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Supplementary Product Disclosure Statement CFDs

31 March 2012

Issued by Forex Capital Trading Pty Ltd (ABN: 69 119 086 270, AFS Licence No: 306400)

1. Important Information

1.1 About this Supplementary PDS

This supplementary product disclosure statement (CFD SPDS2) has been prepared and issued by Forex Capital Trading Pty Ltd (ForexCT).

The CFD SPDS2 is an important document and must be read in conjunction with and supplements the Product Disclosure Statement for CFDs dated 26 May 2011 (CFD PDS) and our previous CFD SPDS dated 8 December 2011.

From 31 March 2012 the CFD PDS comprises this CFD SPDS2 and the CFD SPDS dated 8 December 2011.

1.2 Purpose of this CFD SPDS2

The purpose of this CFD SPDS2 is to notify you of the following:
  1. ForexCT’s disclosures on an ‘if not, why not’ basis to ASIC’s seven new disclosure benchmarks as prescribed by Regulatory Guide 227 (RG 227); and
  2. Information in relation to trading our new Future Index CFDs which we offer to our clients.

2. ASIC Benchmarks – RG 227

RG 227 requires CFD providers to publish certain information addressing a range of disclosure benchmarks.

ASIC has developed seven benchmarks for OTC CFDs that can help retail investors understand the risks associated with these products, assess their potential benefits and decide whether investment in the products is suitable for them. We have addressed each of these benchmarks on an ‘if not, why not’ basis.

Benchmark Meets Details
1. Client Qualification Yes ForexCT assesses each prospective client’s suitability to trade CFDs when they apply to open an account. We will ask you a series of questions during the application process in order to assess your experience and understanding of trading CFDs. A company representative may also ask you additional follow-up questions. The questions will be based on the recommendations set out in RG 227. Depending on your answers to the questions we may agree to open an account or decline your application and recommend that you obtain further education and experience through the use of our demo account.
2. Opening Collateral No

This benchmark recommends that we only accept cash or cash equivalents (e.g. credit cards) as opening collateral when establishing an account and limit credit card payments to $1000.

We comply with the recommendation to only accept cash or cash equivalents including credit/debit card, electronic transfer, BPAY and cheque. However, for your payment convenience, we do not place any limits on credit card payments.
3. Counterparty Risk – Hedging Yes

ForexCT maintains policies to manage our exposure to market risks from client positions. This policy includes the factors we take into account when determining if hedging counterparties are of sufficient financial standing and it sets out the names of the hedging counterparties we may use from time to time.

ForexCT may enter into hedging arrangements with various hedge counterparties in order to mitigate market and client risk.

We take a number of factors into consideration when selecting our hedge counterparties. We will consider their financial standing and their internal processes for managing risk. Other important factors for consideration include; their reputation, conflicts of interests, internal compliance arrangements and our prior business dealings. We currently have an arrangement with Bforex Ltd which is a major shareholder of Forex Capital Trading Ltd. Forex Capital Trading Ltd is the parent company of ForexCT.

Please contact us if you would like a copy of our hedging policy.
4. Counterparty Risk – Financial Resources Yes

ForexCT maintains policies to ensure the ongoing maintenance of adequate financial resources. In particular, how we monitor our compliance with Australian financial service licence (AFSL) requirements and how we conduct stress testing to ensure we hold sufficient liquid funds to withstand significant adverse market movements. ForexCT maintains a written policy to ensure it maintains adequate financial resources and complies with the financial requirements of its AFSL.

The steps that are taken to ensure this include:
  • maintaining a monthly set of financial accounts;
  • preparing monthly management reports which address our base level financial requirements outlined in RG 166 and our AFSL;
  • performing daily client liability reconciliation reports to ensure that there is sufficient client money to cover our client liabilities;
  • having regular monthly communication with independent external accountants and legal advisers; and
  • conducting an independent external audit at the conclusion of every financial year.

You can assess ForexCT’s financial ability to meet its counterparty obligations by reviewing its audited financial statements.

5. Client Money Yes

ForexCT has a clear client money policy and holds all client money in a segregated account at a tier 1 Australian bank in accordance with Australian client money rules under Part 7.8 of the Corporations Act 2001 (Cth) (Client Money Rules).

Client money is also co-mingled with other client money in accordance with Client Money Rules.

It is important to note that the holding of client money in accordance with the Client Money Rules may not afford you absolute protection. In the unlikely event that there was a deficit in the segregated account and we became insolvent, you will be an unsecured creditor.

Please refer to Section 2 of the CFD SPDS for more details.

6. Suspended or halted underlying assets Yes

Trading halts or suspensions of trading in underlying assets on which a particular CFD is based may arise (such as when a company suspends trading pending an important announcement). In these circumstances, ForexCT does not permit any trading in the relevant CFD product.

If there is a halt or suspension in the trading in the underlying asset, ForexCT, acting reasonably, may exercise the following discretions (without limitation):
  • suspend trading in such CFD product;
  • vary, reject, void or cancel any order;
  • vary margin requirements;
  • close out some or all open positions;
  • amend the CFD product offering; and
  • do anything it reasonably believes is necessary to protect it and its other clients.

The current paragraphs 3 and 4 in Section 2.7.1 of the PDS should be ignored and deleted. Accordingly, we would like to clarify that we will not allow any trading in any CFD where the underlying asset to which it relates has been halted or suspended.
7. Margin Calls Yes

ForexCT maintains a clear policy detailing our margining practices.

In particular, ForexCT is unique in that the maximum amount that you can lose when trading CFD products with us is an amount equal to your Balance. Your Balance is typically the funds that you have deposited with us plus or minus any Closed P&L and any other debits and credits.

In summary:
  • You are required to maintain the requisite margin requirements (including initial and variation margin) at all times in order to open and maintain positions
  • You are solely responsible to monitor your positions at all times and to ensure that you satisfy all margin requirements
  • ForexCT is not required to monitor your positions or margin levels, though we may do so as a courtesy
  • If you do not have sufficient margin in your account then some or all of your positions may be automatically closed out without notice to you.

Please refer to Sections 2.4 and 5.6 of the CFD PDS for more details.

3. Future Index CFDs

3.1 Introduction

ForexCT now offers a number of future index CFD products where the relevant underlying asset expires.

It is important to remember when trading future index CFDs that the price will not normally be the same as the underlying cash index. This is because future index CFDs trade at a fair value premium and tend to respond to news and change of sentiment more quickly than the underlying cash index that are not up to date until every constituent share has traded.

3.2 Expiry Date

Each future index CFD product has an expiry date. The expiry date is made clear on the trading platform.

If you do not close your position in a future index CFD before the expiry date, ForexCT will close this position in accordance with the terms below in paragraph 3.3.

You will not be able to open a new position in a future index CFD after the expiry date.

3.3 Trading Terms

The following set outs the additional terms and conditions for future index CFDs and should be read in conjunction with the ForexCT terms and conditions.
  1. A position in a future index CFD that has not been closed by the expiry date or otherwise in accordance with the ForexCT terms and conditions will automatically be closed by us at a price reasonably determined by ForexCT.
  2. A position in a future index CFD will not be rolled over into the next contract month for that product.
  3. All pending orders including entry orders, stop loss orders and take profit orders will be cancelled when a future index CFD position is closed at expiry by ForexCT or otherwise.
  4. If an exchange or underlying asset to which your CFD relates is suspended, ForexCT may increase the margin requirement to the extent considered by ForexCT to be fair and reasonable in the circumstances. If such underlying asset remains suspended for a time that we think is unacceptable to us in our sole discretion, we may close the position at a price reasonably determined by ForexCT.
  5. If an exchange on which an underlying asset to which your CFD relates is principally traded announces that pursuant to the rules of such exchange an underlying asset has ceased (or will cease) to be listed, traded or publicly quoted for any reason we will close that position at a price that ForexCT reasonably determines.
  6. The execution of an order for a future index CFD is not guaranteed and is subject to slippage. In such instances, the order will be executed at a price based on what ForexCT would reasonably be able to obtain in the relevant underlying asset at the relevant time. For the avoidance of doubt, stop loss orders are not guaranteed.
  7. Any trading or purported trading by you to exploit errors in prices or misquotes including without limitation: (i) taking advantage or attempting to take advantage of pricing errors or misquotes or trading outside market hours; and (ii) engaging in any forms of abusive trading determined in our sole and absolute discretion, then we are entitled, in our sole discretion, to take one or more of the following measures (without limitation):
    • adjust the quote, trade size and spreads;
    • adjust or close any and all positions;
    • restrict access to the trading platform;
    • recover from your trading account or otherwise any historic trading profits that have been gained through or reasonably appear to have been gained from such action as determined by us in good faith; and
    • terminate your agreement with us in accordance with the ForexCT terms and conditions.
  8. Due to the nature of online trading systems and the potential unreliability of exchange and liquidity provider price feeds, we may in our sole and absolute discretion amend, remove or delete orders and any associated positions which have been made on the trading platform or otherwise which, in the reasonable opinion of ForexCT, do not reflect the actual underlying asset, exchange or market prices to which the position relates at the time the order was executed.


