RG 227 Benchmark Disclosures

ASIC Regulatory Guide 227 requires that certain matters be disclosed in the Product Disclosure Statement (PDS) of over-the-counter (OTC) derivatives issuers. As part of that requirement, these matters have been referenced in Section 8 of our PDS, noting that further details in relation to some of these benchmarks will be available on our website. Please note that the following information is subject to change without notice.

  1. Client Qualification Policy
  2. Opening Collateral
  3. Counterparty Risk – Hedging
  4. Counterparty Risk – Financial Resources
  5. Client Money
  6. Suspended Or Halted Underlying Assets
  7. Margin Calls

1. Client Qualification Policy

Forex FS will provide each potential client with a qualification survey as part of the online account application process. The survey is designed to test a potential clients' trading experience as well as their understanding of trading conditions, terms, risks, technology and products. The answers to this survey are then assessed in accordance with our client qualification policy and we will not accept applications from potential clients who do not meet our minimum qualification criteria.

Forex FS has, in addition, the right to accept or reject any new client application in its absolute discretion.

Client Qualification Assessment

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2. Opening Collateral

You may transfer funds to us using any of the following methods:

  • Bank transfer;
  • RTGS Bank transfer; or
  • Cheque.

In no circumstances do we accept cash deposits or other financial products as collateral for opening or trading an account.

Forex FS does not accept funds transferred from third parties. We may, in our absolute discretion, without creating an obligation to do so, return any funds transfer or cheque received from a third party back to the account from which it was transferred.

Forex FS will not accept any liability or responsibility for any losses that you may suffer as a result of, or arising out of, or in connection with, us returning any transfer of moneys or cheque from a third party, including any losses incurred by you because you are subsequently in default of your obligations under the Account Application Terms & Conditions.

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3. Counterparty Risk – Hedging

Forex FS provides its clients with a Direct Market Access (DMA) via Prime Brokerage solution. The Forex FS MT4 platform is connected to multi-bank and non-bank liquidity of major global banks and financial institutions.

Given you are dealing with Forex FS as counterparty to every transaction, you will have an exposure to us in relation to each transaction.

Forex FS maintains strict risk management controls to assess and monitor our hedging counterparties (to ensure they are of sufficient financial standing, are licensed by a comparable regulator, and are of sound reputation).

Hedging Counterparties Policy

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4. Counterparty Risk – Financial Resources

Forex FS enters into arrangements with third party liquidity providers for the facilitation of transactions and settlements, and avails monies received for margin calls and settlements to such providers for this purpose. Accordingly, clients are indirectly exposed to the financial risks of our counterparties and organisations with which Forex FS holds client funds. If the financial condition of Forex FS or assets of our counterparties or the parties with which we hold client assets deteriorate, then clients could suffer loss because the return of the client capital could become difficult.

You are reliant on Forex FS’s ability to meet its counterparty obligations to you to settle the relevant contract and you are subject to Forex FS’s credit risk. If we were to become insolvent, we may be unable to meet our obligations to you.

Please note that we have designated staff to monitor our compliance with our license conditions and ASIC RG 166 (financial) obligations, as well as review and input from our independent external legal and accounting advisers.

Further, our external independent auditor conducts an audit at the conclusion of every financial year, a copy of which can be provided to you free of charge upon written request.

Please note we do not undertake stress testing in relation to unhedged market exposures, as all transactions with clients are fully hedged.

Financial Policy

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5. Client Money

Client monies are retained in our segregated account (which is separate to Forex FS monies/assets) in accordance with the Corporations Act. Such monies are only applied to client trades/settlement obligations and to pay agreed fees etc. Please note that individual client accounts are not separated from each other but may be co-mingled into one segregated account. Please note, no scenario is anticipated which would result in a shortfall in the client trust account, and one client’s money is not used to cover the obligations of another. However, it is important to note that holding your money in a segregated account may not afford you absolute protection.

Monies provided by you to meet margins, deposits, fees, transaction settlements, or other costs are immediately on-forwarded by Forex FS to our licensed third party clearing and execution providers, and applied against your margin, exchange, fee and settlement obligations.

Forex FS is entitled to retain all interest earned on client moneys held in segregated accounts with a bank or approved deposit-taking institution. The rate of interest earned by Forex FS on this account is determined by the provider of the deposit facility.

Please note Forex FS does not accept payments from or make payments to any third parties. In accordance with Australian anti-money laundering regulations, Forex FS reports, where necessary, any suspect transactions to AUSTRAC.

Client Money Policy

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6. Suspended Or Halted Underlying Assets

An underlying financial product may be placed in a trading halt, suspended or delisted on the relevant exchange in various circumstances.

