Risk Disclosure Notice
The purpose of the Risk Disclosure Notice (the “Statement”) is to provide Customers with information on the nature and risks of the specific types of Instruments.
The information set out in this Statement does not constitute legal, tax or other advice. It does not exhaustively describe the Instruments discussed and Customer must always assess financial instruments according to their individual terms and in light of Customer’s circumstances, investment objectives and financial situation. Any descriptions of financial instruments are general and not in reference to any particular instrument.
This Statement supplements and forms part of the Agreement between the Customer and MillTech. By accepting the Standard Terms and/or Customer Agreement, Customer represents that it has read and understood this Statement. Customer further asserts that based on information it has received from MillTech, and/or independent advice it has received from its own advisers, Customer is fully equipped and informed of the nature and the risks of the types of Instruments it will be trading in. Customer represents that it is entering into a relationship with MillTech with the benefit of full information and knowledge and independent external advice.
The capitalized expressions and terms used in this Statement which are not defined shall be given the definition as set out in the Standard Terms.
General Risks. Trading in Instruments carries risk and may not be suitable for all investors. Unless Customer knows and fully understands the risks involved in Instruments, they should not engage in any trading activity. Customers should not risk more than they are prepared to lose. Prior to placing an order, Customer should carefully consider which Instrument is suitable for them, taking into account their circumstances and financial resources. If Customer is unclear or does not understand the risks involved in trading in Instruments, they should consult an independent financial advisor. If after seeing the advisor, they still don’t understand these risks, then they should refrain from trading. Purchasing and selling Instruments comes with a significant risk of losses, and each Customer must understand that the investment value can both increase and decrease.
FX Risk. The high degree of leverage associated with trading currencies means that the degree of risk compared to other financial products is higher. There is considerable exposure to risk in any off-exchange FX transaction, including, but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair. Customer should be aware of all the risks associated with FX trading, and seek advice from an independent financial advisor if you have any doubts.
Currency risk is the risk that Customer’s position in an FX Transaction will be adversely affected by changes in the relative value of the relevant currencies. The value of any one particular currency versus another is, by and large, determined in the same manner as for all commodities – by supply and demand. For any country or other currency issuer, the ultimate supply of currency is primarily a function of the creation of money by its central bank, but in a practical sense the supply of a particular currency may be affected by many factors including international trade settlements, speculative trading activity, merger and acquisition transactions, central bank action, and cross-border interest rates. The transactional demand for a currency is similarly affected by corporate and investor activity, though the driving force is frequently related to the economic performance of the subject country or issuer, its political stability, state-sponsored impediments to the movement of capital, and other factors such as anticipated rates of inflation.
Currency markets are inherently volatile because these factors change every day and are beyond the control of the parties. If Customer has an economic position equivalent to ownership of a currency through an FX Transaction, the value of the FX Transaction could decline drastically upon the occurrence of certain events with respect to the relevant country or issuer including government imposition of fiscal, monetary or exchange controls, a change in interest rates or inflation, political instability and market activity by speculators.
In the case of a FX forward, the value of the contract is determined primarily by the spot exchange rate for the relevant currency pair, its value rising or falling by roughly the same percentage as the percentage change in the spot rate. Experiencing a gain or loss following a spot movement is dependent on whether the forward contract holder agreed to buy or sell the underlying currency. For example, a forward contract to sell a currency will lose roughly 5% of its value if the underlying currency appreciates by 5%, while a forward contract to buy the currency would simultaneously gain by a like amount.
Derivative Instruments Generally. Derivative instruments may be subject to various types of risks, including market risk, liquidity risk, the risk of non-performance by the counterparty (including risks relating to the financial soundness and creditworthiness of the counterparty), legal risk and operations risk. Special risks may apply in the future that cannot be determined at this time.
OTC Forward Contracts. With respect to forward currency contracts, this is accomplished through contractual agreements generally to purchase or sell one specified currency for another currency at a specified future date and price determined at the inception of the contract. MillTech may enter into or Over the Counter (“OTC”) forward contracts as agent for Customer which are not traded on exchanges and are generally not regulated. When entering into such contracts, MillTech and Customer are relying on the counterparty to make or take delivery of the underlying currency at the maturity of the contract. There is no limitation on the daily price moves of OTC forward contracts, and a dealer is not required to continue to make markets in such contracts.
