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PRODUCT DISCLOSURE STATEMENT

 

AETOS Capital Group Pty Ltd

Updated on 30 October 2015

 

 

V20160112


 

Table of Contents

 

1.     Key information. 2

2.     What are we authorised to do?. 3

3.     Margin FX contracts. 3

4.     CFDs. 6

5.     Forced Liquidation and Margin Calls. 8

6.     Managing Risks. 10

7.     Conversion of currency. 12

8.     Significant benefits. 12

9.     Significant risks. 13

10.       The costs in using our products. 16

11.        How do the online trading platforms work?. 16

12.       How much money do you need to trade?. 17

13.       Terms &Conditions. 18

14.       Trading Facilities. 19

15.       Providing instructions by telephone. 19

16.       Tax implications. 19

17.       What are our different roles?. 19

18.       What should you do if you have a complaint?. 19

19.       Dictionary. 20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                                                                                               


Product Disclosure Statement

 

1.     Key information

AETOS Capital Group Pty Ltd (AETOS, us, we, our) ACN 125 113 117 is the issuer of the products described in this Product Disclosure Statement (PDS).  Should you have any queries about this document, please do not hesitate to contact us.

 

Our Contact Details

Issuer: AETOS Capital Group Pty Ltd ACN 125 113 117

Address: Level 15, 122 Arthur Street, North Sydney, NSW 2060, Australia

Website: www.aetoscg.com/au

Phone: +61 (2) 9929 2100

Fax:   +61 (2) 9929 2055

Australian Financial Services Licence number: 313016

Preparation date:12 January 2016, Version 20160112

 

Purpose:

This PDS explains what you need to know about the products we can offer you. It is designed to:

·         provide you with the information you need to determine whether the products we offer are appropriate for you needs;

·         explain the terms and conditions, rights and obligations associated with our products; and

·         help you to compare products.

 

Warning: Trading in margin contracts (including CFDs) involves the potential for profit as well as the risk of loss of which may vastly exceed the amount of your initial investment and is not suitable for all investors.  Movements in the price of the margin contract’s underlying asset (e.g. foreign exchange rates or commodity prices) are influenced by a variety of unpredictable factors of global origin.  Violent movements in the price of the underlying asset may occur in the market as a result of which you may be unable to settle adverse trades.  We are unable to guarantee a maximum loss that you may suffer from your trading.

 

Throughout this PDS, we will refer to ASIC benchmarks, like this:

ASIC Benchmark…

ASIC is the government regulator that issued our licence and that monitors financial markets in Australia.  It has set minimum benchmark standards that it expects businesses like us to comply with.  We have set out our compliance throughout this PDS. Here is a summary:

 

Benchmark

Description

Page Number

1.   Client Qualification

Benchmark 1 addresses our policy on investors’ qualification for CFD trading

4

2.   Opening Collateral

Benchmark 2 addresses our policy on the types of assets accepted from you as opening collateral.

4

3.   Counterparty Risk
Hedging

Benchmark 3 addresses our practices in hedging our risk from client positions and the quality of this hedging.

13

4.   Counterparty Risk
Financial Resources

Benchmark 4 addresses whether we hold sufficient liquid funds to withstand significant adverse market movements.

13

5.   Client Money

Benchmark 5 addresses our policy on our use of client money.

16

6.   Suspended or halted underlying assets

Benchmark 6 addresses our practices in relation to investor trading when trading in the underlying asset is suspended or halted.

14

7.   Margin Calls

Benchmark 7 addresses our practices in the event of client accounts entering margin call.

9

 

When you open an account with us, you will be provided with a separate document titled “Terms &Conditions”.  It contains terms and conditions that govern our relationship with you.  You can obtain a free copy of the document by contacting us or visiting the AETOS website www.aetoscg.com/au using the details at the start of this PDS.

 

 

2.     What are we authorised to do?

We are authorised to:

·         give you general financial product advice in relation to derivatives and foreign exchange contracts; 

·         deal in relation to those same products; and

·         “make a market” for foreign exchange and derivatives contracts. This allows us to quote market prices to you, including buy and sell prices. 

 

We will provide you with advice which is general in nature.  Whenever we give general advice (eg. through our website, or in this PDS), we don’t take into account your financial situation, personal objectives or needs. Before using the products referred to in this PDS you should read it carefully, and then consider your objectives, financial situation and needs and take all reasonable steps to fully understand the possible outcomes of trades and strategies that can be employed using our trading platforms.  We recommend you seek independent financial advice to ensure that a particular product is suited to your financial situation and requirements. There are two broad types of product that you can trade with us:

·         Margin Foreign Exchange (Margin FX);

·         CFDs over Underlying Instruments (including shares, indices, agricultural commodity, energy and metals).

 

 

3.     Margin FX contracts

Margin FX trading contracts are agreements between you and us which allow you to make a gain or loss, depending on the movement of underlying currencies.  The contract derives its value from underlying currencies (usually referred to as a Currency Pair) which is never delivered to you, and you do not have a legal right to, or ownership of it. Rather, your rights are attached to the contract itself.  The money you will receive will depend on whether the currency you choose moves in your favour. If it does, then you will make a gain and your account will be credited.  If it does not, then you will make a loss and your account will be debited.  The contracts only require a deposit which is much smaller than the contract size (this is why the contract is “margined” or “leveraged”).

 

This is how our Margin FX trading service works: 

 

Step 1:    First, you must set up a trading account with us.

