KID – CFD on an Equity

KEY INFORMATION DOCUMENT – CFD on Equity

Purpose

This document provides you with key information about this investment product. It is not marketing material. The information is required by law to help you understand the nature, risks, costs, potential gains and losses of this product and to help you compare it with other products.

CFDs are provided by Monecor (London) Ltd, the product manufacturer, a company registered in England and Wales, number 00851820.ETX Capital is a trading name of Monecor (London) Limited which is authorized and regulated by the Financial Conduct Authority in the United Kingdom, register number 124721.

 Call +44 (0) 20 7392 1494or go to www.etxcapital.com for more information. This document was created/last updated on 1 April 2020.You are about to purchase a product that is not simple and may be difficult to understand.

What is this product?

A contract for difference (“CFD”) is a leveraged contract entered with Monecor (Europe) Limited that allows an investor to speculate on rising or falling prices in the underlying asset. CFD on an equity is one of the contract for difference products which ETX Capital offers and these are over the counter financial products in which orders are executed outside a trading venue such as a regulated market within specific trading hours. The trading of a CFD will be performed by ETX Capital where it agrees to settle in cash the performance of the asset which the investor decides to speculate on.

An investor has the choice to buy (or go “long”) the CFD to benefit from rising equity prices; or to sell (or go “short”) the CFD to benefit from falling equity prices. The price of the CFD is derived from the price of the underlying equity price. Price movements in the value of the underlying asset are measured in points. For instance, if an investor is long on an ABC Company CFD and the price of the underlying equity rises, the value of the CFD will increase – at the end of the contract ETX Capital will pay the difference between the closing value of the contract and the opening value of the contract. Conversely, if an investor is long and the price of the underlying equity falls, the value of the CFD will decrease – at the end of the contract they will pay ETX Capital the difference between the closing value of the contract and the opening value of the contract. The leverage embedded within all CFDs has the effect of magnifying both profits and losses.

Objectives

The objective of the CFD is to allow an investor to gain leveraged exposure to the movement in the value of the underlying equity (whether up or down), without actually needing to buy or sell the underlying equity. The exposure is leveraged since the CFD only requires a proportion of the notional value of the contract to be put down upfront as initial margin and is one of the key features of trading CFDs.

The CFD does not have a pre-defined maturity date and is therefore open-ended; by contrast, a future CFD has a pre-defined expiry date. There is no recommended holding period and it is down to the discretion of each individual investor to determine the most appropriate holding period based on their own individual trading strategy and objectives.

Failure to deposit additional funds in the case of negative price movement may result in the CFD being auto-closed. This will occur when losses exceed the initial margin amount. In the case of future CFDs, investors will be given the option to roll their existing contract into the next period – i.e., from a January expiry into a February expiry. Rolling is at the discretion of the investor but failure to do so will result in the CFD being auto-closed at the expiry date. ETX Capital also retains the ability to unilaterally terminate any CFD contract where it deems that the terms of the contract have been breached.For more information and examples of the key features of trading CFDs please see the ETX website https://www.etxcapital.com/

Intended Retail Investor

CFDs are intended for investors who have knowledge of, or experience with, leveraged products. Likely investors will understand how the prices of CFDs are derived, the key concepts of margin and leverage, and that losses may exceed deposits. They will understand the risk/reward profile of the product compared to traditional share dealing, and desire short-term, high-risk exposure to an underlying asset. Investors will also have appropriate financial means, hold other investment types and have the ability to bear losses in excess of the initial amount invested. In times of high volatility and or macroeconomic uncertainty, asset values may fluctuate significantly and adversely affect an investor’s position. Such fluctuations can be even more significant in the case of leveraged products such as CFDs.

<img src="https://clearcapitalmarkets.co.uk/wp-content/uploads/2021/09/MicrosoftTeams-image-28.jpg" title="Equity" alt="Equity" />

What are the risks and what could I get in return? Risk indicator

The summary risk indicator is a guide to the level of risk of this product compared to other products. It shows how likely it is that the product will lose money because of movements in the markets or because we are not able to pay you.

