RISK OF SECURITIES TRADING
The prices of Securities fluctuate, sometimes dramatically. The price of a Security may move up or down, and may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying and selling Securities.
The Client also acknowledges that there are risks in leaving Securities in the custody of JS Financial Holdings Limited or in authorising JS Financial Holdings Limited to lend the client’s Securities to or deposit them with certain third parties (e.g. as collateral for loans or advances made to JS Financial Holdings Limited) under the Securities and Futures Ordinance and related rules. The Client understands that this is allowed only if he consents in writing, which consent must specify the period for which it is current and cannot exceed 12 months if he is not a professional investor. The Client also understands that he is not required by any law to sign these authorities.
RISK OF TRADING GROWTH ENTERPRISE MARKET STOCKS
Growth Enterprise Market (GEM) stocks involve a high investment risk. In particular, companies may list on GEM with neither a track record of profitability nor any obligation to forecast future profitability. GEM stocks may be very volatile and illiquid.
The Client should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.
Current information on GEM stocks may only be found on the internet website operated by the Stock Exchange. GEM Companies are usually not required to issue paid announcements in gazetted newspapers.
The Client should seek independent professional advice if the Client is uncertain of or has not understood any aspect of this risk disclosure statement or the nature and risks involved in trading of GEM stocks.
RISK OF TRADING NASDAQ-AMEX SECURITIES AT THE STOCK EXCHANGE
The Securities under the Nasdaq-Amex Pilot Program (“PP”) are aimed at sophisticated investors. The Client should consult a licensed or registered person and become familiarised with the PP before trading in the PP Securities. The Client should be aware that the PP Securities are not regulated as a primary or secondary listing on the Main Board or GEM of the Stock Exchange.
RISK OF MARGIN TRADING
The risk of loss in financing a transaction by deposit of collateral is significant. The Client may sustain losses in excess of the Client's cash and any other assets deposited as collateral with JS Financial Holdings Limited. Market conditions may make it impossible to execute contingent orders, such as "stop-loss" or "stop-limit" orders. The Client may be called upon at short notice to make additional margin us or interest payments. If the required margin deposits or interest payments are not made within the prescribed time, the Client's collateral may be liquidated without the Client's consent. Moreover, the Client will remain liable for any resulting deficit in the Client's account and interest charged on the Client's account. The Client should therefore carefully consider whether such a financing arrangement is suitable in light of the Client's own financial position and investment objectives.
RISK OF PROVIDING AN AUTHORITY TO REPLEDGE YOUR SECURITIES COLLATERAL ETC.
There is risk if the Client provides JS Financial Holdings Limited with an authority that allows it to apply the Client's Securities or Securities collateral pursuant to a Securities borrowing and lending agreement, repledge the Client’s Securities collateral for financial accommodation or deposit the Client’s Securities collateral as collateral for the discharge and satisfaction of its settlement obligations and liabilities.
If the Client’s Securities or Securities collateral are received or held by JS Financial Holdings Limited in Hong Kong, the above arrangement is allowed only if the Client consents in writing. Moreover, unless the Client is a professional investor, the Client’s authority must specify the period for which it is current and be limited to not more than 12 months. If the Client is a professional investor, these restrictions do not apply.
Additionally, the Client’s authority may be deemed to be renewed (i.e. without the Client’s written consent) if JS Financial Holdings Limited issues the Client a reminder at least 14 days prior to the expiry of the authority, and the Client does not object to such deemed renewal before the expiry date of the Client’s then existing authority.
The Client is not required by any law to sign these authorities. But an authority may be required by JS Financial Holdings Limited, for example, to facilitate margin lending to the Client or to allow the Client's Securities or Securities collateral to be lent to or deposited as collateral with third parties. JS Financial Holdings Limited should explain to the Client the purposes for which one of these authorities is to be used.
If the Client signs one of these authorities and the Client's Securities or Securities collateral are lent to or deposited with third parties, those third parties will have a lien or charge on the Client' Securities or Securities collateral. Although JS Financial Holdings Limited is responsible to the Client for the Client's Securities or Securities collateral lent or deposited under the Client’s authority, a default by it could result in the loss of the Client’s Securities and Securities collateral.
