Risk Warning Notice

CMC Markets UK Plc. (“CMC” or “we” or “us”), whose registered office is at 66 Prescot Street London E1 8HG, is authorised and regulated by the Financial Services Authority (“FSA”) (FSA firm reference number 17370). This Risk Warning Notice is provided to you in compliance with the FSA rules because you are proposing to undertake dealings with us as a Private Customer in financial derivative products under our CFD Terms of Business for Private Customers. Private Customers are afforded greater protections under these rules than other customers are and you should ensure that we have told you what this will mean to you.

This notice cannot and does not disclose or explain all of the risks and other significant aspects involved in trading in contracts for differences (“CFDs”) and other financial derivative products. Engaging in these types of transaction can carry a high risk to your capital. You should not engage in trading CFDs and other financial derivative products unless you understand the nature of the transactions you are entering into and the true extent of your exposure to the risk of loss. You should also be satisfied that the product is suitable for you in the light of your circumstances and financial position. Certain strategies, such as a ‘spread’ position or a ‘straddle’, may be as risky as a simple ‘long’ or ‘short’ position. If you are in any doubt you should seek independent advice.

Different products involve different levels of exposure to risk and in deciding whether to trade in such instruments you should be aware of the following points:

1. General

Although financial derivative products can be utilised for the management of investment risk, some of these products are unsuitable for many customers as they carry a high degree of risk. The “gearing” or “leverage” often obtainable in trading financial derivative products means that a small deposit or down payment can lead to large losses as well as gains. It also means that a relatively small market movement can lead to a proportionately much larger movement in the value of your position, and this can work against you as well as for you. Such transactions may have to be margined, and you should be aware of the implications of this, which are set out in paragraph 3 below.

2. Foreign markets

Foreign markets will involve different risks from UK markets. In some cases risks will be greater. The potential for profit or loss from transactions on foreign markets or in foreign currency denominated markets will be affected by fluctuations in foreign exchange rates.

3. Margin

Contingent liability investment transactions, which are margined, require you to make a series of payments against the contract value, instead of paying the whole contract value immediately. Where you enter into a contingent liability transaction with us, you must maintain sufficient margin on your account at all times to maintain your open positions. We revalue your open positions continuously during each business day. Any profit or loss is immediately reflected in your account and a loss may or may not result in a margin call, which will require you immediately to provide additional funds to us to maintain your open positions. If you do not maintain sufficient margin on your account at all times and/or provide such additional funds within the time required, your open positions may be closed at a loss and you will be liable for any resulting deficit.

4. Off-exchange transactions

When trading CFD and other financial derivative products with us, you will be entering into off-exchange (OTC) derivative transactions. All positions entered into with us must be closed with us and cannot be closed with any other entity. Transactions in off-exchange derivatives may involve greater risk than investing in on-exchange derivatives because there is no exchange market on which to close out an open position. It may be impossible to liquidate an existing position, to assess the value of the position arising from an off-exchange transaction or to assess the exposure to risk. Bid prices and offer prices need not be quoted by us, and, even where they are, we may find it difficult to establish a fair price particularly when the relevant exchange or market for the underlying is closed or suspended.

5. Charges and commissions

Before you begin to trade, you should obtain details of all commissions and other charges for which you will be liable. If any charges are not expressed in money terms (but, for example, as a percentage of contract value), you should obtain a clear and written explanation, including appropriate examples, to establish what such charges are likely to mean in specific money terms. When commission is charged as a percentage, it will normally be as a percentage of the total contract value, and not simply as a percentage of your initial payment.

6. Suspensions of trading

Under certain trading conditions it may be difficult or impossible to liquidate a position. This may occur, for example at times of rapid price movement if the price for the underlying rises or falls in one trading session to such an extent that trading in the underlying is restricted or suspended.

7. Collateral

If you deposit collateral as security with us, we may provide you with additional terms and conditions that apply. Deposited collateral may lose its identity as your property once dealings on your behalf are undertaken. Even if your dealings should ultimately prove profitable, you may not get back the same assets which you deposited and may have to accept payment in cash. It is your responsibility to ascertain how your collateral will be dealt with by us.

8. Insolvency

Our insolvency or default, or that of any other brokers or firms involved with your transaction, may lead to positions being liquidated or closed out without your consent. In certain circumstances, you may not get back the actual assets which you lodged as collateral and you may have to accept any available payments in cash. On request, we must provide an explanation of the extent to which we will accept liability for any insolvency of, or default by, other firms involved with your transactions.

In the unlikely event that we were to face liquidation and cannot meet our obligations, Private Customers may be entitled to compensation from the Financial Services Compensation Scheme. Most types of investment business are covered for 100% of the first £30,000 and 90% of the next £20,000, so the maximum compensation is £48,000. Further information about compensation arrangements is available from the Financial Services Compensation Scheme.