This document provides important information about contracts for difference to help you decide whether you want to enter into any of these derivatives.
Many derivatives are complex and high-risk financial products that are not suitable for most retail investors. If you do not fully understand a derivative described in this document and the risks associated with it, you should not enter into it. You can also seek advice from a financial adviser to help you make your decision. You should ask if that adviser has experience with these types of derivatives.
This is a product disclosure statement (‘PDS’) for contracts for difference provided by circle fx limited. Contracts for difference are derivatives, which are contracts between you and circle fx limited that may require you orcircle fx limited to make payments. The amounts paid or received will depend on the price or value of the underlying currencies, commodities, or indices. The contract specifies the terms on which those payments must be made.
If the price or value of the underlying currencies, commodities, or indices changes, you may suffer losses. In particular, unlike most other kinds of financial products, you may end up owing significant amounts of money. You should carefully read section 2 of the PDS (key features of the derivatives) on how payments are calculated.
Your liability to make margin payments
Circle fx limited may require you to make additional margin payments to contribute towards your future obligations under these derivatives. These payments may be required at short notice and can be substantial. You should carefully read section 2 of the PDS (key features of the derivatives) about your obligations.
When you enter into derivatives with circle fx limited you are exposed to a risk that circle fx limited cannot make payments as required. You should carefully read section 3 of the PDS (risks of these derivatives) and consider circle fx limited’s creditworthiness. If circle fx limited runs into financial difficulty, the margin you provide may be lost.
This PDS covers over-the-counter contracts for difference (‘CFDs’) for a range of underlying assets including a range of currency pairs, commodities such as gold, silver and crude oil, and indices such as the Dow Jones Industrial Average, the S&P 500, and the Nikkei225. CFDs involve two parties entering into a contract at the end of which the parties exchange the difference between the opening and closing prices of an underlying asset. No delivery of the underlying asset occurs and the CFD is cash settled, meaning that at the end of the contract you will either be required to pay money to us or we will be required to pay money to you. As the CFDs are traded over-the-counter (‘OTC’), you (the client) and circle fx limited (the provider) are counterparties to the CFD. They are not traded on a licensed futures market. We offer you the opportunity to trade in a wide variety of CFDs. The contracts offered by circle fx will be at circle fx limited’s discretion and the price will vary according to the prevailing market conditions. The CFDs are available via the online ForexStar platform.
CFDs can be used to hedge exposure to a position in the underlying asset, as well as speculate with a view to profiting from market fluctuations (for example, changes in the price or value of underlying assets). For example, a client may be holding a portfolio of Australian stocks. The performance of these Australian stocks will be closely aligned with the ASX200 index. To hedge his exposure to the vagaries of the Australian stock market, the client could short sell ASX200 CFDs. There by the client can safeguard against the general market risk of their Australian portfolio without selling any of their stock. The client could hold these positions for a short time since they can enter or offer a CFD at any time at their own discretion. Conversely, it could also be a long term strategy, so long as they maintain sufficient margin in their trading account.
CFDs allow the client to take an exposure to a particular underlying instrument or security without the need to buy or sell the underlying instrument. You could lose large amounts if the price of the underlying asset moves significantly against you, particularly if you choose to invest on a leveraged basis. The risks of loss in dealing in CFDs can be substantial and can exceed any deposit or margin that has been provided to cover the CFD.
A CFD is a contract that allows a client to take a position in relation to an underlying asset (in our case, a specified currency pair, commodity, or index), under which the parties (being you, as client, and us, as provider) agree to exchange the difference between the position you have taken and the actual price or value of the underlying asset. Under a CFD, investors can go ‘long’ (meaning you will only profit if the price or value of the underlying asset increases, similar to if you owned the asset) or ‘short’ (meaning you will only profit if the price or value of the underlying asset decreases, similar to if you sold the asset on the basis that you could buy it back at a later date for a lower price).
CFDs are referred to as ‘derivatives’ as, amongst other things, the value of the amount to be paid by one party to the other is ultimately determined, is derived from, or varies by reference to the value or amount of something else. In the case of our CFDs, the underlying asset is a specified currency pair, commodity, or index. No delivery of the underlying asset occurs and the CFD is cash settled, meaning that at the end of the contract you will either be required to pay money to us or we will be required to pay money to you.
circle fx limited offers a comprehensive range of CFDs based on the following underlying instruments:
(ii) Commodities, and
The CFD contracts offered by circle fx limited are subject to change from time to time. Please refer to the current list of available products on our website One of the conditions of entering into our CFDs is that you provide us with margin in the form of cleared funds. We provide you with leverage in return for the margin contribution. When you apply to enter into CFDs with us, you can choose the level of margin applicable to your account. If you deposit USD10,000 and request 5x leverage, you can place positions of up to the equivalent of USD50,000 in value. If you request 100x leverage, and depositUSD1,000 you can trade positions of up to the equivalent of USD100,000. Similar mechanics apply to your account regardless of the account base currency. When deciding your level of margin, please note the minimum requirements for each type of underlying asset set out on the following pages
Your obligation as client andcounterparty is to maintain your margin at a minimum level in accordance with the leverage options set out below.