1.5 Uses of Foreign Exchange

Commercial activities for which foreign exchange may be useful include:

• importing, where the invoice is quoted in foreign currencies
• exporting, where the invoice is quoted in foreign currencies
• foreign currency borrowing
• foreign currency investing
• repatriation of overseas profits or interest in foreign currencies back to Australia; and
• other foreign currency payments

1.6 How does our Online Trading Platform work?

We provide an online trading platform, enabling you to enter into OTC foreign exchange contracts. We provide direct access to currency rates via the internet.

To make a trade using our online trading platform:

1. You first register with ForexCT.com by filling out the registration form located at
   http://www.forexct.com.au/www/293/1001127/displayarticle/1001180.html
2. Once you are registered, you will be able to login to your User Account using your Username and Password. This can be done by clicking on “Login” on the Homepage.
3. Once logged in, a number of windows pop up in the platform. In order to place a trade, you first select a currency pair from the trade window. For example, you can choose the currency pair of EUR/USD.
4. Once you have selected a currency pair, you need to select the amount you wish to invest in the intended foreign exchange contract. The amounts you may choose range between $2,500 and $5,000,000.
5. ForexCT.com offers you “Leverage Trading”. This effectively means you can limit your maximum losses to a small percentage of the value of your investment. ForexCT.com allows you to limit your loss to between 0.33% to 2% of the value of any foreign exchange contract you enter into via our online trading facility.
6. Once you have chosen your currency pair you determine which currency is going to be bought and which is going to be sold. The “Bid” price is the price at which a party has offered to buy the currency and the “Ask” price represents the quoted price at which a party has offered to sell a currency. The difference between the Bid and Ask represents the “spread”. Should you choose to enter into a contract worth US$ 1,000,000 with 1% leverage. The amount required to enter into this trade would be US$ 10,000 (1% of US$ 1,000,000 = US$10,000). This is the amount that will be required to be in your account so that you can enter into this contract.
7. Once the trade has been executed, the particulars of that trade will show up in the “Portfolio” window of your account on our online trading facility.

1.7 How is the Foreign Exchange Rate Calculated?

We cannot predict future exchange rates and our rate quotations on our website are not a forecast of where we believe foreign exchange rates will be at a future date. The decision to transact at a particular rate will always be your decision.

The calculation of the price to be paid (or the payout to be received) for foreign exchange contracts offered by us, at the time the contract is purchased or sold, will be based on our best estimate of market prices and the expected level of interest rates, implied volatilities and other market conditions during the life of the contract and is based on a complex arithmetic calculation.

1.8 The calculation will include a spread in our favour.

We are the counterparty for all transactions with clients using our online forex trading platform. We act as a market maker and earn our income from the spread that we apply to foreign exchange transactions. The spread is the difference between the rate at which we buy and sell foreign exchange and will depend on factors such as the size and value of the transaction and prevailing market rates. As a result spreads may differ from transaction to transaction. This spread is incorporated into the quoted rates and is not an additional charge or fee payable by you.

The contract prices (or the payout amounts) we offer to you when hedging, trading or speculating on market prices may differ substantially from prices available in the primary or underlying markets where contracts are traded. This is due to the spread in the price calculation that favours us. Different spreads are used depending on the value of the contract. These 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 foreign exchange transaction 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.

Trades that are not completed or terminated prior to at 22.00 Greenwich Mean Time are held overnight (“rolled over”) and will result in you paying or receiving interest. This is known as rollover interest. Rollover refers to the interest you may earn or be charged daily on your open positions.

Every currency pair has an interest rate associated with it. Depending on the currency pair you trade, you will pay or earn interest at the end of the trading day at 22.00 GMT. To earn interest, you must buy a currency with a higher interest rate than the one you are selling.

Take USD/JPY in Oct 2006 for example. At the time the US dollar earned 5.25% and the Japanese Yen 0.25% interest. A trader that buys this pair would make the differential of 5% (annualized) by simply holding the position passed 22.00 GMT time.

Interest rate refers to the cash rate, which is the overnight money market interest rate.

Forex Capital Trading will include a spread in its favour from rollover. This is because prices offered to clients may differ considerably from prices offered to Forex Capital Trading in the primary market. Forex Capital Trading operates as a market maker not a broker. Forex Capital Trading makes its earnings from the spreads that are built in to the currency and interest rates.

