Our Guide to Contracts for Difference. next>

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1 Our Guide to Contracts for Difference

2 Welcome to your IWeb CFD Guide We hope you'll find it a helpful introduction to investing in Contracts for Differences. To read each page in order, simply click on the 'next' icon at the bottom right hand corner. If you would like to skip to a specific section, click on the appropriate header in the navigation bar across the top of the page, or if you'd like further explanation, click on terms that appear like this You can print out this brochure and keep it in your files for future reference. We wish you every success with your investments.

3 Glossary Bid The bid price is the price someone is prepared to pay for the CFDs you are selling. Offer The offer price is the price someone is willing to accept for the CFDs you are buying. Bid - Offer Spread The difference between the current bid and offer prices. For example if the Bid - Offer Spread is 740p-750p, you would receive 740p for every CFD you sold or pay 750p for every CFD you bought. You may have heard about CFDs before but not been sure what they are or what they do. For example, did you know that by buying and selling CFDs you can... earn the profit or take the loss on 10,000 worth of shares for only 1,000 initial deposit? earn the profit or take the loss on a $20,000 position on the NASDAQ Index CFD for only $1,000 initial deposit? still benefit from and, as you never own any actual shares, there s no Stamp Duty to pay on purchases. Please refer to the Market Information Sheets for more information. This guide will show you how can help you do this. There are many new terms to learn when you're finding out more about CFDs, so to help you learn them we've included some simple definitions on the relevant pages.

4 Glossary NTR (Notional Trading Requirement) Every time you trade in equity or index CFDs you need to pay us a percentage of the value of the deal, known as the Notional Trading Requirement (NTR). This payment is called a margin. Margin Trading Your margin payment acts as a deposit or security to cover the risk of a loss on a deal for a larger amount of money. CFDs are a way of making (or losing!) money from share price movements without owning the share itself. You simply own a contract which you buy at one price and sell at another making (or paying out) the difference hence the name, Contracts for Differences. So how's that different from conventional share dealing? Crucially, you don't need to have the full value of the shares in the first place you only need to pay a percentage of that (known as the Notional Trading Requirement or NTR) up front. For equities the NTR starts from 10%. That means you could take a 10,000 position and you only need to provide 1,000 initially this is also known as initial margin. With margin trading interest is paid or received on your position. Another advantage is that there's no minimum on the size of the trades you can place. Sounds too good to be true where's the catch? There's no catch, but there is something you need to know! With CFDs you can lose more than your initial investment and you should Understand.

5 Glossary A dividend is a payout often based on the profits made by a company and is divided proportionally between its shareholders. Corporate A corporate action is a decision a company makes that affects the number of shares in issue or the amount of share capital. Trading CFDs is not the same as conventional share trading, so you need to get to know how they work and their features. So before trading your first CFD you need to understand... the differences between Equity and Index CFDs; how to make money when you believe prices will rise with Longs; how to make money when you believe prices will fall with Shorts; how Margin works; your maximum exposure and involved; the impact of on your positions; the which will apply. One of the best ways of getting used to CFDs is to try it for yourself, risk free, using our online Simulator. Use this fully interactive and live trading module to buy and sell a selected range of stocks and indices without risking your money.

6 The differences between equity and index CFDs You can trade CFDs on equities listed on the major UK, US and European stock exchanges. You can also trade CFDs on the major world indices. Both equities and indices work in similar ways and are quoted and traded in the underlying currency. For example, positions in the DAX 30 are traded in Euros. The main differences are: Equities Notional Trading Requirement (NTR) from 10% Trade CFDs in UK, European and US equities Equities are quoted in pence, US cents, Euro cents or the local market equivalent Prices on equity CFDs mirror the exchange price for that equity Indices Notional Trading Requirement (NTR) from 5% Trade CFDs in a variety of indices Indices are quoted in pounds, US dollars, Euros or the local market equivalent Prices for indices CFDs are based on the current index price plus or minus a pre-determined spread. See the Market Information Sheets for more information. for trading CFDs The charges for trading indices are different from those for trading equities. Please refer to the section for a full list of charges.

