Disclosure on risks relating to Online Trading

Transcription

1 Disclosure on risks relating to Online Trading 1) General risks Under no circumstances will orders sent through the Online Trading Service be examined by the Bank or its employees prior to execution. The Bank does not provide, as a general rule, any advice to the Customer. Specifically, the Bank does not provide any service other than those necessary to carry out the orders of the Customer, does not dispense advice and does not manage his/her assets. The Bank performs activities of execution only. If the Bank performs a transaction with or on behalf of the Customer, this cannot be considered advice or a contribution to the outcome of the transaction nor a confirmation that the transaction is appropriate for the Customer's profile. Any contact between the Customer and the employees of the Bank or any information provided does not constitute consulting activity, nor recommendation by the Bank. The Bank does not review whether the transactions, decisions or strategies of the Customer are justified, appropriate or reasonable. The offer of financial services for Customers abroad can be subject to local legal restrictions. If the Bank does not have the authorisations necessary for every country, the offer of online services with reference to that specific country may be reduced. The Customer recognizes that the Bank has the right to modify or limit at any time and without advance notice the offer of the services available for the individual countries, regardless of the measures applicable to the particular case. The Customer acknowledges the fact that, by using the Online Trading Service outside Switzerland, he/she could potentially violate the local law. It is the responsibility of the Customer to get information on the matter. The Bank declines any responsibility in this regard. If he/she is a citizen of the United States (with single, double or multiple nationalities) or foreign resident with domicile in the United States (permanent residence permit or "green card" holder or long/frequent stays in the United States during the year or in the last two years), for legal and tax reasons, the Bank may grant access only to the foreign exchange market and the options on exchanges. The Bank cannot be held responsible for the advice provided to the Customer with regard to any tax charges which may result relative to the services provided by the Bank. 2) Technical and IT risks The Customer is aware and directly responsible for all the risks resulting from the use of the Online Trading Service. Risks connected with online trading include the possibility that: (i) an unauthorised third party accesses the Customer's account; (ii) the existence of a relationship between the Customer and the Bank is identified; (iii) computer viruses enter the computer system of the Customer without his/her knowing; (iv) third parties send communication to the Customer, pretending to represent the Bank; (v) chat conversations on the Platform between the Customer and the Bank are seen by third parties. The Bank does not assume responsibility towards the Customer regarding the use, the conditions or inherent operations. The Customer confirms and acknowledges that occasionally, and for any reason, the Online Trading Service may not be operative or not available for use due to a malfunction of the service or the hardware, a defect of the software, an interruption of the transmission of the service or other causes, and agrees to consider the Bank and any supplier exempt from responsibility for any damages resulting from the unavailability of the Online Trading Service. The Customer acknowledges that the Bank is not responsible for any losses, lost opportunities or increases in fees which may result from his/her inability to use the Online Trading Service to send orders or for finding information. More specifically, the Customer's access to the Online Trading Service, or any inherent part, may be limited or not accessible during times of peak demand, of extreme volatility of the markets, of system updates or other reasons. The Bank does not guarantee that the access or the use of the Online Trading Service will be uninterrupted or free from errors or that the Online Trading Service corresponds to particular criteria of performance or quality. Under no circumstances can the Bank or third parties involved in the creation, production, delivery or management of the Online Trading Service, be considered responsible for direct, indirect, accidental, extraordinary or consequential damage resulting from the use or the impossibility of using the Online Trading Service, or by any violation of responsibility including but not limited to that of interruption of business or loss of profit. The Customer must implement appropriate measures (such as the installation of anti virus software) and must arrange to purchase, install and configure immediately the appropriate hardware and/or software systems which allow the connection with the Online Trading Service. The Bank does not assume any responsibility for actions or omissions by third party suppliers or for any hardware and/or software system not provided by the Bank. The Customer acknowledges having alternative methods (to contact the Bank or third parties assigned by the Bank to provide services of assistance to the Customer in the use of the Online Trading Service), who will remain available for the transmission and the execution of his/her orders, if for any reason circumstances should prevent the transmission and execution of all or part of his/her orders through the Online Trading Service. More specifically, if the Customer's access to the Online Trading Service or to a part of it is limited or not available, the Customer agrees to use other means to send his/her orders or to obtain the necessary information, such as for example direct contact to 231M1309 Page 1 of 6

