Risks associated with transactions in derivative financial instruments (CFDs)

1Introduction

1.1This risk warning notice (the Notice) is provided to the Clients of Majesty FX Trade Limited (the Company) and to any Prospective Client who is willing to enter into an agreement with the Company for opening a trading account, under the provisions of the applicable law as amended from time to time.

1.2Clients and Prospective Clients must read this Notice carefully, which is easily accessible on the Company's website, before deciding to open a trading account and before commencing any trading activity with the Company.

1.3This Notice and the general risk disclosure found on the Company's website cannot and do not disclose or explain all of the risks and other significant aspects involved in dealing in the derivative financial instruments offered by the Company, such as CFDs. The Notice is designed to explain in general terms the nature of the risks involved when dealing in financial instruments on a fair and non misleading basis. The Client should be aware of all the risks associated with trading CFDs and seek advice and consultation from an independent financial advisor if there are any doubts. The Company does not provide such advice. If the Client does not understand the risks involved in trading CFDs, the Client should not trade at all.

1.4This disclosure is a necessary addition to your client agreement with Majesty FX Trade Limited and should be acknowledged by you.

2Definition

2.1CFDs or Contracts for Differences are agreements between two parties to exchange the difference between the opening price and closing price of a contract, including but not limited to shares, currencies, commodities and indices. CFDs provide investors with the benefits and risks of owning a security without actually owning it.

3Leverage and margin trading

3.1The Client and any Prospective Client fully acknowledge and accept that, regardless of any information which may be offered by the Company, the value of the CFDs provided by the Company may fluctuate downwards or upwards and it is not unlikely that the investment may become of no value. This is due to the high degree of gearing or leverage that CFDs carry. It stems from 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 your trades. Any leverage you use will amplify your losses and you may rapidly lose all the funds you deposited as margin.

4Volatility of price and limitation on the available market

4.1CFDs provided by the Company are derivative financial instruments, the price of which is derived from the price of the underlying asset to which the CFD refers. Derivative financial instruments and the relevant markets can be highly volatile. The prices of CFDs and the underlying assets may be volatile and unpredictable and may fluctuate rapidly and over wide ranges and may reflect unforeseeable events or changes in conditions, none of which can be controlled by the Company or the Client. Those movements will affect the Company's prices, whether or not the Client can open or close a position and the price at which the Client can do so. Under certain market conditions it may be impossible to execute any type of order at the declared price. Even stop loss orders cannot guarantee a limit of loss. Stop loss orders are not guaranteed to be filled at the price you state. Once a stop loss order has been triggered it turns into a market order, which is filled at the best possible price, and this price may be worse than the price specified. The prices of CFDs 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.

4.2Some of the underlying assets of CFDs may not be immediately liquid as a result of reduced demand for the underlying instrument, and the Client may not be able to obtain information on the value of these assets or the extent of the associated risks.

4.3Trading in CFDs is speculative and involves a high degree of risk. In particular, because it is conducted using margin, which covers only a small percentage of the value of the underlying asset being traded, even small price changes in the underlying assets of CFDs can result in significant losses. By trading CFDs you may lose the margin held with the Company that serves as collateral for opening and maintaining your trading positions.

4.4Transactions in the derivative financial instruments provided by the Company are not undertaken on a recognized exchange. They are undertaken through the Company's electronic trading platform and, accordingly, may expose you to greater risks than regulated exchange transactions. You may be obliged to close an open position of any given financial instrument during the opening hours of the Company's electronic trading platform.

5Total loss might exceed the initial amount

5.1The Client acknowledges and understands that the risk of loss arising from trading CFDs can be substantial and that the Client might lose more than the initial amount and any additional amounts, including the margin requirement explained in section 7. While CFD trading typically only requires depositing a small percentage of the total trade volume, profits and losses can quickly exceed the margin requirement.

5.2The Client is personally responsible for all losses resulting from these positions. Please refer to the client agreement for the treatment of negative account balances.

6Additional obligations

6.1The Client and any Prospective Client shall obtain details of all commissions and other charges for which they will be liable before they begin trading with the Company. Such information can be found on the Company's website and in the legal documentation uploaded there. If any charges are not expressed in money terms, for instance as a dealing spread, the Client should obtain a clear written explanation, including appropriate examples, to establish what such charges are likely to mean in specific money terms.

6.2When the Client engages in CFD trading, the Client is placing a trade in relation to movements of prices set by the Company. Prices quoted to the Client will include a spread, mark up or mark down when compared with prices that the Company may receive or expect to receive if it were to cover transactions with the Client by a trade in the interbank market or with another counterparty. The total impact of spreads may be significant in relation to the size of the margin the Client deposits and may make it more difficult for the Client to realise a profit. The Client should carefully consider the effect of spreads, mark ups or mark downs on the ability to profit from trading.