Supplementary Product Disclosure Statement CFDs

8 December 2011

Issued by Forex Capital Trading Pty Ltd (ABN: 69 119 086 270, AFS Licence No: 306400)

1. Important Information

1.1 About this Supplementary PDS

This supplementary product disclosure statement (SPDS) has been prepared and issued by Forex Capital Trading Pty Ltd (ForexCT).

The Supplementary PDS is an important document and must be read in conjunction with and supplements the Product Disclosure Statement for CFDs (CFD PDS) dated 26 May 2011 for ForexCT.

From 8 December 2011 the CFD PDS comprises the SPDS.

1.2 Purpose of this Supplementary PDS

The purpose of this SPDS is to notify you of a number of clarifications to the client money provisions of the CFD PDS and removal of free guaranteed stop loss orders.

2. The client money provisions

2.1 We wish to clarify the following matters that are addressed in sections 2.4, 5.7 and 5.8 of the CFD PDS:

  • We are not obligated to credit unrealised profits to your account in the event you have aggregate unrealised profit across your open positions.
  • We are entitled to deduct an amount equal to the variation margin (i.e.net unrealised loss) you owe to us in respect to your open positions from the client money account at the end of each business day.
  • Where amounts are deducted from the client trust account for hedging or other purposes (i.e. for the purpose of paying unrealised losses to ForexCT), you become an unsecured creditor in relation to those amounts and there is a risk that you may not be able to recover some or all of those amounts in the event of default by ForexCT and/or its hedging counterparty.

2.2 The following sentence in Part 5.8 of the CFD PDS should be ignored and is deleted:

“However, even where ForexCT does hedge its exposure to clients, it does not use money held in the client trust account to meet its own obligations. This is an added protection to client monies.”

2.3 We wish to clarify that in relation to day 5 of the cash flow example in section 5.8 of the CFD PDS, we are entitled to deduct an amount equal to the variation margin from the client money account. In this example, the amount is US$4300.

3. Stop loss orders

3.1 We wish to clarify the following matters that are addressed in sections 2.6, 2.7, 2.8, 3.1 and 5.1 of the CFD PDS:

  • We no longer offer free guaranteed stop loss orders on CFDs (i.e. share CFDs and index CFDs).
  • All references to the words ‘guarantee’ and ‘guaranteed’ should be ignored and deleted.

3.2 Insert the following paragraph as a new section 5.10 in the CFD PDS:

“Slippage

While we endeavour to execute your stop loss order at the specified order rate, in some circumstances this may not be possible. In particular, this may occur during exceptional market conditions including periods of volatility or loss of liquidity in any relevant market. Accordingly, your stop loss order may be executed at a rate that is inferior to your specified order rate. In such circumstances, we will use all reasonable endeavours to execute the stop loss order at a price based on what we would be able to obtain in the relevant underlying market.”


PRODUCT DISCLOSURE STATEMENT ("PDS")

CONTRACTS FOR DIFFERENCE (“CFDs”)

Product Issuer: Forex Capital Trading Pty Ltd
ACN: 119 086 270
Address: Level 8, 499 St. Kilda Road, Melbourne, Victoria - 3004, Australia
License No: 306400
Issue Date: 26 May 2011

The information in this PDS is subject to change from time to time and is up to date as at the date stated at the top of the page. Where new information is materially different to that contained in this PDS, we will either issue a new PDS or a supplementary PDS setting out the updated information. Where the new information is not materially different, we will not issue a new PDS or supplementary PDS to you, but you will be able to find the updated information on our web site www.forexct.com.au or you can call 1800 367 392. If you ask us to, we will send you a paper copy of the new information free of charge.

We do not and will not give you personal financial product advice and this PDS does not constitute a recommendation or opinion that the products referred to in this PDS are appropriate to you.

The information and any general advice in this PDS do not take into account your personal objectives, financial situation and needs and, unless you are familiar with Contracts For Difference (CFDs) and products of these types, then these products may not be suitable for you. Before entering into CFD trades referred to in this PDS you should give consideration to your objectives, financial situation and needs and take all reasonable steps to fully understand the possible outcomes of trades and strategies that can be employed using our trading platforms. You should also be aware of the risks involved and be satisfied that trading in CFDs via our trading platforms is suitable for you in view of your financial circumstances. We therefore recommend that you consult your investment adviser or obtain other appropriate independent advice.

This PDS is not an offer or invitation in relation to our products in any place in which, or to any person to whom, it would not be lawful to make that offer or invitation.

This PDS is only intended for Australian residents. If you reside outside Australia, then you are not permitted to register with Forex Capital Trading Pty Ltd.

If you have any questions in relation to this PDS, please do not hesitate to contact us.

Telephone:
1800 367 392
1800 068 022
Mail : P.O Box 7509
St. Kilda Road 3004
E-mail: info@forexct.com

Visit us :
Level 8
499 St. Kilda Road,
Melbourne, Victoria - 3004

Suite 605, Level 6
301 George Street,
Sydney, New South Wales - 2000

  1. INTRODUCTION

    1.1 Who is Forex Capital Trading Pty Ltd?

    Forex Capital Trading Pty Ltd (“ForexCT”, “us”, or “we”) is a subsidiary of Forex Capital Trading Limited, which is a company based in Vanuatu.

    ForexCT was founded by an experienced mix of bankers, venture capitalists, internet experts and foreign exchange (“FX” or “Forex”) specialists. The catalysts for forming this company were the prevalent discrepancies between clients’ needs and the services offered by most companies.

    ForexCT’s mission is to provide our customers with an online trading experience which is superior to any of our competitors. ForexCT offers an opportunity to all traders from novice to experienced, to start trading leveraged margin FX and commodities via our trading platforms (which are accessed via the internet) within minutes of registering with us and with an amount as low as $500.

    1.2 Purpose of a PDS

    Under the Corporations Act 2001, a retail client must receive a PDS from an AFS licensee before acquiring a financial product. The PDS is the document that sets out the significant features of a financial product, including its risks, benefits and costs. The purpose of this PDS is to provide you with sufficient information about FX and commodities to help you make an informed decision in relation to the acquisition of our financial products. This PDS also helps you to compare our products with others you may be considering.

    This PDS has been prepared by ForexCT as the issuer of CFD contracts described in this PDS.

    This PDS is available on the internet at www.forexct.com.au. Paper copies of this PDS will be sent by ForexCT to any person on request, free of charge. To obtain a paper copy, please contact us.

    This PDS is an important document and provides you with key information about our CFD products.

    1.3 Over the Counter Products

    Our trading platforms offer you the opportunity to enter into Over the Counter (“OTC”) CFD contracts with us, using our online facilities (trading platforms) or by instructing us. An OTC CFD is a contract between you and ForexCT. You cannot trade OTC CFDs through an exchange; rather it is a private contract between you and ForexCT as your counterparty. Please refer to section 5.3 of this PDS for more information about “Counterparty Risk”. Accordingly, you can only enter into a CFD trade by opening a trade on ForexCT’s trading platforms or instructing us to open a trade on your behalf. Once an OTC CFD is entered into with us, it can only be closed by you giving instructions to that effect through our trading platforms or instructing us to close it on your behalf. It is not possible to close CFD contracts entered into with us by giving instructions to another CFD provider or Australian financial services licensee.

