Notice of Risk Warning:
All investment products offered in the trading platforms of amana carry a high degree of risk. This includes exchange listed products that are offered with or without leverage, leveraged Over-the-Counter (‘OTC’) derivatives and crypto assets, both physical or in the form of leveraged derivatives. Despite all products being risky, we stress that all leveraged and crypto assets are financial products that carry a much higher risk than the other products offered.
Leveraged derivatives are complex financial contracts based on the value of an underlying asset, group of assets or benchmark. The underlying assets could include stocks, indices, bonds, commodities, currencies, interest rates, or crypto assets. Derivatives may be traded over-the-counter (OTC), meaning an investor purchases them through a brokerage-dealer network, or on exchanges. All amana derivatives that are trading are OTC.
Leveraged OTC derivatives, also called Contracts for Difference (CFDs) and Crypto assets incur a high level of risk and may result rapidly in significant losses and investors might lose more than they have invested. Investing in such derivative instruments might not be suitable for all investors. The Client should not risk more than what they are prepared to lose. Investing commission free in U.S. and regional exchange traded stocks and ETFs carries risk since the value of investments can go up as well as down. Before deciding to trade, the Client should ensure understands the risks involved and consider their experience level and may seek independent advice if necessary.
Risk Disclosure Notice:
All investments in financial products carry risk.
It should be noted that this Notice does not contain all the risks and aspects involved in trading on all financial Products; therefore, the Client needs to ensure that his/her decision is made on an informed basis taking into consideration the following:
- An OTC derivative is a financial contract that does not trade on an asset exchange, it reflects the performance of, including amongst others, forex, precious metals, futures, shares, indices and crypto assets; the profit or loss is determined by the difference between the price an OTC derivative is bought at and the price is sold at and vice versa. These are also referred to as a contract for differences. ("CFD") Leveraged OTC Derivatives are traded on margin, and it should be noted that no physical delivery of either the leveraged OTC Derivatives or underlying asset is occurring. It should be noted that when clients purchase, for example, shares using a Derivatives they are merely speculating on the share’s value to either increase or decrease.
- Leveraged OTC derivatives fluctuate in value throughout the day; the price movements of these products are determined by a number of factors, including but not limited to macro economic factors, speculation, and the availability of market information in general.
It should be noted that past performance of a financial product is not a useful indicator of future performance. What any financial product has done in the past does not mean that it will do that again into the future.
Main Risks Trading Leveraged Derivatives
- Leveraged OTC Derivatives are complex products that are not suitable for all types of investors, therefore you should always make sure that you understand how the product you are buying/selling works, that it does what you want it to do and that you are in a position to take the loss if it fails. All across the world OTC Derivatives traders tend to loss money rather than make it, please never invest more than you are able to loose in your trading account with amana.
- You should carefully read these Terms and the Product Specifications before making a trading decision.
- Prior to trading Leveraged OTC Derivatives, you need to ensure that you understand the risks involved. These products carry a much higher level of risk to the Client’s capital compared to other financial products. Leveraged trading means that potential profits are magnified; it also means losses are magnified. The lower the margin requirement, the higher the risk of potential losses if the market moves against the Client. The value of Leveraged OTC Derivatives may increase or decrease violently depending on market conditions.
- Engaging in trading Leveraged OTC Derivatives may not be suitable for you and independent advice should be sought if necessary. The potential for profit must be balanced alongside prudent risk management given the significant losses that may be generated over a very short period of time when trading Leveraged OTC Derivatives.
- You should not commence trading in Leveraged OTC Derivatives unless you understand the risks involved. You should only consider trading in Leveraged OTC Derivatives if you wish to speculate, especially on a very short-term basis, or you are wishing to hedge an exposure in your existing portfolio, and if you have extensive experience in trading, in particular during volatile markets, and can afford any losses;
- Prior to trading Leveraged OTC Derivatives, you need to ensure that you understand that these products are not suitable for ‘buy and hold’ trading. Leveraged OTC Derivatives can require constant monitoring over a short period of time (minutes/hours/days). Even maintaining an investment overnight exposes you to greater risk and additional cost. The volatility of the stock market and other financial markets, together with the extra leverage on your investment, can result in rapid changes to the Client’s overall investment position. Immediate action may be required for you to manage your exposure, or to post additional margin. You should only trade Leveraged OTC Derivatives if you have enough time to monitor their investments on a regular basis.
Appropriateness and Capital Loss
Trading and investing in crypto assets and leverage products such as Leveraged OTC Derivatives carry a high degree of risk to your capital and as a result, you might suffer significant losses.
Investments such as these are not appropriate for all investors, and you should ensure you understand all the risks and seek independent advice prior to entering into such transactions. Investors might lose more than they have invested. amana is under no obligation to assess the suitability of these products in relation to your particular circumstances.