 

ASIC Benchmark 1 – Client Qualification

Trading in CFDs is not suitable for many investors because of the significant risks involved.  Because of this, we include minimum qualification criteria in our account opening form, which prospective clients like you must satisfy before we will open an account for you.  We look at factors including your understanding of the products listed in this PDS, income and your previous experience before agreeing to open an account for you.  If you do not satisfy the qualification criteria then you are not able to open an account with us.

 

Step 2:       You then need to deposit an Initial Margin of a Base Currency into your newly established AETOS account before you start trading.  You will be required to deposit an Initial Margin which is a percentage of the notional contract amount (typically 1%).  Our online platform will tell you what amount you need to deposit before you make the deposit.  Because our platform typically requires trades to be placed in USD, you will need to convert your Australian dollars or other currencies into the required foreign currency through your bank and deposit the money into your AETOS trading account.  The bank will charge you for this service. 

 

Example

We may request you to deposit USD 1,000 for a USD contract with a notional amount of USD 100,000.  In this example, USD 1,000 is your Initial Margin.

 

ASIC Benchmark 2 – Opening Collateral

We only accept deposits via wire transfer from your account, into our accounts, or via credit card.  You can only deposit up to USD 1,000 equivalent when opening an account with your credit card.  The reason for this limit is that by using your credit card, you may be exposed to “double leverage”.  This means that you are borrowing from your credit card provider (and possibly paying interest), which is a type of leverage.  You are also buying one of our products, all of which have inbuilt gearing, so it is a second form of leverage.  Opening collateral is referred to in this PDS as Initial Margin.

 

Step 3:       You are now ready to trade. When you log in to the AETOS online platform, you will see prices which reflect different currencies.  Currencies are traded in pairs.

 

Example

An example of a Currency Pair is EUR/USD.  EUR/USD 1.31591 means that one euro is exchanged for 1.31591 US dollars.  The currency on the left of a pair is the Base Currency.

 

You can buy or sell a Margin FX contract.  If you buy or sell as your first transaction, you are opening your position.  When you buy, you buy at the “ask” price, and when you sell, you sell at the “bid” price.

 

Example

If the EUR/USD Currency Pair is quoted at 1.31571/ 1.31591, then this is showing the bid/ask price.  To buy (ask), you would pay 1.31591 x contract size.  To sell (bid), you would receive 1.31571 x contract size.  The difference between the two prices is 0.0002 which, in this example, is the Spread.

 

Each contract’s size can be any amount equal to 1,000 or in multiples of 1,000 of a particular trading currency.

 

Remember: what you are actually buying is a contract – not the currency itself.  In the event that our online trading platform is unable to process trades, you can trade with us over the phone where our dealer will provide you with the Spot Rate of exchange.

 

Step 4:       You then choose when to sell or buy in order to close your position.  To close your position you need to do what you did under Step 3 above, with the intention of closing the trade.

 

Step 5:       The profit or loss resulting from the trade will be credited or debited to your account.

We have trading rules (including “Forced Liquidation” which is explained at page 10, and an Initial Margin requirement which is explained above) to help you limit any losses. The trading rules also help reduce (but not avoid) the risk that you will lose more than your deposited funds (see the section titled “significant risks” at page 15). We usually offer settlement of trades on a T+2 basis. This is a global standard which refers to the trade date, plus two Business Days. What constitutes a Business Day depends on what Currency Pair you are trading.  See “Business Day” in the glossary for more information.  This means that your account will be credited or debited within 2 Business Days after you close your position.

 

Example

You think that the EUR will appreciate against the USD in the near future. You see that the prices quoted on the EUR/USD Currency Pair by AETOS is 1.31571/ 1.31591.  The “ask” price is the buy price, so you buy a contract of EUR/USD, at our minimum lot size, which is 100,000.  You want to sell it later at a higher price.

 

Opening the position

 

Buy 100,000 at ask price:

1 x 100,000 x 1.31591= 131,591 USD (contract value)

The contract is leveraged on a 1:200 ratio.  That means that we require an Initial Margin to be deposited into our account, which is 0.5% of the contract value.

131,591 x 0.005 = 657.96 USD (Initial Margin)

 

We earn a Spread on the bid and ask prices we quote to you.  In this example, the difference is 0.0002 (known as two “pips”), which amounts to 20 USD.  It is built in to the price when you clicked “buy” and again when you click “sell”.

(1.31591-1.31571) x 100,000 = 20 USD

Rollover Interest

 

When a position is held open overnight, you are paid or debited interest. Swaps (Rollovers) are calculated on a weekly basis and can be found at www.aetoscg.com/au.

Example:

If rollover rate of buying EUR/USD is 0.77%, you buy 1 lot of EUR/USD, 

Rollover interest = (trading volume x contract size x buy swap rate x current pair price) / 360

 

(1 x 100 000 x (-0.77%) x 1.31571) / 360= -2.81 USD.

Closing the position

 

The next day the price of EUR/USD has increased by 10 pips to 1.31671 (bid) / 1.31691 (ask).  The trade has moved in your favour and you decide to take your profit and close the position by selling at the bid price.

1 x 1.31671 x 100,000 = 131,671 USD

Your gross profit is the difference between the opening position and the closing position.

131,671 – 131,591 = 80,00 USD

Your net profit is the gross profit less the costs. The Spread was built in to the price, and includes 20 USD in this example.

80 - 2.81 = 77.19 USD

 

Summary: In the above example, you had to deposit 657.96 USD to cover your Initial Margin requirement, and you have made a total gain of USD 77.69. In that example, if the price had decreased by 10 pips instead of increasing, you would have made a loss of 122.81 USD.

