Risk Disclosure

CMC Markets UK plc (“CMC” or “we” or “us”), whose registered office is at 133 Houndsditch, London EC3A 7BX, is authorised and regulated by the Financial Conduct Authority (“FCA”) under reference number 173730. This Risk Warning Notice is provided to you because you are proposing to undertake dealings with us in financial derivative products under our CFD Terms of Business.

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This notice cannot and does not disclose or explain all of the risks and other significant aspects involved in trading in contracts for differences (“CFDs”) and other financial derivative products. Engaging in these types of transaction can carry a high risk to your capital. You should not engage in trading CFDs and other financial derivative products unless you understand the nature of the transactions you are entering into and the true extent of your exposure to the risk of loss. You should also be satisfied that the products are suitable for you in the light of your circumstances and financial position. Certain strategies, such as a ‘spread’ position or a ‘straddle’, may be as risky as a simple ‘long’ or ‘short’ position. If you are in any doubt you should seek independent advice.

Different products involve different levels of exposure to risk and in deciding whether to trade in such instruments you should be aware of the following points:

1. General

Although CFDs and financial derivative products can be utilised for the management of investment risk, some of these products are unsuitable for many customers as they carry a high degree of risk. The “gearing” or “leverage” often obtainable in trading CFDs and financial derivative products means that a small deposit or down payment can lead to large losses as well as gains. It also means that a relatively small market movement can lead to a proportionately much larger movement in the value of your position, and this can work against you as well as for you. Such transactions may have to be margined, and you should be aware of the implications of this, which are set out in paragraph 3 below.

2. Foreign markets

Foreign markets will involve different risks from UK markets. In some cases risks will be greater. The potential for profit or loss from transactions on foreign markets or in foreign currency denominated markets will be affected by fluctuations in foreign exchange rates.

3. Margin

CFDs and other financial derivative products are margined, and require you to make a series of payments against the contract value, instead of paying the whole contract value immediately. Where you enter into CFDs and other financial derivative transactions with us, you must maintain sufficient margin on your account at all times to maintain your open bets and we provide you with on-line access to enable you to monitor your margin requirement at all times. We revalue your open positions continuously during each business day, and any profit or loss is immediately reflected in your account and a loss (which may or may not result in a margin call) may require you immediately to provide additional funds to us to maintain your open positions. We may also change our rates of initial margin and/or notional trading requirements at any time, which may also result in a change to the margin you are required to maintain. If you do not maintain sufficient margin on your account at all times and/or provide such additional funds within the time required, your open positions may be closed at a loss and you will be liable for any resulting deficit.

4. Off-exchange transactions

When trading CFDs and other financial derivative products with us, you will be entering into off-exchange (OTC) derivative transactions. All positions entered into with us must be closed with us and cannot be closed with any other entity. Transactions in off-exchange derivatives may involve greater risk than investing in on-exchange derivatives because there is no exchange market on which to close out an open position. It may be impossible to liquidate an existing position, to assess the value of the position arising from an off-exchange transaction or to assess the exposure to risk. Bid prices and offer prices need not be quoted by us, and, even where they are, we may find it difficult to establish a fair price particularly when the relevant exchange or market for the underlying is closed or suspended.

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5. Charges and commissions

Before you begin to trade, you should obtain from us details of all commissions and other charges for which you will be liable which we will usually set out in our Rates Schedule. If any charges are not expressed in money terms (but, for example, as a percentage of contract value), you should obtain a clear and written explanation, including appropriate examples, to establish what such charges are likely to mean in specific money terms. When commission is charged as a percentage, it will normally be as a percentage of the total contract value, and not simply as a percentage of your initial payment.

6. Suspensions of trading

Under certain trading conditions it may be difficult or impossible to liquidate a position. This may occur, for example at times of rapid price movement if the price for the underlying rises or falls in one trading session to such an extent that trading in the underlying is restricted or suspended.

7. Money and Collateral

If you are a retail client then, unless you request otherwise, any money held by us in respect of your margin requirements will be transferred to us to secure your actual or potential obligations to us. It will not be segregated from our money. Money not held by us in respect of your margin requirements will generally be held in a segregated client money bank account, although this may not provide complete protection.

If you are a professional client or eligible counterparty, then any money held by us will be transferred to us to secure your actual or potential obligations to us. If you do not intend to trade with money held with us or use it to meet your margin requirements, then you should request us to transfer this money back to you. Such money will not be segregated from our money and you will rank as a general creditor of CMC.

