CONTRACTS FOR DIFFERENCE

Transcription

1 PRODUCT DISCLOSURE STATEMENT CONTRACTS FOR DIFFERENCE Halifax Investment Services Limited Australian Financial Services Licence No Date 20th October 2014 HALIFAX Product Disclosure Statement 1

2 IMPORTANT INFORMATION AND DISCLAIMER In addition to Reading, Understanding and acknowledging this PDS you must complete a Client Contract For Difference (CFD) Suitability Test As of the 31st of March 2012, all issuers dealing in Over-the-counter (OTC) derivatives are required to meet the disclosure benchmarks outlined in Regulatory Guide 227: Over-thecounter contracts for difference: Improving Disclosure for Retail Investors. These benchmarks are not mandatory, however if they are not satisfied the issuer has an obligation to disclose on an if not, why not basis the reasons why the benchmark is not met and what they are doing to address the issue. Meeting the Disclosure Benchmark Client Qualification As many investors do not receive advice about whether or not (CFDs) are appropriate for their objectives, financial situation and needs ASIC has determined that issuers are to play a role in ensuring that only investors with a sound understanding of the features and risks of CFDs are eligible to open an Account and trade. This is as ASIC believes that investors who thoroughly understand the features and risks of the product will be able to determine whether Overthe-counter (i.e. non-exchange traded) contracts for difference (OTC CFDs) are an appropriate investment for them and to manage the risks associated with trading on an ongoing basis. This requirement is enforced through Disclosure Benchmark 1 of RG 227. Benchmark 1 of RG 227 reads: An issuer should maintain and apply a written client qualification policy that: (a) Sets out the minimum qualification criteria that prospective investors will need to demonstrate they meet before the issuer will agree to open a new Account on their behalf; (b) Outlines the processes the issuer has in place to ensure that prospective investors who do not meet the qualification criteria are not able to open an Account and trade in CFDs; and (c) Requires the issuer to keep written records of client assessments. A client suitability test has been implemented as part of the policy required to meet part (a). A grading scheme has also been adopted to meet part (b) of the benchmark and ensure that investors who do not pass the test are not able to open an Account and trade in CFDs. These documents will be kept on record as a part of satisfying part (c). The client suitability test includes questions which both test the investor s knowledge and also act to reiterate some aspects of the disclosure requirements for OTC CFDs. For example, a number of questions are designed so that the correct answer will ensure that the investor recognises or appreciates risks inherent in OTC CFDs. It should be remembered that testing client knowledge is the primary aim of the client suitability test reinforcing the disclosure requirements is merely a convenient way to enhance investor understanding. You can complete your Suitability Test prior to or after opening an Account with Halifax. To find out more, please contact Halifax Accounts on (overseas ) after Account Opening. Decisions to invest in ( CFD ) are very important. CFDs often have significant risks and consequences. CFDs can be highly leveraged with a high degree of risk. Potential investors should be experienced in CFD products and/or other derivative products or understand and accept the risks of investing in such products. Refer to section 11 for more information about significant risks in trading CFD products. In preparing this Product Disclosure Statement ( PDS ), we have not considered your personal circumstances. This document provides features and risks of CFD products. Before trading in CFD products, you need to be satisfied that these financial products are appropriate to your financial objectives, situation and needs. You must read and acknowledge that before opening an Account and beginning to trade you have read this PDS in its entirety and that you understand it. It is your responsibility to ensure that you fully understand the products, how they are traded and the risks involved. Halifax also recommends that you consider seeking financial, legal, taxation and other professional advice to ensure that you fully understand CFD products and that they are appropriate for you before you begin trading in these products. To the extent permitted by law, neither Halifax 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. 2 HALIFAX Product Disclosure Statement

3 DO YOU HAVE ALL THE RELEVANT DOCUMENTS? This PDS is subject to the detailed provisions of the Client Services Agreement (CSA) and Financial Services Guide ( FSG ). You must ensure you have read and fully understand the Client Services Agreement, the FSG and this PDS. Index 1. Introduction Terms and Conditions The Purpose of this PDS Changes to this PDS The Financial Products this PDS Covers... 5 BEFORE YOU TRADE CFDS, YOU MUST CAREFULLY CONSIDER WHICH TRADING PLATFORM BEST SUITS YOUR NEEDS It is very important for you to understand our arrangements with our Platform Counterparties, as they can affect key terms of the CFD Transactions you enter into and can fundamentally change the nature of your legal rights in respect of a CFD and your Account in general. Your choice of Trading Platform for a CFD Transaction can significantly impact: The way we deal with the funds in your Account, which, in turn, affects the credit risk you take on Halifax; The credit risk you take on the Platform Counterparty for your Trading Platform; The fees and costs you are charged for your CFD Transactions; and The range of CFD Transactions you are able to enter into. In order to enter into a CFD, you must select a Trading Platform About Halifax Purpose of CFD products RG227 Disclosure Benchmarks Key Features of CFDs Key Benefits Significant risks CFDs Margin obligations Opening and Closing Out a CFD Position Electronic Trading Platforms Trading Hours Trading Examples How we deal with your Money Charges, fees and other amounts payable Confirmation of transactions Market Information Cooling Off Arrangements Taxation implications Dispute Resolution Privacy Glossary of terms Annexure A Schedules A F However, in some limited circumstances, we may allow you to enter into a CFD without choosing an Underlying Platform. In this case your funds will be treated as Non Trust, please refer to page 6 What is the difference between a Trust Account Platform and a Non Trust Account Platform?. HALIFAX Product Disclosure Statement 3

