Product Disclosure Statement

Transcription

1 CFDs Product Disclosure Statement Index and Commodity CFDs 23 May 2011

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3 IMPORTANT NOTICES / DISCLAIMERS This is a Product Disclosure Statement (PDS) prepared by MF Global Australia Limited (MFGA). The date of this PDS is 23 May This PDS relates to contracts for difference in respect of underlying instruments which are futures contracts over market indices and commodities, where those futures contracts are quoted on a futures exchange in Australia, the United States and other jurisdictions specified by MFGA (Index and Commodity CFDs). MFGA offers two types of Index and Commodity CFDs: Expiring CFDs and Rolling CFDs. Throughout this document the general term Index and Commodity CFD is used to refer to both Expiring CFDs and Rolling CFDs. WARNING Index and Commodity CFDs are speculative products that are highly leveraged and carry significantly greater risk than non-geared investments such as share trading. You should not invest in Index and Commodity CFDs unless you are experienced in derivatives and understand and are comfortable with the risks of investing in Index and Commodity CFDs. You should obtain your own financial, legal, taxation and other professional advice as to whether Index and Commodity CFDs are an appropriate investment for you. This PDS is important and should be read in its entirety. Investors should ensure they read and understand this PDS, in particular section 4 Significant Risks and determine whether Index and Commodity CFDs are suitable for them, before deciding whether to open a CFD Account with MFGA and invest in Index and Commodity CFDs. This PDS also contains other important information about the costs of Index and Commodity CFDs and the significant characteristics, features and benefits of Index and Commodity CFDs. About MFGA MF Global Australia Limited ABN (MFGA) is the holder of an Australian Financial Services Licence number MFGA is a subsidiary of the broker, MF Global Holdings Ltd, which can trace its origins back 200 years and is today one of the world s largest futures broking organisations. The MF Global group of companies employs over 2,000 people, with key centres in London, Chicago, Hong Kong, New York, Singapore, Sydney, Taiwan and Mumbai. The MF Global group operates on more than 50 exchanges and holds memberships on most of the major futures and securities exchanges worldwide. MFGA is a trading participant of both the ASX and ASX24 and a clearing participant of their respective clearing facilities ASX Clear Pty Limited and ASX Clear (Futures) Pty Limited. Counterparty risk MFGA is the counterparty to any CFDs that you may enter into under this PDS. MFGA s obligations in respect of those CFDs are not guaranteed by MF Global Holdings Ltd or any other entity. Accordingly, you take the risk that MFGA may not be able to meet its obligations in respect of any CFD that it enters into with you. It is important that you understand the risks of this counterparty relationship. To assist you to assess counterparty risk, a copy of MFGA s most recent financial statements lodged with ASIC is available from MFGA on request, free of charge. MFGA s registered office in Australia is located at: Level 21, Grosvenor Place 225 George Street, Sydney NSW 2000 Telephone: (02) Facsimile: (02) Mail: PO Box N699 Grosvenor Place NSW 1220 Internet: cfds@mfglobal.com.au Representations MFGA does not guarantee the performance, return of capital from, or any particular rate of return of, an Index and Commodity CFD. Investment products are always subject to investment risk. Customers may lose more than the amount of funds in their CFD Account. Investments in Index and Commodity CFDs involve significant investment risk, including possible delays in payment and loss of income or capital invested. Customers should note that historical financial performance of any Index and Commodity CFD or any underlying Futures Contract is no assurance of future financial performance. The information contained in this PDS is general advice only. In preparing this PDS MFGA has not taken into account your objectives, financial situation or needs. You should consider the appropriateness of opening a CFD Account and entering into Index and Commodity CFDs having regard 1

