is in the S&P/ ASX 100 index) is trading on the ASX between AUD4.53 to AUD4.55. The FOREX.com quote for XYZ shares is also between AUD4.53 to AUD4.55. You wish to buy 2,500 CFDs for XYZ shares. The Market Information Sheets indicates that the IM Factor for shares within the S&P/ ASX 100 index is 10%. Your Initial Margin would be based on the following: Page 11

12 [Number of CFDs] x [FOREX.com's quoted price for XYZ shares] x [IM Factor] Accordingly, the Initial Margin to be deposited with FOREX.com is AUD (being [2,500] x [AUD4.55] x [10%]). Your Initial Margin must be maintained in respect of all Open Positions. For an account to be in good margin status, the Account Balance must be higher than the prescribed Initial Margin Requirement. Your Initial Margin Requirement will fluctuate depending upon market movements of the Underlying Asset or trading instrument. Any trade that establishes a position, or increases an existing position in the relevant Market will be subject to the IM Factor applicable at that time. Should you be permitted to hold open trades that result in you simultaneously holding both long and short open trades in respect of the same relevant Market this will generally have the effect of reducing Initial Margin in respect of the open hedged trades based upon the reduced IM Factor for open hedged trades applicable at that time. Closing all or part of one side of an open hedged trade would result in the full IM Factor at that time (not the reduced IM Factor) being applicable to any remaining un-hedged open trade. There is not one single calculation that is used to determine the IM Factor you are subject to. Accordingly the IM Factor may change over time, including due to regulatory reasons, Volatility, acts of God, or any unknown factors that FOREX.com may presume in the marketplace that could negatively impact its current margin risk assessment. Variation Margin During the period your contract/s remains open with FOREX.com, you must maintain a Risk Level of at least 26%. Once your Risk Level reaches 25% or less, FOREX.com may, without further notice, Close Out all of your Open Positions (which may mean you will suffer losses and will probably owe FOREX.com some money). FOREX.com is not obliged to tell you if Variation Margin is payable nor to make a Variation Margin Call. We have no liability to you if we fail to tell you that Variation Margin is payable and/or fail to make a Variation Margin Call. Despite the above, in normal circumstances we will endeavour to notify you of the Variation Margin Call by to your registered address as soon as your account enters into Variation Margin Call in accordance with (f) below. This serves as a notice that your account has breached the minimum required level of funds and any Open Positions are at risk of being closed out. You are responsible for monitoring your own account and ensuring adequate funds are maintained at all times. We have no obligation to provide notification and this service is provided to you on a best endeavours basis. We do not provide notification when an account is approaching a Variation Margin Call and you are responsible for monitoring your account at all times. Minimum Margin Requirements Margin Requirements are subject to change without notice, and when issued shall apply to all new and existing positions. Margin Requirements may vary between customers. When you trade on Margin, you will be required to deposit into your account the Initial Margin Requirement as determined by FOREX.com. The Initial Margin Requirement will be notified to you by FOREX.com before a trade is entered into. Thereafter, you are required to post a standard level of Margin in your Base Currency of the value of the Base Currency that you are trading before entering a position. Your Margin Requirement is not a static figure and is determined by reference to the initial percentage and daily movements of the Market for the relevant Underlying. Margin Requirements may vary based on Margin Requirement requested by the customer and, in the case of Spot Forex and FX Options, the Currency Pairs traded. Margin Requirements for all products (Spot Forex, FX Options and CFDs) can fluctuate, and FOREX.com has reasonable discretion to raise or lower Margin rates. FOREX.com also reserves the right to set, and to increase or decrease Margin Requirements on a per customer basis. The level of your Margin Requirement is therefore subject to change. There is not one single calculation that is used to determine the current Margin rates that clients are subject to. They can be changed for regulatory reasons, changes in your account size, Currency pair or position traded concentrated risk, volatility, acts of God, or any unknown factors that FOREX.com may presume in the marketplace that could negatively impact its current Margin risk assessment. Please note that an increased Margin Requirement may mean that you are required to transfer additional funds into your Account before an order for a Foreign Exchange, FX Option or CFD Contract will be accepted by the Online Platform. Also, please note that the increased Margin Requirement may result in a Variation Margin Call or possible liquidation. See Sections 5 and 18 of the PDS for more information about the risks of changes to Margin Requirements. Notification If your Risk Level is 25% or less, we are entitled to close all Open Positions on your Account and cancel all Orders: We can close your Open Positions and cancel all Orders with or without giving you notice. If we do so without giving notice, we will inform you by that we have done so. FOREX.com is not obligated to tell you if your account is close to liquidation. However, as a courtesy, FOREX.com will attempt to send you a Variation Margin Call via when the Risk Level reaches 75%; when the Risk Level reaches 50%. Page 12