4 1. Introduction This PDS is dated 20th October 2014 and is issued by Halifax Investment Services Ltd ( Halifax ). Halifax is an unlisted Australian public company (ABN ), an Australian Stock Exchange (ASX) market participant that holds an Australian financial services licence issued by the Australian Securities and Investments Commission ( ASIC ) (AFS Licence number ). Under the Corporations Act 2001 (Cth) ( Corporations Act ), Halifax is regarded as the issuer of financial products which are derivatives. This PDS has been prepared by Halifax as the issuer of ( CFDs ) referred to in this PDS. CFDs are an Over the Counter ( OTC ) derivative product. The information in this PDS is general information only and does not take into account your personal objectives, financial situation and needs. We also refer you to the detailed provisions of the Client Services Agreement and the FSG. Before making a decision to acquire the financial products described in this PDS you should read this PDS, the FSG and Client Services Agreement and be satisfied that any trading you undertake in relation to those CFD products is appropriate in view of your objectives, financial situation and needs. You can access the FSG and the Client Services Agreement from our website or, by calling Halifax and requesting that a paper copy be provided to you free of charge. See the glossary of terms in section 27 for definitions we use in this PDS. 2. Terms and Conditions This PDS and the FSG set out important information about the financial products and services Halifax offers and about Halifax itself. Additional legal terms governing your dealing with us are set out in: your Client Services Agreement with us; any supplementary terms for particular financial products; any supplementary terms for any electronic Trading Platform which you use. You will need to enter into a Client Services Agreement by completing the application form. The Client Services Agreement sets out the general legal terms of your dealings with us for the products covered by this PDS and also for dealings not covered by this PDS (such as trading in other financial products we offer). By completing an application form you agree to the terms of the Client Services Agreement. 3. The Purpose of this PDS Under the Corporations Act, a retail client must receive a PDS before acquiring a financial product. The PDS is the document that sets out the significant features of a financial product, including its risks, benefits, costs and fees and other related information. The purpose of this PDS is to provide you with sufficient information to make an informed decision in relation to the acquisition of our financial products. You may also use this PDS to compare the financial products described with similar financial products offered by other issuers i.e. other CFD providers. This PDS seeks to explain to you about our products in a clear, concise and effective manner. When we use the terms Halifax, we, our or us in this PDS, the reference is to Halifax, the issuer of the CFD products. When we use the term you we mean you as the applicant for or holder of our CFD products described in this PDS. When we refer to client we mean you or another applicant for or holder our CFD products issued by us. This PDS is an important document and provides you with key information about certain financial products that we offer. CFD products can be highly leveraged and speculative with a high degree of risk. Potential investors should understand the risks of investing in CFD contracts before making any decision to invest. Before trading in the CFD products referred to in this PDS you should give consideration to your objectives, financial situation and needs. We recommend that you take all reasonable steps to fully understand the possible outcomes of trades and strategies in relation to the CFD products offered. You should also be aware of the risks involved and be satisfied that trading in these products is suitable for you in view of your financial circumstances. If you have any questions in relation to this PDS, please do not hesitate to contact us (our contact details are in section 6 of this PDS). We are required to give you this PDS because we are the issuer of the financial products described in this PDS. 4 HALIFAX Product Disclosure Statement

5 Other Jurisdictions The offer to which this PDS relates is available only to persons receiving the PDS in Australia. The distribution of this PDS in jurisdictions outside Australia may be subject to legal restrictions. Any person who resides outside Australia who gains access to this PDS should comply with any such restrictions as failure to do so may constitute a violation of financial services laws. The offer to which this PDS relates is not available to US investors. The Application of this PDS We have recently made a number of fundamental changes to the terms of the CFDs as reflected in this PDS. This PDS relates to Accounts opened after the date of this PDS. If you are one of our pre-existing clients and you have entered into a Client Services Agreement before the date of this PDS, your CFD Transactions will continue to be governed by your existing Client Services Agreement and the PDS under which you invested. You can elect to transition to the terms of the CFDs under this PDS by contacting us and agreeing to vary the terms of your Client Services Agreement. 4. Changes to this PDS This PDS is subject to change from time to time and may be updated on our website A copy can be downloaded from our website or, by calling us and requesting that a paper copy be provided to you free of charge. If any new information is materially adverse information, we will issue a new or supplementary PDS with the new information. If the new information is not materially adverse, we may not issue a new PDS or Supplementary PDS but you will be able to find the updated information on our website at or by contacting us. Our contact details are set out in section 6 of this PDS. 5. The Financial Products this PDS Covers This is a PDS for CFD products offered by us. These are OTC derivative contracts. An OTC product is one that is traded off-market rather than on an exchange such as a stock exchange or futures exchange. A CFD is an agreement by which you can make a profit or loss from changes in the market price, value or level of the Underlying Product of a CFD, usually an ASX traded share or a share listed on an international stock exchange (it may also be a market index or a commodity, bond or interest rate) without actually owning that financial product (share) or having any indirect interest in the financial product. Because the value of the CFD is (in part) derived from the value of the Underlying Product, a CFD is a derivative product. We offer CFD products on: (i) Australian and international shares ( Share CFDs ) refer to section for additional details; (ii) Australian and international market indices ( Index CFDs ) refer to section for additional details; and (iii) Commodities, bonds and interest rates ( Expiring CFDs ) refer to section for additional details. Each CFD Transaction we enter into with you we will enter into as principal. What are the Trading Platforms and how do they affect my CFDs? We are a 100% straight through processor CFD issuer, which means that we essentially hedge 100% of our exposure to you under each CFD Transaction. This means that for each CFD Transaction you enter into with us, we will hedge our exposure to you by entering into an equivalent matching contract for difference with a Platform Counterparty (referred to as the Hedge Transaction ). It is very important for you to understand the hedging arrangements we enter into with our Platform Counterparties as these arrangements can affect a number of features of your CFDs. For your CFD Transactions, you can choose one or more of the approved Platform Counterparties we will enter into for our Hedging Transaction. You make this choice by choosing which Trading Platform to use we offer a separate Trading Platform for each underlying Platform Counterparty, with each platform having a separate online interface. That is, the online interface you use to enter into a CFD Transaction, or to manage your Account will differ depending on which Trading Platform (i.e. which Platform Counterparty) you select. You can change Trading Platforms from time to time by contacting us and/or choose to have one or more trading platforms at any one time, however an open position cannot be transferred from one platform to another. It is very important for you to understand our arrangements with our Platform Counterparties, as they can affect key terms of the CFD Transactions you enter into and can fundamentally change the nature of your legal rights in respect of a CFD Transaction and your Account in general. HALIFAX Product Disclosure Statement 5

6 In particular, your choice of Trading Platform for a CFD Transaction can impact: The way we deal with the funds in your Account. This, in turn, affects the credit risk you take on us. In particular, if you use a Non Trust Account Platform to trade in CFDs your rights against us in respect of the balance of your Account will be unsecured and your claims against us will rank equally with claims by our other unsecured creditors; The credit risk you take on the Platform Counterparty for your Trading Platform; The fees and costs you are charged for the relevant Transaction; and The range of CFD Transactions you are able to enter into. Generally, you cannot enter into a CFD Transaction without selecting a Trading Platform. For further detail, refer to Schedule C. What is the difference between a Trust Account Platform and a Non Trust Account Platform? There is a fundamental difference in the way we treat the balance of your Account depending on whether you use a Trust Account Platform or a Non Trust Account Platform. The Trust Account Platforms are: Halifaxonline (for which, Saxo Capital Markets is our Platform Counterparty); and Trader Work Station (for which Interactive Brokers is our Platform Counterparty). The Non Trust Account Platforms are: FX2 Dealbook (for which Global Futures & Forex is our Platform Counterparty); GAIN MetaTrader (for which GAIN Capital is our Platform Counterparty); and FXDD MetaTrader (for which FXDD is our Platform Counterparty). How we treat your money under Trust Account Platforms For the Trust Account Platforms, amounts you pay to us are deposited into a client trust account maintained by us. This means that client funds (and property) transferred to us through Trust Account Platforms are segregated from our own funds (or property). Client monies (Net Free Equity) are held, used and withdrawn in accordance with the Corporations Act, this PDS and our Client Services Agreement. In brief, this means that those funds are not available to pay general creditors in the event of our receivership or liquidation. Amounts used to meet Margin Requirements will be deducted from the Trust Account and paid to us/ respective counterparties (if required). How we treat your money under Non Trust Account Platforms By contrast to the Trust Account Platforms, for the Non Trust Account Platforms, all amounts you pay to us will be absolutely owned by us from the time of receipt and will be paid into our account. There will be no segregation of this money or property. This means that those funds are available to pay general creditors in the event of our receivership or liquidation. How do I take credit risk on the Platform Counterparty for my Trading Platform? For each CFD you enter into, we will hedge our exposure to you by entering into an equivalent contract for difference with a Platform Counterparty. However, when you enter into a CFD Transaction, you transact with us in a principal capacity. That is, your contractual relationship is with us only, and you have no rights of recourse to the relevant Platform Counterparty, or to any other person. However, you still take credit exposure on the Platform Counterparty, because under the terms of your CFD Transaction, our obligations to you are linked to the performance by the Platform Counterparty of its obligations under the Hedge Transaction. That is, to the extent the Platform Counterparty to a Hedge Transaction for your CFD Transaction fails to perform its obligations under the Hedge Transaction, our obligations to you in respect of your CFD Transaction will be reduced accordingly. This means that if an insolvency event occurs in respect of the Platform Counterparty for your Trading Platform, you might lose some or all of the balance of your Account in that Trading Platform (even though we might continue to be solvent). In addition, you might face considerable delays before you are able to access the amount (if any) that is able to be recovered from the Platform Counterparty. 6 HALIFAX Product Disclosure Statement