2 the Bank or to the third parties assigned by the Bank to provide assistance to the Customer in the use of the Online Trading Service. The Customer expressly accepts that the use of the Online Trading Service is at his/her exclusive risk. The Customer assumes full responsibility and recognises the risks of loss resulting from the use of the Online Trading Service and/or from the data obtained from it. Neither the Bank, nor any director, officer, employee, agent, affiliate, third party vendor, facility, supplier, authorised person, organisation able to regulate the exchange or compensation, other suppliers of data, information, or services of the Bank, guarantees that the Online Trading Service will be uninterrupted or free from errors, nor does the Bank provide any guarantee on the results obtained through the use of the Online Trading Service or for the promptness, sequence, accuracy, completeness, reliability or content of any information, service or transaction provided through the Online Trading Service. The Bank, in particular, cannot be held responsible for any breakdowns relative to the applications or the communication services, nor for delays in the statement of the transactions in the accounting ledgers or in their confirmation or for any breakdowns in the electronic circuits. Furthermore, the Bank cannot be held responsible for the performance of the system or for its use and any connected function by customers. Should there be an obvious error in the price indicated through the Online Trading Service, the Bank is not obliged to carry out any transaction (regardless of the fact that it was or was not yet confirmed). In this situation, the Bank has the right to cancel the transaction. In any case, the Bank is not responsible for any losses, damages, costs, expenses, obligations or claims affecting the Customer. 3) Financial and market risks The Customer acknowledges that the Contracts are carried out in conformity with Market Rules. In particular, the Customer acknowledges that Market Rules, in general, require ample operating margins in case of emergency or in case of unfavourable situations, and agrees that, if a market or other organization undertakes any action which could affect the Contract, the Bank can then make any decisions which, at its own discretion, the Bank believes being compliant with the interests of the Customer and/or the Bank. The Bank is in no way responsible for possible losses suffered by the Customer, because of the acts or omissions resulting from any market, organisation or for any reasonable action undertaken by the Bank deriving from the aforementioned acts or omissions. The Bank can, at its own discretion, define the existence of emergency or exceptional market conditions (an "Event of Force Majeure"); in this case, the Bank takes the necessary measures to inform the Customer. An Event of Force Majeure includes (non-comprehensive list): (i) any action, event or circumstance (including, without limitation, any interruption in the supply of energy, any breakdown in the electronic or communication equipment, strikes, riots or civil unrest) which, according to the Bank, prevents the maintenance of a regular market, in one or several currencies including those in which the Bank usually allows the Customer to stipulate Contracts; (ii) the suspension or the closing of any market or the renunciation or malfunction of any element on which the Bank bases, or to which it is connected in any way (i.e. quotations), respectively the imposition of limits or extraordinary or unusual trading conditions in any market context or event; (iii) the occurrence of an excessive movement in the level of any foreign exchange rate and/or corresponding market. The data included in the Online Trading Service do not constitute a binding offer. In particular, the information which is freely accessible such as foreign exchange and stock exchange rates, are not binding. In measuring specific equity values and/or unlisted financial products, the Bank uses the data given by the information providers, if available, taking no responsibility for verifying their consistency with the effective market values. The Bank does not assume any guarantee for the accuracy and the completeness of the data made available to the Customer through the Online Trading Service. The quotations of the Financial Instruments negotiated through the Online Trading Service can be subject to sudden fluctuations. The Customer accepts the possibility of experiencing a change in the price requested before a transaction is confirmed, in particular in the case in which time elapses between when the input procedure of a transaction was started and the moment when the Customer receives confirmation that