  2. Key features of trading CFDs with ForexCT

    2.1 What are CFDs?

    A CFD is an agreement to exchange the difference in value of a particular underlying asset between the time at which the CFD contract is opened and the time at which it is closed. This agreement allows you to make a profit or a loss from the fluctuations in the price of the underlying asset of the CFD without actually owning that underlying asset. The price of the CFD is based upon and with reference to the price of the underlying asset (i.e. in the case of CFDs offered by ForexCT the asset is a share or share index). A CFD is a derivative product because the value of the CFD is derived from the value or price of the underlying asset.

    2.2 Types of CFD contracts you can trade

    ForexCT offers CFDs on international listed shares (refer to the relevant trading platform for the current international shares) and various share indices (such as the Dow Jones and the Nikkei but refer to our trading platforms for the current share indicies in which we offer CFDs). Refer to section 2.7 of this PDS for additional information.

    Should ForexCT offer additional CFDs we may amend this PDS or we may decide to notify clients of the additional CFD contracts and provide a description of such CFD contracts on our website. Alternatively, clients are able to see the CFDs we offer via our trading platforms.

    ForexCT’s trading platforms allow you to carry out market orders and entry orders in all CFDs displayed on each of its trading platforms.

    Market Order and Entry Order

    A market order allows you to open a CFD contract at the current market price quoted by us on the relevant trading platform. For example, if the current ABCXYZ Ltd (example company) CFD price we are quoting is $5.50/$5.51, then opening an immediate trade at this price would be a market order. In contrast, an entry order is where you request to buy or sell a CFD at a specified price, which may be some distance from the current market price.

    Continuing on from the above example, let’s assume the price we are quoting is currently $5.50/$5.51, but you do not want to open a trade at those current rates. You may elect to set a different entry price (a lower price of say, $5.20 at which you wish to buy a CFD contract) using an entry order. So if the price falls to $5.20, a buy trade in ABCXYZ Ltd CFDs will be automatically opened by the relevant trading platform at your entry order price. All entry order prices must be entered at a minimum distance from the current price. The exact distance may differ according to the CFD.

    2.3 Using ‘leverage’ to trade CFDs

    Our trading platforms allow you to utilise ‘leverage’ to open a CFD contract with a minimal initial margin requirement. Beginner accounts have a default leverage of 1:200 (0.5%), whilst our professional and VIP accounts have default leverages of 1:400 (0.25%). This means that you can open a trade with an initial margin outlay of 0.25% and 0.5% of the face value or nominal value of the CFD contracts. Upon request we are able to change your leverage rate at our discretion to a maximum of 2%.

    2.4 Margin Requirements

    An initial margin is payable when you enter or open a CFD contract. This amount represents collateral for your exposure under the trade and covers the risk to ForexCT. You must maintain margin in such amounts and in such forms as we require in our sole discretion subject to the alternatives available to you to either top-up your account or close out any open positions. We refer you to section 2.6 for additional information with respect to the alternatives available to you. To enter into a trade, the initial margin required to be held in your account is between 0.25% to 2% of the face value of the trade, depending on the margin leverage set for your account. In our sole discretion we will determine the amount of the margin required. Margin requirements are on a per trade basis. Once your margin leverage is set, the relevant trading platform will not be able to open a position beyond those limits.

    The full value of the initial margin is payable to ForexCT immediately upon entering the trade. This means that sufficient cleared funds must be deposited in your account with us before you can trade.

    Due to changing market conditions, the required margin to enable you to continue to hold a CFD contract may differ over a period of time. This is commonly referred to as variation margin or additional margin.

    In order to calculate the required margin to open a trade and continue to hold an open position, you must look at several different factors:

    • Trade size;
    • Your account leverage; and
    • The price of the CFD on a daily basis (this is the unrealized profit or loss or “variation margin”).

    For example, let’s assume you wish to purchase 10,000 ABCXYZ Ltd CFDs at a price of $5.00. Your account leverage is 0.5% (or 200:1). The required initial margin calculation would be as follows:

    (Number of contracts * $5.00) / 200

    = (10,000 * $5.00) / 200

    = $50,000 / 200

    = $250

    The variation margin is the unrealised profit or loss on your open positions which is equal to the dollar value movement of your open trades calculated from the price at which you entered the CFD compared against the current price quoted by us. We will not provide you with specific notice of the variation margin required to continue to hold an open position. You must log into the relevant trading platforms regularly when you have open positions to monitor the level of equity in your account.

    If you do not maintain the margin requirements (by topping-up the balance of your account) immediately by depositing the amount of funds that is required to maintain the open position to cover both initial and variation margin, all of your open positions will be closed out by us without further reference to you. If you do not pay any additional amounts into your account following adverse market movements to maintain the minimum required margin, then as soon as the value of the equity in your account falls to zero, ForexCT will close out all of your open positions immediately and your loss will be limited to the amount which has been deposited in your account.

    For example, let’s assume you purchased 10,000 ABCXYZ Ltd CFDs at a price of $5.00 and you have lodged $1,500 in your account with ForexCT. An initial margin of $250 (as calculated above) means the equity in your account is $1,250 (being $1,500 less $250). Let’s assume the price of ABCXYZ Ltd CFDs falls to $4.95. The required variation margin calculation would be as follows:

    Initial value of CFDs is 10,000 * $5.00 = $50,000

    Current value of CFDs is 10,000 * $4.90= $49,000 i.e. $1,000 unrealised loss

    The variation margin which must be held in your account to continue to hold that CFD is $1,000 being $50,000 less $49,000. You had equity in your account to the value of $1,250 and thus, you had sufficient funds to cover the variation margin leaving $250 in account equity.

    You are not able to fund margin requirements with unrealized profits from another trade. You are only allowed to deal in and maintain positions on the basis of cleared funds being provided for your total margin obligations.

    We have the right to limit the size of your open positions under any circumstances as determined by us. Generally, such limitation of the size of your open positions will be dependent on the value of funds lodged in your account.

    We also have the right to refuse any request made by you to place an order to establish a position at any time at our discretion without having to give a reason or notice.

    2.5 Roll over interest on CFDs

    CFD contracts that are not closed out prior to at 12:00 AM Greenwich Mean Time (“GMT”) are held overnight (“rolled over”) and will result in you paying interest on the face value of the CFD contracts. This is known as roll over interest. Roll over refers to the interest you will be charged daily on your open positions. This interest charge will be incurred regardless of whether you have bought or sold the CFD position. For information about how roll over is calculated, please refer to the example below in section 2.7. You are able to view our roll over rates for each CFD through the PROfit trading platform. If you operate a Meta Trader 4 account or our iPhone Application, then please contact us directly for current roll over rates.

    2.6 Potential Loss

    Your potential loss can be limited to the amount deposited into your account with us if you:

    • choose to close out your open positions at any time before the total loss is the same as the balance in your account; or
    • do not pay any additional amounts into your account following adverse market movements against your open CFD positions (i.e. meet adverse variation margins), in which case, once the value of the equity in your account falls to zero, then ForexCT will close out all of your open positions immediately and your loss will be limited to the amount which has been deposited in your account.

    However, if you choose to top-up the amount in your account by depositing additional funds with us, then the risk of loss will be the initial amount deposited plus any additional amount(s) deposited into the account. Accordingly, at all times the potential loss will be limited to the amount deposited into your account. We guarantee this to be the case on the basis that we have implemented systems (within and, as additional protection, outside the online trading platforms) that will automatically close out a position when the value of your account declines to zero. In the unlikely event of a complete system failure (including our backup systems) then ForexCT has implemented manual procedures which will ensure that any loss which may be generated which is in excess of the amount deposited by you will be borne by ForexCT and will not be passed on to you in any circumstances.

    If you want to limit the potential loss to less than the amount deposited into your account with us, you can employ the use of guaranteed stop loss orders at no cost. This means you can eliminate downside risk. If you use a stop loss order, we will guarantee that your position will be closed out if the exchange rate or commodity price reaches the level specified by you in advance by using a stop loss order. Furthermore, if you wish to predefine a specified take profit amount or rate/price, then we also guarantee this. Please note that the predefined stop loss/take profit rate or price must be a minimum and maximum distance from the market rate. This distance may vary according to the FX pair or commodity. You are able to see these minimum and maximum rates via the trading platforms or alternatively, please contact us for more information.

