Key Risks
Introduction
This Risk Disclosure Statement (“Disclosure”) is provided to you (our Client and prospective Client) in compliance to the Abu Dhabi Global Markets (“ADGM”) COBS Rules 14.2.10 and 15.7 (“the Law”), in relation to the handling of Client Money and Client Investments respectively, as well as other relevant risk disclosures which is applicable to Orion Principals Limited (“the Company”/ “OPL”).
All Clients and prospective Clients should carefully read the following risk disclosure and warnings contained in this document, before applying to the Company for a trading account and before they begin to trade with the Company. However, it is noted that this document cannot and does not disclose or explain all of the risks and other significant aspects involved in dealing in Financial Instruments (including CFDs). The Disclosure has been prepared to illustrate the nature of the risks involved when dealing in Financial Instruments on a fair and non-misleading basis.
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1. Charges and Taxes
1.1 The Provision of Services by the Company to the Client is subject to fees, which shall be duly communicated to the Client. Before the Client begins to trade, he should obtain details of all fees, commissions, charges for which the Client will be liable. It is the Client’s responsibility to check for any changes in the charges.
1.2 If any charges are not expressed in monetary terms (but, for example, as a percentage of contract value), the Client should ensure that he understands what such charges are likely to amount to.
1.3 There is a risk that the Client’s trades in any Financial Instruments may be or become subject to tax and/or any other duty for example because of changes in legislation. The Company does not warrant that no tax will be payable. The Company does not offer tax advice and recommends that the Client seek advice from a competent tax professional if the Client has any questions.
1.4 The Client is responsible for any taxes and/or any other duty which may accrue in respect of his trades.
1.5 It is noted that taxes are subject to change without notice.
1.6 If required by applicable Law, the Company shall deduct at source from any payments due to the Client such amounts as are required by the tax authorities to be deducted in accordance with applicable Law.
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2. Third Party Risks
2.1. It is understood that the Company will promptly place any Client money it receives into one or more segregated account(s) (denoted as ‘clients’ accounts’) with reliable financial institutions such as a credit institution or a bank. Although the Company shall exercise due skill, care and diligence in the selection of the financial institution according to applicable regulations, it is understood that there are circumstances beyond the control of the Company and hence the Company does not accept any liability or responsibility for any resulting losses to the Client as a result of the insolvency or any other analogous proceedings or failure of the financial institution where Client money will be held.
2.2. The Company may pass money received from the Client to a third party (e.g. a liquidity provider) to hold or control in order to effect a Transaction through or with that person or to satisfy the Client’s obligation to provide collateral (e.g. initial margin requirement) in respect of a Transaction. The Company has no responsibility for any acts or omissions of any third party to whom it will pass money received from the Client.
2.3. The financial institution (of paragraph 3.1.) where Client money will be held may be within or outside ADGM. It is understood that the legal and regulatory regime applying to any such financial institution outside ADGM will be different from that of ADGM. Hence, in the event of the insolvency or any other equivalent failure or proceeding of that person, the Client’s money may be treated differently from the treatment which would apply if the money was held in a Segregated Account in ADGM.
2.4. The financial institution to which the Company will pass Client money (as per paragraph 3.1.) may hold it in an omnibus account. Hence, in the event of the insolvency or any other analogous proceedings in relation to that financial institution, the Company may only have an unsecured claim against the financial institution on behalf of the Client, and the Client will be exposed to the risk that the money received by the Company from the financial institution is insufficient to satisfy the claims of the Client.
2.5. The Company acts as the Execution Venue for the execution of Client Orders under the Client Agreement. The Company can transmit client orders for execution to third-party liquidity providers through an electronic communication channel.
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3. Deposited Cash or Collateral
3.1 ADGM Client Money Rules and Safe Custody Provisions under rules oblige OPL to provide some protections for cash and collateral deposited with the Company. Nevertheless, particularly in the event of insolvency or bankruptcy these protections may not apply. In such cases the extent to which you may recover such cash or collateral will depend on relevant legislation in the jurisdiction in which the third-party institution engaged in respect of Client Accounts and Safe Custody Investments is located.