If you deposit collateral as security with us, we may provide you with additional terms and conditions that apply. Deposited collateral may lose its identity as your property once dealings on your behalf are undertaken. Even if your dealings should ultimately prove profitable, you may not get back the same assets which you deposited and may have to accept payment in cash. It is your responsibility to ascertain how your collateral will be dealt with by us.

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Trading CFDs involves certain risks and investors may sustain losses greater than the margin deposit required to establish and maintain a CFD position.

Before making a decision to trade CFDs, you should carefully consider all of the information in this application and in the documents incorporated by reference herein and, in particular, should evaluate the risk factors set out below.

This brief statement does not disclose all of the risks and other significant aspects of trading CFDs. In light of the risks, you should undertake to trade CFDs only if you understand the nature of the product and contractual relationships into which you are entering and the extent of your exposure to risk. Trading CFDs is not suitable for everyone. You should carefully consider whether trading CFDs is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances.

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Trading CFDs is suitable only for sophisticated investors and requires the financial ability and willingness to accept the high risks inherent in such an investment. No assurance can be given that you will receive a return of your capital or any profit thereon.

Investors considering trading CFDs should be aware that they could lose large sums of money. An investor risks losing money because:

  • An investor may lose all the margin deposited with CMC Markets Canada Inc. (“CMC Markets Canada”), and lose further amounts as described below.
  • If the market moves against an open position, an investor may be required, on short notice, to deposit further funds in order to maintain the open position. Such additional funds may be substantial. If an investor fails to provide such additional funds within the required timeframe, any open position(s) may be liquidated, and the investor will be liable for any shortfall that results from such liquidation.
  • Certain strategies and risk management tools intended to reduce the risk of trading CFDs may not be effective because market conditions may make it impossible to implement such strategies.

Trading CFDs allows an investor to have exposure to securities (the “Underlying”) with a relatively small cash collateral deposit. This means that CFDs can involve significant leverage, which can have the effect of magnifying potential profits or potential losses, and consequently carries significant risk. Furthermore, if an investor chooses to fund the margin requirements using borrowed funds, their effective leverage can reach excessive levels. Investors should note that losses can exceed the amount of margin outlaid in some circumstances.

In addition to the above, the Investor’s responsibility to repay the loan and pay interest as required by its terms remains the same even if the value of the securities purchased declines.

Derivative markets can be highly volatile. The prices of CFDs and the Underlying may fluctuate rapidly and over wide ranges, and may reflect unforeseeable events or changes in conditions, none of which can be controlled by the investor. The prices of CFDs will be influenced by, among other things, changing supply and demand relationships, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and prevailing psychological characteristics of the relevant underlying marketplace.

Sometimes markets move so quickly that “gapping” may occur. Gapping is the exposure to loss from the failure of the price of an Underlying to follow a smooth or continuous path due to external forces, such as political events. If gapping occurs in the price of an Underlying, it will also occur in the price of the CFD, which may result in the inability to close an open position or open a new position at the price at which the initial CFD was placed.

At other times the Underlying may lack liquidity because of insufficient trading activity, or because the aggregate of all requests for orders at a particular price or a range of prices (as determined by CMC Markets Canada’s parent company, CMC Markets UK plc (“CMC Markets UK”) in its sole discretion) exceeds that available in the Underlying to which a CFD relates. This may result in CMC Markets UK being unable to offer the relevant Underlying in sufficient volume to allow an open position to be closed, or a new position to be opened. Alternatively, CMC Markets UK may, in its discretion, elect to re-quote the price at which it offers the relevant Underlying.

Investors should be aware that CMC Markets UK also has the right, whether with or without prior demand, call or notice, and in addition to any other rights it may have under the CMC UK Terms (as defined below), to close out all or part, as CMC Markets UK reasonably considers appropriate, of an investor’s open positions.

Commission, bid/ask spreads, and other transaction fees can have a material adverse effect on an investor’s market position and ability to break even and, therefore, ultimately effect profits and losses. In order to achieve a net profit on any transaction, the price received upon the sale of the market position must exceed the purchase price by at least the amount of commissions and other fees paid. Trading CFDs may involve frequent purchase and sale transactions, resulting in significant fees and commissions.

Money deposited with CMC Markets Canada will be segregated from CMC Markets Canada’s and CMC Markets UK’s operating funds. It is important to note, however, that money held in a segregated account may not afford investors absolute protection. Please be advised that a segregated account may not insulate your money from a default by CMC Markets UK.

Furthermore, there is a risk associated with the solvency of CMC Markets UK, the counterparty to each CFD. An investor may lose part or all of their unrealized gains in an open position or funds held on account due to the solvency, bankruptcy or liquidation of CMC Markets UK. The extent to which an investor may be able to recover their money may be governed by specific legislation.