    To further illustrate how a guaranteed stop loss order will be executed by ForexCT, you should refer to the CFD trading examples in section 2.7 below.

    2.7 The different types of CFDs you can trade with ForexCT

    ForexCT offers its clients the ability to trade share CFDs (international shares only) and share index CFDs. Below we explain these two types of CFDs and provide some examples of different trading scenarios:

    2.7.1 Share CFDs

    ForexCT offers CFDs on shares listed on international exchanges (refer to our platforms for the current international shares).

    As described in section 2.1 above, a CFD is an agreement to exchange the difference in value of a particular underlying asset between the time at which the CFD contract is opened and the time at which it is closed. In the case of share CFDs offered by ForexCT the underlying asset is an international share.

    In the event that the underlying share of a CFD contract offered by us is not able to be traded (i.e. the relevant exchange is closed or there is a trading halt imposed with respect to the individual share), then the CFD will generally not be able to be traded. However, in some circumstances, in our absolute discretion, we may not suspend trading in that share CFD.

    In the event that the underlying share of a CFD contract offered by us is not able to be traded (i.e. the relevant exchange is closed or there is a trading halt imposed with respect to the individual share), then the CFD will generally not be able to be traded. However, in some circumstances, in our absolute discretion, we may not suspend trading in that share CFD.

    Trading share CFDs allows you to gain exposure to an individual company’s share without actually having to pay the full value of the actual shares. Through the use of leverage (discussed above in sections 2.3 & 2.4 and illustrated below in “Opening a Market Order share CFD trade”), you are able to open a share CFD contract with a minimal initial margin outlay, but at the same time, you can potentially benefit through either the rising or falling value of the company’s share price.

    In order to benefit through a rising share price, you would open a “buy” share CFD contract. Inversely, a fall in price means that you would potentially incur a loss. In order to benefit through a falling share price, you would open a “sell” share CFD contract. Inversely, a rise in price means that you would potentially incur a loss. If you have opened a buy share CFD, you will not earn any dividends payable to shareholders who actually own the share. This is because you will not own the share. ForexCT does not pay the value of dividends declared by the company on its share CFDs. The main similarities between a share CFD and an actual share is that the price at which you deal is based on or with reference to the “buy” or “sell” price of the underlying share on the relevant share market and the movement in prices of CFDs follow the movement in prices of the underlying share. It is important to note that the price quoted by us is based on or with reference to the underlying share and will not be exactly the same as the price the share is quoted on the relevant exchange.

    Unlike actual share trading however, instead of paying the whole value of the trade, you only have to pay a small percentage (i.e. initial margin and potentially variation margin) of the CFD contract value. The margin applicable to any given share CFD will be determined by the factors set out in section 2.4 above.

    Your profit or loss will be determined according to the difference between the price at which you open the share CFD and the price at which you close it, less any applicable roll over interest charges incurred. This will be illustrated further in the examples set out later in the section.

    How is the price of a share CFD determined?

    The price of listed shares traded on a stock exchange is influenced by a wide variety of factors; including supply and demand but also other factors such as dividends, financial position of the company, prospects of the company generating future profits and the general economic climate. The changes in price in the actual share will be factored into the value of your CFD positions as the prices which we quote are based on or with reference to the underlying share on which the CFD is based. It is the underlying market which influences the price of your share CFD. As a market maker, it is ForexCT that determines share CFD prices. As described above, the prices quoted by us will be based on or with reference to the underlying share and will not be exactly the same as the price the share is quoted on the relevant exchange.

    In order to have a better understanding of how you can open and close a share CFD, we will take you through CFD market order and CFD entry order examples.

    Opening a Market Order share CFD

    You have just opened a trading account with ForexCT and you are interested in trading share CFDs. To start off with, you deposit $5,000 into your trading account. This trading account has its leverage set at 200:1.

    ABCXYZ Ltd is a company that has caught your attention. In recent months, its share price has risen steadily. Currently, ForexCT is quoting ABCXYZ Ltd CFDs at $5.50/$5.51. You are of the belief that ABCXYZ Ltd’s annual financial report to be released tomorrow will show positive results for the company and the price will increase significantly. Accordingly, you decide to “buy” 5,000 share CFDs at $5.51 i.e. our offer price. The initial margin requirement for opening this trade would be calculated as follows:

    (Number of contracts * Price of 1 share CFD) / Leverage

    = (5,000 * $5.51) / 200

    = $27,550 / 200

    = $137.75

    In order to open this trade, you require a minimum amount of $137.75 deposited in your trading account. Since you have a $5,000 balance, then this will not be a problem. You open the CFD contracts.

    When the CFD contacts have been opened, the available usable margin (or equity) in your account is reduced to $4,862.25 ($5,000 - $137.75).

    Now that you have opened these CFD contacts, let’s look at the different outcomes when they are closed at different prices:

    Outcome 1: You make a profit

    Let’s assume that your view was correct and after 1 day the price of the share CFD has increased to $6.51/$6.52. You decide to close out your open positions at $6.51 i.e. our bid price. This will result in a $1 profit per contract.

    To illustrate how roll over interest affects your profit, we should look at a worked example. Let’s assume that the roll over interest rate charge applicable to this share CFD was -0.01% of the trade exposure. Let’s also assume that when roll over occurred at 12:00 AM GMT, the price of the CFD was $5.45. Considering all of the above, the roll over interest payable would be calculated as follows:

    (Roll over rate * Face Value of the Contract) / 100

    (-0.01 * 5000 * $5.45) / 100

    =-$272.5 / 100

    = - $2.72

    In this case, you would have made a $5,000 profit (5000 contracts * $1 profit per contract), less $2.72 roll over interest charge incurred. Therefore, the final net profit would be $4,997.28. This example discloses the roll over interest where you have only held the open position for one day and thus, the financial impact on the result in small. If you hold an open position for a lenghthy period of time, the financial impact on the result of the trade will be much greater i.e. the profit will be less or the loss will be greater.

    Outcome 2: You lose your initial investment

    Let’s assume that your view was incorrect and on the same day that you opened the trade, the price of the share CFDs decreased to $4.51/$4.52. You decide to close out your open positions at $4.51 i.e. our bid price. This results in a $1 loss per contract, or a total loss of $5,000 (your whole account). We note that even if you had not decided to close out your open positions, ForexCT would have automatically done so as described in section 2.4 above.

    Since we have already illustrated how roll over is calculated in the previous example, we will assume that this trade was opened after 12 AM GMT and closed before 12 AM GMT the following day, thus no roll over interest charge was incurred by you. The other examples below are also exclusive of roll over charges.

    Outcome 3: You limit your loss with a stop loss order

    Let’s assume that you wanted to limit your potential losses, so you entered a guaranteed stop loss order price of $5.21. In this outcome we will assume that the price fell just as it did in Outcome 2. However, in this instance your stop loss order would be triggered and the trade closed out at $5.21 being a loss of $0.30 per contract ($5.51 - $5.21). The total loss in this instance would be $1,500 (5000 contracts * $0.30).

    Outcome 4: You make a profit with a take profit order

    Let’s assume that when you opened the trade at $5.51, you set a take profit order at a price at $6. We will also assume that on the same day the price spiked from your share CFD price of $5.51 to $6.05, then back to $5.65. As you had your take profit order price set, this would have automatically been triggered by the trading platform and your open share CFDs would have been closed out at $6, for a profit of $0.54 per contract. This would mean that you made a total profit of $2,700 (5000 contracts * $0.54).

    Opening an Entry Order share CFD

    You also have the option of setting an entry order to establish a position. You may not believe that buying or selling a share CFD at current prices is the right thing to do. Therefore, you can utilise the entry order trade function to set an entry price which you think is more suitable. Once the price hits your predefined entry price, the entry order will trigger and open the share CFD contracts for you.

