General
Pacific Index International Ltd. (“PI” or “we” or “us”) whose registered office is at
Lot 2(a), Level 4, Wisma Lazenda, Jalan Kemajuan, 87000 Labuan, Federal Territory
of Labuan, Malaysia. We are a global online trading broker.
This notice provides you with information about the risks associated with investment
products, which you may invest in through services provided to you by PI.
PI provides a wide range of investment services in relation to a number of products.
This notice does not explain all of the risks involved in investment products or how
such risks relate to your personal circumstances. It is important that you fully
understand the risks involved before making a decision to trade CFD’s or Spread
Betting.
If you are in any doubt about the risks involved with your Account, you should seek
professional advice.
Investment Products
Contracts for Difference (‘CFDs’) and Spread Betting with PI are all margin traded
products. Therefore, they inherently carry a high level of risk compared to other
investments and as such you could lose more than your initial investment. They are
all legally enforceable under the Labuan Financial Services and Securities Act 2010.
The ‘spread’ in spread betting represents the difference between ask price and bid
price. If the markets move the way you bet, your profit will rise. Similarly, if the
markets move the opposite way you bet, you will incur losses.
Nature of CFDs
CFD, or Contracts For Difference, is a type of financial contract in the derivatives
market in which two different entities (trader and broker) enter into an agreement to
exchange the differences in the price of an underlying financial asset between its
opening and closing prices.
It is important that you understand the characteristics associated with CFD trading:
- - Trading CFDs is highly speculative, involves a significant risk of loss and is
a) understand and are willing to assume the economic, legal and other
risks involved;
b) 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.
- - CFD trading also carries a high level of risk compared to other kinds of
investments, and prices could move rapidly. Therefore, only part of your
overall investment portfolio should be invested in CFDs as you could lose
more than your initial investment.
- - CFDs provide higher leverage than traditional trading. With CFDs, you only
have to put in a fraction of the market value of the underlying asset when
making a trade, sometimes as little as 1%.
- - Financial markets may fluctuate rapidly to reflect events that are outside the
control of the Firm and/or your control; as a result, prices will become
volatile. One form of price volatility is ‘gapping’, which occurs when there is a
sudden shift in prices from one level to another. This can be caused, for
example by unexpected economic events or market announcements, within
or outside trading hours. Consequently, PI may be unable to execute your
instructions at the requested price. In addition, if prices move against you,
this will have a direct and real time impact on your trades.
- - CFD is not suitable for buy-and-hold trading or long-term positions.
- - CFDs do not have an expiry date like options or futures contracts.
- - A CFD can only be closed by making a second, ‘reverse’ trade.
Margin
Margin trading is leveraged trading that allows ‘gearing’ which means that you can
place a large trade or bet by only putting up a small amount of money as margin. If
the price moves in your favour, you can greatly increase your profits. However, even
a small movement in price against you can lead to substantial losses and you may
be required to deposit additional margin with us immediately to keep these trades
open. You are liable for this and for any losses that may occur if your positions are
closed. The potential losses, or profits, for margin traded products are, or could be,
unlimited and this should always be considered by you when making trading
decisions.
Margined trades (or bets in the case of spread betting) are trades on the price
movement of a product. They settle based on the difference between the opening
price and the closing price of the trade or bet. They can settle in a currency other
than your base currency and therefore your profit or loss could be liable to foreign
exchange fluctuations.
You should not trade any margined product unless you fully understand all the risks
involved with doing so and that you have sufficient resources available to you that in
the event, however unlikely you may deem it to be, that there is an adverse
movement in the price of that product that you can meet the financial obligations
required by you with respect to margin payments and losses.
Margin trading is not necessarily designed to replace existing or traditional methods
of investing and is therefore not suited to everyone.
All clients margin are set to 30 percent. We will be closing all clients out at 10
percent including professional clients. This requirement is based on one or more
open CFD positions and the rule is based on an account level basis as opposed to
per position. The client may in certain conditions surpass this close-out rule.