4 C to your objectives, financial situation and needs and should obtain your own financial, legal, taxation or other professional advice. This PDS has been prepared to comply with applicable Australian law requirements in respect of financial products. This PDS does not contain, and MFGA provides no advice in respect of, the laws of any jurisdiction to which any underlying instrument or security relates. No aspect of this product has been endorsed or approved by any stock exchange, futures exchange or regulatory agency or any party or market referred to in this PDS. Examples in this PDS are provided for illustrative purposes only and do not necessarily reflect MFGA s actions or determinations or your personal circumstances. example, if you incur a Margin obligation to MFGA, you will be required to pay those Margin amounts to MFGA and your client funds will be used to make that payment. Also, MFGA is entitled to use client funds it receives in connection with Index and Commodity CFDs (which are derivatives) for the purpose of meeting obligations MFGA incurs in connection with margining, guaranteeing, securing, transferring, adjusting or settling dealings in derivatives by MFGA, including dealings on behalf of other clients and, for example, to meet obligations MFGA incurs in respect of its derivatives hedging activities it undertakes to hedge its exposure to you and other clients in relation to Index and Commodity CFDs. Update of information Information in this PDS may be updated from time to time where that information is not materially adverse to customers. MFGA may provide updated information on the MFGA website: A copy of the updated information is also available upon request free of charge by contacting MFGA. MFGA may be required to issue a supplementary PDS as a result of certain changes, in particular where the changes are materially adverse from the point of view of a reasonable person deciding as a retail client whether to open a CFD Account or invest in Index and Commodity CFDs. This PDS and any supplementary PDS is available in paper form and in electronic form from our website at or you can call (02) Consents Blake Dawson has given and has not withdrawn its consent to be named in this PDS in the form and context in which it is named and to the inclusion of the general summary of the tax issues relevant to the Index and Commodity CFDs provided in section 6. Client Money MFGA will handle all client funds it receives in accordance with, and subject to, the requirements of Part 7.8 Division 2 the Corporations Act. Where required by the Corporations Act, client funds will be paid into a segregated account maintained by MFGA with an Australian bank. MFGA is entitled to withdraw client funds from the segregated account in the circumstances and for the purposes set out in the Corporations Act. For Also, under the CFD Client Agreement you authorise MFGA to deduct from the segregated account money to which you are entitled, for the purposes of discharging obligations which MFGA incurs to MFGA s Hedge Counterparty to hedge its exposure to the Client in connection with Index and Commodity CFDs or to hedge its exposure to other clients who have entered into Index and Commodity CFDs with MFGA under agreements similar to the CFD Client Agreement. For example, even though you may deposit $10,000 with MFGA and incur Margin obligations to MFGA of $4,000, some or all of the remaining $6,000 may be used by MFGA to meet obligations it incurs in respect of its derivatives hedging activity. For a further discussion in relation to MFGA s hedging activities and the use of client funds see sections 7.3 and 7.4. It is therefore important for you to note that even though your money may be paid into one or more segregated accounts, this may not afford you absolute protection. First, within the segregated account, all client funds are pooled together and so an individual client balance may not be protected if there is a default in the overall segregated account balance. Secondly, if you have incurred Margin obligations to MFGA, your client funds will be paid to MFGA to meet those obligations. Thirdly, to the extent that MFGA has used client funds to meet obligations incurred by MFGA in respect of its hedging activities referred to above, there is an exposure to counterparty risk in relation to both MFGA and, indirectly, to its Hedge Counterparty, in relation to those funds. For these reasons you 2