    The best way to understand how entry orders work is to look at an example. Let’s assume you have a balance of $500 in your trading account and that the ABCXYZ Ltd CFD is quoted by us at $5.51/$5.52. You are not confident that opening a trade at the current market price is the best thing to do. You are of the belief that by the end of the week, the price may rise to $6 and then may fall sharply. You decide to open a sell entry order at $6 for 1000 ABCXYZ Ltd CFD contracts, with an account leverage of 1:200. The initial margin required for this trade would be calculated in the same way as the market order. The calculation is as follows:

    (Number of contracts * Price of 1 share CFD) / Leverage

    = (1000 * $6) / 200

    = $6000 / 200

    = $30

    In order words, you would require $30 in available margin in order for this entry order to be triggered. This margin is currently available to you as you have a balance of $500 in your account and no other open positions. It is important to point out that the used margin is not reduced from your available margin until an entry order is actually triggered and the CFD contracts are opened.

    Let’s look at several different outcomes for this entry order example.

    Outcome 1: You make a profit

    Let’s assume your view was correct and the price of the share CFD has increased to $6.00/$6.01. Once the price hit $6, your sell entry order would have been triggered and would now appear in your open positions i.e. 1000 sold ABCXYZ Ltd CFDs at $6.00. Over the next few hours, the price continued to rise to $6.15, but just before the close of trading for the day, the price fell back down to $5.69/$5.70. You decide to close the open positions. In this instance, you would have made a profit of $0.30 ($6.00 sold price less $5.70 bought price) per contract or a total of $300 (1000 contracts * $0.30 profit per contract).

    Outcome 2: The entry order is not triggered

    Let’s assume that ABCXYZ Ltd’s CFD price did not rise to $6 and in fact fell sharply over the next few weeks to $4.20. You are prepared to keep your entry order open for now and see where the price moves over the coming weeks. After 2 weeks the price falls to $4. At this stage, your opinion changes and you see little prospect of a rise $6. You subsequently decide to cancel or close your entry order. As the trade was never triggered, you incur no profit or loss and incur no fees.

    Outcome 3: You lose your initial investment

    Let’s assume your view was incorrect. The price of the share CFD hits $6.00/$6.01. Your entry order is triggered and appears in your open positions i.e. 1000 sold ABCXYZ Ltd CFDs at $6.00. However, on the same day the CFD price continues to rise and reaches a price of $6.50. Your position is then automatically closed out by the trading platform. The reason it is closed is because you have insufficient account equity (i.e. $0 in account equity). The loss on this trade was $500 (1000 contracts * $0.50 loss per contract) and you only had a balance of $500 in your account to start off with.

    Outcome 4: You limit your loss with a stop loss order

    Let’s assume in this instance you are cautious and enter a guaranteed stop loss order to buy at a price of $6.15 at the same time as when you set the entry order. In this instance, the $6.00 entry price order will be triggered and the 1000 share CFD contracts are opened at $6.00. However, the price continues to rise and your $6.15 stop loss order is triggered i.e. 1000 share CFD contracts are opened at $6.15. This trade then automatically closes out the open CFD contracts generating a loss of $150 (1000 contracts * $0.15 loss per contract). By comparing this outcome to the previous one, you can see that by entering a stop loss order, you are able to limit your potential losses.

    Outcome 5: You make a profit with a take profit order

    Let’s assume that in this instance you enter a take profit order at a price of $5.30 when you enter the entry order. In this instance, the $6.00 entry price is triggered and the trade is opened. Your view proved to be correct and the price fell down to $5.30 automatically triggering the take profit order i.e. 1000 share CFD contracts at $5.30 which are closed against the open sell positions generating a profit of $700 (1000 contracts * $0.70 profit per contract).

    You should take into consideration any roll over interest charges you incur (as illustrated in the “Opening a Market Order share CFD trade” example) when calculating your total profit or loss on share CFD trades.

    2.7.2 Share Index CFDs

    Trading share index CFDs allows you to gain exposure to a large number of different shares in one single trade. They can be used to take positions on the direction of a whole market without taking a view on the prospects for any individual company’s shares. A short (sell) position in a share index CFD can be used as a low-cost hedge to protect a diversified share portfolio against market falls. A share index CFD works in the same way as a share CFD in that the product allows you to make a profit or loss by reference to fluctuations in the value of the underlying index, such as the Dow Jones, NASDAQ or Nikkei indexes. For a full list of share index CFDs offered by ForexCT, please refer directly to our trading platforms or contact us.

    2.8 Closing a CFD contract

    A CFD contract can be closed in one of the following events:

    • You close it by providing instructions to that effect i.e. entering an equal and opposite CFD contract to match against (close out) an existing open position.
    • The stop loss order or take profit order you entered at a predefined price is triggered as the price has been reached.
    • A force majeure event or other event which prevents the performance of the trade occurs.
    • If the account equity reaches zero dollars, all open trades are automatically closed by the trading platform.

    2.9 How do you place CFD orders with ForexCT?

    You may place orders to trade in CFD contracts in two ways:

    • By using our online trading platform(s); or
    • By calling our office.

    ForexCT will not accept orders via email or via our online chat facility. If our representatives are unable to execute your orders for any reason, then ForexCT will not be held liable for any actual loss or opportunity loss you incur.

    2.10 No physical delivery

    There is no physical delivery of a CFD contract. Positions will always be closed and your account(s) will be either credited or debited according to the profit or loss of the trade.

  3. Trading Platforms

    3.1 How do our Online Trading Platforms work?

    We provide online trading platforms, enabling you to enter into CFD contracts. We provide direct access to CFD prices via the internet. ForexCT provides you with its trading services via several different trading platforms including PROfit, iPhone Application and MetaTrader 4 (“MT 4"). You are permitted to open multiple accounts using the various trading platforms (i.e. you can fund one account on the PROfit trading platform and another account on the MT 4 trading platform). However, since these are two separate trading platforms, you will not be able to monitor the trading activity on both trading platforms at the same time. For example, trading activity on PROfit will not be visible on MT 4. Also, any excess funds in one account cannot be used to meet margin requirements on the other account.

    Each trading platform may have slightly different features (such as lot sizes, ability to implement trailing stop losses, charting and news services). This PDS provides a brief overview of all of the trading platforms currently offered by ForexCT and explains the main differences between them.

    Distinct Features of Trading Platforms

    Platform Minimum initial funding Requirement Base Currencies Available Commissions CFDs Available Guaranteed Stop Loss/Take Profit Trailing Stop Loss Margin Call Warning
    PROfit $500* AUD or USD None 31** Yes No When equity has reached 95% of exposure
    iPhone App. $500* AUD or USD None 31** Yes No When equity has reached 95% of exposure
    MT 4 $500* USD None 31** Yes Yes When equity has reached 70% of Used Margin

    *This will differ according to account type chosen
    **This is subject to change

    3.2 The calculation of CFD prices will include a spread in our favour

    The calculation of the CFD prices quoted by us will include a spread in favour of ForexCT. The prices offered to clients will differ from prices available in the underlying markets where the underlying assets on which the CFDs are based are traded. This is due to the spread favouring ForexCT in the price calculation. ForexCT acts as a market maker (and not a broker) and generates its income from the spreads that are embedded in the CFD prices which are quoted by us. The spread is the difference between the price at which we buy or sell CFD products with our hedging counterparties (where applicable) (or the price at which we can buy or sell the underlying asset) and the rate at which we buy and sell CFD products with our clients. Different spreads may also be applied depending on the value of the trade and the underlying prevailing market conditions. This spread is factored into the prices quoted to clients i.e. they are not an additional charge to the client.

    For example, ABCXYZ Ltd may be trading in the underlying market at the following price:
    ABCXYZ Ltd $5.50/$5.52

    We may add our spread such that the price offered to you by us is $5.49/$5.53. Due to the difference in the buying and selling price, the CFD price we quote on your position must move favourably before you can be in a break even position. In other words, if the CFD price does not move at all and you close out your position, you will make a loss to the extent of ForexCT’s spread and any roll over interest charges which apply to the position.

    The quotes we offer are subject to our right to make corrections in the event of mis-priced or typographically incorrect data.

    We do not provide a market amongst or between clients for investment or speculation. Each CFD trade you enter into is an individual agreement made between us and you as a principal and is not transferable, negotiable or assignable to any third party.