3.2 The Company’s insolvency or default will lead to the Client's Money being subject to the Client Money Distribution Rules
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4. Force Majeure Events
4.1. In case of a Force Majeure Event the Company may not be in a position to arrange for the execution of Client Orders or fulfill its obligations under the agreement with the Client. As a result, the Client may suffer financial loss.
4.2. The Company will not be liable or have any responsibility for any type of loss or damage arising out of any failure, interruption, or delay in performing its obligations under this Agreement where such failure, interruption or delay is due to a Force Majeure event.
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5. Abnormal Market Conditions
5.1. The Client acknowledges that under Abnormal Market Conditions the period during which the Orders are executed may be extended or it may be impossible for Orders to be executed at declared prices or may not be executed at all.
5.2. Abnormal Market Conditions include but not limited to times of rapid price fluctuations of the price, rises or falls in one trading session to such an extent that, under the rules of the relevant exchange, trading is suspended or restricted, or there is lack of liquidity, or this may occur at the opening of trading sessions.
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6. Foreign Currency
When a Financial Instrument is traded in a currency other than the currency of the Client’s country of residence, any changes in the exchange rates may have a negative effect on its value, price and performance and may lead to losses for the Client.
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Additional Disclosures for Contracts for Difference (CFD’s)
7. Information on risks associated with complex financial instruments
7.1. Trading in CFD’s can put Client’s capital at risk as these are categorised as high risk complex Financial Instruments and Clients may lose more than the initial invested capital. Trading CFD’s may not be suitable for all investors (refer to section 8).
The investment decisions made by the Clients are subject to various markets, currency, economic, political, business risks etc., and will not necessarily be profitable.
The Client acknowledges and without any reservation accepts that, notwithstanding any general information which may have been given by the Company, the value of any investment in Financial Instruments may fluctuate either upwards or downwards. The Client acknowledges and without any reservation accepts the existence of a substantial risk of incurring losses and damages as a result of buying or selling any Financial Instrument and acknowledges his willingness to take such risk.
Set out next is an outline of the major risks and other significant aspects of CFD Trading:
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7.2. Trading is very speculative and highly risky and is not suitable for all members of the general public but only for those investors who: a) understand and are willing to assume the economic, legal and other risks involved.
b) considering their personal financial circumstances, financial resources, lifestyle and obligations are financially able to assume the loss of their entire investment.
c) have the knowledge to understand the form of trading and the Underlying assets and Markets.
7.3. The Company will not provide the Client with any advice relating to CFDs the Underlying Assets and Markets or make investment recommendations including occasions where the Client shall request such advice and/or recommendation. However, the Company may provide the Client with information and tools produced by third parties on an “as is” basis (i.e. the Company does not approve, or endorse, or affect the said information and or tools), which may be indicative of trading trends or trading opportunities. The Client accepts and understands that taking any actions based on the information and/or tools provided by third parties may result in losses and or general reduction of value of the Client’s assets. The Company does not accept liability for any such losses resulting from actions taken by the Client on the basis of information and or tools produced by third parties.
7.4. CFDs are derivative financial instruments deriving their value from the prices of the underlying assets/markets in which they refer to (for example currency, equity indices, stocks, commodities, indices futures, forwards etc.).It is important therefore that the Client understands the risks associated with trading in the relevant underlying asset/ market because fluctuations in the price of the underlying asset/ market will affect the profitability of his trade.
7.5. Information of the previous performance of CFDs the Underlying Assets and Markets does not guarantee its current and/or future performance. The use of historical data does not constitute a binding or safe forecast as to the corresponding future performance of the CFDs to which the said information refers.