Note: More detailed explanations are set out under the heading “The costs in using our products” below

 

 

4.     CFDs

When trading CFDs, you and AETOSagree to exchange the difference in value of the CFD between when the CFD is opened and when it is closed. You will either be entitled to be paid an amount of money (if the value of the CFD has moved in your favour) or will be required to pay an amount of money (if the value of the CFD has moved in our favour).

You can keep a CFD trade open for as long as you are able to meet your margin requirements. CFD transactions are closed by making a closing trade. We may, upon your request and subject to a fee, agree to implement a stop loss order or limit order in respect of a CFD trade. Compliance with any such order is subject to prevailing market conditions. See section 6 of this PDS for a description of these features.

 

We offer CFD contracts over the following Underlying Instruments:

·         Precious Metals

·         Shares

·         Indices

·         Energy/Agricultural Commodity

The Underlying Instruments are discussed in more detail below.

In the same way as described in section 3, above, we do not deliver the physical underlying assets (ie. gold or silver) to you, and you have no legal right to it. Rather, settlement is made by cash based on the difference between the buy and sell rates of the contracts.

 

Precious Metals

Metal trading operates in the same manner as foreign exchange trading, except the underlying asset is Loco London Gold (LLG),Loco London Silver (LLS), Copper, Platinum or Palladium, all of which have prices quoted in US currency.

 

When using our services, you can trade on the quoted Spot Rate for Gold (LLG), Silver (LLS), High Grade Copper, Platinum and Palladium contracts.  The examples below show a winning Gold CFD trade, and a losing Gold CFD trade.  Although there are no examples showing Silver and other Precious Metal CFD trades, the mechanics are the same, except the quoted prices relate to the prices of the other Precious Metal, not gold.

 

Example

You believe that the price of gold is undervalued and you decide to enter into a CFD in respect of gold in the expectation that the gold price will rise.  Our online platform is showing the price of gold (GOLD) as being USD 1,621.85 (bid) / 1,622.35 (ask). Our minimum lot size is 100 ounces and you buy 1 lot.

 

Opening the position

 

You "buy" a CFD in respect of 100 ounces of gold at the ask price:

1 x 1,622.35 x 100 = 162,235 USD

The contract requires Initial Margin at 1% of the contract value.

162,235 х 0,01 = 1,622.35 USD

 

We earn a Spread on the difference between the bid and ask prices we quote to you. In this example, the Spread is $0.50, which amounts to $50 USD.  It is built in to the price when you clicked “buy” and again when you click “sell”

(1,621.85 – 1,622.35) x 100 ounces = 50 USD

Rollover Interest

 

When a position is held open overnight, you are paid or debited interest.  In this example, assume the overnight financing cost is 5.9 USD

1 lot х 5.9 = 5.9 USD

Closing the position

 

The next day the price of Gold has increased by $10 USD to 1,631.85 (bid)/1,632.35(ask). The trade has moved in your favour and you decide to close your position.

1 x 1,631.85 x 100 = 163,185

Your total gross gain is the sell price less the buy price.

163,185 – 162,235 = 950.00 USD

Your total net gain is the gross gain less the costs.  The Spread was built in to the price, and includes 50 USD in this example. 

950 - 5.9 = 944.1 USD

 

Summary: In the above example, you deposited 1622.35 USD as your Initial Margin on this trade and made a profit of 944.1 USD.  If the price had not increased by USD 10 dollars but had instead dropped by 10 dollars you would have sustained a loss of 1,055.90 USD assuming the interest rate is 5.9 USD per 1 lot. 

In the case of decreasing by 10 USD you would have your position closed at 1,611.85.

1,611.85 USD х 100 ounces – 1,622.35 USD х 100 ounces - 5.9 USD = -1,055.90 USD.

Note: More detailed explanations are set out under the heading "The Costs in Using Our Products" below

 

 

5.     Forced Liquidation and Margin Calls

If the Margin Level in your account drops below a predetermined level set by us (e.g. 50% or 80%* of an Initial Margin or 0.5% of the notional contract amount) or if we exercise our discretion, then we are entitled to close out your position at the prevailing market rate without notice to you. We could do this in order to minimise trading risk and deduct the resulting realised loss from your remaining funds held by us. You will remain liable for any negative positions which cannot be covered by the closing out of your positions.

* Minimum margin level is 50% for Standard and Mini Account, 80% for Professional Account and Institutional Account

 

Example

You think that the EUR will depreciate against the USD in the near future. You see that the prices quoted on the EUR/USD Currency Pair by AETOS is 1.31571/ 1.31591. The “bid” price is the sell price, so you sell a contract of EUR/USD, at our minimum lot size, which is 100,000. You want to buy it later at a lower price, in order to close your position.

 

Opening the position

 

Sell 100,000 at bid price:

1 x 100,000 x 1.31571= 131,571 USD

The contract is leveraged on a 1:200 ratio.  That means that we require an Initial Margin from you to be deposited into our account, which is 0.5% of the contract value.

131,571 x 0.005 = 657.86 USD (Initial Margin)

 

We earn a Spread on the difference between the bid and ask prices we quote to you.  In this example, the Spread is 0.0002 (known as two “pips”), which amounts to $20 USD.  It is built in to the price when you clicked “sell” and again when you click “buy”.

