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This brief statement does not disclose all of the risks and other
significant aspects of trading in foreign exchange contracts and options. In
light of the risks, you should undertake such transactions only if you
understand the nature of the contracts (and contractual relationships) into
which you are entering and the extent of your exposure to risk. Trading in
foreign exchange contracts and options is not suitable for many members of the
public. You should carefully consider whether trading is appropriate for you in
light of your experience, objectives, financial resources and other relevant
circumstances.
1. Effect of �Leverage� or �Gearing�
Foreign exchange contracts carry a high degree of risk. The amount of initial
margin is small relative to the value of the contract so that transactions are
�leveraged� or �geared.� A relatively small market movement will have a
proportionately larger impact on the funds you have deposited or will have to
deposit; this may work against you as well as for you.You may sustain a total loss
of initial margin funds and any additional funds deposited with the firm to maintain
your position. If the market moves against your position or margin levels are
increased, you may be called upon to pay substantial additional funds on short
notice to maintain your position. If you fail to comply with a request for additional
funds within the time prescribed, your position may be liquidated at a loss and you
will be liable for any resulting deficit.
2.Variable Degree of Risk
Transactions in options carry a high degree of risk. Purchasers and sellers of
options should familiarize themselves with the type of option (i.e. put or call) which
they contemplate trading and the associated risks.You should calculate the extent
to which the value of the options must increase for your position to become
profitable, taking into account the premium and all transaction costs.
The purchaser of options may offset or exercise the options or allow the options to
expire. The exercise of an option results in a cash settlement. If the purchased
options expire worthless, you will suffer a total loss of your investment which will
consist of the option premium plus transaction costs. If you are contemplating
purchasing deep-out-of-the-money options, you should be aware that the chance
of such options becoming profitable ordinarily is remote.
Selling (�writing� or �granting�) an option generally entails considerably greater risk
than purchasing options. Although the premium received by the seller is fixed, the
seller may sustain a loss well in excess of that amount. The seller will be liable for
additional margin to maintain the position if the market moves unfavorably. The
seller will also be exposed to the risk of the purchaser exercising the option and
the seller will be obligated to either settle the option in cash or to acquire or deliver
the underlying interest. If the option is �covered� by the seller holding a
corresponding position in the underlying interest or a future or another option, the
risk may be reduced. If the option is not covered, the risk of loss can be �unlimited.�
When the option is exercised or expires, the purchaser is responsible for any
unpaid premium outstanding at that time.
3.Terms and Conditions of Contracts
Your account must be properly margined at all times. It may become necessary to
deposit substantial additional funds. Failure to meet margin requirements may
result in liquidation of any open positions with a resultant loss. Any failure to
maintain a margin balance in an amount equal to or exceeding fifty percent (50%)
of an initial margin requirement gives Archer Daniels Midland Derivatives, Inc.
(�ADMDI�) the right but not the obligation to liquidate any part of or all open
positions in Customer�s account. Customer�s are responsible for placing their own
stop loss orders to minimize losses and ADMDI�s policy may result in liquidation
losses substantially below the 50% level. Any failure by ADMDI to enforce its rights
hereunder shall not be deemed a future waiver of such rights by ADMDI. ADMDI
has the right to change its margin policy at any time without prior notice to the
Customer.
4. Market Conditions
Market conditions (e.g., illiquidity) may increase the risk of loss by making it difficult
or impossible to effect transactions or liquidate/offset positions. If you have sold
options, this may increase the risk of loss.
5. Commission and Other Charges
Before you begin to trade, you should obtain a clear explanation of all commission,
fees and other charges for which you will be liable. These charges will affect your
net profit (if any) or increase your loss. Fees may include such things as
commissions, brokerage charges, statement charges, order cancellation charges,
account transfer charges, telephone order charges, incidental banking related fees
including wire charges for deposits/wihdrawls and returned check fees, or fees
imposed by any interbank agency, bank, contract market or other regulatory or
self-regulatory organizations arising out of ADMDI�s provision of services
hereunder. Customer may incur additional fees for the purchase of optional, value
added services offered by ADMDI.
6. Currency Risks
The profit or loss in transactions in foreign currency-denominated contracts
(whether they are traded in your own or another jurisdiction) will be affected by
fluctuations in currency rates where there is a need to convert from the currency
denomination of the contract to another currency.
7.Trading Facilities
Most open-outcry and electronic trading facilities are supported by computerbased
component systems for the order-routing, execution, matching, registration
or clearing of trades. As with all facilities and systems, they are vulnerable to
temporary disruption or failure.Your ability to recover certain losses may be subject
to limits on liability imposed by the system provider.
8. Electronic Trading
Trading on an electronic trading system may differ not only from trading in an
open-outcry market but also from trading on other electronic trading systems. If
you undertake transactions on an electronic trading system, you will be exposed to
risk associated with the system including the failure of hardware and software.
The result of any system failure may be that your order is either not executed
according to your instructions or is not executed at all. Since ADMDI does not
control signal power, its reception or routing via internet, configuration of
Customer�s equipment or reliability of its connection, ADMDI shall not be liable for
any claims, losses, damages, costs or expenses, including attorneys� fees, caused,
directly or indirectly, by a break-down or failure of any transmission or
communication system or computer facility or trading software, whether belonging
to ADMDI, Customer, any market, or any settlement or clearing system when
Customer trades on-line (via internet or electronically).
9.Telephone Orders
ADMDI is not responsible for disruption, failure or malfunction of telephone lines.
10. Off-Exchange Transactions
Since, the firm with which you deal may be acting as your counterparty to the
transaction. It may be difficult or impossible to liquidate an existing position, to
assess the value, to determine a fair price or to assess the exposure to risk. For
these reasons, these transactions may involve increased risks. Off-exchange
transactions may be less regulated or subject to a separate regulatory regime.
Before you undertake such transactions, you should familiarize yourself with
applicable rules and attendant risks.
11. Quoting Errors
Should a quoting error occur due to a mistype of a quote or a misquote given by
telephone and/or electronic means (including responses to customer requests)
ADMDI is not liable for any resulting errors in account balances and reserves the
right to make necessary corrections or adjustments to the account involved. Any
dispute arising from such quoting errors will be resolved on the basis of fair market
value as determined by ADMDI, in its sole discretion, of the relevant currency at
the time such an error occurred. In cases where the prevailing market represents
prices different from prices ADMDI has posted on our platform screen, ADMDI will
attempt, on a best effort basis, to execute trades on or close to the prevailing
market prices. These prevailing market prices will be the prices, which are
ultimately reflected on the customer statements. This may or may not adversely
affect Customer�s realized and unrealized gains and losses.
12. Credit Risk
Foreign Exchange & Options trading with ADMDI is not conducted on a regulated
market or exchange. Each contract is a contract between ADMDI and the
Customer. There is no clearinghouse and no guarantee by any other party of
ADMDI�s payment obligations to the Customer. Customer must look only to ADMDI
for performance on all contracts in Customer�s account and for return of any
margin or collateral. The insolvency of ADMDI or a default by ADMDI could cause
the Customer to lose the value of its account and to suffer additional losses from
open positions.
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