2 Products and SERVICES OFFERED

2.1 Day Trading

The Forex Capital Trading online platform allows you to carry out daily currency rate deals on all currencies displayed on its system

Example:

Let’s assume you are of the opinion that the AUD will rise against the USD in a 1 week time frame and were willing to risk A$ 1,000. You could enter a day trade deal via the platform for A$ 100,000. For this example we will assume you bought A$ 100,000 at an exchange rate of 0.8300 and risk A$ 1,000. The system would automatically generate a stop loss at 0.8220. This A$ 1,000 is the maximum amount you could lose, nothing more. At the exchange rate of 0.8300, A$ 100,000 equals US$ 83,000 and at the automatic stop loss exchange of 0.8220, A$ 100,000 equals US$ 82,200.00. The difference is slightly within the maximum at risk A$ 1,000. Keep in mind you are looking for the AUD to appreciate against the USD.

Let’s look at different outcomes when the deal ends at various exchange rates:

1. Let’s assume that in two weeks time (lifespan of the deal) the exchange rate is at 0.8150. In this case your deal would have been closed at the pre-defined stop loss of 0.8220. The result is that you have lost A$ 1,000 which was the amount you were willing to risk. It is worth pointing out that without the stop loss your losses would have been more in the region of approx A$ 1,850.
2. Let’s assume that in two weeks time the exchange rate is at 0.8460. You would have made a profit of approx. A$ 1,900.The amount is the difference between A$100,000 @ 0.8300 (US$ 83,000) and A$ 100,000 @ 0.8460 (US$ 84,600). The difference equals US$ 1,600 profit converted back into A$ @ 0.8460 which equals A$ 1,900.

ForexCT is a market maker and therefore receives access to the primary market. ForexCT has a minimum of three liquidity providers, ensuring that the rates offered to clients are always inline with the actual market.

A day trade can therefore be terminated in one of the following events:

• You terminate it by providing instructions to that effect.
• The stop loss you predefined has been reached.
• The Transactions end date is reached.
• A force majeure event or other event which prevents the performance of the Transaction occurs.

Although it is referred to as a day trade the deal has a duration of 1 month from its open date. Therefore the deal will expire in 1 month time at exactly 22:00 GMT.

Margin Requirements

To enter into a day trade, the initial margin required immediately is 0.33% to 2% depending on the leverage and the contract size you choose.

Example:

Should the client choose leverage of 1:100 (1%) the contract amount of the deal is A$ 100,000, and then the initial margin will be A$ 1,000. With contract sizes starting at A$ 2,500 and leverage of 1:300 (0.33%), clients can start trading with margins of A$ 8.

Margin requirements are taken on a per transaction basis and depend on the leverage chosen for that particular trade. There are no margin calls and the risk of that trade is limited to the intial margin. You are not able to fund margin requirements with unrealized profits from one transaction. You are only allowed to deal in and maintain positions on the basis of cleared funds being provided for your margin obligations.

We have the right to limit the size of your open positions under any appropriate circumstances as determined by us.

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 notice.

2.2

There is no physical delivery of currency as a result of a Transaction. Positions will always be closed and your account(s) will be either credited or debited according to the profit or loss of the Transaction. If a Transaction is held to the nominated end date it is cash settled according to the closing price of the relevant currency, as quoted by us, on that particular day.

3 SIGNIFICANT BENEFITS OF OUR ONLINE FOREX TRADING SERVICE

The significant benefits of using foreign exchange offered by us via our website are:

3.1 Provide cash flow certainty

By agreeing a rate now for a time in the future you will determine the exact cost of that currency, thereby giving certainty over your flow of funds. Any profit (or loss) you make using the online forex trading platform would be offset against the higher (or lower) price you physically have to pay for the foreign currency at the future date.

3.2 Speculation

In addition to using foreign exchange as a risk management tool, you can benefit by using foreign exchange offered by us to speculate on changing exchange rate movements. You may take a view of a particular market or the markets in general and therefore invest in foreign exchange according to this belief.

3.3 Trade in small amounts

Our system enables you to make transactions in small amounts. You can start using our on-line facility for transactions of at least $2,500 contract size When trading in a foreign exchange product offered by us you may deposit the sum that suits you, or the amount which is in line with the amount you are willing to risk.

3.4 Access to the foreign exchange markets at any time

When using our on-line facility you gain access to a system which is active and being updated 24 hours a day. You can control your accounts and positions 24 hours a day.

3.5 Making deposits with your credit card

Our on-line facility allows you to deposit money for your transactions with your credit card, allowing you to lodge your deposits at any time, regardless of banking hours. We use the latest technologies to provide a security shield for your credit card and privacy.

3.6 Real time streaming quotes

Our on-line facility uses the latest highly sophisticated technologies in order to offer you up-to-the-minute quotes. 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.

3.7 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 never lose more than you are prepared to lose.