 

(1.31591-1.31571) x 100,000 = 20 USD

Rollover Interest

 

When a Margin FX or CFD over Precious Metals position is held open overnight (such as in this example), you are paid or debited interest. 

Example:

If rollover rate of selling EUR/USD is 0.73%, you sell 1 lot of EUR/USD, 

Rollover interest = (trading volume x contract size x buy swap rate x current pair price) / 360

 

(1 x 100 000 x (-0.73 %) x 1.31571) / 360 = -2.66 USD.

 

Closing the position

 

The next day the price of EUR/USD has increased by 31 points to 1.31881 (bid) / 1.31901 (ask).  The trade has moved against you,your Margin Level has dropped below 50% and reached Forced Liquidation level. AETOS forces the closing of your position to limit the trading risk. 

1 x 1.31901 x 100,000 = 131,901 USD

Your total loss is the gross loss less the costs.  The Spread was built in to the price, and includes 20 USD in this example.

(131,571 – 131,901) – 2.66 = -332.66 USD

 

Summary: In the above example, you deposited 658USD to cover your Initial Margin requirement, and when you had a floating loss of 332.66 USD the Margin Level dropped to below 50% and reached the Forced Liquidation level.

Note: More detailed explanations are set out under the heading “The Costs in using our products” below. Forced Liquidation will operate in the same way if the Underlying Instrument was commodities, indices etc.

 

In addition to Forced Liquidation, we may margin call your position while a trade is open. However, we do not guarantee that we will call you for this.  See the section below titled “Margin Calls” for more detail.

 

Margin Calls

 

ASIC Benchmark 7– Margin Calls

This section sets out our policy on margin calls.

 

Accounts with Margin Level close to the Margin Call Level are displayed in the corresponding window of your trading software and are monitored by AETOS at all times.

 

If the Margin Level in your account drops below a predetermined level set by us (e.g. below 100%) or if we exercise our absolute discretion, then we are entitled to request a further deposit from you immediately, or we will close out your position at the prevailing market rate without further notice to you. We could do this in order to minimise trading risk and deduct the resulting realised loss from your remaining funds held by us. You will remain liable for any negative positions which cannot be covered by the closing out of your positions.

 

Where AETOS effects or arranges a transaction involving a CFD or Margin FX contract, you should note that, depending upon the nature of the transaction, you may be liable to make further payments when the transaction fails to be completed or upon the earlier settlement or closing out of your transaction. You will be required to make further variable payments by way of margin against the purchase price of the financial instrument, instead of paying (or receiving) the whole purchase (or sale) price immediately. The movement in the market price of your investment will affect the amount of margin payment you will be required to make.

 

You will have access to the trading platform where you can monitor Margin Call Levels. You agree to pay AETOS on demand such sums by way of margin as are required from time to as AETOS may, at its sole discretion, reasonably require for the purpose of protecting itself against loss or risk of loss on present, future or contemplated transactions under the Terms &Conditions. You must note that if at any time equity (current balance including open positions) is equal to or less than a level of the margin (collateral) occupied by open positions as set out on the AETOS’s website, AETOS is entitled at its sole discretion to close one or all open positions in order to meet the margin requirements. Levels at which positions start to close are set out in our Terms &Conditions on our website at: www.aetoscg.com/au

 

Example:

Opening the position

 

Sell 100,000 EUR/USD at bid price:

 

A Standard Account with 1:200 leverage.When opening 1 lot of EUR/USD position, the required margin is 500 USD.

Required margin: 500 USD

Margin call

 

If your total equity falls below 100% of the required margin, we will execute a Margin Call.

Margin Call Level: 500USD x 100%= 500 USD.

Let say your total equity in your account is USD1,200. Then your equity will need to drop to 500 USD before aMargin Call would be made.

1200 USD – 700 USD = 500 USD

Once you reach the Margin Level, we will inform you. (this is not guaranteed)

 

 

As noted on page 2 of this PDS, trading in Margin FX and CFDs involves the risk of losing substantially more than your initial investment.

 

 

6.      Managing Risks

We offer features on our trading platforms that help you control trading losses.

Stop Loss

Stop loss is an order placed to close an open position when it reaches a certain unfavourable price. A stop-loss order is designed to limit your loss on a position.

Example: You have a long position of EUR/USD with the open price of 1.54921. You set a stop loss for this position, the stop loss price of which is 1.54821. If the price of EUR/USD drops to 1.54821 or below, the stop-loss order will be triggered and the position will be closed automatically at the market price.

 

Buy Limit

Buy limit is a trade request to buy at the Ask price that is equal to or lower than the market price. The current price level is higher than the value in the order. Usually this order is placed in anticipation of a price drop followed by a rebound.

Example: The market price of EUR/USD (Ask price) is 1.54921 and you place a 20-pip buy limit level at 1.54721. If the EUR/USD falls to 1.54721 or below, the order will be executed and you will take a long position of EUR/USD at market price, after which you would make a gain if the market price rebounds and make a loss if the market price continues to go down.

 

Sell Limit

Sell limit is a trade request to sell at the Bid price that is equal to or higher than the market price. The current price level is lower than the value in the order. Usually this order is placed in anticipation of a price rise followed by a fall back.

Example The market price of EUR/USD (Bid price) is 1.54921 and you place a 20-pip sell limit level at 1.55121. If the EUR/USD goes up to 1.55121 or above, the order will be executed and you will take a short position of EUR/USD at market price, after which you would make a gain if the market price fall back and make a loss if the market price continues to go up.