7 Do I also take credit risk on Halifax? Yes. Your rights against us in respect of your Account are unsecured contractual rights (with the exception of the amount held in the client trust account for you (i.e. your Net Free Equity) which is applicable only to the Trust Account Platforms). How does my choice of Trading Platform affect the fees and costs I am charged? The fees and costs you are charged will differ depending on your choice of Trading Platform. This is because the fees we charge you reflect the fees that we are charged under the Hedge Transaction (plus various spreads or margins we apply for our profit). The fees and costs charged in respect of each Trading Platform are described in section 19 and in the tables in Schedules A-B. There can be considerable differences in the fees charged in respect of each Trading Platform, so it is very important that you understand the various fee options so that you can choose which Trading Platform best suits your needs. 6. About Halifax We are the issuer of this PDS and the issuer of the CFD products referred to in this PDS. In accordance with our AFS Licence, we are authorised by ASIC to advise, deal and make a market to both retail and wholesale clients in derivatives. CFD products are derivatives. Pursuant to our AFS Licence, among other things, we are also authorised to provide general and/or personal financial product advice in relation to, and to deal in, the following products for both retail and wholesale clients: (i) deposit and payment products limited to basic deposits; (ii) interests in managed investment schemes excluding investor directed portfolio services; (iii) foreign exchange contracts (and make a market); (iv) securities; and (v) miscellaneous financial investment products (limited to managed investment warrants). All enquiries to us should be made during business hours to the Operations Manager. Our contact details are: Contact Details: The Operations Manager Halifax Investment Services Ltd Governor Phillip Tower Level 40, 1 Farrer Place Sydney, NSW 2000 Phone: Facsimile: operations@halifaxonline.com.au Website: 7. Purpose of CFD products CFD products are generally used for one of two purposes hedging or speculating. CFDs can provide those who deal in the Underlying Product with a facility for managing the risks associated with changing prices, value or levels for those investments. This strategy is known as hedging. CFDs are also traded by speculators, who trade in the anticipation of profiting purely from changing prices, value or levels in the Underlying Product. Generally, trading CFDs allows you to leverage your positions to take a much greater exposure than if you were to purchase the Underlying Product. Trading in CFDs does however, involve significant risk. Transactions should only be entered into by traders and investors who understand the nature and extent of their rights, obligations and risks (for more information on risks refer to section 11 of this PDS). HALIFAX Product Disclosure Statement 7

8 8. RG227 Disclosure Benchmarks ASIC Regulatory Guide 227 requires issuers of over-the-counter (OTC) derivatives to publish certain information addressing a range of disclosure benchmarks. These benchmarks are required to be addressed on an if not, why not basis, and are intended to assist retail investors to properly understand the complexity and risks of trading in OTC derivative products, particularly with regard to leverage. There are 7 disclosure benchmarks required to be addressed, all of which we are of the view, have been met by us. Our compliance with each benchmark is addressed in the following table: Benchmark description How does Halifax meet this benchmark? Relevant sections of the PDS which may provide further relevant information Client qualification Opening Collateral We maintain and apply a written policy which sets out the minimum qualification criteria that you will need to demonstrate before we will open a trading Account for you. We also maintain a written policy/procedure to ensure such criteria are properly applied, and unsuitable investors are not accepted. You can request a copy of our policies by contacting our Compliance Officer at compliance@halifaxonline.com.au. We keep records of our assessments. Please note that we do not provide personal advice regarding the suitability of trading in CFDs for your personal financial circumstances and objectives. However, we generally will not allow you to open an Account unless you are able to satisfactorily answer the questionnaire included in our application form which addresses the following criteria: Previous trading experience in financial products; Understanding of leverage, margins and volatility; Understanding of the key features of the product; Understanding the trading process and relevant technology; Ability to monitor and manage the risks of trading; and Understanding that only risk capital should be traded. We only permit clients to open an Account and trade with cleared funds (i.e. transfer of cash from your bank account to your trading account). Please note that credit cards may not be used to open or trade an account at any time. We do not accept other financial products as collateral for opening or trading an account, due to the potential for double leverage in such circumstances. Section 13.5 Counterparty risk hedging We maintain and apply a written policy to manage our exposure to market risk from client positions. This includes strict risk management controls to assess and monitor our Platform Counterparties (to ensure they are of sufficient financial standing, are licensed by a comparable regulator, and are of sound reputation). We are a 100% straight through processor, meaning that we essentially hedge 100% of our exposure to you in respect of CFDs. We facilitate all CFD Transactions through our Platform Counterparties. A summary of our policy, which notes our current approved Platform Counterparties, is available on our website (and may be updated from time to time as Platform Counterparties change). Section HALIFAX Product Disclosure Statement

9 Benchmark description How does Halifax meet this benchmark? Relevant sections of the PDS which may provide further relevant information Counterparty risk financial resources We maintain and apply a written policy to ensure the ongoing maintenance of adequate financial resources. Please note that we have a designated compliance officer who monitors our compliance with our licence conditions, including our capital requirements, 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. Please note we do not undertake stress testing in relation to un-hedged market exposures, as all transactions with clients are fully hedged. While you have no rights of recourse against the Platform Counterparty for your Trading Platform in respect of any CFD Transaction (we transact with each Platform Counterparty in respect of our Hedge Transactions solely as principal), you still take credit risk on the Platform Counterparty for your Trading Platform (in addition to taking credit risk on us). This is because under the terms of your CFD Transaction, our obligations to you are linked to the performance by the Platform Counterparty of its obligations under the corresponding Hedge Transaction. That is, to the extent the Platform Counterparty for our Hedge Transaction for a CFD Transaction fails to perform its obligations under the Hedge Transaction, our obligations to you in respect of your corresponding CFD Transaction will be reduced accordingly. This means that if an insolvency event occurs in respect of the Platform Counterparty for your Trading Platform, you might lose some or all of the balance of your Account in that Trading Platform (even though we might continue to be solvent). In addition, you might face considerable delays before you are able to access the amount (if any) that is able to be recovered from the Platform Counterparty. Section 11.1 HALIFAX Product Disclosure Statement 9