5 are exposed to the risk that you may not receive all money to which you are entitled if there is a deficit in the client money account and MFGA becomes insolvent or is otherwise unable to pay any amount owing to you. Your personal information may be disclosed to other entities in the MF Global group for these purposes. It may also be disclosed to any financial institution nominated by you and may be disclosed to your financial adviser. You can, by contacting us, instruct us not to disclose personal information to companies related to us. You will receive account statements (see section 7.2). The statement will include information such as cash balances and Free Equity. You should note that a reference to a positive cash balance or positive Free Equity does not mean that MFGA holds all or any of that amount in a segregated account. While the information we ask you to supply is not required by law, we may not be able to assess your application if the information is not supplied. Our full privacy policy is available from our website: Foreign Jurisdictions The distribution of this PDS in jurisdictions outside Australia may be restricted by law and therefore persons into whose possession this document comes should seek advice on and observe any such restrictions. Failure to comply with relevant legislation may violate those laws. This PDS does not constitute an offer or invitation in relation to an Index and Commodity CFD in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation. The financial products offered under this PDS have not been and will not be lodged or registered under the United States Securities Act of 1933, as amended and may not be offered or sold directly in the United States. Dispute Resolution MFGA has a formalised client complaint resolution procedure. All complaints are reviewed and investigated by the Compliance Manager based in Sydney. If you make a complaint, our first response will be to contact you to discuss the complaint and to register a formal record of such complaint. We will try to resolve your complaint quickly and fairly. If, despite our best efforts, you believe your complaint has not been satisfactorily dealt with, we offer clients the use of an independent industry arbiter, namely, the Financial Ombudsman Service (FOS). MF Global is a member of FOS and has agreed not to contest a final resolution from FOS. You can contact FOS by writing to: Privacy If you enter into the CFD Client Agreement and complete the information required by the CFD Client Agreement, you will be supplying us with personal information in relation to which we will be bound by the Privacy Act 1988 (Cth). You can contact us by phone, fax or or in any other manner acceptable to MFGA, including to request access to your information. In normal circumstances, we will give you full access to your information subject to any legal or administrative restrictions. There may be a charge to provide you with full access where your request requires the compilation of archived or voluminous information. Financial Ombudsman Service GPO Box 3, Melbourne Victoria 3001 Toll Free: Facsimile: (03) Website: info@fos.org.au Ethical Considerations We do not take labour standards, or environmental, social or ethical considerations into account when offering Index and Commodity CFDs. We may collect and use your information for the following purposes: assessing your application; assessing the credit and other exposures that the MF Global group has to you; marketing of products and services of a similar type; determining future product and business strategies and to develop MFGA services; communicating with you in relation to your holding and all transactions relating to the holding. Cooling off There is no cooling off period in respect of Index and Commodity CFDs. Defined Terms Capitalised terms used in this PDS are defined in the Glossary in section 9 or elsewhere in this PDS, unless the context otherwise requires. 3

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7 Key Features 1. Introduction 2. Description Of Index and Commodity CFDs 3. Significant Benefits 4. Significant Risks 5. Amounts Payable And Interest Payments 6. Taxation 7. Other Important Information 8. Examples 9. Glossary

8 C Key Features This investment Feature Description Cross-reference Issuer of this PDS and Index and Commodity CFDs MF Global Australia Limited (AFSL ) (MFGA) Section 2.1 Index and Commodity CFDs, which are CFDs in respect of futures contracts over market indices and commodities. MFGA offers two types of Index and Commodity CFDs: Expiring CFDs and Rolling CFDs. The main differences between Expiring CFDs and Rolling CFDs are: Expiring CFDs have a fixed expiry date known as the MFGA Expiry Date, whereas Rolling CFDs do not have a fixed expiry date and will remain open until closed out by you or MFGA as described in this PDS; Investment An Expiring CFD will only relate to a single underlying Futures Contract. A Rolling CFD will roll from the current underlying Futures Contract to the next Futures Contract in the relevant series shortly before expiry of the current Futures Contract. This process of rolling into new Futures Contracts will continue until the CFD is closed out by you or MFGA as described in this PDS; Section 2.2, 2.6, 5.1, 5.3, 5.4 and Prices quoted for Expiring CFDs are based on the price of the underlying Futures Contract, subject to an additional spread, known as the MFGA Spread. Prices quoted for Rolling CFDs reflect the price of the underlying Futures Contract and the MFGA Spread, but also reflect an additional component, known as Fair Value; Expiring CFDs are not subject to a Dividend Adjustment. Rolling CFDs are subject to a Dividend Adjustment; Reference Asset Contract Specifications Expiring CFDs are not subject to daily funding rates. Rolling CFDs are subject to daily funding rates. A range of index and commodity futures contracts (Futures Contracts) The contract specifications for each Index and Commodity CFD will vary depending on a number of factors, including the features of the underlying Futures Contract. In some cases minimum and maximum trade and Lot Sizes will apply. Section 2.2 Section 2.2 and Section 2.4 Please refer to the MFGA website for information regarding the contract specifications for each Index and Commodity CFD. 6