 

Buy Stop

Buy stop is a trade request to buy at the Ask price that is equal to or higher than the market price. The current price level is lower than the value in the order. Usually this order is placed in anticipation of a continuous price rise.

Example: The market price of EUR/USD (Ask price) is at 1.54921 and you place a 20-pip buy stop level at 1.55121. If the EUR/USD goes up to 1.55121 or above, the order will be executed and you will take a long position of EUR/USD at market price, after which you would make a gain if the market price continue to rise and make a loss if the market price falls back.

 

Sell Stop

Sell stop is a trade request to sell at the Bid price that is equal to or lower than the market price. The current price level is higher than the value in the order. Usually this order is placed in anticipation of a continuous price fall.

Example: The market price of EUR/USD (Ask price) is at 1.55121 and you place a 20-pip buy stop level at 1.54921. If the EUR/USD goes up to 1.54921 or below, the order will be executed and you will take a short position of EUR/USD at market price, after which you would make a gain if the market price continue to fall and make a loss if the market price rebounds.

 

Trailing Stop

Trailing Stop is a method to move a Stop Loss level automatically.

Example: You are having a long position of EUR/USD at the price of 1.54921, you set a 30-pip trailing stop. The stop price is 1.54621. The EUR/USD then rises by 35 pips to 1.55271, your stop price will automatically move up to 1.54971, locking in your profits. The stop will continue to rise if the EUR/USD rises. If the EUR/USD falls, the stop will remain at 1.54971. If the EUR/USD falls to 1.54971, your stop will be executed and your position will be closed.

Usually this order is placed to lock in the trading profits.

 

 

7.     Conversion of currency

Your trading account with us is normally denominated in a Base Currency. In order to trade, you may need to convert existing funds into USD or another Base Currency. For example, you can only buy or sell a Gold or Silver CFD with us using USD. If you deposit Australian dollars into your account, you will be required to convert it to USD before trading one of those CFD products.

 

You can use your own bank to convert your currency into USD, if you wish. However, AETOS cannot convert your funds.

 

We will convert the realised trading profit or loss in your account into USD or another Base Currency at the closing price of the relevant currency immediately preceding the trade day.

 

 

8.     Significant benefits

The significant benefits of using our services are:

 

·         Hedging

You can use our trading facilities to hedge your exposures to the Underlying Instruments.  Any profit (or loss) you make using our trading facilities would be offset against the higher (or lower) price you physically have to pay for the currency, index, commodity or other asset at the future date.

 

·         Speculation

In addition to using our trading facilities as a hedging tool, you can benefit by using the quoted underlying currency or CFD prices offered by us to speculate on changing price movements. Speculators seek to make a profit by attempting to predict market moves and buying a contract that derives its value from the movement of an underlying currency or commodity for which they have no practical use. The examples of foreign exchange dealing and Gold CFDs above illustrate trades where a client is entering into a speculative trade, based upon a belief that the market will move in a particular direction.

 

·         Access to the foreign exchange markets at any time

When using our online trading platforms you gain access to and trade on, systems which are constantly updated in real time. If for some reason our systems are unavailable, you can contact us by telephone using our contact details at the top of this PDS, and make telephone orders.

 

·         Real time streaming quotes

Our online trading platforms provide real time quotes. You may check your accounts and positions in real time and you may enter into currency and CFD trades based on real-time information.

 

·         Control over your account and positions

When using our trading facilities we allow you to place stop loss limits on your trades. This means that if the market moves against you we will close out your position in accordance with your stop loss order. However, please refer to the risk factors set out below, which highlight the risk to you that in a volatile market we may not be able to close out your position until after the stop loss limit is exceeded. If this occurs you may lose more than you deposited.

 

9.     Significant risks

There are a number of risks in trading Margin FX and CFDs. These risks may lead to unfavourable financial outcomes for you. Monitoring of any risks associated with our trading facilities is your responsibility.  You should seek independent legal, financial and taxation advice prior to commencing trading activities and you should not use our services unless you fully understand the products, and the benefits and risks associated with them. Some of the risks associated with using our Margin FX and CFD trading facilities include:

 

·         Unforeseen Circumstances

If we are unable to perform our obligations to you due to reasons beyond our control then we may suspend our obligations to you. For example, during periods of significant market disturbance it may be impractical or impossible to trade in relevant financial markets. We will inform you if any of these events occur.

 

·         Market volatility:

Foreign exchange and commodity markets are subject to many influences which may result in rapid fluctuations. Because of this market volatility, there is no Margin FX or CFD transaction or stop loss order which is available via our online platform that can be considered “risk free”.

 

Given the potential levels of volatility in foreign exchange markets, it is recommended that you closely monitor your transactions at all times. You can manage some of the downside risk by the use of stop loss orders.  If you use a stop loss order we will close your position if the Underlying Instrument reaches a level specified by you in advance. However, in a volatile market, there may be a substantial time lag between order placement and execution. This can mean that the entry or exit price may be significantly lower or higher than the price at which the sell (or buy) order (including a stop loss order) was placed. This is known as “gapping”, and we do not guarantee that the stop loss order will be successful in limiting your downside risk, which may be greater than you initially anticipated.

 

·         Leverage risk

Trading Margin FX and CFDs involves a high degree of leverage. You can outlay a relatively small Initial Margin which secures a significantly larger exposure to an Underlying Instrument.  The use of products like this magnifies the size of your trade, so your potential gain and your potential loss is equally magnified.  You should closely monitor all of your open positions.  If the market moves against you and your Initial Margin deposit is diminished, we may automatically close out your position once pre-set limits are triggered (refer to the example of Forced Liquidation).  Any remaining balance will be returned to you.