10 Benchmark description How does Halifax meet this benchmark? Relevant sections of the PDS which may provide further relevant information Client money There is a fundamental difference in the way we treat the balance of your Account depending on whether you use a Trust Account Platform or a Non Trust Account Platform. Section 18 Trust Account Platforms For the Trust Account Platforms, we maintain and apply a clear policy with regard to the use of client money. You can request a copy of our policies by contacting our Compliance Officer at compliance@halifaxonline.com. au. Please note that money you transfer to us for your trading Account for a Trust Account Platform is co-mingled with other client money in our client trust account. Such monies are only applied to client trades/ settlement obligations and to pay agreed fees etc., in accordance with the Corporations Act. Monies paid to us in respect of your trading Account to meet margins, deposits, fees, transaction settlements, or other costs shall be immediately on-forwarded (where applicable) to our licensed third party clearing and execution providers, and applied against your margin, exchange, fee and settlement obligations. Client monies which are held pending future transactions and payments, are retained in our segregated account in accordance with the Corporations Act. It is important to note that holding your money in one or more segregated accounts may not afford you absolute protection. Suspended or halted underlying assets Non Trust Account Platforms By contrast to the Trust Account Platforms, for the Non Trust Account Platforms, amounts you pay to us will be treated as amounts paid to purchase a financial product from us (or an increased interest in the financial product) and will be paid into our account and will be absolutely owned by us from the time of receipt. There will be no segregation of your money or property. In brief, this means that those funds are available to pay general creditors in the event of our receivership or liquidation. An Underlying 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. We may, in our absolute discretion, cancel your order in respect of a CFD transaction which has not yet been opened, or close any open CFD, where the Underlying Product is the subject of a trading halt, suspension or delisting. If the CFD is over a security which ceases to be quoted on the Exchange or is suspended from quotation for 5 consecutive Business Days on that exchange, we may elect to close the CFD, rather than change the margin requirements or re-price the position. When you place an order for a CFD with us, we will place a corresponding order to enter into the corresponding Hedge Transaction to hedge our exposure to you. We have the discretion as to when and if we 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 Hedge Transaction cannot be entered into. Accordingly, we may at any time determine, in our absolute discretion, that we will not permit the entry into CFDs over one or more Underlying Products. Section HALIFAX Product Disclosure Statement

11 Benchmark description How does Halifax meet this benchmark? Relevant sections of the PDS which may provide further relevant information Margin calls We maintain and apply a written policy detailing our margining practices. This details 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. Clients are required to monitor all open positions themselves on a real-time basis intraday, to ensure changing Margin Requirements are identified and actioned in a timely manner. We will not notify you of Margin Calls it is your responsibility to monitor your trading Account and fund Margin Calls accordingly. Please note that certain market conditions or events may trigger extreme volatility, requiring urgent funds to be applied to retain your open positions. We reserve our full rights to immediately close positions in relation to which Margin Calls have not been met, in order to protect against exposure to losses in the positions. Trading in OTC derivative 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 13 HALIFAX Product Disclosure Statement 11

12 9. Key Features of CFDs Other features of CFDs are described as follows: The key features of CFDs are: A CFD product broadly replicates: the price movement of the Underlying Security (in the case of Share CFDs); the change in level of an Underlying Index (in the case of Index CFDs); or the movement of the price, value or level of an Underlying Commodity, Underlying Bond or Underlying Interest Rate (in the case of Expiring CFDs). That is, if the price, value or level of the Underlying Product changes, so will the value of the CFD. Share CFDs are a trading solution that provides the opportunity to profit (or incur loss) by dealing in the Underlying Security without having to actually own the Underlying Security. Unlike contracts traded on an exchange, OTC products are not standardised. The terms of a CFD are individually tailored to the particular requirements of the parties involved in the contract i.e. us and the client. In the case of Share CFDs, you have no right or obligation to acquire the Underlying Security itself. This is unlike trading in the Underlying Security where you acquire a beneficial interest in the actual share. As the holder of a Share CFD, you do not have a beneficial interest in the Underlying Security and you have none of the rights of a shareholder, such as voting rights. You are also not entitled to dividends or other distributions which may be paid in respect of the Underlying Security (in the case of Share CFDs). However, certain cash adjustments may be made to your Account (for more information see sections 12.6 to 12.8 of this PDS). CFDs are OTC derivative products with Halifax acting as counterparty (and principal) in its dealings with you. It is a transaction between you and us and can only be entered into with us and Closed Out with us. It is not possible to Close Out the CFD with any other party. CFDs are subject to Margin Requirements and marked to market on a daily basis (for more information see section 13 of this PDS). CFDs generally do not have an expiry date (unless the underlying itself has an expiry date i.e. Expiring CFDs), and will remain in place until either you or we, in our discretion, Close Out the open position. Expiring CFDs will be Closed Out on the expiry date for the Underlying Instrument unless Closed Out by you or us prior to that date Quotes A CFD quote represents the bid/ask spread for the Underlying Product. E.g. where one ANZ share is the Underlying Product, the CFD may be quoted as 33.70/ This quote means that you can: (a) buy the CFD (i.e. enter into a long CFD) at 33.71; and/or (b) sell the CFD (i.e. enter into a short CFD) at The same quoting process applies in the case of Expiring CFDs and Index CFDs. There are a number of additional costs incurred when CFDs are entered into or Closed Out, as described in section 19 and Schedule A-B You can take both long and short positions You can take both long and short CFD positions. If you take a long position (i.e. you purchase CFDs), you profit from a rise in the price, value or level of the Underlying Product, and you lose if the price, value or level of the Underlying Product falls. Conversely, if you take a short position (i.e. you sell CFDs), you profit from a fall in the price, value or level of the Underlying Product and lose if the Underlying Product s price, value or level rises. As well as Share CFDs, you can also enter into CFDs on many world indices which are referred to as Index CFDs. The same principles apply you will go short if you think the market index is going to fall, or go long if you think the index is going to rise. This can be useful if you want to follow a specific market rather than individual securities. In addition, you can also enter into CFDs over futures on many traded physical commodities, bonds and interest rates, which are referred to as Expiring CFDs. The same principles apply you will go short if you think the price, value or level of the Underlying Commodity, Underlying Bond or Underlying Interest Rate is going to fall, or go long if you think the price, value or level of the Underlying Commodity, Underlying Bond or Underlying Interest Rate is going to rise. See sections 13 and 14 for further information in relation to Margin Requirements and Schedule E. 12 HALIFAX Product Disclosure Statement