13 Therefore, you must ensure that you maintain an address at all times and keep us up to date and informed of your current address. FOREX.com will not use any other means of communication to tell you when your account reaches these risk levels. Risk Level is a percentage calculated as follows: (Total Equity divided by Margin Requirement) multiplied by 100. For calculation purposes, all relevant figures will be converted into your Base Currency. You must monitor your Account, and all relevant factors, so that you know the current Risk Level, Available Equity and whether or not your account is at risk of being liquidated. All the information you need in order to make these calculations is available from the following sources: the Online Platform Market Information Sheets, located at You must also make sure you understand how to calculate Risk Level, Available Equity and Margin Requirement. If you are in any doubt please contact us Effect of Margin Requirements Margined transactions carry a high degree of risk. The amount of Initial Margin is small relative to the value of the contract so that transactions are leveraged or geared. A relatively small market movement will have proportionately larger impact on the funds you have deposited or will have to deposit. Even small trading transactions can lead to substantial losses, which far exceed the liquid or asset value of your Account. This may work against you as well as for you. You may lose substantially more than you initially invested. See Section 18 of the PDS for more information about the risks of "leverage" or "gearing". Calls and Trades may result in losses in excess of the amount invested You may sustain a total loss of Initial Margin funds and any additional funds deposited with FOREX.com (such as Variation Margin) to maintain your position. If the market moves against your position, or if Margin levels are increased, you may be called upon to pay substantial additional funds on short notice to maintain your position. If you fail to comply with a request for additional funds within the time prescribed, which may be as brief as a few hours or less, your position may be liquidated at a loss and you will be liable for any resulting deficit. Accounts may be closed out as soon as Account funds and/or collateral diminish below the Margin Requirement. Margin Requirements may reduce profitability on your Account by requiring that positions be sold by you, or FOREX.com, in advance of your desire to Liquidate such positions in order to cover Margins. By entering into the Terms, you agree that FOREX.com may, at its reasonable discretion, Close Out any and all positions at any time if it presents an adverse risk to FOREX.com and FOREX.com finds it unreasonable under the facts and circumstances to keep the position open requiring the Close Out, and you will be responsible for all resulting losses. Price Spikes No Orders will be filled if an invalid price spike occurs. Bad price spikes occur when an incorrect price is entered into the Online Platform. Bad price spikes are removed from the price charts quickly to alleviate confusion. 6. DISPUTE RESOLUTION FOREX.com has an internal dispute resolution process in place to resolve any complaints or concerns you may have, as quickly and fairly as possible in all the circumstances. Any complaints or concerns should be advised to us (by facsimile, or letter). Contact FOREX.com to inform us about your complaint. You may do this by telephone, in person, facsimile, or letter. We will try to resolve your complaint quickly and fairly, within 7 days or such further time period that may reasonably be required given the nature of the complaint. Initially, all complaints will be handled and investigated internally. If you are not satisfied with the outcome of our complaint resolution procedures, you have the right to contact the Financial Ombudsman Service: The Financial Ombudsman Service (FOS) GPO Box 3 Melbourne VIC 3001 (Ph ) FOS is a free service. FOS will facilitate discussions and negotiations between the parties. You may also make a complaint via the ASIC Info line on This is a free call info line. This is another alternative that you may use to make a complaint and obtain information about your rights. Page 13

14 7. NO COOLING OFF PERIOD There are no cooling-off arrangements for Spot Forex, FX Options, or CFDs contracts. This means that when FOREX.com arranges for the execution of a Spot Forex, FX Options, or CFDs contract, you do not have the right to return the product, nor request a refund of the money paid to acquire the product. If you change your mind after entering into a Contract with FOREX.com, you must close it out, pay any Transaction costs and take the risk of incurring a loss in doing so. 8. PRIVACY Your privacy is important to us and we are committed to compliance with the Privacy Act 1988 and the Australian Privacy Principles. The information you provide to us and any other information provided by you in connection with the services provided by FOREX.com under this FSG will be used for the primarily for processing your application and providing you with advice and dealing services. We may disclose your personal information to external parties for the purposes of execution, clearing and settlement of transactions, or those who act on our behalf in the operation of our business or in connection with the transactions to be undertaken. Such external parties are required and committed to protecting your privacy and where they are offshore we take reasonable steps to ensure that to the maximum extent reasonably possible any information sent has the same level of privacy protection as we provide here in Australia. FOREX.com will not otherwise disclose your personal information without your consent, except as authorised or required by privacy laws. Please contact us via the provided above if you have any concerns. 