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8. Volatility:
Some Financial Instruments trade within wide intraday ranges with volatile price movements. Therefore, the Client must carefully consider that there is a high risk of losses. The price of a Financial Instrument is derived from the price of the Underlying Asset in which the Financial Instruments refers to Financial Instruments and related Underlying Markets can be highly volatile. The prices of Financial Instruments and the Underlying Asset may fluctuate rapidly and over wide ranges and may reflect unforeseeable events or changes in conditions, none of which can be controlled by the Client or the Company. Under certain market conditions it may be impossible for a Client Order to be executed at declared prices leading to losses. The prices of Financial Instruments and the Underlying Assets will be influenced by, among other things, changing supply and demand relationships, governmental, agricultural, commercial and trade programs and policies, national and international political and economic events and the prevailing psychological characteristics of the relevant market place.
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9. Liquidity:
Liquidity risk refers to the capacity to readily monetize assets without suffering a significant discount in their prices. The Client accepts and acknowledges that the Underlying Instruments on some Derivative Products on offer by the Company may be inherently illiquid or sometimes face persistent liquidity strains due to adverse market conditions. Illiquid Underlying Assets may exhibit high levels of volatility in their prices and consequently a higher degree of risk, this typically leads to larger gaps in ASK and BID prices for an Underlying Instrument than would otherwise prevail under liquid market conditions. These large gaps may be reflected on the prices of the Derivative Product the Company offers.
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10. No Delivery:
It is understood that the Client has no rights or obligations in respect to the Underlying Assets/Instruments relating to the CFDs he is trading. There is no delivery of the Underlying Asset and all CFD contracts are settled in cash.
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11. 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 rises or falls in one trading session to such an extent that under the rules of the relevant exchange trading is suspended or restricted. Placing a Stop Loss will not necessarily limit the Client’s losses to the intended amounts, because market conditions may make it impossible to execute such an Order at the stipulated price. In addition, under certain market conditions the execution of a Stop Loss Order may be worse than its stipulated price and the realized losses can be larger than expected.
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12. Slippage:
Slippage is the difference between the expected price of a Transaction in a CFD or, and the price the Transaction is executed at. Slippage often occurs during periods of higher volatility (for example due to news events) making an Order at a specific price impossible to execute and also when large Orders are executed when there may not be enough interest at the desired price level to maintain the expected price of trade.
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13. Leverage and Gearing:
13.1. In order to place a CFD Order, the Client is required to maintain a margin. Margin is usually a relatively modest proportion of the overall contract value. This means that the Client will be trading using “leverage” or “gearing”. This means a relatively small market movement can lead to a proportionately much larger movement in the value of the Client’s position, and this can work either against the Client or for the Client.
13.2. At all times during which the Client opens trades, they must maintain enough equity, consider all running profits and losses, for meeting the margin requirements. If the market moves against the Client’s position and/or Margin requirements are increased, the Client may be called upon to deposit additional funds on short notice to maintain his position. Failing to comply with a request for a deposit of additional funds, may result in closure of his position(s) by the Company on his behalf and he will be liable for any resulting loss or deficit.
13.3. It is important that you monitor your positions closely because the effect of leverage and gearing speed the occurrence of profits or losses. It is your responsibility to monitor your trades and while you have open trades you should always be in a position to do so.
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14. Margin:
The Client acknowledges and accepts that, regardless of any information which may be offered by the Company, the value of CFDs may fluctuate downwards or upwards and it is even probable that the investment may become of no value. This is owed to the margining system applicable to such trades, which generally involves a comparatively modest deposit or margin in terms of the overall contract value, so that a relatively small movement in the Underlying Market can have a disproportionately dramatic effect on the Client’s trade. If the Underlying Market movement is in the Client’s favour, the Client may achieve a good profit, but an equally small adverse market movement can not only quickly result in the loss of the Clients’ entire deposit but also expose the Client to a large additional loss.
The Company may change its Margin requirements, according to the provisions of the Client Agreement found on the Company's website(s).
