PRODUCT DISCLOSURE STATEMENT


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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.

1 Key information summary

What is this?

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.

Warning

Risk that you may owe money under the derivative

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.

Risks arising from issuer’s creditworthiness

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.

Which derivatives are covered by this PDS?

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.

2 Key features of the derivatives

Nature and effect of our CFDs

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:

(i) Metals

(ii) Commodities, and

(iii) Indices.

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.

 

 

A CFD works in a similar way to the underlying product and the value of a CFD is derived from the related underlying product. However, CFD holders do not actually hold the underlying product and may not enjoy the same rights as the holders of the underlying product nor are they entitled to sell or transfer ownership to another person or entity.

Switch over at expiry of futures contracts listed above:

The underlying futures contracts referred to on our website expire on exchange set dates and times. The circle fx CFDs expire 2 days prior to the exchange set expiry date and time. Any positions still open at the close of trading on circle fx 's expiry day will be closed by circle fx at the mid-market closing price and cash settled.

In order to avoid the last trading day's volatility, we switch over the price quote from one month to the next month two trading days prior to the exchange expiry dates. Clients can resume trading the same CFD symbol after this quote switching is complete.

Main uses and key benefits of our CFDs

Main uses

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). CFDs allow you to take an exposure to a particular underlying instrument or security without the need to buy or sell the underlying instrument.

As you can enter into our CFDs on a leveraged basis, a relatively small initial deposit is required to invest.

Key benefits

 

 

How to calculate the amounts payable under the CFDs

Set out below is a description of how we calculate amounts payable under the CFDs and examples of the application of this methodology.

We provide continuous online reporting to all clients of all of their positions, equity, and profit and loss. Clients are able to use this information to determine whether they wish to close their positions. Clients can see in real time their profit or loss and account activities. Each client's profit and loss results are transferred to (or from) the segregated accounts referred to in section 5 (client funds) on a daily basis. Clients can use additional equity arising from positive position movements which they receive during the day to re-invest as margin for further CFDs.

Obligation to make payments

If your trade position moves against you there are 3 possible outcomes:

· You provide us with additional margin and keep the position open.

· You close the position thereby crystallizing the loss.

· The system automatically creates an order for our dealers to manually close out the position when your total equity falls below the percentage set out in the table above. There is no guarantee that positions will be closed in periods of excess volatility as outlined in section 3 (risks).

 

If at any time the price moves against your position such that your margin is insufficient to cover any potential losses, we may make a margin call. Your additional deposit following the margin call allows

us to keep the position open. In the event that the margin call remains unpaid, we have the right to close out any position and to recover any losses from you.

We are not obliged to make margin calls. However, we may make a margin call by doing any or all of the following:

§ emailing you

§ calling you

Clients are required to monitor their margin level in order not to be ‘stopped out’ when the margin falls below the stop out level. It is very important that clients retain sufficient margin in their trading accounts to cover their open positions. Otherwise, we will close out the positions in their trading accounts when the margin level falls below the threshold percentage. This close-out feature is designed to limit the potential loss of the client, us, and any counterparties. However there is no guarantee that the positions can be closed, and you will be liable to us for any shortfall.

The stop-out level may be changed at any time at our absolute discretion and without prior notice.

Swap costs for holding CFDs overnight

Open positions held overnight attract a ‘swap cost’. This is essentially the prevailing interest rate differential on the underlying assets bought or sold. If, for example, you buy AUD against USD, and the AUD interest rate is higher than USD, you will receive interest. If you buy USD you will pay interest. Swap rates are determined by our counterparties – see section 4 (fees) for more information.

Examples

This section provides hypothetical examples of how a CFD works. All reference prices are provided only for illustrative purposes. The examples provided should not be taken as an indication or as a commitment by circle fx limited as to how these situations would actually apply to a specific CFD. Each provides an example of one situation only and does not reflect the specific circumstances or the obligations that may arise under a CFD entered into by you.

All currency pair prices are quoted as a bid/offer price. For example, the EUR/USD is at 1.3000/1.3002. This means that if you are buying one Euro (EUR), you will pay 1.3002 US dollars (USD). But if you are selling one EUR, you will receive USD1.3000.

Example 1: Long position and making a profit

Adam believes the Euro will strengthen against the US dollar. He therefore buys one lot (goes long), of EUR/USD at the offer price of 1.3000. Because the lot size for currencies is 100,000 of the base currency, this means that he has bought USD 100,000 of EUR/USD. Adam holds the position for one day. During that time EUR/USD has increased to 1.3150. This means that when he closes the position at that higher price, he will make a gross profit of:

 

As this position was held overnight, an interest rate differential charge (referred to as the ‘swap cost’) for one day will also apply to this trade. At the time Adam took his position, the swap costs were as follows:

· If he bought EUR/USD (he took a long position), he would receive 0.3 points (0.00003) per night

· If he sold EUR/USD (he took a short position), he would pay 0.4 points (0.00004) per night

This is on the basis that the Euro interest rate is higher than the US dollar interest rate. Because he went ‘long’ overnight, he received 0.3 points.

So, this means that he received:

 

Entering derivative and rights to alter terms or terminate derivative

Entering derivative

Entering into a Client Services Agreement 

Clients who wish to enter into CFDs with us after reading this PDS and the other information set out in our offer register entry must apply to use circle fx limited Leveraged Trading by entering into a Client Services Agreement (‘CSA’) with us. You will be required to provide us with the information required for us to set up your account. There is no minimum amount required to open an account.

If you are accepted as a client:

§ you will be advised where to deposit your trading funds

§ an online trading platform account and password will be allocated to you

§ we will process all of your trading and settlement instructions

§ we will report to you 24/7 via our online trading platform.

