Risk Disclosure Notice
This Risk Disclosure Notice has been provided to you in compliance with the rules of the Financial Conduct Authority and for your consideration before choosing to undertake dealings with FP Markets in financial derivate products under our terms of business.
This notice outlines some of the risks when dealing in FP Markets financial products however it cannot and does not explain all of the risks and other significant aspects involved in trading financial derivative products. Additionally this notice does not explain how these risks relate to your personal circumstances and FP Markets recommends that you seek professional advice if you have any doubt about the risks associated with trading derivate products. You should also be satisfied that the products are suitable for you in the light of your circumstances such as your investment objectives, risk appetite and financial position.
Entering into a trading relationship with us carries a high degree of risk to your capital. You should not engage in trading financial derivative products unless you understand the nature of the transactions you are entering into and the true extent of your exposure to the risk of loss.
Different products involve different levels of exposure to risk and if you choose to enter into a trading relationship with us, it is important that you are aware and remain aware of the risks and that your financial resources are appropriate given such risks involved. Risks include though are not limited to the following:
Margin and Leverage
Due to the high degree of leverage involved with Derivative Financial Products, such as Contracts for Difference (CFDs), these products are unsuitable for many customers. The leverage or gearing that is often available through the use of CFDs means that only a small margin payment can lead to both extensive losses and gains. As a result of the small margin requirement relative to exposure, for example a contract may require a margin outlay of 10% of total exposure, even small market movements can lead to large movements in the value of your total position and therefore lead to substantial losses or gains relative to your initial outlay.
While a position is open with us, you will be required at all times to maintain a margin requirement. Therefore you must ensure that your account balance, taking into account both profits and losses at that time is equivalent to the total margin required to maintain the position. It is your responsibility to maintain this required margin payment.
Financial derivative products are margined, and require you to make a series of payments against the contract value. As your open positions are continuously re-valued with market movements, and this is immediately reflected in your account, these payments may be required at short notice to maintain your open trades. If payment is not made we will be entitled to close out some or all of your positions and you will be responsible for any losses incurred. In the event that your account is in deficit, you will be responsible for this.
We may also change our rates of initial margin and/or notional trading requirements at any time, which may also result in a change to the margin you are required to maintain. Such changes may occur at short notice and may require you to provide additional funds at short notice in order to maintain your open positions. Failure to make payments in such circumstances will provide us with the entitlement to close one or more or all of your trades.
You should be aware that it is possible for adverse market movements to result in the loss of the whole of your margin and more, so that you owe additional money to us beyond your initial margin payment.
International markets will involve different risks from UK markets. The profit or loss potential from transactions on foreign markets or in foreign currency denominated markets will be affected by fluctuations in foreign exchange rates. The risks of dealing in foreign markets may be greater that that of dealing in the UK.
All transactions with FP Markets are off-exchange or over-the-counter (OTC) transactions. Therefore all transactions entered into with us can only be closed with us and not with any other entity. Such OTC derivative transactions can be considered riskier as trades opened can only be closed with the same provider and contracts are not transferable to any other person. As a result, you may be exposed to the risk of our default or it may be impossible to liquidate a position or to access the value of the position. Trading prices need to be quoted by us and in some cases such as when a market is suspended or closed, FP Markets may find it difficult to establish and therefore quote a price.
As a result of constantly changing prices and the effect of gearing or leverage there is a need to monitor your positions and any resulting margin payments. The monitoring of positions is your responsibility and it is important that you do this on an on-going basis.
No Right to Underlying Instruments
OTC products will give you no right to the underlying instrument on which the instrument is based. Also you will not receive the voting rights attached to the underlying shares.
Charges and Commissions
Charges and Commissions are payable on all transactions and will effect your profitability. A list of all fees and charges will be provided to you upon opening the account and we encourage you to ensure that you are aware of chares and commissions before you commence trading.
Inability to Liquidate a Position
In certain circumstances the underlying Financial Product on which a Transaction is based may become restricted or suspended. In such situations it is may be impossible to liquidate a position. Furthermore, if an underlying instrument becomes suspended, we may increase the margin requirement up to 100% of the contract value.
Stop Loss Orders
Stop loss orders trigger an order to close out your position. In some circumstances when such an order is triggered, the price at which you entered your stop loss may not be available at the stop level and therefore you will receive a less favourable price.
Gapping occurs when there is a sudden price movement from one price level to another. This can, for example be caused by releases, economic data or a positive or negative company announcement. The market is particularly prone to gapping when the market has been closed and is subsequently re-opening, however it can also happen when the market is open. In the event of market â€œgappingâ€ there is no opportunity to close out positions and may result in significant losses to you.
As OTC products are highly leveraged a small price movement in the underlying Financial Product on which they are based can result in substantial profits or losses exceeding your deposit. The prices of our products may be volatile and fluctuate rapidly over wide ranges. Price fluctuations may be as a result of uncontrollable events or changes in a variety of conditions such as changing supply and demand relationships, governmental, agricultural, and commercial and trade programs and policies, national and international political and economic events and the prevailing psychological characteristics of the relevant marketplace.
Electronic communication of orders
As a client of FP Markets you will be given an electronic trading platform in order to view information and place orders. Although we make every effort to ensure that our technology is reliable, no electronic communication is entirely reliable or always available. Therefore you should consider that communication between you and us via electronic means may fail, be delayed or may not reach us.
FP Markets does not provide investment advice relating to possible transactions in investments. We are permitted to provide factual market information and information about transaction procedures, potential risks involved and how those risks may be minimised, but, any decisions made must be yours.