  4. SIGNIFICANT BENEFITS OF OUR ONLINE TRADING SERVICE

    The significant benefits of trading CFDs as offered by us via our trading platforms are:

    4.1 Risk Management Tool

    By agreeing to a price now for a time in the future you will determine the exact cost of the underlying share, thereby giving certainty over your flow of funds. For example, if you ultimately wish to hold ABCXYZ Ltd in your investment portfolio but your not sure if now is the right time to outlay the full value for say 10,000 shares which are currently trading in the underlying market at $5.50 i.e. $55,000. Instead you may choose to buy a ABCXYZ Ltd with a smaller outlay (being the initial margin). Assuming you were correct and the value of ABCXYZ Ltd increased then so would the value of your ABCXYZ Ltd CFDs. Thus, you could close out your open positions and buy the 10,000 ABCXYZ Ltd shares and use the profit generated to offset the higher purchase price.

    Thus, any profit (or loss) you make using trading our ABCXYZ Ltd CFDs would be offset against the higher (or lower) price you physically have to pay for the foreign currency or commodity at the future date.

    4.2 Speculation

    In addition to using CFD trading as a risk management tool as described in section 4.1 above, you can benefit by using CFD trading offered by us to speculate on changing CFD price movements. You may take a view of a particular share or the relevant share market in general and therefore, invest in CFDs according to this belief.

    4.3 Trade in small amounts

    ForexCT enables you to make trades in small amounts. You can start using our trading platforms for transactions of at least 1 contract size for CFDS. When trading in a CFD product offered by us, you may deposit a minimum amount of $500, or the amount which is in line with the amount you are willing to risk. There is a minimal withdrawal amount of $100.00 on all accounts with us.

    4.4 Access to the movements in prices of underlying shares and share markets

    When using our trading platforms, you gain access to systems which are active and being updated 24 hours a day, 5 days a week. However, your ability to open or close an individual CFD contract will depend on the trading hours of the relevant exchange where the underlying share (or index) is traded. The CFDs available on our trading platforms are based on shares and indexes from different exchanges in many different countries (i.e. different time zones). Each exchange will have different trading hours for its markets. For more information about the trading hours pertaining to an individual CFD, then please contact us directly.

    We may also impose a restriction against trading in certain CFDs for 2 minutes before and after a critical news release. A critical news release is a release that would significantly affect the CFD price, as determined by us in our absolute discretion. Generally, no notice will be provided via the trading platforms or on our website, so if you have doubts as to whether a certain CFD will be tradable during a news release, please contact us and we will provide you with that information. During the period of the trading restriction, your ability to trade in those CFDs will be disabled. If for some reason the disabling of the CFD was not implemented and we allowed you to trade through the restricted period, we retain the right to revoke any trades in the relevant CFDs that you made during the 2 minutes before and after the critical news release.

    4.5 Making deposits with your credit card

    Our trading platforms allow you to deposit money for your trades with your credit card, allowing you to lodge your deposits at any time during trading hours, regardless of banking hours. This can be done directly through the PROfit trading platform or iPhone application. If you are using our MT 4 trading platform, then all credit card transactions must be done directly through our deposit site: https://deposit.forexct.com. Alternatively, if you want our Accounts Department to make the credit card deposit on your behalf, then we will require you to complete our Credit Card Authorisation form. Please contact us directly for a copy of this form to be sent to you. We use the latest technologies to provide a security shield for your credit card and personal privacy.

    4.6 Real time streaming prices

    Our trading platforms use the latest highly sophisticated technologies in order to offer you up-to-the-minute CFD prices provided the CFD is able to be traded at that time i.e. during trading hours of the relevant exchange where the underlying share is traded or index is calculated. You may check your accounts and positions in real time and you may do so 24 hours a day and make a trade based on real-time information.

    4.7 Full control over your account and positions

    With us, you are able to control your costs and risks. We use the latest technologies in order to ensure your stop loss orders are filled. We are committed to the principle that you should never lose more than you are prepared to lose.

    4.8 Tailor-made conditions for frequent traders

    The spreads on our trading platforms assume transactions of small, up to medium amounts. If you are a frequent user of our trading platforms and wish to trade with medium up to large amounts, you can contact us by email or telephone to enable us to provide you with tailor-made trading conditions.

    4.9 Fixed Spreads

    We quote fixed spreads during all market conditions to all of our clients types (be it beginner, professional or VIP). This is in contrast to other providers who may vary spreads during news releases or during other market conditions. However, we do retain the right to change your account type (which may increase your fixed spread) if you do not satisfy the account type requirements. For example, if you open a professional account, but do not deposit the minimum deposit amount of $5,000 then we retain the right to change your account to a beginner account. Alternatively, if you open a beginner account and have satisfied the requirements of a professional account, then we retain the right to upgrade your account type to professional. This will result in reduced fixed spreads.

    We may amend or change the spreads we quote at any time at our discretion.

  5. SIGNIFICANT RISKS

    Risks may lead to unfavorable changes in the financial outcomes that you expect from use of our trading platforms in the products we offer. Monitoring of any risks associated with the trading platforms is your responsibility.

    5.1 Market Volatility

    CFD contracts are subject to many influences which may result in rapid fluctuations in prices and reflect unforeseen events or changes in conditions. This results in market volatility. Prices of the underlying asset on which the CFD contract is based can be highly volatile and are difficult to predict. Due to such volatility, no CFD contract available via ForexCT’s trading platforms may be considered as risk free.

    Given the potential levels of volatility, it is recommended that you closely monitor your trades at all times.

    You can eliminate some downside risk by the use of guaranteed stop loss orders (refer to section above entitled ”Potential Loss”). If you use a guaranteed stop loss order we will enter into a position opposite to your existing position if the CFD price reaches a level specified by you in advance.

    5.2 Counterparty Risk

    Given you are dealing with us as a counterparty to every trade, you will have an exposure to us in relation to each trade if we are not ready, willing or able to meet our obligations, for example, if ForexCT were to become insolvent. In all cases, you are reliant on our ability to meet our obligations to you under the terms of each trade. This is common to all OTC products. This risk is described as counterparty risk. You can assess ForexCT’s financial ability to meet its counterparty obligations by reviewing its financial statements. Should you wish to be provided with a copy of our most recent audited Balance Sheet and Profit and Loss statement for your review then please request this information directly from us and we will provide it free of charge.

    We have been operating since 2006 and have an unblemished track record i.e. we have not been subject to any disciplinary action by any regulatory body. We hold an Australian Financial Services (“AFS”) License (AFS License no. 306400).

    In addition, we may choose to limit our exposure to our clients by entering into opposite trades as principal in the wholesale market i.e. implement hedge trades. In such cases, ForexCT would then be exposed to the counterparty risk to its hedging party.

    5.3 Market Information

    We may in the future make available to you a broad range of financial information generated internally or obtained from agents, vendors or partners (“Third Party Providers”). This includes, but is not limited to, financial market data, quotes, news, analyst opinions and research reports, graphs or data (“Market Information”).

    Market Information provided by us by email or through our website (or Third Party websites) is not intended as advice and we do not endorse or approve the Market Information. We make it available to you only as a service for your own convenience. We and any Third Party Providers do not guarantee the accuracy, timeliness, completeness or correct sequencing of the Market Information or warrant any results from your use or reliance on the Market Information.

    Market Information may quickly become unreliable for various reasons including, for example, changes in market conditions or economic circumstances. Neither us nor the Third Party Providers are obligated to update any information or opinions contained in any Market Information and we may discontinue offering Market Information at any time without notice.

    5.4 Systems Risks

    We rely on technology to provide our trading platforms to you. A disruption to the facility may mean you are unable to trade in CFDs when desired. Alternatively, an existing trade may be aborted as a result of a technology failure. An example of disruption includes the “crash” of the computer systems used to operate the trading platforms.

    If we determine in our absolute discretion that you have entered into a trade that takes advantage of internet connectivity delays or price feed errors that have caused the prices displayed on our trading platforms to not accurately reflect market rates, or we determine that trades individually or together reasonably appear to rely on price latency arbitrage opportunities, we may revoke those trades without further liability to you and we may make any necessary or prudent corrections or adjustments to your account that we deem necessary in our absolute discretion.

