Risk Disclosure Statement
In consideration of Gstaad Brokers Ltd (hereafter the “Company”) agreeing to enter into over-the-counter
(“OTC”) contracts for differences (“CFDs”) with the Client (hereinafter referred to as the “Client”, “you”, “your”, “he”, “she”), Client acknowledges, understands and agrees that:
1.Trading is very speculative and risky
Trading CFDs is highly speculative, involves a significant risk of loss and is not suitable for all investors but only for those Client s who:
- understand and are willing to assume the economic, legal and other risks involved;
- are experienced and knowledgeable about trading in derivatives and in underlying asset types; and
- are financially able to assume losses significantly in excess of margin or deposits because investors may lose the total value of the contract not just the margin or the deposit.
CFDs are not appropriate investments for retirement funds CFDs are among the riskiest types of investments and can result in large losses. Client represents, warrants and agrees that he/she understands these risks, is willing and able, financially and otherwise, to assume the risks of trading CFDs and that the loss of Client ’s entire account balance will not change Client ’s lifestyle.
2.Risks related to long CFD positions, i.e. for purchasers of CFDs
Being long in a CFD means you are buying the CFDs on the market by speculating that the market price of the underlying will rise between the time of the purchase and sale.
As owner of a long position, you will generally make a profit if the market price of the underlying rises whilst your CFD long position is open. On the contrary, you will generally suffer a loss, if the market price of the underlying falls whilst your CFD long position is open. Your potential loss may therefore be bigger than the initial margin deposited. In addition, you might suffer a loss due to the closure of your position, in case you do not have enough liquidity for the margin on your account in order to maintain your position open.
3.Risks related to short CFD positions, i.e. for sellers of CFDs
Being short in a CFD means you are selling the CFDs on the market by speculating that the market price of the underlying will fall between the time of the purchase and sale. As owner of a short position, you will generally make a profit if the market price of the underlying falls whilst your CFD short position is open. On the contrary, you will generally suffer a loss, if the market price of the underlying rises whilst your CFD short position is open. Your potential loss may therefore be bigger than the initial margin deposited. In addition, you might suffer a loss due to the closure of your position, in case you do not have enough liquidity for the margin on your account in order to maintain your position open.
4.High leverage and low margin can lead to quick losses
The high degree of “gearing” or “leverage” is a particular feature of CFDs. The effect of leverage makes investing in CFDs riskier than investing directly in the underlying asset. This stems from the margining system applicable to CFDs which generally involves a small deposit relative to the size of the transaction, so that a relatively small price movement in the underlying asset can have a disproportionately dramatic effect on your trade. This can be both advantageous and disadvantageous. A small price movement in your favour can provide a high return on the deposit, however, a small price movement against you may result in significant losses.
Your losses will never exceed the balance of your account, which is balanced to zero, if the losses are higher than the amount deposited. Such losses can occur quickly. The greater the leverage, the greater the risk. The size of leverage therefore partly determines the result of your investment.
Client must maintain the minimum margin requirement on their open positions at all times. It is Client ’s responsibility to monitor his/her account balance. Client may receive a margin call to deposit additional cash if the margin in the account concerned is too low. The Company has the right to liquidate any or all open positions whenever the minimum margin requirement is not maintained, and this may result in Client ’s CFDs being closed at a loss for which he/she will be liable.
Client understands that CFDs can only be settled in cash and the difference between the buying and selling price partly determines the result of the investment.
7.Conflicts of Interest
The Company is the counterparty to all transactions entered into under the Client Agreement and, as such, the Company’s interests may be in conflict with yours. Our Conflicts of Interest Policy is available at the Company’s website.
There is no central clearing and no guarantee by any other party of Company’s payment obligations to the Client, thus Client is exposed to credit risk with the Company. Client must look only to the Company for performance of all contracts in Client ’s account and for return of any collateral.
When trading CFDs with us, such Transactions will not be executed on a recognized or designated investment exchange and are known as OTC transactions. All positions entered into with us must be closed with us and cannot be closed with any other entity. OTC transactions may involve greater risk than investing in on-exchange contracts because there is no exchange market on which to close out an open position. It may be impossible to liquidate an existing position, to assess the value of the position arising from an OTC transaction or to assess the exposure to risk. Bid Prices and Ask Prices need not be quoted by us, based on best execution policies applicable in the market. There is no central clearing and no guarantee by any other party of the Company’s payment obligations to the Client. The Client must look only to the Company for performance of all contracts in the Client ’s Account and for return of any Margin or collateral.
Trading CFDs carries a high degree of risk. The gearing or leverage often obtainable in such trading means that a relatively small market movement can lead to a proportionately much larger movement in the value of your liability. You should be aware of the implications of this, in particular, the Margin requirements.