We have classified this product as 7 out of 7, which is the highest risk class. This rates the potential losses from future performance of the product at a very high level.

CFDs are leveraged products that, due to underlying market movement, can generate losses rapidly. Losses can exceed the amount invested and you may be required to deposit additional funds in order to keep your positions open. There is no capital protection against market risk, credit risk or liquidity risk. The risks included in this paragraph are non-exhaustive and a comprehensive description of the risks involved can be found at ETX Risk Warning Notice.  www.etxcapital.com/en-gb/legal/risk-warning-notice.Losses may be incurred. Retail clients are subject to negative balance protection and your losses cannot exceed the amount invested.

Be aware of currency risk

It is possible to buy or sell CFDs on an equity in a currency which is different to the base currency of your account.  The final return you may get depends on the exchange rate between the two currencies. This risk is not considered in the indicator shown above.In some circumstances, you may be required to make further payments to pay for losses.

Market conditions may mean that your CFD trade on an equity is closed at less favourable price, which could significantly impact how much you get back.  We may close your open CFD contract if you do not maintain the minimum margin that is required, if you are in debt to the company, or if you contravene market regulations. This process may be automated. A margin close-out protection is used to ensure that the retail investor’s net equity in their account does not fall below 50% of the margin required to maintain the retail investor’s open position on a CFD trade and it is applied as soon as market conditions allows. 

This product does not include any protection from future market performance so you could lose some or all of your investment. 

If we are not able to pay you what is owed, you could lose your entire investment. However, you may benefit from a consumer protection scheme (see “what happens if we are unable to pay you”). The indicator shown above does not consider this protection.

Performance scenarios

The scenarios shown illustrate how your investment could perform but are not an exact indicator. The scenarios presented are an estimate of future performance based on evidence from the past on how the value of this investment varies. What you get will vary depending on how the market performs and how long you hold the CFD. 

The following assumptions have been used to create the scenarios in Table 1:

For example if an investor buys 10,000 Shares of Barclays CFD with an underlying equity price of 205p and an initial margin amount of 20%; the initial investment will be £4100 ((205p x 10,000)/100 x 20% ), when using the price in pence the equation would be ((P x TS)/100 x M).  It has a notional value of the contract of £20,500 ((205p x 10,000)/100).  This means for every 1p change in the market price the underlying value of the position changes by £100.  If the investor is long and the market increases in value, a £100 profit is made for every 1 point increase in the market.  If the market decreases in value, a point decrease in value in the market will lead to a £100 loss.

Equity CFD (held intraday)

Equity opening price:                                      P

205p (£2.05)

Trade size (per CFD):                                       TS

10,000 shares

Margin %:                                                          M

20%

Margin Requirement (£):                               MR = (P x TS) x M

£4100

Notional value of the trade (£):                    TN = (P x TS)

£20,500

Table 1

LONG

Performance Scenario

Closing Price (Inc. Spread)

Price Change

Profit/Loss

SHORT

Performance scenario

Closing Price (inc. spread)

Price Change

Profit/Loss

Favourable

208.075

1.5%

£307.5

Favourable

201.925

-1.5%

£307.5

Moderate

206.025

0.5%

£102.5

Moderate

206.025

-0.5%

£102.5

Unfavourable

201.925

-1.5%

-£307.5

Unfavourable

208.075

1.5%

-£307.5

Stress

194.75

-5%

-£1025

Stress

215.25

5%

-£1025

The figures shown an example of a trade include all the costs of the product itself. If you have been sold this product by someone else, or have a third party advising you about this product, these figures do not include any cost that you pay to them. The figures do not take into account your personal tax situation, which may also affect how much you get back.For more information and examples please see the ETX website: https://www.etxcapital.com/

What happens if ETX Capital is unable to pay out?

If ETX Capital is unable to meet its financial obligations to you, you may lose the value of your investment. However, ETX Capital segregates all retail client funds from its own money in accordance with the UK FCA’s Client Money Rules. ETX Capital also participates in the UK’s Financial Services Compensation Scheme (FSCS) which covers eligible investments up to £85,000per person, per firm. See www.fscs.org.uk.