9. ANTI-MONEY LAUNDERING AND COUNTER-TERRORISM FINANCING Following the implementation of the AML/CTF Act in Australia, FOREX.com is obliged to conduct adequate customer identification prior to opening a Account with you. This procedure will involve collecting from you certain customer information such as your full name, residential address and date of birth and verifying this information through identification documentation such as your driver's license. Throughout the course of your relationship with us, there may be times where we may collect additional information from you pursuant to FOREX.com's AML/CTF obligations. In circumstances where it is reasonable for FOREX.com to suspect that there may be a breach of applicable laws or regulations, FOREX.com may decide to refuse any transactions on your account or to freeze your funds. If this occurs, FOREX.com will not be held liable for any losses you may incur as a result of such actions. If your Account is established, FOREX.com may disclose your personal information or stop Transactions on your Account for the purposes of the AML/CTF laws or under FOREX.com s AML/CTF procedures, without liability to you for any loss that arises due to that occurring. 10. TAX CONSIDERATIONS If you trade in Spot Forex, FX Options, or CFDs, you may be subject to Australian taxation. This Section outlines general information about significant Australian income tax and GST implication of trading derivatives. The information contained in this Section is of a general nature only and is not intended to constitute legal or taxation advice and should not be relied upon as such. The taxation implications of your transactions will depend on your own individual circumstances and FOREX.com recommends that you obtain independent professional taxation advice on the full range of taxation implications applicable to your own personal facts and circumstances. Taxation laws are complex in nature and their interpretation and administration may change over the term of your transacting. We will not advise you of any changes in taxation laws should they occur. You must take full responsibility for the taxation implications arising from your own transacting, and any changes in those taxation implications during the course of your transacting. The information provided below is for Australian resident investors only and is based on interpretation of taxation laws in Australia current as at the date of this combined FSG and PDS. If you are not an Australian resident, you should consult a taxation advisor in your own jurisdiction to determine the tax consequences of transacting in derivatives. The availability of tax deductions or losses incurred as a result of transacting in derivatives to offset current and future year income will depend on your personal circumstances and you should seek advice from your tax advisor in this regard. Tax consequences of Transacting in CFDs Page 14

15 The approach of the Commissioner of Taxation to the income tax and capital gains tax consequences of dealing in financial contracts for difference, such as CFDs, is reflected in Taxation Ruling 2005/15. We set out a summary of that ruling below which we believe is also relevant to the income tax treatment of Margin FX Contracts. A copy of Taxation Ruling 2005/15 is available at It is the Commissioner s view that any gain a taxpayer makes from dealing in a CFD will be assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997), while any loss it makes from dealing in CFD will be an allowable deduction under section 8-1 of ITAA 1997 provided that: the CFD transaction is entered into as an ordinary part of carrying on a business; or the profit is made, or the loss is incurred, as a consequence of a business operation or commercial transaction entered into for the purpose of profit-making. A gain from dealing in a CFD will also be assessable income under section of ITAA 1997 where a taxpayer is carrying on, or has carried out, a profit-making undertaking or scheme, and the gain from it is not assessable under 6-5 of ITAA Correspondingly, a loss from dealing in a CFD where the gain would have been assessable under section of ITAA 1997 is an allowable deduction under section of ITAA A gain or a loss from a CFD entered into for the purposes of recreation by gambling will not be assessable under either section 6-5 or of ITAA 1997, or deductible under section 8-1 or of that Act. The Commissioner is also of the view that a capital gain or a capital loss from a CFD entered into for the purpose of recreation by gambling will be disregarded under paragraph (1)(c) of ITAA Capital Gains Tax A CFD is a CGT asset under section of ITAA On the maturity or closing-out of a CFD, CGT Event