7 Glossary LIBOR The British Banking Association LIBOR is the most widely used benchmark or reference rate for short term interest rates. LIBOR stands for the London Inter Bank Offered Rate and is the rate of interest at which banks borrow funds from other banks in London. Notional Value As you don't buy the actual shares or index, the NTR is based on the Notional Value of the shares. For example, if an equity trades at 556 pence and you buy 1000 CFDs based on it, the notional value would be 5,560. Trade long if you believe prices will rise When you believe a share price or an index is going to rise you would buy CFDs and you'll make a profit if it goes up, but a loss if it goes down. This is known as a long position. Follow the example below, using an index, to see how it works: You decide to buy 10 FTSE 100 CFDs when the market is at Price of FTSE 100 CFD: 4, Number of CFDs: 10 Notional Value of CFDs: 45, Commission : Margin (NTR is 5%): 2, Click here for more info on margin Finance* 7.71 *When you take a long position using a CFD you must pay a daily financing rate based on LIBOR and the closing price of the share. So, to hold a long position overnight, you will pay LIBOR plus 1.5%. Assuming LIBOR stands at 4.75% on a given day, the rate would be 6.25% For the purposes of this example let's assume that the FTSE 100 closing price for the day is You would pay 10 x 4500 x 6.25% / 365 = 7.71 for holding the position overnight and this would be debited from your account on the next trading day.

8 What happens if the price goes up? 4 days later the FTSE 100 CFD is quoted at so you decide to sell your 10 CFDs and take your profit. Price of FTSE 100 CFD: 4, Number of CFDs: 10 Closing value: 46, Opening value: 45, Commission: Profit on trade: 1, Commission: ( 20.00) 4 days 7.71: ( 30.84) Overall profit on trade: 1,229.16

9 What happens if the price goes down? 4 days later the FTSE 100 CFD is quoted at so you sell your 10 CFDs to close the position: Price of FTSE 100 CFD: 4, Number of CFDs: 10 Closing value: 44, Opening value: 45, Commision: 10 Loss on trade: ( ) Total commission: ( 20.00) 4 days 7.71: ( 30.84) Overall loss on trade: ( ) There s no Stamp Duty to pay One of the major attractions of dealing in CFDs is that you don t pay Stamp Duty. Because you never actually own any shares, there's no 0.5% Stamp Duty when you buy. Of course you may still be liable for Capital Gains Tax and tax rules may change. If trading in Irish Equity CFDs please refer to the Market Information Sheets for further information.

10 Trade short if you believe prices will fall One of the best features of CFDs is that you can still make money even if you think a share price or index is going to fall by taking a short position. Going short means selling something at a high price, with a view to buying it back at a lower one, and taking a profit. Follow the example below to see how it works: XYZ plc is currently trading at 825 pence per share, but you think the share price is going to fall so you sell 10 XYZ plc CFDs: Price of XYZ plc CFD: 825 Number of CFDs: 1,000 Notional Value of CFDs: 8,250 Margin (NTR is 10%): Click here for more info on margin Finance* 0.51/day *When you take a short position using a CFD we'll pay you a daily financing rate based on LIBOR and the closing price of the share. So, to hold a short position overnight, you will be paid LIBOR less 2.5%. Assuming LIBOR stands at 4.75% on a given day, the rate would be 2.25% For the purposes of this example let's assume that XYZ plc's closing price for the day is 825 pence. You would receive 1,000 x 825 x 2.25% / 365 = 0.51 for holding the position overnight and this would be credited to your account on the next trading day.

11 What happens if the price falls? 3 days later XYZ plc share price drops to 750 pence, so you buy back the CFD and take your profits. Price of XYZ plc CFD: 750 Number of CFDs: 1,000 Value of CFDs: 7, %: Closing value: 7, Opening value: 8, Profit on trade: Total commission: ( 31.50) 3 days 0.51: 1.53 Overall profit on trade:

12 What happens if the price goes up? 3 days later XYZ plc has gone up to 850 pence so you buy back the CFD. Price of XYZ plc CFD: 850 Number of CFDs: 1,000 Value of CFDs: 8, %: Closing value: 8, Opening value: 8, Loss on trade: ( ) Total commission: ( 33.50) 3 days 0.51: 1.53 Overall loss on trade: ( ) There s no Stamp Duty to pay One of the major attractions of dealing in CFDs is that you don t pay Stamp Duty. Because you never actually own any shares, there's no 0.5% Stamp Duty when you buy. Of course you may still be liable for Capital Gains Tax and tax rules may change. If trading in Irish Equity CFDs please refer to the Market Information Sheets for further information.

