This brief statement is not a full and exhaustive list of all the risks and other significant aspects of trading in leveraged investments. Considering these risks, you should undertake such transactions only if you understand the nature of the transactions (and contractual relationships) into which you are entering and the extent of your exposure to risk. You should carefully consider whether trading is appropriate for you based on your experience, objectives, financial resources, and other circumstances.
1. Effect of ‘Leverage’ or ‘Gearing’
Transactions in OTC accounts carry a high degree of risk. The amount of initial margin for contracts for differences, commodities, foreign exchange, futures or indices is small relative to the value of the OTC contract so that transactions are highly ‘leveraged’ or highly ‘geared’. A relatively small market movement will have a proportionately larger impact on the funds you have deposited or will have to deposit; this may work against you as well as for you. You may sustain a total loss of initial margin funds and any additional funds deposited with the firm to maintain your position. If the market moves against your position or margin levels are increased, you may be called upon to pay substantial additional funds on short notice to maintain your position. If you fail to comply with a request for additional funds within the time prescribed, or to maintain sufficient usable margin in your account, your position may be liquidated at a loss without notice and at the sole discretion of Sterling Gent Trading Ltd (SGT).
2. Risk-reducing Orders or Strategies
The placing of certain orders (e.g., ‘stop-loss’ order, where permitted under local law, or ‘stop- limit’ orders) which are intended to limit losses to certain amounts may not be effective because market conditions may make it impossible to execute such orders. Strategies using combinations of positions, such as ‘spread’ and ‘straddle’ positions may be as risky as taking simple ‘long’ or ‘short’ positions.
3. Terms & Conditions of Contracts
You should understand the terms and conditions of the specific contracts for differences, commodities, foreign exchange, cryptos, futures or indices which you are trading and any associated obligations.
4. Suspension or Restriction of Trading & Pricing Relationships
Market conditions, including, but not limited to, illiquidity, and/or the operation of the rules of certain markets (e.g., suspension of trading in any security due to price limits, government intervention or “circuit breakers”) may increase the risk of loss by making it difficult or impossible to effect transactions or liquidate/offset positions.
5. Deposited Cash & Property
You should familiarise yourself with the protections accorded money or other property you deposit for domestic and foreign transactions, particularly in the event of a firm’s insolvency or bankruptcy. The extent to which you may recover your money or property may be governed by specific legislation or local rules. In some jurisdictions, property which had been specifically identifiable as your own will be pro-rated in the same manner as cash for purposes of distribution in the event of a shortfall.
6. Commission and Charges
Before you begin to trade, you should obtain a clear explanation of all commission, fees, markups, markdowns, rollovers, interest rate differential and other charges for which you will be liable. These charges will affect your net profit (if any) or increase your loss.
7. Transactions in Other Jurisdictions
Transactions in currencies in other jurisdictions, including markets formally linked to a domestic market, may expose you to additional risk. Such markets may be subject to regulation which may offer different or diminished investor protection. Before you trade you should inquire about any rules relevant to your particular transactions. Your local regulatory authority will be unable to compel the enforcement of the rules of regulatory authorities or markets in other jurisdictions where your transactions have been effected. You should understand about the types of redress available in both your home jurisdiction and other relevant jurisdictions before you start to trade.
8. Currency Risks
The profit and loss in transactions in foreign currency-denominated contracts or securities (whether they are traded in your own or another jurisdiction) will be affected by fluctuations in currency rates where there is a need to convert from the currency denomination of the contract to another currency.
9. Trading Facilities
OTC business is not traded on a regulated market and therefore does not require open outcry. Even though quotations or prices are afforded by many computer-based component systems, the quotations and prices may vary due to market liquidity. Many electronic trading facilities are supported by computer-based component systems for the order-routing, execution or matching of trades. As with all facilities and systems, they are vulnerable to disruption or failure. Your ability to recover certain losses may be subject to limits on liability imposed by the system provider, the market, the bank and/or financial institution and such limits may vary.
10. Electronic Trading
Trading on an electronic trading system may differ not only from trading in the interbank or other regulated markets but also from trading on other electronic trading systems. If you undertake transactions on an electronic trading system, you will be exposed to risks associated with the system including the failure of hardware and software. The result of any system failure may be that your order is either not executed according to your instructions or is not executed at all.
a) Internet Failures
Since SGT does not control signal power, its reception or routing via the Internet, configuration of your equipment or reliability of its connection, we cannot be responsible for communication failures, distortions, or delays when you trade on-line (via the Internet).
b) Market Risks & Online Trading
Trading contracts for differences, currencies, commodities, cryptos, futures, and indices involves substantial risks that may not be suitable for everyone. Trading online, no matter how convenient or efficient, does not necessarily reduce risks associated with securities trading and may increase the risks in the event of communication breakdowns.
c) Password Protection
The Trader is obligated to keep passwords secret and ensure that third parties do not obtain access to the trading facilities. The Trader will be liable to SGT for trades executed by means of the Trader’s password, even if such use may be wrongful.
d) Quoting Errors
Should quoting errors occur due to a dealer’s mistype of a quote or an erroneous price quote from a pricing source, SGT will not be liable for the resulting errors in account balances. SGT reserves the right to make the necessary corrections or adjustments on the account involved. Any dispute arising from such quoting errors will be resolved on the basis of a fair market value of the contract or security at the time such an error occurred.
11. Off-exchange transactions
In OTC markets, firms are not restricted to effect off-exchange transactions. The firm with which you deal may be acting as your counterparty to the transaction. It may be difficult or impossible to liquidate an existing position, to assess the value, to determine a fair price or to assess the exposure to risk. For these reasons, these transactions may involve increased risks. Off- exchange transactions may be less regulated or subject to a separate regulatory regime. Before you undertake such transactions, you should familiarize yourself with applicable rules and attendant risks.
Notice for clients with annual income or net worth less than $25,000
If a customer’s annual income or net worth is less than $25,000, the customer is advised to read and understand the following Risk Statements:
The potential for loss in trading Forex and CFDs can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your personal financial circumstances and financial resources. The high degree of leverage that is obtainable in Forex trading and CFDs trading on account of minimal margin requirements can work against you as well as for you. The use of leverage can lead to large losses as well as gains. Please consider the financial risks involved in Forex trading with regard to your personal financial circumstances and financial resources, before proceeding to open an account with SGT.
CFDs, FX, futures, crypto, commodities and other leveraged products carry a high level of risk to your capital, with the possibility of losing significantly more than your initial investment. They are not suitable for everyone. Ensure you fully understand the risks and seek independent advice if necessary.
Please contact our Compliance Department with any questions regarding the terms and conditions under which you may open an account and trade or invest with SGT.
The services and products offered by SGT are not being offered within the United States of America and are not being offered to U.S. citizens, as defined under U.S. law. As such, should you reside in or be a citizen of a country in which SGT does not conduct business, any email message received is not intended to serve as a solicitation or inducement on behalf of any of the aforementioned entities. Furthermore, SGT does not accept traders, clients or customers from Ontario, Canada, and is not registered to sell securities in the province of Ontario, Canada. SGT has not been registered or qualified under the securities laws of the United States or any other jurisdiction or with any other supervisor or regulatory authority, outside of the British Virgin Islands.
SGT services are not intended for distribution to, or use by, any person, corporation, trust or partnership in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. It is the responsibility of the trader, client, or customer to ascertain the terms of and comply with any local law or regulation to which they are subject.
Investments of any kind can carry a risk of losing money and may not be suitable for everyone. Ensure you fully understand the risk of investing into products and programs, and seek independent advice if necessary on these products and programs.