Additionally, banks and other dealers may require a deposit with respect to trading. Counterparties are not required to continue to make markets in such contracts. There have been periods during which OTC forward contract dealers have refused to quote prices for these contracts or have quoted prices with an unusually wide spreads (the difference between the price at which the counterparty is prepared to buy and at which it is prepared to sell). A counterparty may refuse to quote prices for these contracts at any time. Trading OTC forward contracts will be subject to the risk of credit failure or the inability or refusal of a dealer to perform with respect to its contracts. Failure by the counterparty to do so would result in the loss of any expected benefit of the transaction. Arrangements to trade forward contracts may be made with only one or a few counterparties, and liquidity problems therefore might be greater than if such arrangements were made with numerous counterparties.
Prices. Prices from third party liquidity providers are used in trading and valuation of the Customer’s Transactions. As such, they may not directly correspond to real time market levels at the point in time at which execution or valuation of a Transaction occurs.
Historical Prices are no indication of Future Prices. The historical movement of prices does not give a reliable indication of the movement of prices in the future. Past performance is no indication of future performance and Customer should understand that market trends can vary significantly over time.
Financial markets may fluctuate rapidly to reflect events that are outside the control of MillTech and/or Customer’s control; as a result, prices will become volatile. One form of price volatility is ‘gapping’, which occurs when there is a sudden shift in prices from one level to another. This can be caused, for example by unexpected economic events or market announcements, within or outside trading hours. Consequently, MillTech may be unable to execute your instructions at the requested price. This may also occur when there is insufficient underlying liquidity in the market.
Market Conditions. Customer acknowledges that under abnormal market conditions MillTech may be unable to execute Customer’s orders and instructions and therefore, the period during which the orders and instructions are executed may be extended and the execution prices may vary.
Settlement Risk. Settlement risk in FX Transactions is the risk of loss when one party to the FX Transaction delivers the currency it sold but does not receive the corresponding amount of the currency it bought. Settlement risk arises in deliverable FX Transactions where the parties have not arranged to use a mechanism for payment-versus-payment (“PVP”) settlement, such as an escrow arrangement or PVP settlement through a member of CLS Bank International (which operates a multi-currency cash settlement system used by many participants in the FX market) or on the books of a bank at which both parties to a FX Transaction maintain settlement accounts in the relevant currencies. Because a party’s payment obligations under a deliverable FX Transaction are denominated in a different currency than those of its counterparty, the payments cannot be netted against one another. Although payment netting across multiple FX Transactions with coinciding settlement dates and currencies is possible in principle, and may be provided for under a master agreement governing the FX Transactions, such multi-transaction payment netting can be effective only to the extent that the same party has offsetting obligations in the same currency on the same date. A contributing factor to settlement risk in FX Transactions is the time zone difference between the principal financial centres of each currency, particularly when the hours of operation of the payment systems in each country do not overlap or overlap only briefly.
Conflicts. MillTech is committed to act transparently and fairly when dealing with customers. To the best of its efforts, MillTech has identified the conflicts of interest that may arise during its business operations and has taken appropriate action to handle such conflicts to promote fair treatment of its customers. At times, MillTech’s interests may be in conflict with Customer’s interests. Please refer to MillTech’s Conflicts of Interest Policy which is available on MillTech’s website and on the Portal.
MillTech is not an adviser to Customer. Where MillTech provides generic market recommendations, such generic recommendations do not constitute a personal recommendation or investment advice and do not consider any of Customer’s circumstances or investment objectives, nor is it an offer to trade, or the solicitation of an offer to trade, in any Instrument. Each decision taken by Customer to trade in Instruments with MillTech and each decision as to whether a transaction is appropriate or proper for Customer is an independent decision made by Customer. MillTech is not acting as an advisor to Customer. Customer agrees that MillTech has and accepts no liability in connection with and is not responsible for any liabilities, claims, damages, costs and expenses, including attorneys’ fees, incurred in connection with Customer following MillTech’s generic trading recommendations or taking or not taking any action based upon any generic recommendation or information provided by Customer.