13 9.3. Calculating profits and/or losses The amount of any gross profit or loss made on a CFD Transaction will be equal to the difference between the price, value or level of the CFD s Underlying Product when the CFD is opened and the price, value or level of the CFD s Underlying Product when the CFD is Closed Out, multiplied by the number of the CFDs held. We determine the price, value or level of the Underlying Product for a CFD by reference to the relevant Pricing Source. The indicative price, value or level for an Underlying Product at which you can enter into or Close Out a CFD over that Underlying Product is available on your Trading Platform. The calculation of profit or loss is also affected by other adjustments, including relating: to dividends declared on the Underlying Security for a Share CFD; commissions deducted from your Account; interest charges where you hold a CFD overnight; FX spreads applied in respect of CFD Transactions over Underlying Products denominated in a currency other than the currency in which your Account is denominated and/or; any other costs or charges applied to your Account as set out in section 19. For more information on costs and charges see section 19 of this PDS and the tables in Schedules A-B. Example 1: Assume: you purchase 1,000 Share CFDs (i.e. you enter into a long CFD) where the Underlying Security is an ANZ share and the price at which you enter into the CFD is $32.71; and you later Closed Out the CFD by selling (or entering into a short CFD) at a higher price of $ The resulting gross profit on the transaction would be $600 being sale price ($33.31) less buy price ($32.71) x 1,000. The net profit is determined after deducting commission, funding charges, transaction costs and any other charges. The impact of fees on the net profit realised will be dependent on many factors and in particular, the length of time the open position was held as the funding charge is applied daily (for more information on costs and charges see section 19 of this PDS and we also refer you to the various trading examples which can be found on our website at Example 2: Assume: you purchase 1,000 Share CFDs (i.e. you enter into a long CFD) where the Underlying Security is an ANZ share and the price at which you enter into the CFD is $32.71; and you later Closed Out the CFD by selling (or entering into a short CFD) at a lower price of $ The resulting gross loss would be $700 being sale price ($32.01) less buy price ($32.71) x 1,000. The total loss is determined after adding commissions, funding charges, transaction costs and any other charges. The impact of these costs on the total loss realised will be dependent on many factors and in particular, the length of time the open position was held as the funding charge is applied daily (for more information on costs and charges see section 19 of this PDS and we also refer you to the various trading examples which can be found on our website at The examples above are included for illustrative purposes only. They should not be considered to be indicative of the actual prices, rates, fees or spreads which might be offered Realised and unrealised profits and losses Profits and/or losses are realised if both the buy and the sell side of the transaction have been completed and have been matched against each other or Closed Out. Profits and/or losses are unrealised if only one side of the transaction has been completed i.e. it remains an open position. If you do not instruct us (through your Trading Platform) to match selected trades against previous opposite trades then your Trading Platform will default to matching trades on a First In First Out ( FIFO ) basis. For a worked example of how an open position is Closed Out we refer you to the trading examples on our website at Alternatively, please contact one of our representatives to assist you in understanding the importance of and how to match and close out trades. HALIFAX Product Disclosure Statement 13

14 10. Key Benefits CFDs provide a number of benefits which must, of course, be weighed against their risks. These potential benefits include: Ability to use CFDs to hedge You can use CFDs to hedge your exposure to the relevant Underlying Product. Ability to use CFDs to speculate You can use CFDs for speculation, with a view to profiting from market fluctuations in the Underlying Product. You may take a view of a particular Underlying Product and therefore invest in CFDs according to this belief. CFDs enable you to take a position with an exposure to a particular Underlying Product without needing to buy or sell the actual Underlying Product. Tailored As described in section 9 of this PDS, unlike exchange traded products, OTC contracts are not standardised and can be personally tailored to suit your requirements. For example, we allow you to enter into CFDs in small amounts whereas exchange traded products have a minimum transaction size based on a dollar value. Profit potential in both rising and falling markets Since the price, value or level in the Underlying Products are constantly moving, there are always trading opportunities, whether a particular Underlying Product is increasing or decreasing in price, value or level. There is the potential for profit (and loss) in both rising and falling markets depending on the strategy you employ. Leverage CFD Transactions involves a high degree of leverage. These products enable a user to outlay a relatively small amount (in the form of the Initial Margin) to secure an exposure to the Underlying Product without having to pay the full price of, for example, holding the Underlying Security. You can effectively take a position with the same results as you would get from purchasing or selling the shares, but for less initial outlay than the equivalent physical transaction and still potentially benefit from a move in the price, value or level. However, if the move in the price, value or level is unfavourable, then the use of leverage makes it possible that you will lose more than your Initial Margin for the CFD Transaction. Accordingly, leverage gives the user the ability to take a greater level of risk for a smaller initial outlay, thus amplifying the potential risks and rewards. However, you need to fully understand that leverage also increases risks and can magnify losses. Please refer to section 11 Significant Risks. The use of leverage can lead to large losses as well as large gains. For example, if you have a positive view about the prospects of a company, say XYZ, you could either buy 10,000 shares of XYZ at $1.00 and pay your stock broker $10,000 (plus costs) or you could buy 10,000 Share CFDs from us (where the Underlying Security is XYZ shares) and lodge an Initial Margin (depending on the particular company) of generally somewhere between $500 and $2,500 (plus costs). For the experienced investor, this leverage provides an attractive means of gaining exposure to the performance of the Underlying Securities without the need to invest in the physical shares or to pay the full purchase price. Strategies Strategies may be complex and will have different levels of risk. Please contact one of our representatives for assistance in different trading strategies available to you. We can assist you by providing general advice which will be generic in nature and will not take into consideration one or more of your objectives, financial situation or needs. 11. Significant risks You should be aware that trading in the CFD products offered by us involves risks. It is important that you carefully consider whether trading our products is appropriate for you in light of your investment objectives, financial situation and needs. You should be aware that the risks you face differ depending on which Trading Platform you choose to trade through. In particular, you will take credit exposure not only on us, but also on the Platform Counterparty with which we enter into Hedge Transactions in respect of your Trading Platform. Therefore, you should make your own assessment of both our ability to perform our obligations under the CFD Transaction and the relevant Platform Counterparty s ability to meet its obligations under the corresponding Hedge Transaction. We have a risk management framework within the software supporting the Trading Platforms which, assuming you meet all of your obligations to us (as fully set out in the Client Services Agreement), attempts to limit your potential loss to the amount in your Account. However, at all times, if you have open positions with us your potential loss can be substantial and is not limited to any amount. We recommend that you do not risk money that you are not in a position to lose and that you adopt a philosophy of capital preservation and implement risk mitigation techniques (such as the use of stop loss orders). For more information on stop loss orders and other order types, see Annexure A of this PDS. 14 HALIFAX Product Disclosure Statement