9 Relevant Currency Long and short positions Each Index and Commodity CFD is denominated in the Relevant Currency which will be the same currency as the currency in which the underlying Futures Contract is denominated. You can open long or short positions depending on your view of the market. The Contract Expiry differs depending on the type of Index and Commodity CFD. Section 2.4 Section 2.4 Contract Expiry Expiring CFDs have a fixed expiry date, known as the MFGA Expiry Date. The MFGA Expiry Date will not necessarily exactly correspond with the expiry date of the underlying Futures Contract. A Last Dealing Time will also apply to each Expiring CFD. Section CFD Client Agreement Minimum CFD Account opening balance Opening an Index and Commodity CFD Rolling CFDs do not have a fixed expiry date and will remain open until closed out by you or MFGA as described in this PDS. Opening an account Complete and sign the CFD Client Agreement and return it to MFGA or your adviser. Deposit the Minimum Deposit Amount as notified to you by MFGA. Trading Orders can be placed through our electronic trading platform, by phone, fax or by or in any other manner acceptable to MFGA. The circumstances in which an Index and Commodity CFD can be closed differ depending on the type of Index and Commodity CFD. Section 2.3 Section 2.8 Section 2.4 Closing an Index and Commodity CFD You can place an order to close out an Expiring CFD at any time before the Last Dealing Time of the Expiring CFD during the relevant trading hours. If you elect not to do so the Expiring CFD will be closed out by MFGA on the relevant MFGA Expiry Date. Section 2.6 Initial Margin Variation Margin Additional Margin A Rolling CFD can be closed out at any time during market hours of the Rolling CFD by instructing MFGA to close your open CFD position. Initial Margin rates are generally set at between 2% and 15% of the Contract Value of an Index and Commodity CFD but may vary (up to 100% of the Contract Value) depending on volatility. All Index and Commodity CFDs are marked to market daily, with profits or losses credited or debited to your CFD Account. MFGA may require payment of Additional Margin if the Gross Liquidation Value of your account falls below AUD1,000 or if the amount in your account is not sufficient to meet all payments when due. Section Section Section

10 C Method of payment MFGA Spread Any amounts payable by MFGA to you will be credited to your CFD Account and any amounts payable by you to MFGA will be debited from your CFD Account. Fees and charges MFGA will apply a spread, known as the MFGA Spread, when it quotes prices to you to buy or sell an Index and Commodity CFD position. The MFGA Spread is in addition to any buy/sell spread or similar spread which may apply to the underlying Futures Contract on the Relevant Exchange (and, in the case of a Rolling CFD, is separate from the Fair Value component). Section Section 5.1 Commission Fair Value Dividend Adjustment Electronic trading platform Credit interest Debit interest The MFGA Spread will vary in respect of each Index and Commodity CFD. For information on the MFGA Spread applicable to a particular Index and Commodity CFD, please refer to the contract specifications on the the MFGA website. Commission may also be charged on CFD transactions when you enter into a CFD and when you close out a CFD. Minimum transaction commissions (also referred to as minimum tickets) may also apply. The price MFGA quotes to you to buy or sell a Rolling CFD will also be affected by a Fair Value component, to reflect announced and anticipated dividends, distributions and corporate actions, and the implicit funding cost that is included in the price of the underlying Futures Contract. A Dividend Adjustment will be applied to your CFD account in respect of dividends, distributions and corporate actions announced by a constituent of the index covered by the relevant Futures Contract, taking into account that constituent s weighting in the relevant index. You will generally receive a Dividend Adjustment if you hold a long Rolling CFD and you will generally be required to pay a Dividend Adjustment if you hold a short Rolling CFD. If you use MFGA s CFD electronic trading platform, you may be charged a monthly fee of up to AUD100. Interest rates MFGA will pay interest to you on your CFD Account credit balances at the MFGA Base Rate minus a maximum of 3.5% per annum. This will be determined separately for AUD and each currency in a Foreign Currency Ledger in your CFD Account. You will be required to pay interest to MFGA on CFD Account debit balances at the MFGA Base Rate plus a maximum of 4% per annum. This will be determined separately for AUD and each currency in a Foreign Currency Ledger in your CFD Account. Section 5.2 Section 5.5 Section Section