C2 happens (section of 1997). However, to the extent that a gain from dealing in a CFD as a result of a CGT Event is assessable under section 6-5 or of ITAA 1997, a capital gain arising from the event is reduced (section of ITAA 1997). To the extent that a loss made from dealing in a CFD is deductible under sections 8-1 or of ITAA 1997, the reduced cost base of the asset is reduced, thereby reducing the amount of the capital loss (subsection (4) of ITAA 1997). Finally, in calculating any capital gain or loss, a taxpayer is entitled to take into account the cost of acquiring, holding and disposing of the CFD. Income Tax Treatment of Margin FX Contracts It is significant that Income Tax Ruling 2005/15 did not refer specifically to Margin FX Contracts. Margin FX Contracts take the same legal form as currency CFDs. It should, therefore, be reasonably expected that the taxation implications of dealing in both instruments, will be identical and will be treated accordingly by the Commissioner. However, it may well be that he will adopt the view that currency CFDs fall under Division 775 of ITAA 1997, because not only is the physical currency caught, but also a right to receive foreign currency, with an extended definition which would appear to include cash-settled margin foreign exchange contracts. It should, however, be noted that the tax treatment would appear to be the same whether a Margin FX Contract falls for treatment under the above Ruling or under Division 775; that is they are treated on revenue account. It is problematic whether the entry into a Margin FX Contract could ever be regarded as an exercise in recreation by gambling. Interest on your Account Should FOREX.com agree to pay interest on your Account with FOREX.com, such interest is likely to be treated as assessable income for Australian tax purposes at the time that it is credited to you. If you do not provide your TFN (or ABN if applicable) or proof of exemption, FOREX.com may be required to withhold tax from any interest payment at the rate of 46.5%. Expenses Certain expenses incurred by you in connection with trading in the financial products detailed in this PDS may be deductible to the extent that they are incurred for the purpose of deriving your assessable income. The deductibility of these expenses will depend on your own personal circumstances. You should obtain your own advice as to whether such expenses will be deductible to you. Taxation of Financial Arrangements In March 2009, the Federal Parliament passed the Tax Laws Amendment (Taxation of Financial Arrangements) Act ( the legislation ). This legislation provides a framework for the taxation of gains and losses from certain financial arrangements. Gains from the financial arrangements are assessable and losses are deductible. The legislation generally applies to all financial arrangements as defined in subdivision 230-A or included by the additional operation of subdivision 230-J. However, certain financial arrangements, as detailed below are effectively subject to an exemption under subdivision 230-H. Page 15

16 Division 230 of the legislation provides a range of elective methods for determining gains and losses; namely the fair value method, the retranslation method, the hedging method and the financial reports method. Where these selective methods are not, or cannot be made, the appropriate treatment is either the accruals or realisation method. Goods and Services Tax The Commissioner has also released a determination relating to the GST implications of trading in CFDs: GST Determination GSTD 2005/3. The Commissioner has stated that the costs incurred in having a CFD Position open, such as commissions (on both opening and closing), dividend and corporate event adjustments, Daily Funding Charges and Margins are all considered financial supplies under the A New Tax System (Goods and Services Tax) Act 1999 ( the GST Act ). Consequently, they are input taxed and no GST is payable on their supply. GST may apply to certain fees and costs charged to you and you should obtain your own advice as to whether an input tax credit is available to you for such fees and charges as it will depend on your personal circumstances. 11. FEES AND COSTS PAYABLE FOR TRADING WITH FOREX.COM Part 1: Costs and amounts payable for all products offered under this PDS (Spot Forex, FX Options and CFDs) a) Minimum Opening Deposit Requirement All deposits are accounted for in the Base Currency chosen for that Account. When depositing funds into your FOREX.com account, please send the same Currency as the Base Currency of your FOREX.com account. Your bank will often convert your funds for a nominal charge. If you deposit funds in a Currency other than the Base Currency of your FOREX.com account, FOREX.com will convert your funds to your Base Currency. The conversion rate will be the current FOREX.com Ask (Buy) rate plus a conversion Premium of up to 3%. This Premium covers the cost of purchasing small and uneven amounts of physical Currency from other parties. Incurring this Premium will reduce the net amount of funds deposited. You must deposit at least AUD with FOREX.com to open an Account. Some types of Accounts may only be opened using a specific Base Currency. b) Fees The fees and costs which FOREX.com may apply to an Account are disclosed in this Section and are accurate as of the date of this PDS. These fees and costs can be changed by FOREX.com under the Terms subject to providing existing clients with