Recommendations are not guaranteed. The generic market recommendations provided by MillTech are based solely on the judgment of its personnel and should be considered as such. Customer acknowledges that it enters into any transactions relying on his/her own judgment. Any market recommendations provided are generic only and may or may not be consistent with the market positions or intentions of MillTech and/or its affiliates, including with regard to its other businesses, services or products or clients. The generic market recommendations of MillTech are based upon information believed to be reliable, but MillTech cannot and does not guarantee the accuracy or completeness thereof or represent that following such generic recommendations will reduce or eliminate the risk inherent in trading Instruments.
No guarantees of profit. There are no guarantees of profit nor of avoiding losses when trading in Instruments. Customer has received no such guarantees from MillTech or from any of its representatives. Customer is aware of the risks inherent in trading Instruments and is financially able to bear such risks and withstand any losses incurred.
Telephone Orders and Immediate Execution. Orders executed over the telephone are completed when the MillTech’s telephone operator provides confirmation of the executed Transaction following Customer’s placing of an order. Upon such confirmation of the telephone operator, Customer has bought or sold and cannot cancel the order. By placing orders through the telephone, Customer agrees to such immediate execution and accepts the risk of this immediate execution feature. MillTech is not responsible for disruption, failure or malfunction of telephone facilities and does not guarantee its telephone availability. For the avoidance of doubt, Customer is aware that MillTech may not be reachable by telephone at all times and therefore, Customer can, as long as the Portal is active, place orders through the Portal. Customer acknowledges that at times of excessive demand, Customer may experience increased waiting times in speaking to a representative of MillTech.
Internet Trading. When Customer trades via the Portal, Customer may suffer or incur losses caused, directly or indirectly, by malfunction or failure of transmission, communication system, computer facility or trading software, whether belonging to MillTech, Customer, any third party or any exchange or any settlement or clearing system. There are risks associated with utilising an internet-based trading system including, but not limited to, the failure of hardware, software, and internet connection.
Portal. Customer is responsible for the security of all Security Information. If Customer undertakes Transactions on an electronic system (including via the Portal), Customer will be exposed to risks associated with the system, including the failure of hardware and software (internet/servers). For example, there may be a delay when receiving an order, and this may affect the price of execution. Consequently, the result of any system failure may be that the order is either not executed according to the Customer’s instructions, or it is not executed at all.
While trading through the Portal or via an electronic system, Customer may suffer or incur losses caused directly or indirectly by Customer’s hardware or software failure, malfunction or misuse, poor internet connection either on the side of Customer, MillTech or both. This includes interruptions, transmission blackouts, public electricity network failures, overload of connection or hacker attacks, the wrong settings in the Portal, delayed Customer updates, Customer disregarding any applicable rules described in Standard Terms, on the Portal or MillTech’s website.
Customer acknowledges that only one order is allowed to be in the queue at one time. Once Customer has sent an order, any further orders sent by Customer are ignored and the order is locked. Customer acknowledges that when Customer closes the order placing window, the order which has been sent to the server, shall not be cancelled. In case that Customer has not received the result of the execution of the previously sent order but decides to repeat the order, Customer shall accept the risk of making two transactions instead of one.
Systems and Operational Risk. MillTech may use its own proprietary systems as well as systems which are provided by third parties. Systemic failures in the programmes and systems employed by MillTech, brokers and/or counterparties, exchanges and similar clearance and settlement facilities and other parties could result in mistakes made in the confirmation or settlement of Transactions, or in Transactions not being properly booked, evaluated or accounted for. MillTech may not be in a position to verify the risks or reliability of third-party systems. These and other similar disruptions in MillTech’s operations may cause material losses. Although MillTech makes every effort to conduct its business responsibly, MillTech makes extensive use of computer hardware, systems and software and its activities are exposed to risks caused by failures of IT infrastructure and data. Outright failure of the underlying hardware, operating system, software or network, may leave MillTech unable to trade or provide Services, and this may expose it to risk should the outage coincide with turbulent market conditions. To ameliorate this risk, backup and disaster recovery plans have been put in place by MillTech.
Certain operational risks are intrinsic to MillTech’s operations, especially given the volume, diversity and complexity of transactions that the Customer may enter into. MillTech’s business is highly dependent on its ability to process, on a daily basis, transactions across numerous and diverse markets. Consequently, MillTech relies heavily on its financial, accounting and other data processing systems. The ability of its systems to accommodate an increasing volume, diversity and complexity of transactions could also constrain MillTech’s activities. MillTech’s systems and procedures may not account for every actual or potential disruption of its operations.
