SB
Financial Spread Betting services are provided by CMC Markets Spreadbet Plc (trading as NatWest Index), to whom you have been introduced by NatWest Stockbrokers Limited. This Risk Warning Notice is provided to you because you are proposing to undertake dealings with us in financial derivative products under our Financial Spread Betting Terms of Business. This Risk Warning notice cannot disclose all of the risks and other significant aspects involved in dealing Contracts for Difference in the form of Financial Spread Bets. Engaging in this type of transaction can carry a high risk. As these transactions differ markedly from normal bets you should not engage in this form of betting unless you understand the nature of the transaction you are entering into and the true extent of your exposure to the risk of loss. The amount that you may win or lose will vary according to the extent of the fluctuations in the price of the underlying markets or instruments on which the bet is based (the "underlying") instead of a sum predeterminable when a normal bet is placed. For many members of the public Financial Spread Betting is not suitable. You should, therefore, consider carefully whether it is suitable for you in the light of your circumstances and financial resources. In considering whether to engage in this form of betting, you should be aware of the following:
General
The high degree of "gearing" or "leverage" is a particular feature of this type of transaction. This stems from the margining system applicable to spread bets 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 can have a disproportionately dramatic effect on your bet. If the price of the underlying moves in your favour, you may achieve a good profit, but an equally small adverse movement can not only quickly result in the loss of your entire initial deposit, but may also expose you to a large additional loss. You may be able to restrict your potential loss by entering into a controlled risk bet with us, although this type of bet generally requires an additional charge to be paid.Foreign markets
Foreign markets will involve different risks from UK markets. In some cases risks will be greater. The potential for profit or loss from bets on foreign markets or in foreign currency denominated markets will be affected by fluctuations in foreign exchange rates.Margin
Financial Spread Bets are margined, and require you to make a series of payments against the contract value, instead of paying the whole contract value immediately. Where you enter into Financial Spread Bets with us, you must maintain sufficient margin on your account at all times to maintain your open bets and we provide you with online access to enable you to monitor your margin requirement at all times. We revalue your open positions continuously during each business day, and any profit or loss is immediately reflected in your account and a loss (which may or may not result in a margin call) may require you immediately to provide additional funds to us to maintain your open bets. 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. If you do not maintain sufficient margin on your account at all times and/or provide such additional funds within the time required, your open bets may be closed at a loss and you will be liable for any resulting deficit.Off-exchange transactions
When trading financial spread bets with us, you will be entering into off-exchange (OTC) derivative transactions. All bets entered into with us must be closed with us and cannot be closed with any other entity. Transactions in financial spread bets may involve greater risk than investing in on-exchange derivatives because there is no exchange market on which to close out an open bet. It may be impossible to assess the value of the position arising from an off-exchange transaction or to assess the exposure to risk. Bid prices and offer prices need not be quoted by us, and, even where they are, we may find it difficult to establish a fair price particularly when the relevant exchange or market for the underlying is closed or suspended.Charges and commissions
Before you begin to trade, you should obtain from us details of all commissions and other charges for which you will be liable which we will usually set out in our Fees and Charges guide. If any charges are not expressed in money terms (but, for example, as a percentage of contract value), you should obtain a clear and written explanation, including appropriate examples, to establish what such charges are likely to mean in specific money terms. When commission is charged as a percentage, it will normally be as a percentage of the total contract value, and not simply as a percentage of your initial payment.Enforceability
As a result of section 412 of the Financial Services and Markets Act 2000, the Financial Spread Bets you enter into with us are enforceable and we may be sued by you (if you win) and may sue you (if you lose).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.Money and Collateral
Unless you request otherwise, any money held by us in respect of your margin requirements will be transferred to us to secure your actual or potential obligations to us. It will not be segregated from our money. Money not held by us in respect of your margin requirements will generally be held in a segregated client money bank account, although this may not provide complete protection. If you deposit collateral as security with us, we may provide you with additional terms and conditions that apply. Deposited collateral may lose its identity as your property once dealings on your behalf are undertaken. Even if your dealings should ultimately prove profitable, you may not get back the same assets which you deposited and may have to accept payment in cash. It is your responsibility to ascertain how your collateral will be dealt with by us.
CFD
Services relating to Contracts for Difference (CFDs) are provided by CMC Markets UK Plc (trading as NatWest Index), to whom you have been introduced by NatWest Stockbrokers Limited. This Risk Warning notice is provided to you because you are proposing to undertake dealings with us in financial derivative products under our CFD Terms and Conditions. This notice cannot and does not disclose or explain all of the risks and other significant aspects involved in trading in CFDs and other financial derivative products. Engaging in these types of transactions can carry a high risk to your capital. You should not engage in trading CFDs and other 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.