15 The following is a description of some of the significant risks associated with trading CFD products offered by us General Risks Leverage CFD Transactions are leveraged products, meaning that they require a relatively small amount of outlay (in the form of the Initial Margin) to secure an exposure to the Underlying Product without having to pay the full price of, for example, holding the Underlying Security. You can effectively take a position with the same results as you would get from purchasing or selling the shares, but for less initial outlay than the equivalent physical transaction and still potentially benefit from a price move. However, if the price move is unfavourable, then the use of leverage makes it possible that you will lose more than your Initial Margin for the CFD Transaction. Accordingly, leverage gives the user the ability to take a greater level of risk for a smaller initial outlay, thus amplifying the potential risks and rewards. Market risk Financial markets such as stock markets can change rapidly due to external market forces. Share prices (on which the value of Share CFDs are based) depend on a number of factors including for example, interest rates, demand and supply, actions by the company concerned and potentially, the actions of governments. In some cases, shares may be suspended from trading or have their quotation withdrawn from the exchange where they are traded. This could adversely affect the value of a Share CFD. Fluctuations in the level of an Underlying Index, and thus Index CFDs, are a direct result of the fluctuating prices of the underlying shares which comprise the relevant index. This could adversely affect the value of an Index CFD. The price, value or level of an Underlying Commodity, Underlying Bond or Underlying Interest Rate will also be affected by these factors, and the price, value or level of an Underlying Commodity will also be affected by a range of other factors that influence commodity prices. This could adversely affect the value of a CFD. Given the potential levels of volatility in the markets, it is therefore recommended that you closely monitor your open positions at all times. Client monies For investments through Non Trust Account Platforms Funds paid to us through a Non Trust Account Platform will be paid into our personal account and will be absolutely owned by us from the time of receipt. There will be no segregation of your money or property in these circumstances. This means that those funds are available to pay general creditors in the event of our receivership or liquidation. This means that you have increased credit exposure on us under the Non Trust Account Platforms as compared to the Trust Account Platforms. Client monies For investments through Trust Account Funds transferred to us through a Trust Account Platform are deposited into our client trust account. However, your Net Free Equity is held in an omnibus client account with amounts in respect of our other clients. We refer you to section 18.1 of this PDS for additional information. In addition, we may use the funds in the client trust account to manage our dealings with Platform Counterparties. Co-mingling of client monies Trust Account Platforms Funds paid to us by you through a Trust Account Platform are first paid into a client trust account maintained by us. This means that client funds (and property) transferred to us are not available to pay general creditors in the event of our receivership or liquidation. Client monies under Trust Account Platforms are held, used and withdrawn in accordance with the Corporations Act, this PDS and our Client Services Agreement. For money paid into our client trust accounts, you should be aware that individual client accounts are not separated from each other and all clients funds are co-mingled into the one client trust account. Generally, you should also be aware that the client money provisions of the Corporations Act 2001 may not insulate any individual client s funds from a default in a client trust account if such a default were to occur. Such a default may arise from trading by any client or clients i.e. by a client failing to pay for all losses incurred on their Account. Substantial losses Despite trying to Close Out open positions, your loss on a CFD Transaction could be very substantial. Stop loss orders are instructions placed by the client with us to Close Out an open CFD Transaction if the Underlying Product trades at or through a specific level. Stop loss orders are often used to attempt to limit or minimise the amount which can be lost on an open CFD Transaction. Stop loss orders may not always be filled and, in any event, may not limit your losses to the amounts specified in the order. The operation of stop loss orders should be discussed with one of our representatives. Payment of Variation Margin If the price, value or level of the Underlying Product moves against your CFD Transaction, you will be required to have sufficient funds in your Account to meet your Margin Requirement in order to maintain your CFD Transaction. The amount of the Variation Margin may be substantial. If you fail to satisfy a Margin Call immediately, your position may be Closed Out at a loss and you will HALIFAX Product Disclosure Statement 15

16 be liable for any shortfall in your Account balance. Positions are marked to market on a generally dynamic real time basis depending on the platform you utilise, with payments being settled in real time to account for market movements (for more information about Margin Obligations see section 13 and Schedule E of this PDS). If the balance in your Account is less than the amount of the Margin Requirement to enter a new or maintain a CFD Transaction, we reserve the right to Close Out some or all of your open positions or to refuse to allow you to enter into a new CFD Transaction. The risk of abrupt adverse changes in the price or value of the Underlying Product is even greater in circumstances where there is an increase in market volatility. Traditionally, volatility can increase significantly as a result of unexpected news or unknown data being released such as terrorist attacks, acts of god, or financial market collapse. Not a regulated market The CFD products offered by us are OTC derivatives and are not covered by the protections for exchange-traded derivatives arising from any domestic or international exchange rules (such as guarantee or compensation funds). Notifications are via the electronic platform that you use If you do not actively monitor your open positions via the Trading Platform, you may not be aware of a Margin Call/Account Position or when some or all of your open positions are Closed Out. Counterparty risk: Halifax Given you are dealing with us as counterparty to every transaction, you will have an exposure to us in relation to each of those transactions. You should review our financial accounts (available on our website) to assess our ability to meet our financial obligations. If we become insolvent, then we may be unable to meet our obligations to you in full or at all. We enter into a Hedge Transaction with the Platform Counterparty for your Trading Platform in relation to our exposures to clients i.e. we hold back to back positions (with you as one counterparty and with a Platform Counterparty as the other counterparty). Any funds you transfer to us may not be protected. Refer to the paragraph in section 18.2 of this PDS for further information. Credit risk: Platform Counterparties Even though your contractual relationship in relation to CFDs is with us only, and you have no rights of recourse to the relevant Platform Counterparty, you still take credit exposure on the Platform Counterparty, because under the terms of your CFD Transaction, our obligations to you are linked to the performance by the Platform Counterparty of its obligations under the Hedge Transaction. That is, to the extent the Platform Counterparty to a Hedge Transaction in respect of a CFD Transaction fails to perform its obligations under the Hedge Transaction, our obligations to you in respect of your CFD Transaction will be reduced accordingly. This means that if an Insolvency Event occurs in respect of the Platform Counterparty for your Trading Platform, you might lose some or all of the balance of your Account in that Trading Platform (even though we might continue to be solvent). In addition, you might face considerable delays before you are able to access the amount (if any) that is able to be recovered from the Platform Counterparty. Order Acceptance Risk When you place an order (i.e. request to open or Close Out a transaction), we have an absolute discretion whether or not to accept and execute any such request. Our discretion applies in relation to, but is not limited to, Stop Loss orders, Market orders, Market-on-Open orders, Stop Entry orders, One cancels the other orders, If Done orders and any other order type established and defined on the relevant Trading Platform from time to time. Our rights to refuse your request (to enter into a new CFD Transaction or to amend or Close Out an existing open position) are set out in full at Clause 6.2 of the Client Services Agreement. You should refer to that clause for the circumstances in which we may exercise our discretion not to accept your order and to section 1 of Annexure A of this PDS for further information. The effect of our discretion is that an order you give may not be executed and you may suffer loss (including actual loss or lost opportunity) as a result. We are not responsible for any such loss. Liquidity Under certain conditions, it may become difficult or impossible for you to Close Out a position. This can, for example, happen when there is a significant change in the price, value or level of the Underlying Product over a short period of time. Use and Access to the Website You are responsible for providing and maintaining the means by which to access a Trading Platform, which may include without limitation a personal computer, modem and telephone or other access line. Technical problems or other conditions may delay or prevent access. If you are unable to access the internet and thus, the Trading Platform, it will mean you may be unable to trade in CFDs and you may suffer loss as a result. Furthermore, in unforeseen and extreme market situations, we reserve the right to suspend the operation of our online Trading Platform or any part of it. We will however, endeavour to contact you beforehand in this regard. In such an event, we may, at our sole discretion (with or without notice), Close Out your open positions at prices, value or level we consider fair and reasonable at such a time. We may impose volume limits on certain client accounts, at our discretion. This could occur if you place an order and we deem the size of the order to have an excessive impact on the risk profile that we are prepared to take. If you require further clarification 16 HALIFAX Product Disclosure Statement