Changes to securities regulatory law, tax law and other laws, government, fiscal and regulatory policies in respect of all or part of the business carried on by CMC Markets Canada or CMC Markets UK may have a material adverse effect on an investor’s dealings with CMC Markets Canada or CMC Markets UK.

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The operation of a CFD account is reliant on the continuing operation of, among other things, the CMC Markets UK trading platform (the “Trading Platform”), internet connectivity, and an investor’s personal computer and related software. A fault, delay or failure of any of these things could result in delays or failures in respect of CFD orders or an investor’s account. While CMC Markets UK will endeavour to provide investors with access to the Trading Platform, CMC Markets UK does not control signal power, its reception or routing via the internet, configuration of an investor’s equipment or reliability of its connection, therefore, CMC Markets UK cannot be responsible for any communication failures, distortions or delays experienced when trading CFDs via the internet.

All opinions, news, research, analysis, prices or other information contained on the Trading Platform or the website of any of CMC Markets UK’s affiliates are provided as general market commentary and do not constitute investment advice.

ADDITIONAL INFORMATION RE. CMC MARKETS CANADA’S ONLINE APPLICATION FORM FOR CFD TRADING

To ensure prompt processing of your Application Form, please complete ALL Sections of the online application form. CMC Markets Canada Inc. (“CMC Markets Canada”) and CMC Markets UK plc (“CMC UK”) requires the following information to be completed in full to process your online application.

When completed, this application form will form part of your contractual relationship with CMC Markets Canada and CMC UK. The Application Form contains the following sections:

  1. Accredited Investor Declaration
  2. Personal Details
  3. Family Information
  4. Employment
  5. Insider Information
  6. Financial Information
  7. Trading Experience
  8. Trading Experience Details
  9. Further Details

Québec Residents

If you are a resident of the Province of Québec, you acknowledge requesting that this document, together with all other related documentation, be provided to you in the English language only. Si je suis un résident de la province de Québec, je confirme avoir demandé que le présent document, ainsi que tous les documents qui s’y rapportent, me soient remis en anglais seulement.

Order Execution Only Account

No investment advice or recommendation will be provided by CMC Markets Canada regarding the purchase or sale of any security. CMC Markets Canada offers Order Execution Only accounts.

All trading decisions are made by you and are done so in reliance solely on your own judgment and at your own risk. You must rely on your own judgment and information before trading and, where necessary, seek independent advice. It is your responsibility to be aware of all terms, conditions, rules and regulations that govern a market, an underlying security, or CFD.

No Suitability Reviews

The information collected herein is used by CMC Markets Canada and CMC Markets UK plc as a method to pre-screen clients as part of the online account opening process and is not used to determine your general investment needs and objectives. CMC Markets Canada is not required to, and does not, make any determination as to the suitability of a proposed purchase of CFDs either at the account opening stage or any ongoing trading activity you may wish to conduct.

Consent to Electronic Delivery of Documents

In order for CMC Markets to communicate information efficiently and cost effectively, all documents shall be provided to you via electronic delivery and in electronic form including the following documents: Offering Memorandum; Rates Schedule; Execution Policy Summary: Risk Warning Notice; Daily Statements; Monthly Statements; Annual Statements, Trade Confirmations, Risk Disclosure Addendum and, if required, Liquidation Notices; Margin Calls; Product Offering Changes and Bank Guarantee calls.

You should verify the contents of each document received from us as, in the absence of manifest error, they shall be conclusive unless you notify us in writing within three (3) Business Days of receiving a document of any mistake, error or inaccuracy in such document. These documents will be delivered to the email address you provide on this application as an attachment or in the body of the email.

Paper copies of the documents above can be requested by contacting CMC Markets Canada Inc., 130 Adelaide Street West, Suite 1800 Toronto, ON. Telephone 416-682-5000. You are not obliged to consent to electronic delivery.

If electronic delivery fails you can request the information to be resent via email or request the correspondence in paper format by contacting the address below.

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You may revoke your consent or change your email address by contacting the address below at anytime, however electronic delivery is the fastest most efficient service.

CMC Markets Canada is a member of the Investment Dealers Association of Canada and of the Canadian Investor Protection Fund.

CMC MARKETS CANADA INC.

130 Adelaide Street West, Suite 1800
Toronto, Ontario M5H 3P5
Tel: 416-682-5000
Toll Free: 1-866-884-2608
Fax: 416-682-5099
Email: info@cmcmarkets.ca
Website: www.cmcmarkets.ca

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