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13. Contingent Liability Investment Transactions:
Contingent liabilities are potential obligations that may be assumed by the Client depending on the outcome of an event that was beyond any person’s control and/or expectations. For example, in case whereby due to extreme volatility of the underlying instrument the Client has sustained losses that exceed his balance with the Company (i.e. he has generated a negative balance with the Company), the Client may be then called to pay an amount equal to these losses.
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14. Risk-reducing Orders or Strategies
The Company makes available certain Orders (e.g. "stop-loss" orders, where permitted under local law, or "stop-limit" Orders), which are intended to limit losses to certain amounts. Such Orders may not be adequate given that markets conditions make it impossible to execute such Orders, e.g. due to illiquidity in the market. We aim to deal with such Orders fairly and promptly, but the time taken to fill the Order and level at which the Order is filled depends upon the underlying market. In fast-moving markets, a price for the level of your Order might not be available, or the market might move quickly and significantly away from the stop level before we fill it. Therefore, Stop Limit and Stop Loss Orders cannot guarantee the limit of loss.
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15. Advice and Recommendations
15.1. When placing Orders with the Company, the Company will not advise the Client about the merits of a particular Transaction or give him any form of investment advice and the Client acknowledges that the Services do not include the provision of investment advice in CFDs or the Underlying Markets. The Client alone will enter into Transactions and take relevant decisions based on his own judgement. In asking the Company to enter into any Transaction, the Client represents that he has been solely responsible for making his own independent appraisal and investigation into the risks of the Transaction. He represents that he has sufficient knowledge, market sophistication, professional advice and experience to make his own evaluation of the merits and risks of any Transaction. The Company gives no warranty as to the suitability of the products traded under this Agreement and assumes no fiduciary duty in its relations with the Client.
15.2. The Company will not be under any duty to provide the Client with any legal, tax or other advice relating to any Transaction. The Client should seek independent expert advice if he is in any doubt as to whether he may incur any tax liabilities. The Client is hereby warned that tax laws are subject to change from time to time.
15.3. The Company may, from time to time and at its discretion, provide the Client (or in newsletters which it may post on its Website or provide to subscribers via its Website(s) or the Trading Platform or otherwise) with information, news, market commentary or other information but not as a service.
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Where it does so:
a) the Company will not be responsible for such information.
b) the Company gives no representation, warranty or guarantee as to the accuracy, correctness or completeness of such information or as to the tax or legal consequences of any related Transaction;
c) this information is provided solely to enable the Client to make his own investment decisions and does not amount to investment advice or unsolicited financial promotions to the Client;
d) if the document contains a restriction on the person or category of persons for whom that document is intended or to whom it is distributed, the Client agrees that he will not pass it on to any such person or category of persons;
e) the Client accepts that prior to dispatch, the Company may have acted upon it itself to make use of the information on which it is based. The Company does not make representations as to the time of receipt by the Client and cannot guarantee that he will receive such information at the same time as other clients.
15.4. It is understood that market commentary, news, or other information provided or made available by the Company are subject to change and may be withdrawn at any time without notice.
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16. No Guarantees of Profit
The Company provides no guarantees of profit nor of avoiding losses when trading in Financial Instruments. The Company cannot guarantee the future performance of the Client’s Trading Account, promise any specific level of performance or promise that Client’s investment decisions, strategies, will be successful/profitable. Customer has received no such guarantees from the Company or from any of its representatives. Customer is aware of the risks inherent in trading in Financial Instruments and is financially able to bear such risks and withstand any losses incurred. The Client acknowledges and accepts that there may be other additional risks apart from those mentioned above.
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17. Updates of this document and Frequency of Distribution
The Company reserves the right to review and/or amend this document at any given time it deems suitable and appropriate without notice to the Client. This Disclosure is available for review by Clients and is uploaded on the Company’s website. This Disclosure shall be provided to Retail clients on onboarding and on annual basis thereafter.
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