it has been executed. The Customer confirms that he/she has received an appropriate disclosure on the risks generally connected with the purchase, sale and possession of equity, notably the trend risks, liquidity risks (particularly for equity values without floating and/or with limited trading activity), counterparty, trading and exchange rate and interest rate risks. The Customer declares that he/she has been informed that transactions in foreign exchanges, CFDs, futures and options are highly speculative products and entail a high level of financial risk, insofar as they are subject to extreme price oscillations that can give rise to substantial losses. Transactions should only be made in such products by individuals understanding the exact nature of the transactions stipulated, aware of the exposure to the risk and who can assume a risk of loss that is greater than the guarantee margin deposited (for margin operations). The suitability of such an action must therefore be carefully considered in view of the characteristics in terms of experience, objectives, financial resources and other circumstances. Most of the Financial Instruments traded Online are margin products: this means that a specific initial margin must be paid in at the time the Contract is stipulated. The initial margin is generally a percentage of the total Contract value that can be modified at any time depending on market volatility. Additionally, during the course of the Contract, a variation Page 2 of 6

3 margin is calculated regularly to consider any changes in value of the Contract or underlying assets. Given that the amount of the initial margin is fairly modest with respect to the Contract value, transactions are with "leverage effect", which means that a relatively modest market change will have a proportionally greater effect on the margin deposited or to be deposited. More specifically, if the market moves unfavourably with respect to the position held or margin levels are increased, substantial additional funds may require payment with short notice given in order to maintain the position. If the request for additional funds is not met within the terms established, the position can be liquidated as a loss and the investor will be liable for any resulting losses. It is therefore important to be aware of the fact that potential losses can be significantly greater than the value of the initial margin (and any additional margins) deposited with the Bank and that you may be obliged to close the position at the worst time possible. The Customer declares that he/she has been informed and is aware that the execution of transactions in currencies, precious metals, options, futures or CFDs can generate a leverage effect on the portfolio. The level of the leverage applied may depend on the margin required for the specific Financial Instrument. The leverage effect entails a multiplication, based on a specific coefficient, of the result (profit or loss) realised in a specific financial transaction. The use of the financial leverage boosts the effects of the market movements on the capital invested. A higher coefficient of leverage increase potential profits, but produces an equally significant increase in potential losses. If the activity underlying a trading operation records a movement opposite to the expectations, the financial leverage increases significantly the potential losses. The greater the coefficient of leverage used, the higher the risk of losing the entire investment in a short span of time. In addition, by using the leverage effect, theoretically one risks incurring losses which are greater than the capital invested. When trading through the Online Trading Service, the losses can be greater than the initial margin (and any additional margin contributions) that the Customer had deposited at the Bank. In extreme market situations, with very high volatility, it cannot be excluded that debit balances are created on the Customer's online portfolio. By signing the Request to access the Online Trading Service, the Customer declares that he/she has read and understood this risk disclosure, that he/she has acquired all the information and knowledge necessary to make his/her own decisions regarding the degree of leverage to be used in his/her trading operations, and lastly that he/she has acted in this regard independently from the Bank and holds the Bank harmless for every responsibility relative to the consequences of using the leverage effect in trading operations. The Customer confirms that his/her financial and asset situation allows him/her to meet any losses which could result from the trading using the Online Trading Service and completely accepts the risks connected to the investments which will be carried out. In the context of these risks, the fact must be reiterated that a position may only be liquidated with a significant loss. Furthermore, in certain market conditions it is not possible to immediately settle a position or limit the risk of loss to the extent desired. Past performance is not indicative of the future course of an investment. The execution of transactions in derivatives (such as, but not only, futures, options, CFDs, etc.) entails a high level of risk and unfavourable market movements may give rise to losses in excess of the equity originally allocated