thirty (30) days' prior notice of any increase in fees and costs. Accordingly, the Fee Schedule may be updated from time to time by FOREX.com publishing an updated version of the Fee Schedule on its website at When fees are increased, a notice regarding the increase will be posted on our website thirty (30) days prior to the increase taking effect. All changes to information in this PDS, including in relation to fees and costs, that are materially adverse to investors, that is, changes of a material and extraordinary nature, which may reasonably be likely to have a material influence on a decision of a reasonable client to trade, will be disclosed by way of a Supplementary PDS or new PDS. FOREX.com charges no fees for opening or closing Accounts, monthly maintenance or withdrawing funds unless a wire transfer or overnight cheque is requested. The following fees apply to all products offered under this PDS: An Account will be deemed inactive if there is no trading activity or if an Open Position is not held for a period of sixty (60) days or more. A monthly inactivity fee of AUD and any additional applicable fees will be charged to these inactive Accounts. All banking fees, including but not limited to wire transfers, and stop payments, are your responsibility and will be charged to your Account. FOREX.com may, on occasion, initiate new fees, as they become necessary to the proper functioning of FOREX.com. Notice of such fees will be posted on FOREX.com's website, accessible by you at any time. You are responsible for the payment of all fees to FOREX.com arising out of your relationship with FOREX.com. Your Account will be automatically debited with the amount of such fees that are not settled or paid as required. You agree, by entering into the Terms, to pay all reasonable fees incurred by FOREX.com, to maintain your Account. This is true of all fees, including but not limited to, the fees set out in this PDS. The fees below are not necessarily all payable by Australian Investors. Processing Fees Inactivity Fee AUD Wire Fee within Australia AUD 5.00 Wire Fee - International AUD Page 16

17 Service Fees Customers must fill out a subscription form and pay the applicable service fee each month to receive the service. Service fees will be charged in the Base Currency of the relevant Account. The services listed in the table are trading or analysis tools which may be utilised by customers in conjunction with other tools and functions. This table sets out the monthly fee charged by FOREX.com for each of the services listed below. Dinapoli Tools AUD Exchange Fees Subject to you complying with the following in relation to FOREX.com Prices: - The FOREX.com Price is made available to you by FOREX.com for your exclusive non-commercial use within the FOREX.com Online Platform. You are only permitted to use the FOREX.com Price to deal with us and/or our Associated Companies. With respect to any market data or other information that we or any third party service provider provide to you (1) we and any such provider are not responsible or liable if any such data or information is inaccurate or incomplete in any respect; (2) we and any such provider are not responsible or liable for any actions that you take or do not take based on such data or information; (3) you will use such data or information solely for the purposes set out in this Agreement. You are not permitted to: (unless you have formally signed up to the specific Market Data Subscriber Agreement with the relevant and requisite exchange): o o o extract from the FOREX.com Price Online Platform retransmit, redistribute, publish, disclose or display in whole or in part such data or information to third parties except as required by Applicable Exchange Regulations; use the FOREX.com Price for any purpose other than allowed under this agreement. FOREX.com will not normally charge Non-Professional customers any Exchange Fees that may be applicable to their trading with FOREX.com. However, FOREX.com reserves the right to do so by giving you 10 Business Days notice. A customer who meets the following criteria will generally be accepted as a Non-Professional by FOREX.com: The customer subscribes, (i.e. registers and pays), and is not acting in a professional capacity, but solely for their own account as a private investor; The customer, if: o currently registered or qualified with any national or state exchange, regulatory authority, professional association or recognised professional body as a registered securities broker-dealer, investment adviser, futures commission merchant, commodities introducing broker or commodity trading advisor, member of a securities exchange or association or futures contract maker, or an owner, partner or associated person of any of the foregoing, (whether or not they have at some time in the past been qualified to do so), or; o currently employed by a bank or other organisation exempt from registration to perform functions that would require him or her to be so registered or qualified if he or she were to perform such functions for an organisation not so exempt; Is not acting in a professional capacity, but solely for their own account as a private investor; The customer uses any data provided by FOREX.com solely in relation to the management of their personal funds and not as a trader to the public or for the investment of corporate funds; The customer does not redistribute, republish or otherwise provide any data provided by FOREX.com to any