17 please contact our Operations Manager for additional explanation. Electronic Trading Platforms You should be aware that there are a number of risks associated with using internet-based Trading Platforms. Such risks include, but are not limited to, risks related to the use of software and/or telecommunications systems such as software errors and bugs, delays in telecommunications systems, interrupted service, data supply errors, faults or inaccuracies and security breaches. These risks and the occurrence of disruptive events are outside of our control and, accordingly, you will have no recourse against us in relation to the use of or availability of our Trading Platforms or any errors in the software and/or related information systems. There are important provisions regarding the use of the Trading Platforms contained in the Client Services Agreement. You must ensure that you fully understand these provisions and the risks involved in relying on an on-line, electronic trading system and the limitations in the service that we can provide in relation to the Trading Platforms. We rely on a number of technology solutions to provide you with the online Trading Platforms. We have outsourced the operation of our Trading Platforms to various third parties, and in doing so have relied on these third parties to ensure the systems are regularly updated and maintained. We have been operating various Trading Platforms since Additional Trading Platforms may be offered from time to time at our discretion. Trading on the Halifax Trading Platforms may differ from trading on electronic trading systems offered by other providers. A disruption to a Halifax Trading Platform could mean you are unable to trade in a CFD and that you may suffer a financial loss or an opportunity loss as a result. In most cases, orders can be placed using any of the Trading Platforms we provide, however there may be certain circumstances that could restrict order entry. Some examples of these include: 1. Order size this could occur if you are trading and we deem the size of your order to be potentially adverse to the risk profile that we are prepared to take. 2. Product type this could occur if the Underlying Product is illiquid. 3. Availability this could occur as a result of the Trading Platform server or connectivity being down or inoperative. 4. Order type this could occur if we deem that the order was placed outside the current fair value of the Underlying Product in an attempt to protect you from error. Please note that if you attempt to contact us by phone to execute an order when the same order could have been placed through the Trading Platform i.e. the Trading Platform is available but for some reason you choose to place the order by phone, you may incur an additional fee (refer to section 19 of this PDS). However, this fee will not be charged if you are placing the phone order due to a disruption to the Halifax Trading Platforms which results in you not being able to place an order through the Trading Platforms. Systems Risk We are not responsible for any external disruptions such as your computer and internet service not being operational. Foreign Exchange Risk We are not responsible for exchange rate movements where you trade in a CFD based on an Underlying Product priced in a currency other your Account currency. Your profit or loss will be determined by movements in the price, value or level of the Underlying Product and also by the impact of movements in the exchange rate. Your Account is always maintained in a specific currency (which you nominate), for example AUD. You will instruct us what you want this currency to be. All Margin Requirements, profits, losses and all other variables (such as fees) will be debited or credited to your Account in the nominated Account currency (in this example, AUD) at the prevailing exchange rate plus a conversion fee (refer Section 19.4 and Schedule D for additional details). If you transact in a CFD where the Underlying Product is denominated in a currency other than the Account currency (e.g. a share traded on the New York Stock Exchange is priced in USD), all Margin Requirements, profits and losses will be converted from USD to the Account currency. If you hold an open position and the exchange rate when you Close Out the open position is different from the exchange rate at the time you entered the position, this will impact on the ultimate profit or loss that is realised. Transactions are not Transferable As each CFD Transaction you enter into with us is a transaction between you and Halifax and is not traded on an exchange or market, you will not be able to transfer or assign your rights or benefits under the CFD Transaction to any other person. Exercise of our Discretion to Close Out We have absolute discretion to Close Out a client s open position and at prices, values or levels we determine, acting reasonably (refer Section 14). The effect of us exercising our discretion is that we may Close Out your open position and you may suffer loss as a result (including actual loss or lost opportunity if the price, value or level improves from the price, value or level the open position was Closed Out). We are not responsible for any such loss. HALIFAX Product Disclosure Statement 17

18 Trading Platform Closed Due to the dynamic nature of the CFD products and the Underlying Products, it is possible that the value of your open positions will change while the trading function of one or more of our Trading Platforms is closed. In this case, you will not be able to trade in a CFD Transaction, including to Close Out an open transaction until the trading function of the Trading Platform re-opens. You may suffer a financial loss or opportunity loss as a result Risks associated with Derivatives Derivative markets can be highly volatile. Accordingly, the risk of loss in trading in derivatives contracts can be substantial. You should carefully consider whether trading is appropriate for you in light of your personal and financial circumstances. In deciding whether or not to invest, you should be aware of the following matters: As noted in section 11.1 of this PDS, CFDs involve a high degree of leverage because the Initial Margin requirements are relatively small in comparison to the value of the Underlying Product. The use of leverage can lead to large losses. Even a slight fluctuation in the price, value or level of the Underlying Product could result in you incurring substantial losses. By trading in CFDs you could lose the full balance of your Account (and more). You could sustain a loss of the total balance of your Account (and more). Your loss is not limited to that amount i.e. you could lose additional money beyond the funds you have transferred to us. In this situation we will require those funds to be paid immediately. If the market moves against your position, you will be required to transfer additional funds to us in order to maintain your position i.e. to top up your Account balance (refer to section 13 of this PDS). Those additional funds may be substantial. If you fail to provide those additional funds immediately, we may Close Out some or all of your open positions. You will also be liable for any shortfall in your Account balance following that closure. Under certain market conditions, it could become difficult or impossible for you to manage the risk of open positions by entering into opposite positions in another contract or Close Out existing positions (refer section 11.1 of this PDS under the heading Market Risk ). Under certain market conditions the prices of our CFD products may not maintain their usual relationship with the price, value or level of the Underlying Product. These circumstances could be pre-market pricing, settlement, corporate actions and price anomalies not related to standard price action. The CFD products offered by us involve risk. However, the placing of contingent orders such as a stop loss order may potentially limit your loss. We will generally attempt to execute a stop loss order at or near the price or value requested, but this is not guaranteed. Accordingly, stop loss orders may not limit your losses to the exact amount you specify. 12. CFDs What is a CFD? A CFD is a financial product which is essentially an agreement between you and Halifax to trade the difference arising from movements in the price, value or level of an Underlying Product. An Underlying Product may be an Underlying Security (in the case of Share CFDs), an Underlying Index (in the case of Index CFDs), or an Underlying Commodity, Underlying Bond or Underlying Interest Rate (in the case of Expiring CFDs). A CFD is an over-the-counter (OTC) derivative product and not an exchange traded financial product. CFDs generally do not have an expiry date (unless the Underlying Instrument itself has an expiry date i.e. Expiring CFDs), and will remain in place until either you or we, in our discretion, Close Out the open position. CFDs with expiry dates will be Closed Out on the expiry date unless Closed Out by you or us prior to that date. CFDs are not standardised contracts and have no fixed contract size. As a party to a CFD Transaction, you can be paid an amount of money (profit), or be required to pay an amount of money (loss) arising from movements in the price, value or level of the Underlying Product. When a CFD Transaction is Closed Out your Account will be either credited or debited with the net profit or loss on the transaction. Trading CFDs does not result in the ownership by you of any actual Underlying Security and you will have none of the rights of an owner in the Underlying Security The Capacity in which we act As previously described in section 5 of this PDS, when trading CFD products you are dealing with us as principal. This is a counterparty relationship. Therefore, the details of each transaction are negotiated between you and us. This means that any positions you choose to open with us can only be Closed Out with us. However, even though your contractual relationship in relation to CFDs is with Halifax only, and you have no rights of recourse to the relevant Platform Counterparty for your Trading Platform, you still take credit exposure on the Platform Counterparty, because under the terms of your CFD Transaction, our obligations to you are 18 HALIFAX Product Disclosure Statement