by the Customer to the investment; consequently, the Customer may lose more than the deposit held with by the Bank and incur all losses resulting from a Contract. Subscribing and/or purchasing shares and/or units investing in the capital of unlisted companies may be associated with the possibility of being unable to mobilise the investment and the risk of losing all or part of the capital invested. The regulations of the markets and/or the imbalance between supply and demand could temporarily make it impossible to carry out the trade orders, including the closing of positions which the Customer has decided to liquidate. When the Customer gives an order through the Online Trading Service, market conditions could prevent its revocation. The Bank, at its sole discretion, can deny the execution of the orders if the Bank believes that these break laws or market rules. In other cases, the rules and market uses can enable the intervention and retroactive cancellation of the transactions stipulated, particularly in the event of error, of illegal or anomalous transactions or specific market situations, in which case the Customer accepts any losses or consequences deriving from the cancellation. Some markets are not regulated, therefore in these cases the Contracts are carried out in connection with the applicable laws and the Customer will not benefit from any schedule, statutory or general, of compensation with regard to the trading activity carried out through the Bank. The possibility of executing limited or suspensive orders is not guaranteed at the price or the amount specified, if not specifically confirmed by the Bank for the specific order. Customer orders can be grouped with the orders of other Customers, with orders of the Bank and any company or person near to the Bank. Orders are grouped together if the Bank reasonably considers that this is generally in the overall interests of its Customers. However, the Customer acknowledges and accepts that the grouping may entail a less favourable price for the Customer with respect to where the order had been implemented differently. Depending on the market and product type, the Bank intervenes as buying agent for the Customer or counterparty. The Bank acts as buying agent in transactions on organised markets, whilst it acts as counterparty in the case of transactions in forex, CFDs and other over-the-counter products (OTC products). The Bank can, at its own discretion, choose the counterparties and markets to execute Customer orders. The Bank is not responsible for the losses or damages caused by (i) counterparts (for example Brokers) who do not fulfil their own Contractual obligations or by (ii) laws or provisions in the various countries in which it operates which may obstruct the execution of any operation. The Bank is also not Page 3 of 6

4 responsible for any damages suffered by the Customer following deeds or omissions by a counterparty of the Bank, by a market, by a compensation service or by any other third party intervening to enable the conclusion or execution of transactions or the storage of the Customer's assets. If, through the Online Trading Service, the Customer attempts to assume a position opposite toanother already opened position of the same underlying asset, the Bank may in accordance with the FIFO (first in - first out) principle close the opposite position opened first. The Customer is responsible for taking all steps to safeguard rights concerning the Financial Instruments traded on the Online Trading Service, in particular for giving the order to sell, exercise or sell subscription rights, exercise an option right, proceed to make payment for a share that has not been entirely freed up or proceed with a conversion. The Bank is not required to take any action. The Customer acknowledges and agrees that the Bank shall not demand the registration of named shares on the registration of shares of the company and shall not represent the Customer at general shareholders' meetings, nor order the necessary registration documents. EXCHANGE MARKET The exchange market enables the purchase and sale of currencies, one against the other, and speculation on exchange rate differences. Exchange rates may be affected by world political and economic events, by differences in interest rates and by a great many other factors, including extreme weather conditions, acts of terrorism etc. Changes in exchange rates between different currencies can lead to both increases and decreases in the investment. CONTRACTS FOR DIFFERENCE (CFDs) A Contract for Difference (CFD) is an agreement between the Customer and the Bank which at the end of the Contract establishes the difference between the opening price of an underlying position (such as, for example, indexes or raw materials) and its closing price. The amount of each profit or loss incurred on a CFD will be equal to the difference between the price of the underlying when the CFD is opened and the price of the underlying when the CFD is closed, multiplied by the number of the CFDs. The CFDs which can be negotiated through the Online Trading Service have different underlying assets (such as, for example, futures, options, forex, etc.) and are traded off exchange with CFD brokers or market makers. The price of the CFDs is therefore linked to the price of the underlying