 

In applying to use circle fx Leveraged Trading, you must confirm that you have the ability to evaluate and understand the terms, conditions and risks of the transactions entered into via circle fx Leveraged Trading. These include, but are not limited to, understanding the concepts of leverage, margins, volatility, interests or rights in the underlying asset(s) along with the processes and technologies used in trading.

You must also confirm that you are willing and able to accept those terms and conditions and to assume (financially and otherwise) those risks. You acknowledge your responsibility for monitoring and managing the risks of trading. When you enter into the CSA, you are making this confirmation.

Margin deposit

You must provide your margin to us in cleared funds before we will enter into CFDs with you. We accept telegraphic transfers, as well as deposits in a variety of currencies. When you complete your application, talk with our representative who will advise you on where to deposit funds, depending on the currency involved.

When a client deposits money with circle fx, the client's funds are pooled with other client's funds and held in an account (segregated accounts) on trust for our clients and separate to our business operating accounts. See section 5 (How circle fx treats funds and property received from you) for more information.

If you would like to withdraw funds, please complete the withdrawal form and speak to our representative.

Entering into a CFD

CFDs are over-the-counter derivatives contracts under which you (the client) and we (the provider) are counterparties to the CFD under which you take a position.

We offer you a contract price based on our assessment of the prevailing market conditions. The price which you are quoted will incorporate our spread for the particular CFD. Your instructions will need to nominate the underlying asset, the amount, and whether you are buying or selling.

Any instruction you send will only be a valid instruction and/or binding contract between us and you when it has been recorded as executed by us and we send you a trade confirmation (which is sent to your online trading platform account). The transmission of an instruction by you will not in itself result in a binding contract between us and you. When positions are opened or closed, a trade confirmation is immediately forwarded to your online trading platform account.

As we do not provide discretionary investment services, you must authorise all trading instructions (including by appointing an authorised person under the CSA).

Although it is not our current practice, when you enter into transactions, we are entitled to withdraw margin from your account to cover the open position. Our practice may change in the future.

Rights to alter term

Variation due to CFDs

You are able to partially close out a position at any time during trading hours by reducing the size of your position (for example, by decreasing the number of lots held).

An existing position cannot be added to (although you can enter into a new CFD to increase your exposure to a particular underlying asset).

Corporate actions and dividends will alter the price of a CFD over an index.

Costs / payments on alteration

You will be responsible for paying any outstanding costs where you partially close out a position (for example, if you have made a loss or if you have held a position overnight and incurred swap costs).

Termination of CFDs

Due to Client Services Agreement

The CSA may be terminated at any time by one party giving written notice to the other to that effect. This does not affect the existing rights and obligations of ours and yours at termination, but we will close out all open positions unless, in accordance with your directions, those CFDs are transferred to another participant of a futures exchange in accordance with the Rules.

Due to CFDs

Although you cannot terminate a CFD, you can close out your position under the CFD, crystallising your profit or loss. This will be credited or debited to your account. We can also close out your position in the circumstances set out above.

Costs / payments on termination You will be responsible for paying any outstanding costs where you close out a position (for example, if you have made a loss or if you have held a position overnight and incurred swap costs).

3 Risks of these derivatives

There are a number of risks associated with entering into CFDs, which can be divided into product risks, issuer risks, and risks when entering or settling the derivatives. Set out below are what we believe to be the significant risks associated with entering into CFDs with us.

Product risks

The use of derivatives generally can result in large gains and/or losses due to the use of leverage. Derivatives allow investors to earn large returns from small movements in the underlying asset's price or value. However, you could lose large amounts if the price of the underlying asset moves significantly against you. 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 CFDs. For example, a major shift in the price of an underlying commodity could result in potentially unlimited losses.

In addition, the following risks may arise:

 

 

 

Issuer risks

As we are the counterparty to CFDs, you are exposed to the risk that we become insolvent and are unable to meet our obligations under the CFDs.

Issuer risks

As we are the counterparty to CFDs, you are exposed to the risk that we (Circle Fx Limited) become insolvent and are unable to meet our obligations under the CFDs

circle fx’s creditworthiness has not been assessed by an acircle fx’s creditworthiness has not been assessed by an approved rating agency. This means that circle fx limited has not received an independent opinion of its capability and willingness to repay its debts from an approved source.

We manage our risk exposures by hedging some transactions with a range of counterparties, and accept some risks due to the natural hedging provided by clients taking positions opposite to other clients within our book. We consider that those client transactions act as a natural hedge against each other. If we do not completely hedge our positions with you, and/or if one of our hedging counterparties fails to make a payment to us, the risk of us being unable to meet our obligations under the CFDs may be increased.

Risks when entering or settling the derivatives

The significant risks that arise from the processes by which our CFDs are entered into and settled are as follows:

System disruption

The ability to trade CFDs smoothly depends on the continued operation of the online platform (and the Internet connection and personal computers) that are used to access it. An operational failure in relation to any of these elements will result in delays or failures to place orders and execute trades. This could result in an inability to close out positions when you wish to do so.

We make every endeavour to ensure system stability but may not take any responsibility for financial losses resulting from any of the above events. Clients should contact us immediately for assistance should they encounter any problems affecting their online trading activities.

Information technology

There is a risk that information technology may fail. We have taken measures to ensure that our systems are operated in a safe and secure manner, they are regularly maintained, and we have back up procedures in place. Nevertheless, we do not guarantee that the systems will never fail.

You should regularly check your account and your open trade positions and report any discrepancies or irregularities immediately.

You should also ensure that you have the right equipment available (hardware and software) to operate our systems.