3.8 No software download

Our on-line facility does not require you to download proprietary software, enabling you to start trading immediately.

3.9 Tailor-made conditions for frequent traders

The spreads in our on-line facility assume transactions of small, up to medium amounts. If you are a frequent user of our on-line facility 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 SIGNIFICANT RISKS

Risks may lead to unfavorable changes in the financial outcomes that you expect from use of our on-line facility. Monitoring of any risks associated with the on-line facility is your responsibility.

4.1 Market Risk

We expect that foreign exchange transactions on our on-line facility will be used to manage foreign currency cash flows in most cases. If you enter into a foreign exchange transaction for a purpose other than the immediate exchange of a foreign currency, you may be directly exposed to changes in the relevant foreign exchange market. These changes may result in losses to you.

4.2 Market Volatility

Foreign exchange currency markets are subject to many influences which may result in rapid currency fluctuations and reflect unforeseen events or changes in conditions. This results in market volatility. Foreign exchange markets are highly volatile and are difficult to predict. Due to such volatility, no foreign exchange transaction available via the online forex trading platform may be considered as risk free.

Given the potential levels of volatility in foreign exchange markets, it is recommended that you closely monitor your transactions at all times..

You can eliminate some downside risk by the use of stop loss orders. If you use a stop loss order we will enter into a position opposite to your existing position if the exchange rate reaches a level specified by you in advance.

4.3 Counterparty Risk

Given you are dealing with us as a counterparty to every transaction, you will have an exposure to us in relation to each transaction. In all cases, you are reliant on our ability to meet our obligations to you under the terms of each transaction. This risk is sometimes described as counterparty risk.

We may choose to limit our exposure to our clients by entering into opposite transactions as principal in the wholesale market. In addition, we must comply with the financial requirements imposed under our Australian Financial Services License.

4.4 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 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.

4.5 Systems Risks

We rely on technology to provide our on-line facility to you. A disruption to the facility may mean you are unable to trade in foreign exchange when desired. Alternatively, an existing Transaction 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 on-line facility.

4.6 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. If you are unable to access the internet and thus, our on-line facility, it may mean you are unable to enter into foreign exchange transactions when desired and you may suffer a loss as a result.

Furthermore, in unforeseen and extreme situations, we reserve the right to suspend the operation of our website and on-line facility 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 volume limits on client’s accounts, at our sole discretion.

5 CLIENT’S MONIES

5.1 Trust Account

Before you can enter into a transaction of any contract size, you must have first deposited the margin required for that contract or have that margin amount in your account available prior to placing the trade

The funds in your account will be held in a client trust account. Funds deposited in our account are segregated from Forex Capital Trading’s money and held in a client trust account in accordance with the Corporations Act 2001 The client relinquishes the right to any interest on funds deposited with Forex Capital Trading Individual client accounts are not separated from each other but instead are pooled into the one trust account;

6 ENTERING INTO A FOREIGN EXCHANGE TRANSACTION

6.1 Engaging in a Transaction

In order to use our on-line facility and engage in a Transaction you must do the following:

1. Read this Product Disclosure Statement 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 the on-line trading platform.

7 TERMINATING A FOREIGN EXCHANGE TRANSACTION

A foreign exchange transaction may be terminated by agreement between you and us. A transaction will also be terminated if:

• You terminate it by providing instructions to that effect.
• The stop loss you predefined has been reached.
• The Transactions end date is reached.
• A force majeure event or other event which prevents the performance of the Transaction occurs.

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
• Changing the take-profit
• Depositing funds
• Withdrawing funds
• Placing an order
• Execution of the pre-defined order

9 PAYMENT NETTING

If you have more than one foreign exchange transaction with the same end date and for the same currencies, payments and receipts arising from the transactions may be "net settled". This means that all settlements for those transactions are combined to a single net payment between you and us.

10 TAX IMPLICATIONS

Foreign exchange transactions may have tax implications. These can be complex and are invariably specific to your circumstances. Therefore, you should discuss any taxation issues with your tax adviser before entering a transaction.

11 Dispute Resolution

Forex Capital Trading 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

FOS
GPO Box 3, MELBOURNE VIC 3001

Telephone: 1300 78 08 08
Facsimile: (03) 9613 6399

Website: http://www.fos.org.au/
Email: info@fos.org.au  

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 online forex trading account and our customer relationships and provide customers with the products and services they request from us as well as information on the Forex CT 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 may also require us to collect personal information, e.g. Commonwealth legislation requires us to identify 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.

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.

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 purposes.

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 the online forex trading you confirm that you consent to the use and disclosure of your personal information, as set out in this PDS.