FOREX RISK DISCLOSURE STATEMENT
The risk of loss in
trading the foreign exchange markets can be
substantial.
You should therefore carefully consider whether such
trading is suitable for you in light of your
financial condition. In considering whether to trade
or authorize someone else to trade for you, you
should be aware of the following:
If you purchase or sell a
foreign exchange option
you may sustain a total loss of the initial margin
funds and additional funds that you deposit with
your broker to establish or maintain your position.
If the market moves against your position, you could
be called upon by your broker to deposit additional
margin funds, on short notice, in order to maintain
your position. If you do not provide the additional
required funds within the prescribed time, your
position may be liquidated at a loss, and you would
be liable for any resulting deficit in you account.
Under certain market
conditions, you may find it difficult or impossible
to liquidate a position.
This can occur, for example when a currency is
deregulated or fixed trading bands are widened.
Potential currencies include, but are not limited to
the Thai Baht, South Korean Won, Malaysian Ringitt,
Brazilian Real, Hong Kong Dollar.
The placement of contingent
orders
by you or your trading advisor, such as a
"stop-loss" or "stop-limit" orders, will not
necessarily limit your losses to the intended
amounts, since market conditions may make it
impossible to execute such orders.
A "spread" position
may not be less risky than a simple "long" or
"short" position.
The high degree of
leverage
that is often obtainable in foreign exchange trading
can work against you as well as for you. The use of
leverage can lead to large losses as well as gains.
In some cases, managed accounts
are subject to substantial charges for management
and advisory fees. It may be necessary for those
accounts that are subject to these charges to make
substantial trading profits to avoid depletion or
exhaustion of their assets.
Currency trading is speculative
and volatile
Currency prices are highly volatile. Price movements
for currencies are influenced by, among other
things: changing supply-demand relationships; trade,
fiscal, monetary, exchange control programs and
policies of governments; United States and foreign
political and economic events and policies; changes
in national and international interest rates and
inflation; currency devaluation; and sentiment of
the market place. None of these factors can be
controlled by any individual advisor and no
assurance can be given that an advisor’s advice will
result in profitable trades for a participating
customer or that a customer will not incur losses
from such events.
Currency trading can be highly
leveraged
The low margin deposits normally required in
currency trading (typically between 3%-20% of the
value of the contract purchased or sold) permit an
extremely high degree leverage. Accordingly, a
relatively small price movement in a contract may
result in immediate and substantial losses to the
investor. Like other leveraged investments, in
certain markets, any trade may result in losses in
excess of the amount invested.
Currency trading presents
unique risks
The interbank market consists of a direct dealing
market, in which a participant trades directly with
a participating bank or dealer, and a brokers’
market. The brokers’ market differs from the direct
dealing market in that the banks or financial
institutions serve as intermediaries rather than
principals to the transaction. In the brokers’
market, brokers may add a commission to the prices
they communicate to their customers, or they may
incorporate a fee into the quotation of price.
Trading in the
interbank markets differs from trading in futures or
futures options in a number of ways that may create
additional risks. For example, there are no
limitations on daily price moves in most currency
markets. In addition, the principals who deal in
interbank markets are not required to continue to
make markets. There have been periods during which
certain participants in interbank markets have
refused to quote prices for interbank trades or have
quoted prices with unusually wide spreads between
the price at which transactions occur.
Failure of a client’s dealing
center
Under regulation, dealing centers are required to
maintain a clients assets in a segregated account.
If a client’s dealing center fails to do so, the
client may be subject to a risk of loss of his funds
on deposit with the dealing center in the event of
its bankruptcy. In addition, under certain
circumstances, such as the inability of another
client of the dealing center or the dealing center
itself to satisfy substantial deficiencies in such
other client’s account, a client may be subject to a
risk of loss of his funds on deposit with his
dealing center, even if such funds are properly
segregated.
When acting as an
introducing foreign exchange broker for its
customers, The Introducing Foreign Exchange Broker
could receive a portion of the commission charged by
the dealing center for the execution of client
trades. The receipt of a portion of such commissions
could create a potential conflict of interest for it
by creating an incentive to execute trades in such
client accounts on a more frequent basis than would
be appropriate.
Independent introducing
foreign exchange brokers and dealing centers who are
unaffiliated with but introduce clients to be
advised by may receive compensation, either directly
from the client or through the advisor in the form
of a shared portion of the advisory incentive fee
charged. Such introducing foreign exchange brokers
also may share a portion of the dealing spread
charged by the client’s dealing center. Such brokers
may charge their own management, administrative or
other fees in connection with introducing the
client. These forms of compensation to the broker
create a potential conflict of interest for the
broker by creating a financial incentive potentially
for them to recommend an advisor.
This brief statement
cannot disclose all the risks and other significant
aspects of the foreign exchange markets. You should
therefore carefully study all documents and foreign
exchange trading before you trade, including the
description of the principle risk factors of the
investment.
ADDITIONAL INFORMATION
The following legal information has been furnished
for your convenience. Managed Account Research, Inc.
may modify any of the information, and such
modifications shall take effect immediately upon
their posting upon this Web site.