The margin the Client needs to maintain as a deposit with amana is recalculated real time in accordance with changes in the value of the products the Client holds. If this recalculation produces a reduction in value compared with the valuation on the previous day, the Client will be required to pay amana immediately in order to restore the margin position and to cover loss. If the Client cannot make the payment, amana will close the client’s position whether or not they agree to this action. Clients will have to meet the loss, even if the prices of the underlying asset subsequently recover.
When using Leveraged OTC Derivatives, the Client is effectively entering into an OTC transaction; this implies that any position opened with amana cannot be closed with any other entity. OTC transactions may involve greater risk compared to transactions occurring on regulated markets, for example traditional exchanges; this is due to the fact that in OTC transactions there is no central counterparty and either party to the transaction bears certain credit risk (or risk of default).
Leverage (Or Gearing)
- Leveraged OTC Derivatives trading, unlike traditional trading, enables the Client to trade the markets by paying only a fraction of the total trade value. However, it should be noted that leverage, or gearing as it is often referred to, means that a relatively small market movement may lead to a proportionately much larger movement in the value of the client’s position. amana offers flexible leverage starting from 1:1. To understand more about leverage please reach out to amana customer service and one of our team members can answer any questions you may have.
- It should be noted that amana will monitor the leverage applied to Client’s positions, at all times; amana reserves the right to decrease the leverage depending on the Client’s trade volume.
The trading platform allows Clients to place a stop-loss order to each individual position of the Client which then that stop-loss is aimed at closing that position should the current price exceed or equal the stop-loss limit price. The closing out of the position at the limit price is not guaranteed and may be greater. This may occur when the underlying market in the Leveraged OTC Derivatives has become unusually volatile and the market moves past the price of the client’s stop loss order. Please keep this is mind as the markets tend to gaps through prices very often. A difference in your price filled versus the actual stop loss price is known as "slippage" and is a common factor of the markets.
Costs and Commissions
Depending on the Client, their trading requests, and the trades they enter into, the product traded, and how long he/she holds them for, amana may require the client to pay commission and/or holding costs. This is most common with professional clients, or active traders of US equities and or OTC derivatives. Commission will be incurred on entering certain trades and will be determined by reference to the size of the trade. In some cases, and particularly where the client keeps trades open for a long time using OTC derivatives, overnight financing costs will apply. The aggregate of these holding costs may exceed the amount of any profits or increase the client’s loss.
- Circumstances may occur which will affect the Clients ability to trade. amana’s ability to generate prices and execute orders is dependent on the availability of prices and liquidity in the centralized exchanges, with market makers/specialists and other venues from which amana gathers market liquidity. In addition, because amana maintains its own financial stability via it's active risk management hedging strategy with other counterparties, amana may be unable to execute client orders where it cannot enter into a corresponding trade to hedge its own risk. Market circumstances may impact on the Client’s ability to place an order or close a trade with amana. Financial markets may fluctuate rapidly which affects the prices on the platform. Movements in amana prices will have a direct real time effect on Client trades and accounts.
- There is also a technical risk that, for example, system errors and outages, maintenance periods and internet connectivity issues prevent you from accessing the platform and being able to execute orders.
- Crypto assets trade outside an exchange are not regulated, and are highly volatile. The utility of each Crypto asset are usually not transparent and require research and advanced understanding. Crypto assets are highly speculative and susceptible to market manipulation. The worst-case scenario could well be that the product could be rendered worthless. Clients should be aware of the distinction between indicative prices and ‘executable’ prices. Indicative quotes only give an indication of where the market is. Crypto markets are not only off exchange but are also decentralized, namely lack a single central exchange where all transactions are conducted, and as such each market maker may quote therefore different prices. As a result, any prices displayed might only reflect “indicative” prices and not necessarily actual “dealing” prices where trades can be executed.
- All services offered by amana on crypto assets are done via a derivative contract to keep them in a regulated environment. These derivatives may or may not have leverage associated with them. Please review the traded product ahead of buying or selling to determine if you are using leverage. The underlying crypto assets are not always traded in a regulated environment when Amana mitigates the risk of your transaction and as such those venues and are not governed by any specific regulatory framework. This means that there is no financial regulator, including a central bank, that can take any preventive measure to protect the value of the crypto assets should there be a crisis. The markets can become very illiquid very quickly and no bid/offer quotation might be available at all times. This said our clients will continue to enjoy the benefit from the rules relating to best execution when executing orders and client money and safekeeping of client assets only due to us structuring all our cryptos as an OTC derivative contract. Crypto asset trading is also susceptive outside of amana to being misused for illegal activities due to the anonymity of transactions and amana investors could be therefore adversely affected if law enforcement agencies were to investigate any alleged illicit activities which may or may not have an impact on liquidity and pricing of a variety of crypto assets.
- Therefore, crypto assets are an extremely high-risk asset class and investors should never invest funds that they cannot afford to lose.