What are the costs?

Trading a CFD on an equity incurs one-off, ongoing, incidental and other costs. The following costs and charges will reduce any net profit or increase your losses.

This table shows the different types of cost categories and their meaning

One-off entry and exit costs

Currency conversion

Any cash, realised profit and losses, adjustments, fees and charges that are denominated in a currency other than the base currency of your account, will be converted to the base currency of your account and a currency conversion fee will be charged to your account. Clear Capital Markets  Will charge up to 1% of the notional value of the trade.

Ongoing costs

Daily holding cost

A fee is charged to your account for every night that your position is held.                                                              This means the longer you hold a position, the more it costs.

Incidental costs

Distributor fee

We may from time to time where permitted by applicable law share a proportion of our spread, commissions and other account fees with other persons including a distributor that may have introduced you.

Other costs

Rollover costs

We charge you to roll over a futures contract into the next month or quarter, equal to half the applicable spread to open and close a trade.

How long should I hold it and can I take money out early?

CFDs are intended for short term trading, in some cases intraday and are generally not suitable for longer term investment. There is no recommended holding period, no cancellation period and therefore no cancellation fees. You can open and close a CFD on an equity at any time during market hours. Please note that a fee charge to your account will be applied for each overnight position carried over and or for any equity borrowing charges.

How can I complain?

If you wish to make a complaint about Clear Capital Markets, you should contact our client services team on 0203 869 6080, or email compliance@clear-cm.co.uk. If our client services team is unable to resolve the matter you may refer it to our compliance department. If you do not feel that your complaint has been resolved satisfactorily, you are able to refer your complaint to the Financial Ombudsman Service (“FOS”). See www.financial-ombudsman.org.uk for further information. You can also refer to the European Commission’s Online Dispute Resolution Platform, however it is likely that you will be referred to the FOS.

Other relevant information

If there is a time lag between the time you place your order and the moment it is executed, your order may not be executed at the price you expected. Ensure your internet signal strength is sufficient before trading.

The Legal section of our website contains important information regarding the terms and conditions relating to your trading with ETX Capital. You should ensure that you are familiar with all the terms and any other policies that apply to your account. www.etxcapital.com/en-gb/legal/customer-terms-and-conditions

The table shows the different types of cost categories and their meaning
Cash and Futures
One-off entry or exit costs
Spread
The difference between the buy price and the sell price is called the spread_ This cost is realised each time you open and close a trade_
Currency Conversion
Any cash. realised profit and losses. adjustments, fees and charges that are denominated in a currency other than the base currency of your account, will be converted to the base currency of your account and a currency conversion fee will be charged to your account
Cash and Futures
Incidental Costs
Distributor Fee
We may from time to time, after informing you, share a proportion of our spread, commissions and other account fees with other persons including a distributor that may have introduced you

How long should I hold it and can I take money out early?

CFDs on options are intended for short or longer term trading, in some cases intraday and could be suitable for long term investments. There is no recommended holding period, no cancellation period and therefore no cancellation fees. You can open and close a CFD on an option at any time during market hours.

How can I complain?

If you wish to make a complaint about Clear Capital Markets, you should contact our client services team on 0203 869 6080, or email compliance@clear-cm.co.uk. If our client services team is unable to resolve the matter you may refer it to our compliance department. If you do not feel that your complaint has been resolved satisfactorily, you are able to refer your complaint to the Financial Ombudsman Service (“FOS”). See www.financial-ombudsman.org.uk for further information. You can also refer to the European Commission’s Online Dispute Resolution Platform, however it is likely that you will be referred to the FOS.

Other relevant information

If there is a time lag between the time you place your order and the moment it is executed, your order may not be executed at the price you expected. Ensure your internet signal strength is sufficient before trading. The Terms and Policies section of our website contains important information regarding your account. You should ensure that you are familiar with all the terms and policies that apply to your account.