6.3The value of open positions in the CFDs provided by the Company may be subject to financing fees. The price of long positions may be reduced by a daily financing fee throughout the life of the CFD. Conversely, the price of short positions may be increased by a daily financing fee. Financing fees are based on prevailing market interest rates, which may vary over time. Details of daily financing fees applied are available on the Company's website.

6.4The Client should take reasonable care to maintain sufficient available funds to avoid negative account equity due to position size and overnight financing fees, especially when trading CFDs on cash indices and CFDs on shares where financing fees are applied to reflect corporate actions.

6.5The Client should be aware that trades in CFDs may be or become subject to tax or other duty, for example because of changes in legislation or the Client's personal circumstances. The Company does not warrant that no tax or other stamp duty will be payable. The Client will be responsible for any taxes or other duties which may accrue in respect of their trades.

7Margin requirements

7.1Initial margin requirements. The Client should be aware of the implications of CFD transactions and in particular the specific margin requirements which are applied to them. The Client is required to deposit funds in the trading account in order to open a position, and the funds should reflect the specific margin required. The Client will be informed of the margin requirement for each account before beginning to trade.

7.2Maximum and reduced leverage. Under normal trading conditions the maximum leverage available on trading accounts is up to 1:2000. Lower leverage limits may apply depending on the relevant financial instrument, account type, account leverage setting and other applicable provisions of this Notice. Please refer to the Company's website for instrument specific leverage. The Client acknowledges that the Company reserves the right, at its sole discretion, to reduce the applicable leverage limits in circumstances including, but not limited to, the release of significant news, daily and weekly market session openings and closings, bank and public holidays, and earnings announcements. Where more than one leverage restriction applies, the lowest applicable maximum leverage will prevail.

7.3Equity based leverage adjustments. The Client acknowledges and agrees that the maximum leverage for a trading account may be adjusted automatically and without prior notice, taking into consideration the account equity, that is balance plus floating profit and loss plus swap plus commission, in accordance with the applicable account category.

7.4Volume based leverage. The leverage for positions in certain instruments, such as cryptocurrency CFDs and 24 hour gold, may be determined by the symbol traded and the total volume traded for each symbol. The Client is responsible for checking the trading details of each symbol before and while trading.

7.5Additional discretionary leverage restrictions. The Company reserves the right, at its sole discretion, to impose, modify or remove leverage restrictions on any trading account or financial instrument, temporarily or indefinitely, including during periods of increased market risk. Where restrictions are applied to existing positions, the margin required to maintain those positions may increase and this may reduce the Client's free margin or margin level, potentially leading to automatic position closures in accordance with the stop out provisions.

7.6Margin calculation. Margin requirements depend on the underlying asset of the CFD, the level of leverage chosen and the value of the position to be established.

7.7Margin call notification. The Client should not rely on receiving a margin call notification to sustain a loss making position. The Company may not notify the Client of a margin call.

7.8Hedged positions. The margin treatment of hedged positions, being equal buy and sell volumes in the same financial instrument, is set out in the client agreement. Closing a position that removes a hedge during a reduced leverage period may be subject to an additional margin check, and the request may be rejected where the available funds are insufficient.

7.9Discretionary closure and stop out. The Company has the discretionary right to start closing positions, and to close all positions automatically at market prices, when account equity falls to the levels of used margin specified for the relevant account type in the client agreement and trading details.

8Potential conflicts of interest

8.1While it is not feasible to define an exhaustive list of potential conflicts, the following circumstances constitute or may give rise to a conflict of interest. The Company executes orders based on quotes provided by the Company. Prices may be determined without reference to a relevant benchmark or market. The Company may be matching the Client's order with that of another Client. The Company may receive or pay inducements to or from third parties due to the referral of new Clients or the Client's trading. The Company may use entities which are members of its group as counterparties to certain transactions. Where the remuneration of third parties such as affiliates is based on the trading activity of the Clients they refer, this may incentivize prohibited marketing tactics and the use of misleading information.

8.2Clients have the right to object to conflicts of interest, and acceptance of this risk disclosure will be taken as a positive affirmation of acceptance of the aforementioned potential conflicts.

9Review

9.1The Company reserves the right to review or amend its risk disclosure statements, at its sole discretion, whenever it deems necessary, without prior notice to the Client.

10Client declaration

10.1The Client acknowledges, confirms and accepts that by entering into an agreement with the Company, and every time the Client decides to place an order in a CFD, the Client runs a high risk of incurring losses and damages as a result, and declares that they are willing to proceed with this kind of trading and undertake such risks.

10.2It is the responsibility of the Client to consult legal and other professional advisors before committing to any transaction or binding agreement in relation to these products.