A cash account not involving Securities borrowing and lending is available from JS Financial Holdings Limited. If the Client does not require margin facilities or does not wish the Client's Securities or Securities collateral to be lent or pledged, the Client should not sign the above authorities and ask to open this type of cash account.
RISK DISCLOSURE STATEMENT AND DISCLAIMERS FOR OPTIONS TRADING
This brief statement does not disclose all of the risks and other significant aspects of trading in Futures/Options Contracts. In light of the risks, the Client should undertake such transactions only if the Client understands the nature of the Futures/Options Contracts (and contractual relationships) into which the Client is entering and the extent of the Client's exposure to risk. Trading in Futures/Options Contracts is not suitable for many members of the public. The Client should carefully consider whether trading is appropriate for the Client in light of the Client's experience, objectives, financial resources and other relevant circumstances.
1. RISK OF TRADING FUTURES AND OPTIONS
The risk of loss in trading Futures/Options Contracts is substantial. In some circumstances, the Client may sustain losses in excess of the Client's initial margin funds. Placing contingent orders, such as "stop-loss" or "stop-limit" orders, will not necessarily avoid loss. Market conditions may make it impossible to execute such orders. The Client may be called upon at short notice to deposit additional margin funds. If the required funds are not provided within the prescribed time, the Client's position may be liquidated. The Client will remain liable for any resulting deficit in the Client's account. The Client should therefore study and understand Futures/Options Contracts before the Client trades and carefully consider whether such trading is suitable in the light of the Client's own financial position and investment objectives. If the Client trades options the Client should inform itself of exercise and expiration procedures and the Client's rights and obligations upon exercise or expiry.
2. FUTURES CONTRACTS
2.1 Effect of “Leverage” or “Gearing”
Transactions in Futures Contracts carry a high degree of risk. The amount of initial margin is small relative to the value of the Futures Contracts so that transactions are “leveraged” or “geared”. A relatively small market movement will have a proportionately larger impact on the funds the Client has deposited or will have to deposit: this may work against the Client as well as for the Client. The Client may sustain a total loss of initial margin funds and any additional funds deposited with JS Financial Holdings Limited to maintain the Client's position. If the market moves against the Client's position or margin levels are increased, the Client may be called upon to pay substantial additional funds on short notice to maintain the Client's position. If the Client fails to comply with a request for additional funds within the time prescribed, the Client's position may be liquidated at a loss and the Client will be liable for any resulting deficit.
2.2 Risk-reducing orders or strategies
The placing of certain orders (e.g. “stop-loss” orders, or “stop-limit” orders) which are intended to limit losses to certain amounts may not be effective because market conditions may make it impossible to execute such orders. Strategies using combinations of positions, such as “spread” and “straddle” positions may be as risky as taking simple “long” or “short” positions.
3. OPTIONS CONTRACTS
3. 1 Variable degree of risk
Transactions in Options Contracts carry a high degree of risk. Purchasers and sellers of Options Contracts should familiarise themselves with the type of Options Contracts (i.e. put or call) which they contemplate trading and the associated risks. The Client should calculate the extent to which the value of the Options Contracts must increase for the Client's position to become profitable, taking into account the premium and all transaction costs.
The purchaser of Options Contracts may offset or exercise the Options Contracts or allow the Options Contracts to expire. The exercise of an Options Contract results either in a cash settlement or in the purchaser acquiring or delivering the underlying interest. If the Options Contracts is on a Futures Contract, the purchaser will acquire a futures position with associated liabilities for margin (see the section on Futures Contracts above). If the purchased Options Contracts expire worthless, the Client will suffer a total loss of the Client's investment which will consist of the option premium plus transaction costs. If the Client is contemplating purchasing deep-out-of-the-money Options Contracts, the Client should be aware that the chance of such Options Contracts becoming profitable ordinarily is remote.