11 Daily funding rates may apply depending on the type of Index and Commodity CFD. There is no daily funding rate applicable to Expiring CFD positions. Short and Long Funding Rates Daily funding rates are applicable to Rolling CFD positions. If you hold a short Rolling CFD position past Business Close, you will generally receive a daily funding rate equal to the MFGA Base Rate less a maximum of 3% per annum. Section Default interest If you hold a long Rolling CFD position past Business Close, you will generally be required to pay a daily funding rate equal to the MFGA Base Rate plus a maximum of 3% per annum. You will be required to pay interest to MFGA on any overdue unpaid amounts at the applicable MFGA Base Rate plus a maximum of 8% per annum. Section

12 C Introduction 1.1 What is a contract for difference? 1.2 Who trades in CFDs and why? A contract for difference (CFD) is an agreement which allows you to make a profit or loss from fluctuations in the price of an underlying instrument or security without actually owning that instrument or security. Under the CFD, one party is entitled to be paid an amount of money, or is required to pay an amount of money, depending on movements in the price or value of the underlying instrument or security. This transaction concludes with the parties settling the difference between the value of the CFD at the time it was entered into and the value of the CFD at the time it was closed. Any profit or loss will also be affected by other payments applying to CFDs such as fees and interest and may also be affected by spreads, commissions or foreign exchange rates. During the term of the CFD transaction, the price of the CFD will be marked-to-market daily so that at the end of each day during the term of the CFD transaction, a payment will generally have to be made by you to MFGA, or to you by MFGA, to reflect any changes in the value of the CFD during that day. People trade in CFDs for a variety of reasons. Some trade to speculate with a view to profiting from fluctuations in the price or value of the underlying instrument or security. Others trade CFDs to hedge their exposures to other instruments or securities. CFDs also allow people to trade on a leveraged basis. You are able to outlay a relatively small amount (in the form of Initial Margin) to secure an exposure to the relevant underlying instrument or security. *Note: The risk of loss in trading in derivatives and/or leveraged products can be substantial. You should carefully consider whether trading such products is appropriate for you in light of your objectives, financial situation and needs. Trading CFDs allows you to take leveraged long or short positions without having to take or make delivery of the underlying instrument or security. Instead, you provide a Margin payment, the amount of which fluctuates daily depending on the value of the CFD, as collateral. Although the value of a CFD generally follows price movements of the underlying instrument or security, you have no right or obligation to acquire or deliver the underlying instrument or security itself and no other rights of holders of the underlying instrument or security. 10