19 linked to the performance by the Platform Counterparty of its obligations under the Hedge Transaction. That is, to the extent the Platform Counterparty to a CFD Transaction fails to perform its obligations under the Hedge Transaction, our obligations to you in respect of your CFD Transaction will be reduced accordingly. This means that if an Insolvency Event occurs in respect of the Platform Counterparty for your Platform, you might lose some or all of the balance of your Account in that Platform (even though we might continue to be solvent). In addition, you might face considerable delays before you are able to access the amount (if any) that is able to be recovered from the Platform Counterparty Two models for determining the price or value of a CFD There are two models or ways of trading CFD Transactions. The first is via what is commonly known as, or commonly referred to as, the Direct Market Access ( DMA ) model. The second is via what is commonly known as, or commonly referred to as, the Market Made model. You can elect to use either model. New clients that do not have a preference will be provided access to the Market Made model The DMA model Under the DMA model all CFD quotes will be the same as the price or value of the Underlying Product on the relevant exchange i.e. we will not apply any spread to prices or values of CFDs. The spread is the difference between the bid price and the offer price. For example, if BHP is quoted on the ASX as 34.20/34.22, then the price we will quote for CFDs using the DMA model will be the same i.e / The Market Made model Under the Market Made model all CFD quotes we make are with direct reference to the price or value of the Underlying Product on the relevant exchange but we apply an additional spread to prices or values of CFDs. For example, if BHP is quoted on the ASX as 34.20/34.22, then the price we generally quote for CFDs using the Market Made model could be, for instance 34.19/ This spread is at the discretion of Halifax The fundamental difference between the DMA and Market Made models We earn income from the CFD products you trade and other factors, including the length of time you hold your CFD positions. The fundamental difference between DMA and Market Made models is that under the Market Made model, additional commissions and fees are charged. All other features of CFDs, including the benefits and the associated risks are the same under each model. Using the Market Made model, the commission is generally the same as the DMA model plus an additional amount of up to 0.05% of the contract value of the CFD. The result is that in most cases you may pay more in commission using the Market Made model than if you were to trade via the DMA model (for more information on commissions see section 19.1 of this PDS) Types of CFDs We offer Share CFDs, Index CFDs and Expiring CFDs Share CFDs Share CFDs derive their price from the real time fluctuations of the price of the Underlying Security on the relevant exchange or market. Prices are only quoted for Share CFDs, and Share CFDs can only be traded, during the open market hours of the relevant exchange on which the Underlying Security is traded. Details of the open hours of the relevant exchanges are available by viewing the relevant exchange website (for more information of the relevant exchanges see section 12.5 of this PDS). In addition, we might choose not to quote a price on a CFD over a particular Underlying Security if: that Underlying Security is illiquid or in suspension (for more information on potential external disruptions see section 10 of this PDS); or the company that issues the Underlying Securities has gone into external administration. Share CFDs allow you to receive many of the benefits of owning the relevant Underlying Security without physically owning it (excluding franking credits, i.e. you will not get the benefit of any franking credits on dividends paid on the Underlying Securities). For more information on benefits of trading in CFDs see section 10 of this PDS). We do not offer CFDs over all listed Australian and global stocks. Through each Trading Platform we offer CFDs over different Underlying Securities. For more information on which Share CFDs you can trade with us, please download a demonstration Trading Platform located on our website or contact us. The notional or contract value for Share CFDs is based on the price of the Underlying Security. For example, if you buy 1,000 Share CFDs and the price of the Underlying Security was quoted as 25.70/25.71 then the notional or contract value for your Share CFDs would be $25,710 (being x 1,000). HALIFAX Product Disclosure Statement 19

20 Index CFDs Index CFDs derive their price or value from the fluctuations in the level of the relevant Underlying Index as calculated by the relevant Index sponsor, or by us. Generally Index CFDs can only be traded during the open market hours of the relevant exchange to which the Underlying Index relates, or while real time index levels are quoted by the sponsor of the Underlying Index. For more information see section 12.5 of this PDS. Index CFDs allow you to trade on broad markets rather than individual shares or commodities. 1. S&P 500 Index 2. NASDAQ 100 Stock Index 3. Dow Jones Industrial Average 4. FTSE 100 Index 5. DAX 30 Performance Index 6. CAC 40 Index 7. Dow Jones Euro STOXX 50 Index 8. Swiss Market Index 9. ASX S&P 200 Index Nikkei OMX Stockholm 30 Index IBEX Denmark top S&P MIB MDAX Index AEX 25 The notional or contract value for Index CFDs is determined by the number of units per index point of the Underlying Index. For example, if the level of the ASX S&P 200 is 5000 then trading 10 Index CFDs would mean the notional or contract value of the trade was $50,000. You will need to check with the relevant Trading Platform for the notional or contract value of the instrument that you are trading, please see Schedule E Expiring CFDs Expiring CFDs derive their price, value or level from fluctuations in the price, value or level of futures over the relevant Underlying Commodity, Underlying Bond or Underlying Interest Rate as calculated by us. We will generally calculate the price, value or level of the Underlying Instrument for an Expiring CFD by reference to publicly available Pricing Sources, as published on the relevant Trading Platform. However, we reserve the right to use different Price Sources for any Expiring CFD. Although the Underlying Commodity, Underlying Bond or Underlying Interest Rate for which the CFD is based may trade over specific trading times, we reserve the right to reduce or extend the trading times at our discretion. The Underlying Commodities, Underlying Bonds or Underlying Interest Rates on which you can enter into an Expiring CFD will differ depending on which Platform you platform you use. You should review the online Trading Platform for a list of potential Underlying Commodities, Underlying Bonds or Underlying Interest Rates for Expiring CFDs. 20 HALIFAX Product Disclosure Statement