 

Using credit cards to invest in CFDs trading will pose double leverage risk to you.  This means that you use the funds, which you borrowed from a bank, to invest in a leveraged financial product (e.g. CFD products).  You may lose your capability of paying your credit cards if you lose in your investment.

 

·         Counterparty risk

Because you are dealing with us as a counterparty to every transaction, you will have an exposure to us in relation to each transaction.  In all cases, you are reliant on our ability to meet our obligations to you under the terms of each transaction.  This risk is sometimes described as counterparty risk.

 

The products in this PDS are not protected by a licensed exchange, also known as a central counterparty.  Instead, the products are called "over-the-counter" derivatives. This means that you contact directly with us, and you are subject to our credit risk. If our business becomes insolvent we may be unable to meet our obligations to you.  You can assess our financial ability to meet these counterparty obligations to you by reviewing financial information about our company. You can obtain a free copy of our financial statements by contacting us by using the details at the start of this PDS.

 

We may choose to limit our exposure to our clients by entering into opposite transactions with hedging counterparties as principal in the wholesale market. However, there is also a risk that a hedging counterparty (which may include one of AETOS’ related entities) that we deal with may become insolvent.  Where this occurs, we may become an unsecured creditor of the hedging counterparty.

 

ASIC Benchmark 3 & 4 – Counterparty Risk

We have a policy which includes carefully selecting hedging counterparties. One factor in selecting them is whether the hedging counterparty is of sufficient financial standing. One of our primary hedging counterparties is our holding company, AETOSCapital Group Holdings Limited which is registered in the Cayman Islands.It, in turn has third party liquidity providers including:

·             AxiCorp Financial Services Pty Ltd, registered in Australia, AFSL number 318232.

·             Capital Markets Services UK Ltd, registered in UK, FCA registration number 488900.

 

We can provide a written hedging policy to clients and prospective clients upon request. You can request a copy of these statements at no charge via email or obtain it through our website at www.aetoscg.com/au.This policy is updated regularly.

 

We have a written policy to maintain adequate financial resources, which sets out how we monitor compliance with our financial requirements, as well as how we conduct stress testing to ensure we hold sufficient liquid funds to withstand significant adverse market movements.

 

You can obtain a summary of our latest financial statements by contacting us on the details at the start of this PDS.

 

·         Systems Risks

We rely on technology to provide our trading facilities to you. A disruption to the facility may mean you are unable to trade when you want to.  Alternatively, an existing transaction may be aborted as a result of a technology failure. An example of disruption includes the “crash” of the computer systems used to operate the online facility.  We manage this risk by having advanced IT systems and backup measures.

 

·         Fees and charges

It is possible that you enter into a trade with us and the price of the Underlying Instrument moves in your intended direction, but you still end up with less than you started after closing your position.  This can happen because of the combined effect of the Spread between bid and ask prices, and the negative rollover interest which could apply on consecutive days that a contract is held open. 

 

·         Use and access to our website

You are responsible for providing and maintaining the means by which you access our website. These may include, without limitation, a personal computer, smart phone, tablet, modem and telephone or other access system available to you.

 

While the internet is generally reliable, technical problems or other conditions may delay or prevent you from accessing our website. If you are unable to access the internet and thus, our online facility, it may mean you are unable to enter into asset transactions when desired and you may suffer a loss as a result. We are not responsible for any loss which you sustain as a result of being unable to access the internet.

 

·         Suspension or trading halt of the Underlying Instrument

 

ASIC Benchmark 6 – Suspended or halted underlying assets

In the event of trading in an Underlying Instrument being suspended, we have discretion to re-price open positions, close out positions, or change the margin requirements on a position.  We would widen the Spread if there was an increased risk of illiquidity in the market in which the Underlying Instrument is traded.

 

·         Latency and price feed risk

Internet connectivity delays and price feed errors sometimes create a situation where the prices displayed on our trading screen do not accurately reflect market rates. We are not responsible for any loss which you sustain as a result, and we may take action to recover any loss sustained by us as a result, including repairing, reversing, opening, and/or rolling over new or existing positions.

 

·         Third party trading 

Third party trading can be risky. Third party trading services are often called “money managers”, “expert advisers” or “mirror trading plugins”. They may enable your account to mirror trades made by third party asset managers. They may claim to exploit price latency across platforms or markets. They may promise exceptional returns. Our platforms may allow you to plug in or otherwise connect to third parties which are licenced by ASIC.  Some providers of third party plugins may charge you fees, and others do not.  Regardless of our approval, we are not responsible for, and will not indemnify you for loss which arises out of your reliance on any statements made by their makers or promoters, or any loss incurred in connection with third party plugins that you use. 

 

Key risks when using third party trades or software include:

You can lose control of your trades and suffer financial loss. 

Any software may stop working and you are stuck with open positions and you suffer financial loss.

You can lose more money than your initial deposit. 

It may result in you being margin called (see section 7of this PDS titled “Margin Calls”) and your positions may be liquidated.

Some are offered by fraudulent or illegal / underground entities in remote parts of the world.

Some create or are otherwise affected by price latency which may result in significant losses on your account due to inaccurate pricing. 

 

If promoters of these plugins or trading services make promises that are too good to be true, then you should avoid them.You should never provide your account user name or password to a third party without our express consent – to do so would be a breach of the Terms &Conditions.  You are wholly responsible for managing the risks (including the risk of loss) associated with using third parties.