13 Description of Index and Commodity CFDs 2.1 The issuer - MFGA The Index and Commodity CFDs offered under this PDS are issued by MF Global Australia Limited ABN (MFGA). 2.2 Reference asset The reference asset for each Index and Commodity CFD offered under this PDS is a futures contract over an index or commodity quoted on a major futures exchange in Australia, the United States or elsewhere (Futures Contract). Please refer to the MFGA website for specific details of the Index and Commodity CFDs offered. 2.3 Opening a CFD Account Before you enter into any Index and Commodity CFD with MFGA you will be required to complete, sign and return a CFD Client Agreement and open a CFD Account (if you have not already done so). The offer or invitation to open a CFD Account and enter into MFGA Index and Commodity CFDs is only available to persons receiving the PDS (whether in paper or electronic form) within Australia who are Australian residents and who provide an Australian address when making their application to open a CFD Account. MFGA reserves the right to refuse to open a CFD Account for any person. You must deposit the Minimum Deposit Amount as notified to you by MFGA into your CFD Account to activate your CFD Account. You may deposit any foreign currency agreed to by MFGA into your CFD Account. Each foreign currency balance held in your CFD Account is operated as a separate Foreign Currency Ledger. 2.4 Establishing an Index and Commodity CFD position To enter into an Index and Commodity CFD transaction you can contact MFGA either electronically, by phone, fax or or in any other manner acceptable to MFGA to determine the Contract Price for the relevant Index and Commodity CFD. MFGA will only provide the Contract Price for an Index and Commodity CFD during the trading hours specified in the contract specifications on the MFGA website. MFGA will inform you of the Contract Price and the Initial Margin rate and you may make an offer to enter into an Index and Commodity CFD with MFGA based on those parameters. Please note that minimum and maximum transaction sizes and Lot Sizes may apply. You must confirm with us that offers sent via or fax have in fact been received by us. MFGA will confirm any Index and Commodity CFD transaction it enters into with you. After you have offered to enter into an Index and Commodity CFD with MFGA, until MFGA actually enters into the Index and Commodity CFD (as determined by MFGA), you may notify MFGA that you wish to cancel or vary that offer. MFGA may, in its absolute discretion refuse to accept such cancellation or variation and has no responsibility or liability to you if it is unable to cancel or vary your offer. MFGA may at any time notify you of an exposure limit beyond which you may not be authorised to enter into further Index and Commodity CFDs. Under the CFD Client Agreement, MFGA has sole discretion whether or not to accept an offer from you to enter into an Index and Commodity CFD. MFGA may refuse to enter into an Index and Commodity CFD for a variety of reasons, including, for example, where you have exceeded limits imposed by MFGA on your CFD Account or where MFGA does not hold sufficient cleared funds from you for the amount of the Initial Margin. You can take both long and short Index and Commodity CFD positions. If you take a long position, you will generally profit if the price of the underlying Futures Contract rises, and you will generally make a loss if the price of the underlying Futures Contract falls. Conversely, if you take a short position, you will generally profit if the price of the underlying Futures Contract falls, and you will generally make a loss if the price of the underlying Futures Contract rises. Under the CFD Client Agreement, MFGA has the right to cancel any Index and Commodity CFD which involves or is based on a manifest error, including without limitation, an error in the Contract Price. MFGA also has the right to amend the terms of an Index and Commodity CFD to reflect terms which MFGA considers in its sole discretion acting in good faith to be the correct terms. The Open Contract Value of an Index and Commodity CFD, any applicable commissions and all debits and credits in respect of an Index and Commodity CFD, and the Contract Value and Closing Value of an Index and Commodity CFD are denominated in the Relevant Currency. When you first open an Index and Commodity CFD position, if you do not have a Foreign Currency Ledger in your CFD Account in the Relevant Currency, MFGA will establish a Foreign Currency Ledger in your CFD Account in the Relevant Currency for the purpose of recording all debits and credits in respect of open Index and 11

