Risk Disclosure Statement
Understanding the risks associated with CFD and Forex trading is essential. Please read this document carefully before opening an account.
Contents
Important Risk Warning
Trading Contracts for Difference (CFDs) and Foreign Exchange (Forex) on margin carries a high level of risk and may not be suitable for all investors. Before deciding to trade, you should carefully consider your investment objectives, level of experience, and risk appetite.
There is a possibility that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.
1. Introduction
1.1. Purpose
This Risk Disclosure Statement ("Statement") is provided to you by Vertex1 Brokers Limited ("Vertex", "the Company") in compliance with the Securities (Licensing) Rules 2007 issued by the Financial Services Commission (FSC) of Mauritius.
1.2. Scope
The purpose of this document is to inform you of the potential financial risks involved in trading CFDs and other financial instruments offered by the Company. It cannot disclose all risks and other significant aspects of such trading. You should ensure that you understand the nature of the transaction you are entering into and the extent of your exposure to risk.
2. Nature of the Instruments (CFDs)
2.1. Derivative Nature
CFDs are complex derivative products. When you trade a CFD (e.g., Apple CFD or Gold CFD), you do not own the underlying asset and you have no rights to the underlying asset (such as voting rights or physical delivery). You are entering into a contract with Vertex to exchange the difference in price of an underlying asset between the time the trade is opened and closed.
2.2. Execution Venue
Transactions in CFDs are not undertaken on a recognized exchange (like the NYSE or LSE). They are "Over-The-Counter" (OTC) transactions executed on the Company's platform. This means you are exposed to the counterparty risk of the Company and its Liquidity Providers.
3. Leverage and Margin Risks
3.1. Effect of Leverage (Gearing)
Trading on margin involves the use of "Leverage." Leverage allows you to control a large position with a relatively small deposit.
Example: Up to 1:500 Leverage
⚠️ While leverage can magnify your profits, it equally magnifies your losses. A small price movement against your position can result in a significant loss of capital.
3.2. Margin Call and Stop Out
It is your responsibility to monitor your account balance. If the market moves against you, you may be required to deposit additional funds immediately to maintain your open positions.
Stop Out: If your Equity falls below the required Margin Level (30%), the Company's system will automatically close your positions at the current market price to prevent further losses. This may result in the realization of a loss.
4. Market Risks
4.1. Volatility
Financial markets can be highly volatile. Prices can move rapidly over wide ranges due to economic events, geopolitical news, central bank decisions, or unexpected news ("Black Swan events"). Vertex has no control over these movements.
4.2. Slippage
The price at which your order is executed may differ from the price you saw on the platform at the time you placed the order. This is known as Slippage.
- Slippage often occurs during periods of high volatility or low liquidity (e.g., during news releases).
- Slippage can be positive (in your favor) or negative (against you).
4.3. Gapping
Market prices may "Gap" (jump significantly from one price to another without trading at prices in between), particularly over weekends or market holidays.
Risk: If a gap occurs, your Stop Loss order may not be executed at your requested price but at the next available price ("Gapping Risk"). This could result in a larger loss than you anticipated.
5. Specific Asset Risks
5.1. Cryptocurrencies
Trading CFDs on Cryptocurrencies (e.g., Bitcoin, Ethereum) involves specific risks:
- Extreme Volatility: Crypto assets can experience massive price swings in minutes.
- Unregulated Underlying: The underlying crypto markets are largely unregulated and susceptible to manipulation or exchange failures.
- Weekend Trading: While Vertex offers 24/7 crypto trading, liquidity may be thinner on weekends, leading to wider spreads and potential slippage.
5.2. Emerging Market Currencies
Trading "Exotic" currency pairs carries higher risk:
- Lower Liquidity: Exotic pairs (e.g., USD/ZAR, USD/TRY) have wider spreads compared to Major pairs (EUR/USD).
- Political Risk: Political instability in emerging economies can cause sudden, drastic currency devaluation.
6. Technical and Platform Risks
6.1. System Failure
Electronic trading is subject to failures in hardware, software, and internet connectivity.
- Client Side: If your internet connection fails, or your computer freezes, you may be unable to close a losing position. Vertex is not liable for losses caused by equipment failure on your end.
- Company Side: While Vertex maintains robust backup systems and servers (Equinix LD5/NY4), total system failure is a possibility.
6.2. Communication Delays
There may be delays in the transmission of orders or the reception of price updates due to internet latency. This can affect order execution prices and timing.
7. Copy Trading and PAMM Risks
7.1. No Guarantee
If you use the Copy Trading or PAMM (Percent Allocation Management Module) features, you acknowledge that past performance is not a guarantee of future results. A Strategy Provider who was profitable in the past may lose money in the future.
7.2. Execution Risk
Trades executed in the Master account are replicated in your account. However, due to latency or market volatility, the execution price in your account may differ slightly from the Master account.
7.3. Independence
Strategy Providers are independent third parties and are not employees of Vertex. Vertex does not vet the trading skill of Strategy Providers and is not responsible for their trading decisions.
8. Liquidity and Costs
8.1. Liquidity Risk
In certain market conditions, it may be difficult or impossible to liquidate a position. This may occur if trading is suspended in the underlying market or if there is insufficient liquidity.
8.2. Cost of Trading
Before you begin trading, you should obtain details of all commissions, spreads, and other charges for which you will be liable.
Swaps: If you hold positions overnight, you may incur "Swap" (interest) charges which can exceed the profit of the trade if held for a long period.
8.3. Currency Risk
If you trade an instrument denominated in a currency different from your Account Base Currency, your profit or loss will be affected by exchange rate fluctuations when converted back to your Base Currency.
9. Client Money and Insolvency
9.1. Segregation
Vertex holds Client Money in segregated trust accounts separate from the Company's funds. However, in the event of the insolvency of the banking institution holding the funds, there is a risk that you may not recover all your funds.
9.2. Third-Party Funds
The Company may pass money received from you to a third party (e.g., an intermediate broker, settlement agent, or OTC counterparty) to effect a transaction. The legal and regulatory regime applying to any such third party will be different from that of Mauritius, and in the event of the insolvency of that third party, your money may be treated differently.
10. Tax and Legal
10.1. Tax Liability
You are responsible for any taxes and/or any other duty which may accrue in respect of your trades. Vertex does not provide tax advice. Tax laws are subject to change.
10.2. No Advice
Vertex provides services on an execution-only basis. We do not provide investment advice. If you do not understand the risks involved, you should seek advice and consultation from an independent financial advisor.
Acknowledgement
By opening a trading account, you acknowledge that you have read, understood, and accepted this Risk Disclosure Statement.
End of Risk Disclosure Statement • Vertex1 Brokers Limited