10.Prices, Margin and Valuations are set by the Company and may be different from prices reported elsewhere
The Company will provide prices to be used in trading, valuation of Client positions and determination of Margin requirements in accordance with its Trading Policies and Procedures.
The performance of your CFD will depend on the prices set by the Company and market fluctuations in the underlying asset to which your contract relates. Each underlying asset therefore carries specific risks that affect the result of the CFD concerned.
11.Extent of Losses
Where you are short in the market and the price rises, it is possible that the extent of your losses may not become clear until the position has been closed. You must undertake sufficient analysis prior to entering into a Transaction to ensure you are able to support the extent of the risk arising.
12.Rights to Underlying Assets
You have no rights or obligations in respect of the underlying instruments or assets relating to your Trading, or CFDs. The Client understands that CFDs can have different underlying assets, such as Stocks, Indices, Forex Pairs and Commodities.
Investing in CFDs with an underlying asset listed in a currency other than your base currency entails a currency risk, due to the fact that when the CFD is settled in a currency other than your base currency, the value of your return may be affected by its conversion into the base currency.
14.One click trading and immediate execution
The Company’s online trading system provides immediate transmission of Client ’s order once Client enters the notional amount and clicks “Buy/Sell.” This means that there is no opportunity to review the order after clicking “Buy/Sell” and Market Orders cannot be cancelled or modified. This feature may be different from other trading systems you have used. Client should utilize the Demo Trading System to become familiar with the Online Trading System before actually trading online with the Company. Client acknowledges and agrees that by using the Company’s online trading system, Client agrees to the oneclick system and accepts the risk of this immediate transmission/execution feature.
15.The Company is not an adviser or a fiduciary to Client
Where the Company provides generic market recommendations, such generic recommendations do not constitute a personal recommendation or investment advice and have not considered any of your personal circumstances or your investment objectives, nor is it an offer to buy or sell, or the solicitation of an offer to buy or sell, any CFD. Each decision by Client to enter into a CFD with the Company and each decision as to whether a transaction is appropriate or proper for Client, is an independent decision made by the Client. The Company is not acting as an advisor or serving as a fiduciary to Client. Client agrees that the Company has no fiduciary duty to Client and no liability in connection with and is not responsible for any liabilities, claims, damages, costs and expenses, including attorneys’ fees, incurred in connection with Client following the Company’s generic trading recommendations or taking or not taking any action based upon any generic recommendation or information provided by the Company.
16.Recommendations are not guaranteed
The generic market recommendations provided by the Company are based solely on the judgment of the Company’s personnel and should be considered as such. Client acknowledges that Client enters into any Transactions relying on his/her own judgment. Any market recommendations provided are generic only and may or may not be consistent with the market positions or intentions of the Company and/or its affiliates. The generic market recommendations of the Company are based upon information believed to be reliable, but the Company cannot and does not guarantee the accuracy or completeness thereof or represent that following such generic recommendations will reduce or eliminate the risk inherent in trading CFDs and/or FX Contracts.
17.No guarantees of profit
There are no guarantees of profit nor of avoiding losses when trading CFDs. Client has received no such guarantees from the Company or from any of its representatives. Client is aware of the risks inherent in trading CFDs and is financially able to bear such risks and withstand any losses incurred.
18.Client may not be able to close open positions
Due to market conditions which may cause any unusual and sharp market price fluctuations, or other circumstances the Company may be unable to close out Client ’s position at the price specified by the Client and the Client agrees that the Company will bear no liability for a failure to do so.
When Client trades online (via the internet), the Company shall not be liable for any claims, losses, damages, costs or expenses, caused, directly or indirectly, by any malfunction, disruption or failure of any transmission, communication system, computer facility or trading software, whether belonging to the Company, Client , any exchange or any settlement or clearing system.
Should a quoting error occur (including responses to Client requests), the Company is not liable for any resulting errors in account balances and reserves the right to make necessary corrections or adjustments to the relevant Account. Any dispute arising from such quoting errors will be resolved on the basis of the fair market value, as determined by the Company in its sole discretion and acting in good faith, of the relevant market at the time such an error occurred. In cases where the prevailing market represents prices different from the prices the Company has posted on Company’s website, the Company will attempt, on a best-efforts basis, to execute Transactions on or close to the prevailing market prices. These prevailing market prices will be the prices, which are ultimately reflected on the Client statements. This may or may not adversely affect the Client ’s realized and unrealized gains and losses.
The Company does not participate in any Investor Compensation Scheme.
The Company has the right to amend the current Policy as per its discretion and at any time it considers it suitable and appropriate. In such an event the Company will notify the client accordingly. The Company shall review and amend the current Policy at least on an annual basis. The Policy is available for review by clients upon request and it is uploaded to the Company’s website.