third party in any manner or use or process data for any commercial purpose. c) Additional Costs applying to all products offered under this PDS (Forex and CFDs) FOREX.com is compensated by revenue from its activities as a Dealer. This includes proceeds from buying, selling, converting, as well as holding currencies and interest on deposited funds and rollover fees. These fees and costs may be, and often are, substantial. Accordingly, your Account must earn substantial trading profits to avoid depletion of assets due to such fees and costs. You will be responsible for bearing any expenses, losses, commissions and fees that result from FOREX.com maintaining your Account. FOREX.com charges a commission for executing an equity CFD trade. For CFD commissions, please refer to the Commission rates at FOREX.com will charge you a commission on both Opening and Closing an equity CFD position. Commission charged will be the greater of a set dollar fee or by multiplying the dollar value of the contract at each of the Open and Close of the trade by the Basis Point commission level indicated at the links above. FOREX.com will not charge commission on non-equity CFDs. FOREX.com, in its absolute discretion, and acting Page 17

18 reasonably, also reserves the right, from time to time, during the lifetime of the Terms to vary commission rates and impose commission charges on products FOREX.com has not previously subjected to such charges, irrespective of whether such charge were not payable at the time of opening. Under the FOREX.com Client Agreement and the FOREX.com CFD and Spot Forex Terms ( the Terms ) you must pay to us any and all costs and expenses (such as bank charges, court fees, legal expenses) we pay or incur because you fail to pay amounts due on time or which we incur in enforcing our rights against you. Dealer Spread The Dealer Spread is essentially the difference between the buy and sell price quoted by FOREX.com as Dealer. As the Dealer, FOREX.com may profit from part, all, or more than the Dealer Spread, which can be calculated at any given time by you by comparing the Bid and Offer prices quoted by FOREX.com. For example, FOREX.com currently quotes an Exchange Rate of EUR/USD / to all of its clients. Client A wishes to buy 100,000 EUR/USD at the price of Client B wishes to sell 100,000 EUR/USD at the price of When both clients buy and sell FOREX.com, as the market maker, sells to one client at and buys from another client at making 3 Ticks on the Spread. In the case of a CFD transaction it may be that FOREX.com currently quotes a price of 5638/5646 for the AUS200 market to all of its clients. Client A wishes to buy 10 CFDs AUS200 at the price of Client B wishes to sell 10 CFDs AUS200 at the price of When both clients buy and sell FOREX.com, as the market maker, sells to one client at 5646 and buys from another client at 5638 making 8 Ticks on the Spread. When trading with FOREX.com, where no commission is applicable, FOREX.com may receive benefit from the Dealer Spread. A Dealer Spread represents a benefit to FOREX.com and may negatively impact the profitability of your Account. Buying, selling, converting FOREX.com may obtain benefit from Offsetting your position in a CFD or Spot Forex if the market moves favourable in respect of the relevant CFD or Spot Forex or by using Arbitrage to buy or sell the relevant Currency Pair with a narrower Spread. For example, FOREX.com sells EUR/USD to a client at However, FOREX.com entered the open spot EUR/USD market and bought EUR/USD at In this example, FOREX.com would obtain a benefit of 4 Ticks on the sale of EUR/USD to the client. Note that this is not a fee or a charge paid by client; it is simply FOREX.com Offsetting the trade at a better rate than the price received by the customer. Negative account balances Numerous transactions may be required to stabilise your Account and such transactions may result in fees that overtake the value/assets of your Account. Should such an event occur, you are responsible for paying such fees within a designated period of time. Failure to satisfy this requirement may result in your positions being liquidated at a loss to cover such fees. Further, where funds maintained in your Account are insufficient to meet losses, fees and other charges, you will be required to bring your Account to a zero balance, at least, within forty eight (48) hours after the occurrence. If you fail to bring your Account to a zero balance, at least, within forty eight (48) hours after the occurrence, you will be subject to legal proceedings and the court and legal fees spent to recover these amounts due. Account subject to lien The funds and CFD and/or Spot Forex in your Account will act as collateral to give FOREX.com security for any amounts due by you to FOREX.com. This means that FOREX.com has the right to use the assets in your Account to satisfy any outstanding liability you have to FOREX.com. Please refer to the Netting Agreement in the Client Agreement. Fee disputes All disputes over fees must be brought to our attention as soon as you become aware of them and in any case within four (4) Business Days of the fee's origination. Payments of Referring Parties, Introducing Brokers, and representatives A Referring Party, who refers a Forex or CFD customer to FOREX.com, will be compensated by FOREX.com. Compensation paid to a Referring Party is based upon the respective client s trading volume. The customer has a right to be informed of the precise