 

 

10.  The costs in using our products

Please refer to our current FSG for a description of how AETOS, its employees and related parties are paid, and for information about the costs, fees and commissions that may be payable in relation to the products described in this PDS.  You can find this information (with worked examples) in the current FSG which is available on our website.  You can download or obtain a free hard copy of the FSG by contacting us using the details at the start of this PDS.

 

 

11.  How do the online trading platforms work?

See the heading “Margin FX contracts” above for a detailed explanation and example of how our trading platform works. To make a trade using our online trading platforms:

 

·         You must first register with us by filling out the registration form from our website www.aetoscg.com/au by providing requested client information and setting an AETOS online user name and password. The password you set during registration is also the trading password for your online trading account.

 

·         Secondly, you must fill out the AETOS account opening form which was either provided to you at the same time as this PDS, or can be located at www.aetoscg.com/au. A pre-condition to your successful registration is an acknowledgement by you that you have read this PDS, the FSG and that you have read and agreed to be bound by our Terms &Conditions. Another pre-condition is that you meet our client qualification criteria, which is explained in section 3 of this PDS in more detail. There may also be other terms and conditions that you will need to agree to, if you are outside of Australia.

 

·         Once your trading account is successfully opened, you will receive the trading account number through the email you registered at the AETOS website. The trading password is set by you when you register online

 

·         You can download the AETOS online trading platform (Meta Trader 4, 'MT4') software from our website www.aetoscg.com/au. You can then use your trading account number and password to login after installation.

 

·         Once logged in, a number of windows will pop up in the platform. In order to place a trade, you first select a foreign exchange Currency Pair, energy / agricultural commodity, share, index or metal from the Market Watchwindow. For example, you can choose the Currency Pair of EUR/USD. Once you have selected a Currency Pair, energy / agricultural commodity, share, index or metal, you need to select the amount you wish to invest by buying/selling the intended number of contracts.

 

·         Once the trade has been executed, the particulars of that trade will be communicated to you electronically via the trading platform or by email. You can transfer money into or out of your account, subject to our Terms &Conditions, which are set out on our website at www.aetoscg.com/au.

 

 

 

12.  How much money do you need to trade?

Before you can trade, you need to deposit with us an Initial Margin. 

 

·         This is typically 1% of the contract amount in the case of Margin FX.  However, we will tell you what Initial Margin is required before you trade. We may vary the Initial Margin at our own discretion.

 

Example: You need to deposit USD 100 for a contract with a notional value of USD 10 000.

 

·         There is no typical percentage of the contract amount in the case of CFDs. Each CFD has its fixed Initial Margin. You may learn more about actual Initial Margins of CFDs at www.aetoscg.com/au. We may vary the Initial Margin at our own discretion.

 

Example: You need to deposit 1000 USD for a CFD with a notional volume of 100 troy ounces (GOLD).

 

How do we handle your money?

The funds in your account will be held in a designated account (also known as a trust account). Funds deposited by our clients are segregated from our money and held in a designated account in accordance with Australian law.

ASIC Benchmark 5 – Client Money

This section explains our client money policy, including how we deal with your money and when we make withdrawals from your account.  It also mentions the counterparty risk associated with the use of your money

 

By using our services, you relinquish the right to any interest on funds deposited in our designated client accounts.  Individual client accounts are not separated from each other but are pooled together.  The pooled money is held on trust for you until you withdraw money, use the money to place a trade, or otherwise provide us with a legal right to that money because of outstanding fees owed to us or in such other circumstances as referred to in our Terms & Conditions, which are set out on our website at www.aetoscg.com/au.

 

Example

If you close a position and incur a loss, your account balance will be debited instantly.

 

Example

If you hold a position overnight (ie. holding a position from 21:59:59GMT onwards (20:59:59 GMT during US Day Light Saving), and you are charged rollover interest, then that money is deducted from your account balance instantly

 

Counterparty risk

There is also a counterparty risk that you may lose some or all of your money if there is a deficiency in the designated segregated account. See the section above titled “Significant Risks” for more information concerning counterparty risk.

 

We may use client money to hedge your transactions. Once you open a position, we may immediately transfer any amount of your account balance to our hedging counterparty which may be a related party (like our holding company) or a wholesale liquidity provider, and it will not be held in a designated client account.  This means your money would not be fully protected by the client money provisions in the Corporations Act, and you would rank as an unsecured creditor if we, or our related entities or wholesale liquidity providers, were to become insolvent and were wound up.

 

 

13.  Terms &Conditions

Our Terms &Conditions, are set out on our website www.aetoscg.com/au and must be read and agreed to before a contract is entered into. If you are outside Australia, there may be other terms and conditions you will be required to sign or acknowledge.

 

When you use our services you will be bound to our Terms & Conditions as amended from time to time, along with any other terms you are required to sign or acknowledge (for example, if you are outside of Australia).  However, in the event of inconsistency, the terms in the legal documents described below will rank according to the following priority, to the extent of any inconsistency:

 

·         This PDS

·         Our Terms &Conditions

·         Account Opening Form

 

The information in this PDS is subject to change from time to time and is up to date as at the date stated at the start of this PDS.

 

Information in this PDS that is not materially adverse to users of our products is subject to change and may be updated via our website www.aetoscg.com/au. You can access that information by visiting the website, or telephoning us and asking for an electronic or paper copy. You can also access the website which may contain, from time to time, other information about our products.

 

There is no cooling off period for any product offered by us.