13 If you hold an open CFD position, you may need to make an additional margin payment. Section 15 of our Terms and Conditions covers this in detail and you should make sure you're happy with how margin payments work before buying or selling a CFD. Here's an example as a guide: You buy 1,000 equity CFDs in XYZ plc when they are trading at 1043 pence: Price of XYZ plc CFD: 1043 Number of CFDs: 1,000 Notional Value of CFDs: 10, Margin (NTR is 10%): 1, In this example the Notional Trading Requirement (NTR) is 10%. This means you need to provide an initial margin of 1,043 to your margin account. At the end of day 1 the price of the CFD has fallen to close at 857 pence so the value of the CFDs would fall to 8,570.00, meaning you are losing 1, This loss is deducted from your margin account, but since it only holds 1,043.00, you d need to pay another to cover the loss. In addition, you're still required to keep 10% (the NTR) of the value of the CFD in your margin account: Value of CFD at end of day 1: 8, Margin required (NTR is 10%): So at the end of day 1 the additional margin required will be 1, ( to cover the loss plus required to maintain the 10% NTR).

14 Important points to note with regard to margin calls Please be aware that each individual position you hold has a Notional Trading Requirement (NTR). You must maintain the NTR percentage, in addition to any losses on the CFD. For margin calls over 10k need to receive the funds on the same day by electronic transfer. For calls under 10k may contact you to arrange payment. Failure to pay margin calls may result in positions being closed. You will be liable for any outstanding losses. If you are going on holiday or will be away from your normal contact details whilst running open positions, please let know. It is important that can contact you in the event of any margin calls. Please note that normally make margin calls by phone. It is policy not to disclose our company name or the nature of the call (except that it is a personal call) when attempting to contact you by phone. However, reserve the right to leave a detailed message including the company name should wish to do so.

15 Making payments We accept a variety of payments simply choose the method that's most convenient for you: Debit cards You can pay by Switch/Maestro, Solo or Visa Delta. Cheques Can be used to cover margins below 10k and must be drawn on a UK clearing bank. Please make cheques payable to. Always ensure you write your IWeb CFD Account number on the back. Cheques will be credited to your account once they have cleared. Telegraphic transfer Details are available on request. Please make sure your name and account details appear on all transfers.

16 the risks You can potentially enjoy big returns on. Equally, there is the potential for large losses. Remember: you can lose more money than you initially invest; you may need to make further deposits at short notice if your positions move against you; CFDs are not for everyone. You should understand what you are getting into by reading our risk warning notice. Please seek independent advice if necessary. Maximum Loss on a long CFD The maximum loss on a long CFD is the notional value of the CFDs you've bought. In our Fully Worked Out Example the most you could lose would be 45,000 even though you only have to provide 2,250 as your initial margin. But the FTSE 100 would have to fall to zero before you lost the full amount. For an equity, liquidation could take the notional value of your position to zero. Maximum Loss on a short CFD For a short CFD, there is no limit to the amount of money you could lose. In our Fully Worked Out Example if the price continued to rise, you would lose 1,000 for every 100 pence the CFD price went up. These losses would continue until you closed the position. So the key to CFD trading is to know how much you're prepared to lose, and how to use all the features of the product to help protect you against losses you cannot afford. See Stop Losses and Limits. A CFD is an open-ended contract with no specified closing date. If your CFD is not performing as you'd hoped you can keep it open if you think the position will recover, so long as you can afford to keep financing the contract.

17 A dividend adjustment is credited to long positions and debited from short positions held at close of business on or before the ex-dividend date. Payment is credited or debited to your margin account on or before the ex-dividend date. Please note, dividends on UK equities will be paid or received at 90% of the dividend amount. For non-uk equities you will generally receive 85% on long positions and pay 100% on short positions, however this may vary for some currencies and you should contact trading desk if you require further information. Corporate CFD positions will be adjusted in the event of a corporate action, for example a rights issue. The adjustment will be to replicate the corporate action on the underlying equity. If this is not possible then at the discretion of, an equivalent cash adjustment may be made. This will apply to positions held at the close of business on the preceding business day to the corporate action date.

18 started Opening an account is easy. Just complete an Application Form and return it to us. You may need to send additional documentation but we ll advise you if anything else is needed. Once your application has been approved we will open an account for you and, when sufficient funds have been deposited, you can begin CFD trading online or by telephone. We accept deposits by debit card, BACS transfer and electronic transfer. Trading online Simply visit select CFDs from the menu then log in. Click Live Trading and you will be offered a Master Menu. To trade, simply hit the Trade button. This will launch a separate dealing screen known as a Dealing Ticket with real time prices. On the Quote page you can also see the direction of the last price move. Select either Buy or a Sell to place your trade.we will quickly check your credit is fine before fulfilling your order. You can also review your last 10 trades. Simply click the Account History icon on the top left hand corner of the Quote page. If you're still unclear about anything, simply click the Help icon. This section explains how the systems work, details common faults, recommends the best hardware specifications and will give you contact details for our helplines.