assets. Trading on CFDs entails a leverage effect which can turn out to be greater than the leverage effect generated by an investment in futures on the market, since the Bank defines a margin which may be different than that required by the market in case of negotiation of futures. Having a long position in CFDs means buying CFDs on the market in order to sell them at a higher price and establish a deposit margin. In this situation the Customer is identified as the position which acquired the CFD and the Bank is identified as the short party. When the Customer is the long party, he/she earns a profit if the underlying index or the raw materials rise while the CFD position is open. Otherwise, the Customer suffers a loss if the price of the underlying index or raw materials drops while the CFD position is open. The Customer can lose up to the total value of the underlying element at the time of the purchase multiplied by the number of CFDs. Theoretically, the losses could exceed the capital invested. Having a short position in CFDs means selling the CFDs on the market with the expectation of buying them back at a lower price, depositing a sum as margin of guarantee. In this situation the Customer is identified as the position which sold the CFD and the Bank is identified as the long party. When the Customer is the short party, he/she earns a profit if the underlying index or the raw materials drop while the CFD position is open. Otherwise, the Customer suffers a loss if the price of the underlying index or raw materials increases while the CFD position is open. Theoretically, a limit does not exist since the market value of the underlying index or raw material can increase and the potential loss of the Customer is therefore unlimited. Some of the CFDs may have maturity dates and some CFDs may even have maturity dates which may not correspond to the maturity dates of the underlying products on the market. All the positions opened in CFDs will be closed at the price on the maturity date, which could be more unfavourable for the Customer compared to the course of the underlying element on the market, and the positions will not be rolled automatically to a new Contract. As a result of existing market conditions, the Customer may not be able to sell a CFD even if this CFD is offered by the Bank or, when the Customer has already sold a CFD, the Bank could force the Customer to close his/her position. This can happen if the underlying asset cannot be borrowed for various reasons, such as the announcement of an offer of purchase, payment of dividends, detachment of rights or significant aggressive sales orders on the market. A CFD replicates the purchase or sale of the underlying shares but does not assign voting rights or other rights enjoyed by shareholders. Although the investor is responsible for the shares, the Bank covers the market position and is therefore the physical owner. Consequently, the investor has no voting rights over corporate actions such as the issue of shares, issue of rights, share splits or reverse splits, etc. For example, the issue of shares by the company in which CFDs are held may automatically have an impact on the position held in CFDs and therefore on the account and margin Page 4 of 6

5 requirements. This also means that if the margin is used in full following the issue of shares (or any other corporate action), the position may be closed without notice. Holders of long positions in CFDs have the right, when dividends are distributed on the underlying shares, to receive proportional payment, net of any applicable tax deductions. Debits or credits of dividends are made by the Bank and not by the company distributing dividends and only correspond to adjustments of liquidity reflecting the corporate actions relating to the underlying shares. Payment will therefore take no consideration of any specific dividend taxation regime such as credits allocating dividends as part of dual taxation agreements (whereby the shareholder can reduce the tax paid on the dividend if the company issuing the dividend has already paid part of the tax due). Payment of dividends on CFDs may therefore differ from the dividend paid if the physical share was held. Holders of short positions in CFDs must pay an amount equal to the gross dividend paid on the underlying shares. Amounts will be credited or debited to the investor's account on the date on which the dividend is detached (the "ex-date"), except where the dividend rate is not confirmed (e.g. if the dividend is declared in a currency and must be converted into another currency prior to the payment date), in which case the dividend will be paid on the payment date. OPTIONS Options give the buyer the right to buy (call options) or sell (put options) an asset (underlying) by a certain date (expiration date) at a given price (base price or strike price). In listed options (American style), this right may be exercised at any time. The price paid for this right is named "Premium". In the event of purchasing an option (put or call), the maximum loss is the premium paid initially. If deciding to exercise the call option, the underlying asset is physically delivered and this includes the risks connected with the position in the asset received in exchange for the exercise of the option. In the event of