nature of such remuneration should it be requested. This compensation is usually individually negotiated between FOREX.com and each Referring Party. For example, if a commission of USD5.00 per round turn is agreed to with the Referring Party and the number of round turns is 50, the payment to the Referring Party would be USD250. A FOREX.com representative may receive a portion of the income earned by FOREX.com as described above. You may request particulars of the remuneration and other benefits received, or to be received by a Referring Party for referring you or as a FOREX.com representative within a reasonable time after you have received a FOREX.com financial services guide or PDS. Automatic rollover of Net-Based Spot Forex trades not notified for delivery All Spot Forex and FX Options contracts remain open until FOREX.com is notified that the transaction is or has been executed for actual delivery on the Page 18

19 Value Date or the position is Closed Out. For Spot Contracts the Value Date will be the second Business Day after the date when the Order is executed, except for USD/CAD contracts. USD/CAD Spot Forex have a Value Date on the first Business Day after the date when the Order is executed. The Value Date for forward Spot Forex will be agreed between you and FOREX.com at the time the Order for the forward Spot Forex is executed. If you intend to take physical delivery of the Currency in relation to a Spot Forex or FX Option Contract, this must be communicated to the trading desk via or phone. You will be required to complete a delivery form and return to FOREX.com at least prior to 17:00 hours (5:00 p.m.) (EST) (8:00 a.m. AEST) two business days prior to the trade s Value Date, except for USD/CAD. For USD/CAD FX Option transactions a Delivery Notice may be provided to FOREX.com one business day before the Value Date. At a minimum, you must identify the specific trade by identification number to be delivered and provide the delivery deposit, institution s name, address, telephone number, ABA routing numbers, and the for credit to account name and number. FOREX.com reserves the right to seek further information it may deem appropriate before executing any such transaction. Alternatively, a transaction which is intended to be executed for actual delivery can be made in a specially notated account, that is, in an account in which all transactions are intended for delivery. If FOREX.com is not notified of your intent to take actual delivery of the Currency Pair in time, or if the transaction is not made in a specially notated account, then any Spot Forex or FX Options contract held at the end of the business day, occurring at 17:00 hours (5:00pm) (EST) (8:00 a.m. AEST), will be subject to a roll over via swap transaction into the next business day, with the spot Value Date applicable to that day s new trades. Any forward Spot Forex for which FOREX.com has not received a Delivery Notice on the Value Date for that forward Spot Forex will be subject to roll over via swap transaction to the next spot Value Date. The roll over process is where trades, for which delivery has not been specified in a timely manner, are rolled over on a daily basis by FOREX.com. Rollover permits you to continue to carry a position for which delivery is not desired, that is, the position continues to exist, by Closing Out the position and simultaneously re-establishing the position to reflect both current market prices and the same Long or Short Position. The only difference between the old position and the new position is that the Value Date has been extended by another day. In addition, to reflect current market prices, a new position which has been rolled over reflects a swap rate, also known as forward points. The purpose of the swap rate is to account for the interest rate differential between the two currencies in a Currency Pair. For example: If Currency A has a higher interest rate than Currency B, the person who holds a Long Position in A and Short Position in B will be receiving payment of the swap rate, while the person who holds a Short Position in A and Long Position in B will be paying the swap rate. Each day, when rollover occurs, the swap rate is applied to the position with the new Value Date as either a credit or a debit to your Account. The swap rate is incorporated into the difference between the Closing Price of the position rolled out of, and the Opening Price of the position rolled into, which would be the same in the absence of the swap rate. Therefore, you may make or lose money on this aspect of the rollover, depending on the relative interest rates of the Long and Short Positions in respect of the currencies in the Currency Pair that your are holding. FOREX.com will continue to roll your positions until you notify FOREX.com of your intention to take delivery or Close Out the Currency position. There are no commission charges for these "rollover" transactions. Financing of Position Based Spot Forex Trades Each business day at 5:00 pm EST (8:00 a.m. AEST), a debit or credit will be applied to your Account to account for the interest payment or receipt due as a result of the positions held in your Account. This procedure will occur daily until you Close Out the Currency position. Delivery is not available if you are trading on a Position Based system. All positions will remain open until closed by you or your Risk Level reaches 25% or less. Part 2: Additional costs and amounts payable for Spot Forex