 

You must provide all information to us which we reasonably require of you to comply with any law in Australia or any other country. In particular, you must provide us with satisfactory identification before you can use our products or services. We may delay, block or refuse to enter, adjust or complete a transaction if we believe on reasonable grounds that making the payment may breach any law in Australia or any other country, and we will incur no liability if it does so.  We may disclose any information that you provide to a relevant authority where we are required to do so by any law in Australia or any other country.

 

Unless you have disclosed to us that you are acting in trustee capacity or on behalf of another party, you warrant that you are acting on your own behalf when obtaining services from us.

 

When you use our services, you are promising that you will not breach any law in Australia or any other country.

 

We reserve the right to suspend the operation of our website and online facility or any part or sections of them.  In such an event, we may, at our sole discretion (with or without notice), close out your open positions at prices we consider fair and reasonable.

 

We may impose volume limits on client accounts, at our sole discretion.

 

 

14.          Trading Facilities

We are able to provide Margin FX and CFD trading facilities through our online trading platform.  Dealers in our trading room will also accept orders in the event of the online trading platform being unable to take orders.

Our online trading platform is an internet based tool for you to trade.

 

 

15.  Providing instructions by telephone

We only offer telephone services if our online platform is unavailable for some reason.  When providing instructions by telephone, you will need to provide us with adequate identification information.

 

 

16.  Tax implications

Trading margin contracts can create tax implications.  Generally, if you make a gain attributable to an exchange rate or price fluctuation then that part of the gain is included in your assessable income.  Conversely, if you make a loss attributable to an exchange rate or price fluctuation then that part of the loss is deducted from your assessable income.  However, the taxation laws are complex and vary depending on your personal circumstance and the purpose of your currency trading.  Accordingly, you should discuss any taxation questions you may have with your tax adviser before using our products or services.

 

 

17.  What are our different roles?

AETOS is the product issuer. This means that we issue the products described in this document, and do not act on behalf of anyone else.

 

AETOS is also the service provider. Our website (and at times, our Representatives) can give you general advice only and help you use the trading services.

 

 

18.  What should you do if you have a complaint?

In the event you have a complaint about us, you can contact us and discuss your complaint. If you are overseas, we may refer you to an overseas dispute resolution body, which gives you rights in addition to your rights in Australia.

 

If your complaint is not satisfactorily resolved within 6 weeks, please contact us by telephone or in writing, using the contact details at the beginning of this PDS

 

We will try and resolve your complaint quickly, fairly and within prescribed time frames.

 

If the complaint cannot be resolved to your satisfaction you have the right to refer the matter to the Financial Ombudsman Service (FOS) which is an external complaints service, of which AETOS is a member (FOS Member ID: 29539).

 

You can contact the FOS on 1300 780 808 (if in Australia) or +613 9613 7366 (if outside Australia) or in writing at GPO Box 3, Melbourne, Victoria 3001, Australia. You can also contact the FOS through their website: www.fos.org.au.

 

19.  Dictionary

·         ASIC refers to the Australian Securities and Investments Commission.

·         Base Currency refers to the currency in which your trading account is denominated, and also refers to the currency on the left of a quoted trading pair.  Any profit or loss on a trade is converted into the Base Currency.   See Step 3 of Section 4 of this PDS for an example.

·         Business Day refers to any day other than a Saturday or a Sunday, or the 25th of December, or the 1st of January(including dealings in foreign exchange) in the two host countries of the relevant Currency Pair, or in the case of CFDs in the host country of the relevant Underlying Instrument.

·         Contract for Difference (CFD) is a leveraged financial instrument that changes in value by reference to fluctuations in the price of an Underlying Instrument such as the price of gold or silver.

·         Currency Pair refers to the value of one named currency relative to another named currency.

·         EUR refers to the euro – the official currency of the European Union.

·         Forced Liquidation is described in Section 4 of this PDS.

·         FSG refers to the Financial Services Guide issued by us.

·         FX means Foreign Exchange

·         Initial Margin is the initial deposit required by you before you can trade with us. See Step 2 in Section 4 of this PDS.

·         Loco London Gold and Silver refers to the place at which gold is physically held and to which a particular price applies. Loco London Gold means not only that the gold is held in London but also that the price quoted is for delivery there.

·         Margin Call Level is the percentage Margin Level at which a Margin Call will be made.

·         Margin Level refers to the equity or balance of funds in your account and is calculated as a percentage by dividing your account equity by your used margin.

·         PDS means this Product Disclosure Statement

·         Precious Metals refers to gold, silver, copper, platinum or palladium

·         Representative includes a director or employee of AETOS, and a director or employee any company related to AETOS, as well as any other entity that is appointed as an authorised representative of AETOS.

·         Spot Rate refers to the price that a Currency Pair or commodity is quoted at, for an immediate “on the spot” transaction. All prices quoted by us are quoted using the Spot Rate.

·         Spread is the difference between bid and ask prices for a particular Underlying Instrument.  The amount of the Spread is described in our FSG under the heading “What fees and commissions are payable to us?” which forms part of this PDS and is available on our website www.aetoscg.com/au.

·         Terms &Conditions refers to the terms and conditions that you are required to agree to before you can use the products described in this PDS. They are available on our website www.aetoscg.com/au, and are incorporated by reference into the PDS.  You can obtain another free copy of this document by contacting us using the details at the start of this PDS.

·         Underlying Instrument means a Currency Pair, shares, indices and Precious Metals.

·         USD refers to the United States dollar.