19 Trading by phone Placing a CFD trade by phone Simply call us on when you are ready to place your deal. Please remember Dealers cannot give you advice about which CFDs to trade. Lines are open 7am to 9.15pm Monday Friday. You'll need to have your account number ready and be sure about the deal you want to place. You will need to know if your deal is for a number of shares or a value. Please remember to state whether you want to place a CFD trade with a guaranteed stop loss when you call. Calls are recorded for your security.

20 your account There are a couple of simple precautions you can take to help keep your IWeb CFD portfolio in order. Always check your contract notes and statements for discrepancies, so they can be reported immediately. It's wise to keep a written record of all trades to enable us to investigate any query. If any of your personal details change, please let us know so we can keep our records up-to-date. Remember to keep your IWeb CFD personal account number and any passwords confidential. Order types offer a range of Order Types to help you limit your exposure on a CFD. Stop Sell You would use this type of order if you want to sell below the current market price. Most commonly used if you have a long a position, as you may want to limit your exposure by selling out if the price falls to a pre-determined level. However this order could also be used to open a short position. Stop Buy If you have a short position, you may want to limit your exposure by buying in if the price rises to a pre-determined level. To do this you would use a Stop Buy order. You could also use this order type to open a long position when the price rises to a predetermined level.

21 Limit Buy This order type can be used to both establish a new position as well as realise a profit from an existing position. A Limit Buy allows you to buy below the current market price and is useful to close profitable short positions or open long positions once the price as fallen. Limit Sell If you want to sell short at a pre-determined level set by you, but only when the price is higher than the current price, you would use a Limit Sell order. You would also use this order type to close out a profitable long position. Guaranteed Stops You can also choose to limit the risk on CFDs by using a Guaranteed Stop order. This means that the stop loss you place is guaranteed to be executed at exactly the price specified. For example, if the current price is 742 and you placed a stop loss at 740 but the next available price in the market was 735, your order would still be executed at 740. There is a Premium Payable for this service at the time of opening the trade. Please note that this feature is only available on certain CFDs. GFTD Good for the day orders a limit order which only runs for one business day. At the end of the day, if the order hasn't been executed, it is cancelled. GTC Good until cancelled orders a limit order which you place once, to run until you either cancel it or change it. Please note that you must manage your open orders carefully.

22 are very competitively priced and start from just 10 Comm Fee Min. Comm. Initial Margin Requirement/NTR Funding Interest Long Position Funding Interest Short Position Guaranteed Stop Loss Premium UK Equities US Equities Euro Equities 0.2% 0.2% 0.2% 10 $ % 10% 10% 0.25% 0.25% N/A Index Comm Fee CFDs Spread Initial Margin Requirement/NTR Funding Interest Long Position Funding Interest Short Position Guaranteed Stop Loss Premium Please note that different LIBOR rates apply to each currency. These are available on request. FTSE 100 Wall Street S&P 500 NASDAQ 100 DAX 30 CAC 40 Swiss Market IBEX 35 MIB 30 Euro STOXX 50 Nikkei Dow 225 Hang Seng 10 $15 $15 $ Sfr HK$ % 5% 5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 3 index points 4 index points 0.4 index points N/A N/A N/A N/A N/A N/A N/A N/A N/A

23 Trade online or by phone Glossary of terms Once you've applied and your account is open, you have the option of trading online or by telephone. Whichever method you choose, Lorem ipsum dolor sit amet, consectetuer adipiscing elit, sed our charges are the same. diam nonummy nibh euismod tincidunt ut laoreet dolore magna aliquam erat volutpat. Ut wisi enim ad minim veniam, quis Call: to deal. nostrud exerci tation ullamcorper Lines are open between 7am and 9.15pm Monday to Friday. suscipit lobortis nisl ut aliquip ex ea commodo consequat. Duis autem vel eum iriure dolor in hendrerit in vulputate velit esse Online: and click CFDs. molestie consequat, vel illum Our website is open 24/7 but you can only deal during the appropriate market dolore eu hours. feugiat. If you have a customer service enquiry, please call our dedicated Support Team on Lines are open 8am to 8pm Monday to Friday. IWeb (UK) Limited, Registered in England No Registered Office: Trinity Road, Halifax, West Yorkshire HX1 2RG. Authorised and regulated by the Financial Services Authority and a Member of the London Stock Exchange. For the purposes of CFD trading, IWeb (UK) Limited has introduced you to which is a trading name of City Index Limited (CI), Moorgate Hall, 155 Moorgate, London EC2M 6XB. For the purposes of CFD trading the contract is between you and CI and your account is held with CI who are authorised and regulated by the Financial Services Authority and registered in England No home>