If the market was to gap, we would not need to credit the client back to the 30
percent close-out level. Our sole obligation is to ensure that the client does not incur
a negative balance (see
Negative Balance Protection below).
The margin close-out rule is imposed on a per account basis (rather than a per
position basis). We can close one or more of a client’s open CFD positions on terms
most favorable to the client accordingly. When the sum of funds in the CFD trading
account and the unrealized net profits of all open CFDs connected to that account
falls to less than half of the total initial margin protection for all those open CFD, the
client would be closed out.
Market Risks
It is important that you understand that trading financial instruments on different
markets has its own inherent risk. Some of such risks include currency, volatility and
liquidity.
Currency risk arises from the change in price of one currency in relation to another.
This may impact the profit and loss of the transaction. Currency risk can be reduced
by hedging, which offsets currency fluctuations.
Volatility refers to the amount of uncertainty or risk involved with the size of changes
in a currency exchange rate. High volatility means that the price of the currency can
change dramatically over a short time period in either direction.
Liquidity risk is the risk originating from the lack of marketability of an investment that
cannot be bought or sold quickly enough to prevent or minimize a loss. Liquidity can
impact the price, spreads and sizes that your order is executed.
Leverage Trading
With leverage trading of derivative products, a relatively small price movement in the
underlying asset may result in proportionately larger profits or losses. If the market
moves against your position(s) and/or the margin requirements are increased, you
may be required to deposit additional funds at short notice in order to maintain your
open margined position (s). If you do not provide additional funds or other acceptable
collateral to satisfy the margin requirements, we are entitled to close your open
margined position(s). Consequently, you shall be liable for any losses or deficit on
the account as the result of the close-out.
No Investment Advice
We do not provide investment advice in relation to our products or services as well
as regulatory, tax or legal advice. You are responsible for managing your tax and
legal affairs including making any regulatory filings and payments and complying
with applicable laws and regulations. If you are in any doubt as to the tax treatment
or liabilities of investment products available through any of your Accounts, you may
wish to seek independent advice.
Monitoring Positions
It is important that you monitor all of your positions closely. It is your responsibility to
monitor your positions and during the period that you have any open Contracts or
are holding any Instruments, you should always have the ability to access your
Accounts.
Swap Rates
You may be subject to swap rates for overnight financing if you leave your positions
open at or after Market Close (MOC) time. Please note that this time can change
with daylight savings adjustments.
Trade Restrictions
Not all trades (or bets) can be opened or closed 24 hours a day. Many are subject to
strict opening and closing times which can fluctuate. These are posted on our Market
Information Sheets (MIS) which are available online and which we endeavours to
keep up to date, without any obligation or liability on us to do so, or for its accuracy.
For example, national holidays and Daylight savings changes will affect the times
when you can trade. Also, a market may be suspended for a variety of reasons and
during this time you will not usually be able to trade.
Electronic Communications
Although electronic communication is often a good way to communicate, it may also
fail, can be delayed, may not be secure and/or may not reach the intended point of
destination.
Suspensions of Trading
Under certain trading conditions it may be difficult or impossible to liquidate a
position. This may occur, for example at times of rapid price movement if the price
for the underlying rises or falls in one trading session to such an extent that trading in
the underlying is restricted or suspended.
Customer Funds
If you are categorized as a retail client, any money that we hold on your behalf will
be kept in one or more segregated accounts with an institution within or outside the
Federal Territory of Labuan, Malaysia, separated from the Firm’s money. However,
even in a segregated account you may not be afforded complete protection.
Trade Prices
You are placing trades (or bets) on our prices and not those on an exchange.
Depending on the market, our prices will usually be based on an exchange price but
can fluctuate away from the underlying prices due to a variety of reasons. All open
trades can only be closed and settled with us.
Technical Risks
We aim to generate prices continuously and provide you with access to our trading
platforms throughout the trading sessions. However, there are instances where this
is not possible (e.g. due to poor internet connectivity, system errors and outages,
etc.). This may cause prices to change between the time an order is placed and the
time the order has been received by the Firm. In addition, these technical risks may
significantly impact the execution of your orders.