This brief statement does not disclose all of the risks and other significant aspects of trading in foreign exchange contracts and options. In light of the risks, you should undertake such transactions only if you understand the nature of the contracts (and contractual relationships) into which you are entering and the extent of your exposure to risk. Trading in foreign exchange contracts and options is not suitable for many members of the public. You should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances.
1. Effect of Leverage or Gearing
Foreign exchange contracts carry a high degree of risk. The amount of initial margin is small relative to the value of the contract so that transactions are leveraged or 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, your position may be liquidated at a loss and you will be liable for any resulting deficit.
2.Variable Degree of Risk
Transactions in options carry a high degree of risk. Purchasers and sellers of options should familiarize themselves with the type of option (i.e. put or call) which they contemplate trading and the associated risks.You should calculate the extent to which the value of the options must increase for your position to become profitable, taking into account the premium and all transaction costs. The purchaser of options may offset or exercise the options or allow the options to expire. The exercise of an option results in a cash settlement. If the purchased options expire worthless, you will suffer a total loss of your investment which will consist of the option premium plus transaction costs. If you are contemplating purchasing deep-out-of-the-money options, you should be aware that the chance of such options becoming profitable ordinarily is remote.
Selling (writing or granting) an option generally entails considerably greater risk than purchasing options. Although the premium received by the seller is fixed, the seller may sustain a loss well in excess of that amount. The seller will be liable for additional margin to maintain the position if the market moves unfavorably. The seller will also be exposed to the risk of the purchaser exercising the option and the seller will be obligated to either settle the option in cash or to acquire or deliver the underlying interest. If the option is covered by the seller holding a corresponding position in the underlying interest or a future or another option, the risk may be reduced. If the option is not covered, the risk of loss can be unlimited.
When the option is exercised or expires, the purchaser is responsible for any unpaid premium outstanding at that time.
3.Terms and Conditions of Contracts
Your account must be properly margined at all times. It may become necessary to deposit substantial additional funds. Failure to meet margin requirements may result in liquidation of any open positions with a resultant loss. Any failure to maintain a margin balance in an amount equal to or exceeding fifty percent (50%) of an initial margin requirement gives Archer Daniels Midland Derivatives (ADMD) the right but not the obligation to liquidate any part of or all open positions in Customer's account. Customer's are responsible for placing their own stop loss orders to minimize losses and ADMD's policy may result in liquidation losses substantially below the 50% level. Any failure by ADMD to enforce its rights hereunder shall not be deemed a future waiver of such rights by ADMD. ADMD has the right to change its margin policy at any time without prior notice to the Customer.
4. Market Conditions
Market conditions (e.g., illiquidity) may increase the risk of loss by making it difficult or impossible to effect transactions or liquidate/offset positions. If you have sold options, this may increase the risk of loss.
5. Commission and Other Charges
Before you begin to trade, you should obtain a clear explanation of all commission, fees and other charges for which you will be liable. These charges will affect your net profit (if any) or increase your loss. Fees may include such things as commissions, brokerage charges, statement charges, order cancellation charges, account transfer charges, telephone order charges, incidental banking related fees including wire charges for deposits/withdrawals and returned check fees, or fees imposed by any interbank agency, bank, contract market or other regulatory or self-regulatory organizations arising out of ADMD's provision of services hereunder. Customer may incur additional fees for the purchase of optional, value added services offered by ADMD.
6. Currency Risks
The profit or loss in transactions in foreign currency-denominated contracts (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.
Most open-outcry and electronic trading facilities are supported by computer-based component systems for the order-routing, execution, matching, registration or clearing of trades. As with all facilities and systems, they are vulnerable to temporary disruption or failure.Your ability to recover certain losses may be subject to limits on liability imposed by the system provider.
8. Electronic Trading
Trading on an electronic trading system may differ not only from trading in an open-outcry market but also from trading on other electronic trading systems. If you undertake transactions on an electronic trading system, you will be exposed to risk 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. Since ADMD does not control signal power, its reception or routing via internet, configuration of Customer's equipment or reliability of its connection, ADMD shall not be liable for any claims, losses, damages, costs or expenses, including attorneys' fees, caused, directly or indirectly, by a break-down or failure of any transmission or communication system or computer facility or trading software, whether belonging to ADMD, Customer, any market, or any settlement or clearing system when Customer trades on-line (via internet or electronically).
ADMD is not responsible for disruption, failure or malfunction of telephone lines.
10. Off-Exchange Transactions
Since, 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.
11. Quoting Errors
Should a quoting error occur due to a mistype of a quote or a misquote given by telephone and/or electronic means (including responses to customer requests) ADMD is not liable for any resulting errors in account balances and reserves the right to make necessary corrections or adjustments to the account involved. Any dispute arising from such quoting errors will be resolved on the basis of fair market value as determined by ADMD, in its sole discretion, of the relevant currency at the time such an error occurred. In cases where the prevailing market represents prices different from prices ADMD has posted on our platform screen, ADMD will attempt, on a best effort basis, to execute trades on or close to the prevailing market prices. These prevailing market prices will be the prices, which are ultimately reflected on the customer statements. This may or may not adversely affect Customer's realized and unrealized gains and losses.
12. Credit Risk
Foreign Exchange & Options trading with ADMD is not conducted on a regulated market or exchange. Each contract is a contract between ADMD and the Customer. There is no clearinghouse and no guarantee by any other party of ADMD's payment obligations to the Customer. Customer must look only to ADMD for performance on all contracts in Customer's account and for return of any margin or collateral. The insolvency of ADMD or a default by ADMD could cause the Customer to lose the value of its account and to suffer additional losses from open positions.
This is not a solicitation of any order to buy or sell, but merely a collection of information related to ADM Derivatives and FOREX trading provided by ADM Derivatives Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor do they purport to be complete. No responsibility is assumed with respect to any such statement, nor with respect to any expression of opinion herein contained.
The risk of loss in trading FOREX can be substantial. Each investor must carefully consider whether this type of investment is appropriate for them. Past performance is not necessarily indicative of future results.