You should also be satisfied that the products are suitable for you in the light of your circumstances and financial position. Certain strategies, such as a 'spread' position or a 'straddle', may be as risky as a simple 'long' or 'short' position. If you are in any doubt you should seek independent advice.
Different products involve different levels of exposure to risk and in deciding whether to trade in such instruments you should be aware of the following points:
General
Although CFDs and financial derivative products can be utilised for the management of investment risk, some of these products are unsuitable for many customers as they carry a high degree of risk. The 'gearing' or 'leverage' often obtainable in trading CFDs and financial derivative products means that a small deposit or down payment can lead to large losses as well as gains. It also means that a relatively small market movement can lead to a proportionately much larger movement in the value of your position, and this can work against you as well as for you. Such transactions may have to be margined, and you should be aware of the implications of this, which are set out in paragraph 3 below.Foreign markets
Foreign markets will involve different risks from UK markets. In some cases risks will be greater. The potential for profit or loss from transactions on foreign markets or in foreign currency denominated markets will be affected by fluctuations in foreign exchange rates.Margin
CFDs and other financial derivative products are margined, and require you to make a series of payments against the contract value, instead of paying the whole contract value immediately. Where you enter into CFDs and other financial derivative transactions with us, you must maintain sufficient margin on your account at all times to maintain your open bets and we provide you with online access to enable you to monitor your margin requirement at all times. We revalue your open positions continuously during each business day, and any profit or loss is immediately reflected in your account and a loss (which may or may not result in a margin call) may require you to immediately provide additional funds to us to maintain your open positions. 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. If you do not maintain sufficient margin on your account at all times and/or provide such additional funds within the time required, your open positions may be closed at a loss and you will be liable for any resulting deficit.Off-exchange transactions
When trading CFDs and other financial derivative products with us, you will be entering into off-exchange (OTC) derivative transactions. All positions entered into with us must be closed with us and cannot be closed with any other entity. Transactions in off-exchange derivatives may involve greater risk than investing in on-exchange derivatives because there is no exchange market on which to close out an open position. It may be impossible to liquidate an existing position, to assess the value of the position arising from an off-exchange transaction or to assess the exposure to risk. Bid prices and offer prices need not be quoted by us, and, even where they are, we may find it difficult to establish a fair price particularly when the relevant exchange or market for the underlying is closed or suspended.Charges and commissions
Before you begin to trade, you should obtain from us details of all commissions and other charges for which you will be liable which we will usually set out in our Rates Schedule. If any charges are not expressed in money terms (but, for example, as a percentage of contract value), you should obtain a clear and written explanation, including appropriate examples, to establish what such charges are likely to mean in specific money terms. When commission is charged as a percentage, it will normally be as a percentage of the total contract value, and not simply as a percentage of your initial payment.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.Money and collateral
If you are a retail customer then, unless you request otherwise, any money held by us in respect of your margin requirements will be transferred to us to secure your actual or potential obligations to us. It will not be segregated from our money. Money not held by us in respect of your margin requirements will generally be held in a segregated client money bank account, although this may not provide complete protection.
If you are a professional customer or eligible counterparty, then any money held by us will be transferred to us to secure your actual or potential obligations to us. If you do not intend to trade with money held with us or use it to meet your margin requirements, then you should request us to transfer this money back to you. Such money will not be segregated from our money and you will rank as a general creditor of NatWest Index.
If you deposit collateral as security with us, we may provide you with additional terms and conditions that apply. Deposited collateral may lose its identity as your property once dealings on your behalf are undertaken. Even if your dealings should ultimately prove profitable, you may not get back the same assets which you deposited and may have to accept payment in cash. It is your responsibility to ascertain how your collateral will be dealt with by us.
Compensation Scheme
As a client of NatWest Index, you may benefit from the protection offered by the Financial Services Compensation Scheme ("FSCS"), in the event that NatWest Index become insolvent or cease trading.
The FSCS is the UK's compensation fund of last resort for customers of authorised financial services firms. They may pay compensation if a firm is unable, or likely to be unable, to pay claims against it. This is usually because the firm has stopped trading or has been declared in default. The FSCS provides compensation to qualifying investors for a loss of £50,000.
Using the scheme does not cost you anything, but to qualify for compensation you need to be eligible within the FSCS rules. Generally, the FSCS covers private individuals, as well as some small businesses.
Further information on the FSCS can be obtained from the FSCS website, www.fscs.org.uk or by calling the FSCS Helpline on +44 (0) 20 7892 7300.