Aggregation and allocation of orders under the Manual Order Process: Customer acknowledges that where permitted by Applicable Rules, MillTech may combine Customer Orders under the Manual Order Process with orders of other clients. By combining Customer’s orders with those of other clients MillTech must reasonably believe that this is in the overall best interests of MillTech’s clients. However, aggregation may result in Customer obtaining a less favourable price in relation to a particular Customer Order.
Where the Customer and other clients of MillTech submits orders or the Customer submits multiple orders, MillTech will normally fill the orders in accordance with the time of their arrival. Where permitted by Applicable Rules, MillTech may also choose under the Manual Order Process, if it believes to be fair and that it will help delivering best execution, to fill the Customer Orders on an aggregated basis. In either case, depending on the market conditions, it may on occasion result in the Customer Orders not being filled (either in full or in part).
Force Majeure Event. In case of a Force Majeure Event the Customer accepts there is a risk of loss arising directly or indirectly from such Force Majeure Event. A Force Majeure Event can lead to your orders not being executed at all or not being executed at the price indicated by Customer at the time of the order. As a consequence, it may be impossible for Customer to close trades or Customer may only have the option of closing a trade at an unfavourable price, which may increase Customer losses, reduce or eradicate your potential profits or may even lead to potential profits being transformed into losses. It is possible that orders cannot be executed outside the trading hours of the underlying market. MillTech does not guarantee execution.
Counterparty Insolvency. When buying or selling Instruments, there is the risk that the counterparty of the contract becomes insolvent and is therefore unable to meet the obligations under the contract. As a consequence, Customer may not be able to realise profits from previous transactions or losses from previous transactions may be increased. Furthermore, the insolvency of the counterparty may lead to transactions being closed without Customer’s consent or against Customer’s will. This can lead to losses being realised or increased or potential profits being unable to be realised in part or in full or your profitable transactions even being closed at a loss. Even though insolvency risk exists in every transaction in financial instruments, it is much larger in OTC transactions than in exchange transactions as there is no central clearing counterparty in OTC transactions.
Counterparty Risk. The markets in which the Customer may effect transactions are not “exchanged-based,” including “over-the-counter” or “interdealer” markets. The participants in such markets are typically not subject to the credit evaluation and regulatory oversight to which members of “exchange-based” markets are subject. The lack of evaluation and oversight of over-the-counter markets exposes Customer to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thereby causing loss. The lack of a complete and “fool-proof” evaluation of the financial capabilities of counterparties and the absence of a regulated market to facilitate settlement may increase the potential for losses to Customer.
Counterparty Default. The stability and liquidity of OTC derivative transactions depend in large part on the creditworthiness of the parties to the transactions. If there is a default by the counterparty to such a transaction, there will under most normal circumstances be contractual remedies available pursuant to the agreements related to the transaction. However, exercising such contractual rights may involve delays or costs which could result in losses to Customer and Customer shall bear such losses.
Close out. Under the Agreement, MillTech has the right subject to certain conditions described therein, to close any open positions held by Customer without giving prior notice. This can lead to losses for Customer.
Taxes. Profits and losses from Transactions entered into can have consequences on Customer’s tax liability, for example with regard to income tax. MillTech does not give any advice or make any suggestions regarding liability to tax, nor will tax related issues be considered or advised upon by MillTech in the execution of orders. If Customer has doubts regarding the effects of trading on their tax liability, Customer must consult third parties such as a tax advisor. Customer shall make sure that investing in Instruments is not subject to tax and/or any other duty in Customer’s jurisdiction. Customer is responsible for any taxes and/or any other duty which may accrue in respect of its trades.
Costs and Other Considerations. Prior to effecting Transactions in Instruments, Customer needs to be aware of any costs involved, such as spread(s), commission(s) and swap(s). This is because when Instruments are purchased or sold, several types of incidental costs (including transaction fees and commissions) are incurred. These costs may significantly reduce or even exclude the profit potential of the Instruments. Before Customer places an order, Customer should obtain, and is deemed to have received details of all costs and other charges for which it is liable, while acknowledging that there may be circumstances that may lead to an increase in such costs and charges from time to time. Customer hereby agrees that, before proceeding to place an order, it has read and understood any Costs and Charges information made available to Customer by MillTech.