the sale of options, if used, the seller is obliged to buy (put sale) or delivery (call sale) an asset by a certain date at a certain price. Differently from the purchase of options where there is the right to exercise a right, in the sale of options, there is an obligation to buy or sell an underlying asset at an established price. We speak of "naked short call sales" when at the time of selling the option, the underlying assets are not held. In the event of assignment, a loss is incurred equal to the difference between the market price of the underlying asset and the exercise price. The maximum potential loss in this case can in theory be unlimited. We speak of "naked short put sales" when at the time of selling the put, no short position is held on the underlying asset. Under the scope of the sale of options, the maximum earnings is determined by the premium initially collected. In the event of assignment, a loss is incurred equal to the difference between the market price of the underlying asset and the exercise price. The maximum potential loss on the sale of puts can be all the equivalent value of the underlying asset traded, in the event that the underlying asset is to be purchased at the exercise price and sold at 0. ETFs/ETCs ETF is an investment fund characterised by passive management, insofar as it mirrors the trend of a given share index, traded publicly on the stock exchange, just as traditional shares. ETC is an investment fund characterised by passive management, insofar as it mirrors the trend of a given commodity index, traded publicly on the stock exchange, just as traditional shares. The purchase and sale of ETCs takes place in the same way as for shares, but provides exposure to a range of commodities and related indexes that includes energy sources, agricultural goods, metals and their non-metal raw materials. ETCs are open-ended term securities, just like ETFs and are assets supported by physical reserves of precious metals or Contracts for commodities (futures). ETFs and ETCs are therefore subject to risks of volatility and liquidity connected with the related underlying asset. The possibilities of redemption may be affected by the credit risk to which the issuing company is exposed and the importance of participants in the reference secondary market. Additionally, ETFs and ETCs may not be authorised for public offering and/or distribution in the jurisdiction in which the Customer has domicile and/or operates by means of the Online Trading Service. The Customer is aware that lack of authorisation to distribution may mean that the investment fund has particular risk elements and/or a lower level of protection and information for the investor. FORWARD AND FUTURE CONTRACTS Forward and future Contracts imply the obligation to deliver or receive a pre-established quantity of an underlying asset at a price agreed on the Contract date, on a specified expiration date. Futures are traded on the stock exchange. They take the form of Contracts with standardised quantities of underlying assets and expiration dates. Forwards are not traded on the stock exchange; consequently, they are defined as "forward OTCs" (forward over-the-counter). Their technical characteristics may also be standardised or can otherwise be agreed by buyer and seller. The investor has the right to close the Contract at any time prior to the expiration date. The related closure methods depend on the type of Contract or the practice of the stock exchange: the Contract is sold or an offsetting operation is agreed with identical conditions. The conclusion of an offsetting operation means that the two series of opposite obligations for delivery are Page 5 of 6

6 mutually cancelled out. For forward sales Contracts, the underlying asset must be delivered at the price originally agreed, even if the market value has risen above the price agreed. In this case, the risk is the loss of the difference between the two amounts. If sales are made with a forward Contract of an underlying asset not held at the Contract stipulation, we speak of short sales. In this case, the risk is of having to acquire the underlying asset at a disadvantageous market price in order to fulfil the obligation of making delivery on the Contract expiration date. In theory, there is no limit to how much the market value of the underlying asset can increase, hence potential losses are also unlimited. For forward purchase Contracts, the underlying asset must be received at the price originally agreed, even if the market value has dropped below the price agreed. The potential loss corresponds to the price originally agreed. The seller of financial futures who does not own the underlying asset assumes supplementary risks if he/she is required to physically deliver the underlying asset or pay the total amount due in cash. The Bank does not physically deliver the underlying asset on the expiration date of a futures Contract. The Customer must verify the expiration dates and close the positions by these. Any positions open on the expiration date will be automatically closed by the Bank. Any profits, losses or costs will be borne by the Customer. This document is not intended to provide a complete disclosure on all risks and cannot replace a personal understanding and experience of and with these products. Page 6 of 6