    5.5 Use and Access to our Website

    You are responsible for providing and maintaining the means by which you access our website. These may include, without limitation, a personal computer, modem and telephone or other access system available to you.

    While the internet and the World Wide Web are generally reliable, technical problems or other conditions may delay or prevent you from accessing our website or trading platforms. If you are unable to access the internet and thus, our trading platforms, it may mean you are unable to enter into new CFD trades or update/amend existing CFD trades when desired and you may suffer a loss as a result. If you are unable to access the internet you may contact our office during business hours and place an instruction to trade with one of our representatives.

    Furthermore, in unforeseen and extreme situations, we reserve the right to suspend the operation of our website and trading platforms or any part or sections of them. In such an event, we may, at our sole discretion (with or without notice), close out your open positions at prices we consider fair and reasonable.

    We may impose trading volume limits on client’s accounts, at our sole discretion.

    5.6 Margin Risks

    If your losses from an open position are equal to the deposits used to fund your account (see section 2.4), then we will close out all of your positions. We are not obliged to contact you or to give you notice before we close out your positions. You are solely responsible for monitoring any open positions you have and the level of account equity in your trading account.

    Market volatility or market losses that result in a decline in the market value of your trades may require you to deposit more funds into your account with us or close out your positions prior to the total loss bringing your account to zero. The decision whether to top up your account to maintain the required margin or close out your positions at this point is your decision. However, if the funds in your account fall below the required margin, we will immediately close out all of your positions without reference or liability to you. For example, you deposit $50,000 into your account. You open 5 trades and 4 of those trades cause you to reach a total unrealised loss of $60,000. The other open trade has an unreaslised profit of $10,000. All your positions will be closed out because the running losses for all open positions are equal to the cash amount in your account ($50,000). You can avoid this closing out by us by topping up the funds in your account (paying additional amounts into your account) prior to your account equity reaching zero dollars. This must be done in accordance with the requirements that we would have already specified to you in this PDS or by subsequent communication.

    5.7 Client Monies

    Money paid to ForexCT in connection with a financial service or a product offered by us will be paid into an account designated as a client trust account, with an Australian bank, no later than the next business day after it is received. Only such money, interest and other money permitted by the Corporations Act will be paid into this account. The client money is taken to be held in trust by ForexCT for the benefit of the client.

    This means that client funds deposited with us are held in safe keeping and segregated from our own funds. Those funds are not available to pay general creditors in the event of receivership or liquidation by ForexCT. Monies lodged or deposited with us to meet margin requirements, are not treated as funds belonging to ForexCT but are treated as funds belonging to the client.

    However, for money deposited in 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.

    The client waives the right to any interest on funds deposited in our client trust account. All such interest will be retained by and for the benefit of ForexCT and will not be available to clients. Money may also be invested from our client trust account in accordance with the Corporations Act 2001. Any income generated from such investments will also be retained by and for the benefit of ForexCT and will not be available to clients.

    For money deposited in our client trust account, the client is required to acknowledge as part of our Terms and Conditions that:

    • Individual client accounts are not separated from each other;
    • All clients’ funds are co-mingled into the one client trust account;
    • The client money provisions in the Corporations Act 2001 may not insulate any individual client’s funds from a default in our client trust account if such a default were to occur. Such a default may arise from any clients’ trading i.e. by a client failing to pay for all losses incurred on their account; and
    • Assets in the client trust account belonging to non-defaulting clients are potentially at risk, even though they did not cause the default. However, in the case of ForexCT, no default by any client is likely to occur on the basis that we have implemented systems and procedures whereby the potential loss for any one client is limited to the amount deposited into their account with us (refer Section 2.6 under the heading “Potential Loss” for additional detail as to how ForexCT guarantees this). Thus, no client will be in a position where they incur a loss in excess of the amount they have deposited with us and accordingly, no client can become a debtor to ForexCT and default on the payment of that debt. Although generally assets in the client trust account belonging to non-defaulting clients are potentially at risk, even though they did not cause the default, this is not the case with ForexCT.

    Notwithstanding the above, clients are still exposed to the risk that they may not receive all money owed to them, if there is a deficiency in the client trust account, and ForexCT becomes insolvent or otherwise unable to meet the deficiency. It is possible that the hedging counterparty used by ForexCT may become insolvent and fail to return client money that ForexCT has lodged with them to meet its hedging obligations.

    ForexCT is entitled to withdraw, deduct or apply any amounts payable to ForexCT under the terms of this PDS or the Terms and Conditions or the Corporations Act 2001. These amounts will generally only be debited from the client trust account when a client closes their positions in loss.

    Payments may be made out of or withdrawn from the client trust account in limited circumstances, including:

    1. payments in accordance with any written direction of the client including a direction included in the Terms and Conditions to pay fees and other expenses relating to transactions and to settle transactions and to otherwise execute client instructions;
    2. when a financial product is issued or transferred according to client instructions;
    3. to meet proper charges;
    4. to pay ForexCT money to which it is entitled;
    5. to return monies to the client;
    6. to make payments otherwise authorised by Law; and
    7. making certain investments authorised by the Corporations Act 2001 or Regulations (for example, an investment on deposit at interest with an Australian authorised deposit taking institution).

    We are also permitted to use money belonging to a client to meet the margin obligations of other clients and our own positions. Thus, one client’s money deposited in the client trust account may be used to satisfy obligations arising from dealing on behalf of another client (or ForexCT) which exposes each client to counterparty risk i.e. the risk that they may not receive all of the money held by us on their behalf in the client trust account if there is a deficit in the client trust account and we become insolvent or otherwise unable to pay the deficiency.

    Please contact ForexCT if you have further questions about the client trust account.

    5.8 Client Monies to which ForexCT is entitled

    Where a client incurs a loss as a result of entering into a trade in a product offered by ForexCT, then at the time that loss is realised (i.e. when the open position is closed out) ForexCT is entitled to the amount of funds held in the client trust account equivalent to the value of the loss.

    Following is a description of the timing of cash flows during a typical trade and when the funds are held as client money and when the funds cease to be held as client money (note this is a simplified example and disregards any fees or charges which may apply):

    Day 1:

    1. Client A opens an account and deposits US$10,000.
    2. ForexCT deposits the US$10,000 in its client trust account.
    3. The balance of the client trust account is US$10,000.

    Day 2:

    1. Client A decides to buy ABCXYZ Ltd share CFDs with a total quantity of 10,000 contracts. Our quote is $5.51/$5.53. The value of a movement from $5.51 to $6.51 is US$10,000 (10,000 contracts * 1 dollar).
    2. Client A opens a trade, say buy 10,000 contracts at a price of $5.53. This represents a notional value of US$55,300 (being: buy price (US$5.53) x 10,000 (number of contracts)). Let’s say the margin obligation is $276.50 (US$55,300/200).
    3. As counterparty to the trade, ForexCT sells 10,000 ABCXYZ Ltd share CFDs to Client A at a price of US$5.53.

    ForexCT does not always hedge its exposure. However, where the trade is in excess of a certain amount (that is determined by ForexCT at its discretion) it is hedged with a hedging counterparty. In circumstances where it is considered appropriate to hedge, ForexCT enters into on a trade with a hedging counterparty. However, even where ForexCT does hedge its exposure to clients, it does not use money held in the client trust account to meet its own obligations. This is an added protection to client monies.

    In this example, whether ForexCT hedges the risk or not, Client A’s $10,000 will remain in the client trust account.

    Days 3 to 5:

    1. Client A continues to hold an open position;
    2. The price of the share CFD has decreased (in line with the underlying share) and our quote is $5.10/$5.12 on Day 5.
    3. The notional value of Client A’s open positions is now US$51,000 (being: sell price (US$5.10) x 10,000 (number of contracts)). Thus, Client A’s margin obligation has increased by US$4,300 (being the unrealised loss on the open positions namely, US$55,300 less US$51,000 = US$4,300).

    Day 6:

    1. The price of the share CFD has decreased further and our quote is now $4.85/$4.87.
    2. Client A enters into a trade to close the open positions (by selling 10,000 ABCXYZ Ltd share CFDs to ForexCT at a price of US$4.85) and realises a loss of US$6,800 (as Client A had originally bought at a price of US$5.53 i.e. US$5.53 less sale price of US$4.85 equals US$0.68 per contract * 10,000 contracts resulting in a loss of $ US$6,800).