and FX Options only a) Rollover and Swap rate for net-based Forex A swap rate, also known as forward points, is applied on the rollover of a net-based Forex Contract. The purpose of the swap rate is to account for the interest rate differential between the two currencies in a Currency Pair. For example, if Currency A has a higher interest rate than Currency B, the person who holds a Long Position in A and Short Position in B will be receiving payment of the swap rate, while the person who holds a Short Position in A and Long Position in B will be paying the swap rate. Each day, when rollover occurs, the swap rate is applied as either a credit or a debit to your Account, and is incorporated into the difference between the Closing Price of the position rolled out of, and the Opening Price of the position rolled into, which would be the same in the absence of the swap rate. Therefore, you may make or lose money on this aspect of the rollover, depending on the relative interest rates of the Long and Short Positions in respect of the currencies in the Currency Pair that you are holding. b) Daily financing charges/credits for position-based Forex Each business day at 5:00 pm EST (8:00 am AEST), a debit or credit will be applied to your account for the interest payment or receipt due as a result of the positions held in your Account. This procedure will occur daily until you Close Out the Currency position. If the first currency has a higher interest rate, then you are generally credited for holding a long position and debited interest for holding a short position. Page 19

20 If the first currency has a lower interest rate, then you are generally debited for holding a long position and credited interest for holding a short position. The Account History report will display these amounts as financing debits/credits in the same way that they are displayed for the CFD instruments. Below is the formula to show how the financing amounts are calculated. For a short position: F = S * V * P For a long position: F = S * V * P * -1 F = Finance charge/credit S = Swap Rate V = Number of lots P = Pip value in account base currency Part 3: Additional costs and amounts payable for CFDs only Daily financing charges A daily financing charge is applied in respect of CFDs relating to cash indices, spot foreign exchange markets, individual equities, and cash metals. The financing charge is levied for each day that the trade remains open (including weekends and public holidays). The financing charge is applied to all Open Positions at 17:00 EST (which equates to 8.00 am AEST) on each business day. Accordingly, if you hold "long" (buy) CFD positions, you will have to pay the daily financing charge, which will be debited from your Account Balance. If you hold "short" (sell) CFD positions, FOREX.com will pay you the financing charge, which will be credited to your Account Balance. In the case of CFD trades relating to foreign exchange, if the first Currency has a higher interest rate, then you are credited financing for running a long CFD position and debited financing for running a short CFD position. If the first Currency has a lower interest rate, then you are debited financing for running a long CFD position and credited financing for running a short CFD position. The relevant financing charge will be debited from or credited to your Account on the next Business Day after the day to which it relates. However, in the case of short CFD trades relating to individual equities and cash indices, you will be debited and not credited with the financing charge/interest when the relevant interest rate is lower than the number of basis points to be deducted from that relevant interest rate. We credit short positions when LIBOR is greater than the basis points to be deducted from LIBOR. Please refer to the Market Information Sheets for details of the financing charge. The amount of the financing charge will vary due to the elements that constitute the charge. It is your responsibility to make sure you know how to calculate the financing charge. If you are in any doubt, contact our Customer Services Team. The daily financing charge is calculated as follows: f = (s x p x r) / d where: f = daily financing charge; s = number of CFDs; p = Closing Price as determined by FOREX.com (usually this will be the Closing Price of the Underlying Share); r = relevant overnight LIBOR rate, PLUS 250 Basis Points for Long Positions, or MINUS 250 Basis Points for Short Positions; and d = number of days (365 days for UK and Australian shares and 360 for all others) Accordingly, using the above example, if you hold 2,500 CFDs for XYZ shares for 2 days and the Closing Price on day 1 is AUD4.60 and on day 2 is AUD4.70, the LIBOR rate on day 1 is 5.75% and day 2 is 5.70%, the daily finance charge will be as follows: Day 1: (2,500 x AUD4.60 x [5.75%+3%])/365=AUD2.76: Day 2: (2,500 x AUD4.70 x [5.70%+3%])/365=AUD2.80 Accordingly, at the end of day 1, AUD2.76 will be debited to your Account and at the end of day 2, AUD2.80 will be further debited to your Account. You must always maintain enough funds in your Account in addition to the Margin to cover these financing charges. As provided in the Terms, FOREX.com reserves the right, from time to time during the lifetime of any CFD contract when the need to do so is brought about by, amongst other things, volatile market conditions, to vary financing charges and also to impose financing charges on products that were not Page 20