Selling (“writing” or “granting”) an Options Contract generally entails considerably greater risk than purchasing Options Contracts. 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 unfavourably. The seller will also be exposed to the risk of the purchaser exercising the Options Contract and the seller will be obligated to either settle the Options Contract in cash or to acquire or deliver the underlying interest. If the Options Contract is on a Futures Contract, the seller will acquire a position in a Futures Contract with associated liabilities for margin (see the section on Futures Contracts above). If the Options Contract is “covered” by the seller holding a corresponding position in the underlying interest or a Futures Contract or another Options Contract, the risk may be reduced. If the Options Contract is not covered, the risk of loss can be unlimited.
Certain exchanges in some jurisdictions permit deferred payment of the option premium, exposing the purchaser to liability for margin payments not exceeding the amount of the premium. The purchaser is still subject to the risk of losing the premium and transaction costs. When the Options Contract is exercised or expires, the purchaser is responsible for any unpaid premium outstanding at that time.
4. ADDITIONAL RISKS COMMON TO FUTURES AND OPTIONS
4.1 Terms and conditions of contracts
The Client should ask JS Financial Holdings Limited about the terms and conditions of the specific Futures/Options Contracts which the Client is trading and associated obligations (e.g. the circumstances under which the Client may become obliged to make or take delivery of the underlying interest of a Futures Contract and, in respect of Options Contracts, expiration dates and restrictions on the time for exercise). Under certain circumstances the specifications of outstanding contracts (including the exercise price of an Options Contract) may be modified by the Exchange, Futures Exchange or Clearing House to reflect changes in the underlying interest.
4.2 Suspension or restriction of trading and pricing relationships
Market conditions (e.g. illiquidity) and/or the operation of the rules of certain markets (e.g. the suspension of trading in any contract or contract month because of price limits or “circuit breakers”) may increase the risk of loss by making it difficult or impossible to effect transactions or liquidate/offset positions. If the Client has sold options, this may increase the risk of loss.
Further, normal pricing relationships between the underlying interest and the Futures Contracts, and the underlying interest and the Options Contracts may not exist. This can occur when, for example, the Futures Contract underlying the Option Contract is subject to price limits while the Option Contract is not. The absence of an underlying reference price may make it difficult to judge “fair value”.
4.3 Deposited cash and property
The Client should familiarise himself with the protections given to money or other property the Client deposits for domestic and foreign transactions, particularly in the event of a firm insolvency or bankruptcy. The extent to which the Client may recover the Client's money or property may be governed by specific legislation or local rules. In some jurisdictions, property which had been specifically identifiable as the Client's own will be pro-rated in the same manner as cash for purposes of distribution in the event of a shortfall.
4.4 Commission and other charges
Before the Client begins to trade, the Client should obtain a clear explanation of all commission, fees and other charges for which the Client will be liable. These charges will affect the Client's net profit (if any) or increase the Client's loss.
4.5 Transactions in other jurisdictions
Transactions on markets in other jurisdictions, including markets formally linked to a domestic market, may expose the Client to additional risk. Such markets may be subject to regulation which may offer different or diminished investor protection. Before the Client trades the Client should enquire about any rules relevant to the Client's particular transactions. The Client's local regulatory authority will be unable to compel the enforcement of the rules of regulatory authorities or markets in other jurisdictions where the Client's transactions have been effected. The Client should ask JS Financial Holdings Limited for details about the types of redress available in both the Client's home jurisdiction and other relevant jurisdictions before the Client starts to trade.
4.6 Currency risks
The profit or loss in transactions in foreign currency-denominated contracts (whether they are traded in the Client's 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.
4.7 Trading facilities
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. The Client's ability to recover certain losses may be subject to limits on liability imposed by the system provider, the market, the clearing house and/or JS Financial Holdings Limited. Such limits may vary: the Client should ask JS Financial Holdings Limited for details in this respect.
4.8 Electronic trading
Trading on an electronic trading system may differ from trading on other electronic trading systems. If the Client undertakes transactions on an electronic trading system, the Client will be exposed to risks associated with the system including the failure of hardware and software. The result of any system failure may be that the Client's order is either not executed according to the Client's instructions or is not executed at all.
4.9 Off-exchange transactions
In some jurisdictions, and only then in restricted circumstances, firms are permitted to effect off-exchange transactions. JS Financial Holdings Limited may be acting as the Client's 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 the Client undertakes such transactions, the Client should familiarise himself with applicable rules and attendant risks.