    Client A’s account would be debited with the US$6,800 loss reducing the account balance to US$3,200.

    ForexCT has made a profit of US$6,800 (as it had sold to Client A at US$5.53 and bought from Client A at US$4.85).

    At this point, ForexCT is entitled to the US$6,800 which Client A has lost. This amount would still be held in the client trust account but would be money to which ForexCT is entitled i.e. it would no longer constitute client money but it would be money belonging to ForexCT. ForexCT is then entitled to withdraw the money from the client trust account. The current balance of the client trust account is $10,000 of which Client A is entitled to US$3,200 and ForexCT is entitled to US$6,800.

    Day 7:

    1. Client A notifies ForexCT it wishes to close its account. The balance of the account would be US$3,200 (being the original deposit of $10,000 less the loss of US$6,800).
    2. ForexCT transfers US$3,200 to Client A form the client trust account.
  6. ENTERING INTO A CFD TRADE

    6.1 Engaging in a Trade

    In order to use our trading platforms and engage in a trade, you must do the following:

    1. Read this PDS and our Financial Service Guide
    2. Read, acknowledge and accept the Terms and Conditions contained on our website at www.forexct.com.au
    3. Set up an account with us in accordance with the steps set out on our website at www.forexct.com.au
    4. Commence entering into contracts with us using ForexCT’s platform.

    6.2 Prohibition on Scalping

    We prohibit the practice referred to as “Scalping” on our trading platform. We consider scalping to have occurred if a client opens a position and then closes that position within a 2 minutes timeframe. We consider this practice an illegal use of our trading platforms and reserve the right to revoke any trade at your cost if we determine, in our absolute discretion, that a trade constituted scalping. If a client has a losing trade, then the system will allow them to close the trade at a loss within the two minute timeframe to enable the client to avoid incurring further losses. We do not regard this as scalping.

  7. ACCOUNT ADMINISTRATION

    7.1 Confidentiality of login details

    You, the account holder and/or the Authorised Person on your trading account must keep all security information relating to your account confidential. You are responsible for all orders and instructions and for the accuracy of all information sent electronically using the login details that have been linked to your trading account. If you are aware or suspect that your username or password has been compromised and is no longer confidential, then you should contact us immediately (please refer to our contact details on page 2 of this PDS).

    7.2 Account statements

    All past trading history is accessible from the trading platforms. However, if you require a printed account statement, which shows your past trades, all cash movements and your profit or loss, then please contact our accounts department and we will send this to you free of charge.

    7.3 Promotions

    On occasion, we run promotions as an incentive to register, deposit funds or trade on our trading platforms. These promotions are all subject to specific terms and conditions. Generally these terms and conditions are on our website or are communicated to you via email, telephone or in person. If you have any queries regarding any of our promotions, then we advise you to contact us directly.

  8. REPORTING

    8.1 Notifications

    You will automatically receive notification by pop-up message when you execute the following actions:

    • Opening a trade
    • Closing a trade
    • Changing the stop loss order
    • Changing the take profit order
    • Depositing funds
    • Placing an order
    • Execution of the pre-defined order
  9. TAX IMPLICATIONS

    Trading in CFDs has the potential for generating substantial profits and losses and the tax implications may be significant depending on the personal circumstances of each individual client. These tax implications can be complex and are invariably specific to the individual client’s circumstances. ForexCT does not provide tax advice and we recommend that you seek your own professional tax advice as to the impact that any profits or losses generated from trading may have on your overall tax position.

    The Australian Taxation Office has released Taxation Ruling 2005/15 which describes the income tax and capital gains tax consequences of dealing in CFD products. A copy is available at the ATO’s website www.ato.gov.au.

    You should note that this is a public ruling for the purpose of Part IVAAA of the Taxation Administration Act 1953 (Cth) and therefore, if the ruling applies to an investor, the Commissioner of Taxation is bound to assess that investor on the basis outlined in the ruling. Penalties may apply where the treatment outlined in a taxation ruling is not followed and the investor has a tax shortfall.

  10. DISPUTE RESOLUTION

    ForexCT has an internal dispute resolution process in place with the aim to resolve any complaints or concerns you may have, swiftly and fairly. Any complaints or concerns should be directed to the complaints officer (by telephone, facsimile, or letter) at the address and telephone/fax numbers provided in Section 1 of this PDS or by email to complaints@forexct.com.

    ForexCT will firstly acknowledge receipt of written complaints within 5 business days, and aim to resolve and respond to complaints within 30 business days of receipt. We will investigate your complaint, and provide you with our decision, and the reasons on which it is based, in writing.

    Should you be dissatisfied with the outcome, you have the right to lodge a complaint with the Financial Ombudsman Service Ltd (contact details below), an approved external dispute resolution scheme, of which ForexCT is a member. You may also make a complaint via the ASIC free call Infoline on 1300 300 630.

    Financial Ombudsman Service Ltd
    GPO Box 3
    Melbourne VIC 3001
    Toll free: 1300 78 08 08
    Facsimile: +613 9613 6399
    Website: www.fos.org.au
    Email: info@fos.org.au

  11. COOLING-OFF ARRANGEMENTS

    There are no cooling-off arrangements for the CFD products offered by ForexCT. This means that when you enter a trade with us you do not have a right to return the financial product and you do not have the right to request ForexCT to repay the money you have paid to acquire a financial product. Should you change your mind after entering into a trade with us, you should close out your position by entering into an offsetting and opposite transaction.

  12. PRIVACY

    12.1 Collection of personal information

    We collect personal information (including customers' full names, addresses and contact details) so that we may administer the trading account and our customer relationships and provide customers with the products and services they request from us as well as information on the ForexCT Group's ("the Group") products and services.

    Where necessary, we also collect information on individuals such as company directors and officers (where the company is our customer), as well as customers' agents and persons dealing with us on a "one-off" basis.

    The law also requires us to collect personal information, e.g. the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, requires us to identify and verify persons who open or operate accounts. We may take steps to verify the information collected, e.g. a birth certificate provided as identification may be verified with records held by the Registry of Births, Deaths and Marriages to protect against impersonation, or we may verify with an employer that employment and remuneration information provided in an application for credit is accurate. Your identification may also be verified electronically by ForexCT via third parties. From time to time we may request additional identification documentation from you. If you do not comply with our requests for such information, then we reserve the right to restrict or suspend your access to our trading platforms. By registering with ForexCT, you give us consent to verify your name, address and date of birth through a range of public and private databases. These databases include; Medicare Australia, the Australian Tax Office, the Department of Foreign Affairs and Trade, ACT Road Transport Authority, NSW Transport Roads & Traffic Authority, Queensland Transport and Main Roads, South Australia Department for Transport, Energy and Infrastructure, VicRoads, and / or Western Australia Department of Transport.

    12.2 You must provide us with accurate and relevant information

    If you provide us with incomplete or inaccurate information, we may not be able to provide you with the products or services you are seeking. We rely on the information you provide to us, by giving such information you warrant that the information is true and correct. If information we received from you is not true and correct then we reserve the right to restrict or suspend access to your account or cancel any trades previously made by you. If the information provided by you in our account information form has changed (i.e. change of name, address etc), then you must inform us of this change as soon as practically possible.

    12.3 Other disclosures

    Personal information may be disclosed to:

    • Other members of the Group for the purpose of providing services to you or for the purpose of providing you with information about those services;
    • brokers and agents who refer your business to us;
    • any person acting on your behalf, including your financial adviser, solicitor or accountant, executor, administrator, trustee, guardian or attorney;
    • other financial product providers to which your investment might be transferred; and
    • organisations, including overseas organisations, to whom we outsource certain functions.

    Personal information may only be used by our agents, contractors and outsourced service providers for the purposes set out in this PDS.

    We may also disclose personal information to other financial institutions and organisations at their request if you seek credit from them.

    We may be allowed or obliged to disclose information by law, e.g. under court orders or statutory notices pursuant to taxation or social security laws.

    By using our trading platforms you confirm that you consent to the use and disclosure of your personal information, as set out in this PDS.