Should our liquidity providers stop providing pricing and clearing in a certain product or underlying asset due to a suspension or trading halt, then Forex FS will be unable to process orders which have not yet been opened, and will suspend trading on open positions until such time as pricing becomes available again.

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7. Margin Calls

All contracts will be subject to Margin obligations. Accordingly, you are responsible for meeting all margin payments required by Forex FS. It is your sole responsibility to monitor and manage your open positions and exposures, and ensure Margin Calls are met as required. Margin Calls will be notified via the trading platform and e-mail, and you are required to log-in to the system on a daily basis when you have open positions to ensure you receive notification of any such Margin Calls. Please note that if you do not check the trading platform or your e-mail for Margin Call notifications, and hence do not meet them in a timely manner, positions will be closed out by Forex FS, without further reference to you, in accordance with the executed Account Application Terms & Conditions. A Margin Call will not be considered to have been met UNLESS AND UNTIL cleared funds have been received by Forex FS in the nominated account AND Forex FS has updated the electronic trading platform (generally around 10am on the following Business Day).

Positions will be monitored by Forex FS on a mark to market basis to account for any market movements. If the value of the position moves against you then you will be required to “top up” the Initial Margin and, if so, you will be subject to a Margin Call i.e. to pay additional Margin or alternatively to close the position in order to reduce your Initial Margin to a level acceptable to Forex FS. The Variation Margin liability is incurred at the time of the occurrence of any movement in the market that results in an unrealised loss, regardless as to when the call to pay is made by Forex FS on you.

Should you want to protect any or all contracts from being liquidated, then you must be in a position to fund your account at all times. Funding immediately after a margin call does still not ensure protection from liquidation as the markets could move further against your position and liquidate any or all contracts before funds are received. In rare circumstances, the markets could move against your position giving Forex FS no time to make a Margin Call on you to request additional funds for Forex FS to protect its positions.

If you fail to meet any Margin Call i.e. if we fail to receive cleared funds, we may reduce or close all your open positions without further notice or in the rare circumstances where Forex FS does not have time to make a Margin Call due to exceptional market movements, then Forex FS may in its absolute discretion and without creating an obligation to do so, close out, without notice, all or some of your open positions (or transactions) and deduct the resulting realised loss from the Initial Margin (and other excess funds held in your account with Forex FS).

In either case, any losses resulting from Forex FS closing your position will be debited to your account and may require you to provide additional funds to Forex FS.

Margin FX and CFD products can be highly volatile and you should ensure that you are always able to access the trading platform or your email to receive notification of margin calls.

Margin calls will be made on net account basis i.e. should you have several open positions, then Margin Calls are netted across the group of open transactions. In other words, the unrealised profits of one transaction can be used or applied as Initial or Variation Margins or to offset the unrealised losses of another transaction.

You will only be allowed to deal in and maintain positions on the basis of cleared funds being provided for your Margin obligations or your net balance is in credit. Margin calls can be made by Forex FS at any time and you are responsible for ensuring that they are met.

Forex FS has the right to limit the size of your open positions, whether on a net or gross basis under any appropriate circumstances as determined by Forex FS. Forex FS also has the right to refuse any request made by you to place an order to establish a position at any time at Forex FS’s discretion without having to give you notice.

Example: Client has a trading account with Forex FS and a balance of $ 10,000. Client buys AUDUSD 1 lot (100,000) at a rate of 1.05000.

Leverage: Based on standard leverage of 1:200, the client will be required to place down $ 500.

Margin Call: Client will receive a margin call when the margin level reaches 150%. Margin level calculates as follows:

ML% = Equity/Margin*100%

Based on $10,000 account balance and were you to open a 1 lot position it would require $500 margin and therefore your margin level will be: ML% =10,000/500*100 = 2000%

Should the market move approximately 925 points against you, then your open trade will have a floating loss of $9,250. You new margin level will be: ML% = (10,000 – 9,250)/500*100=150%. On this 150% level you will receive a margin call.

Should the market move further against you and your floating loss reach $9,700 then your margin level will be: ML% = (10,000 – 9,700)/500*100=60%. At this level your position will be liquidated automatically at the market rate.

Forex FS offers its clients leverage from 1:100 to 1:300 (from 1% to 0.33%). The typical offered leverage is 1:200. This means the client must have a sum of money equal to or more than 0.5% of the notional amount of risk.

Clients will be informed when their equity level has reached 150% of their margin required. When equity reaches 60% of margin required, all positions could be closed.

Forex FS reserves the right to alter margin levels of clients at all times and to request for additional money to serve as margin. Also, this choice of margin is revocable by Forex FS at any time. Forex FS is not responsible for any greater amount of loss that may be incurred by client due to client trading.

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