14 C Commodity CFD positions in such currency. Any deposit which you make to, or which is held in, your CFD Account in a Relevant Currency will be recorded in the Foreign Currency Ledger. MFGA will apply a spread, known as the MFGA Spread, when it quotes prices to you to buy or sell an Index and Commodity CFD position. The MFGA Spread is in addition to any buy/sell spread or similar spread which may apply to the underlying Futures Contract on the Relevant Exchange. See Section 5.1 for more information. The MFGA Spread will vary in respect of each Index and Commodity CFD. For information on the MFGA Spread applicable to a particular Index and Commodity CFD, please refer to the MFGA website. MFGA may apply the opening balance of your CFD Account or any other Free Equity in your CFD Account to the payment of Initial Margin in respect of an Index and Commodity CFD. For this purpose MFGA may notionally convert the currency of the opening balance of your CFD Account or other Free Equity in your CFD Account to the Relevant Currency using the Exchange Rate quoted by MFGA (see section 2.7). MFGA will determine in its absolute discretion whether the Free Equity in your CFD Account is sufficient to satisfy the Initial Margin. An indication of the Initial Margin rate which may apply to certain types of Index and Commodity CFD transactions can be obtained from the MFGA website, our electronic trading platform or from your adviser Variation Margin In respect of a Rolling CFD, the price MFGA quotes to you to buy or sell a Rolling CFD will also be affected by the application of a Fair Value component. See section 5.3 for more information Commission may also be charged on each CFD transaction when you enter into a CFD and when you close out a CFD. Minimum transaction commissions (also referred to as minimum tickets) may also apply. See section 5.2 for more information. 2.5 Margins Entry into Index and Commodity CFDs involves the payment of Margin. There are three components of Margin that you may be required to pay in connection with each Index and Commodity CFD: Initial Margin, Variation Margin, Additional Margin Initial Margin The Initial Margin which is payable in respect of an Index and Commodity CFD will fluctuate daily depending on the Contract Value of the Index and Commodity CFD and will be debited from your CFD Account. The Initial Margin represents the security deposit that you are required to provide to MFGA when you first open an Index and Commodity CFD position (and thereafter throughout the term of an Index and Commodity CFD). The Initial Margin rate applicable to each Index and Commodity CFD is determined by MFGA in its sole discretion. It is typically 2% to 15%of the Contract Value of the Index and Commodity CFD but may be as high as 100% of the Contract Value depending on the volatility and liquidity of the underlying Futures Contract. MFGA may vary the Initial Margin rate at any time and will notify you of the new Initial Margin rate by telephone, electronic message or , on our website, or in any other manner acceptable to MFGA. Following close of the financial market of the Relevant Exchange each Local Business Day during the term of an Index and Commodity CFD, MFGA (as the calculation agent) will determine the Contract Value of the Index and Commodity CFD. This will ordinarily be determined by reference to the closing price of the underlying Futures Contract quoted by the Relevant Exchange (but may not be the actual closing price quoted by the Relevant Exchange, due to the application of the MFGA Spread and, in the case of Rolling CFDs, the Fair Value component). Where trading in the underlying Futures Contract is suspended or halted by the Relevant Exchange, the Index and Commodity CFD position will be valued, and a closing price will be determined by MFGA in its discretion. If the Contract Value calculated by MFGA is greater than the Contract Value calculated by MFGA on the previous Local Business Day and you hold a short position in the Index and Commodity CFD, MFGA will debit the difference between the values from the relevant Foreign Currency Ledger in your CFD Account. If the Contract Value is less than the Contract Value calculated by MFGA on the previous Local Business Day and you hold a short position MFGA will credit the difference between the Contract Values to the relevant Foreign Currency Ledger in your CFD Account. If the Contact Value calculated by MFGA is greater than the Contract Value calculated by MFGA on the previous Local Business Day and you hold a long position in the Index and Commodity CFD, MFGA will credit the difference between the Contract Values to the relevant Foreign Currency Ledger in your CFD Account. If the Contract Value is less than the Contract Value calculated by MFGA on the previous Local Business Day, MFGA will debit the difference between the Contract Values from the relevant Foreign Currency Ledger in your CFD Account. 12

15 Any such amounts debited or credited to your CFD Account are referred to as Variation Margin Additional Margin MFGA may require the payment of additional funds during the term of the Index and Commodity CFD contract, in addition to the Initial Margin and Variation Margin. This is referred to as Additional Margin. MFGA will determine the amount of any Additional Margin required in its sole discretion. Without limiting its right to call Additional Margin, MFGA may call Additional Margin: if the Gross Liquidation Value in your CFD Account falls below AUD1,000 or foreign equivalent (as determined by MFGA in its sole discretion). The Gross Liquidation Value (GLV) is the amount of money you would have in your CFD Account were you to close out all positions at the current market price (less any transaction charges or adjustments). This is calculated by MFGA on an aggregate basis across all your open Index and Commodity CFD positions in AUD; or If the funds in your CFD Account are insufficient to cover any amount payable by you to MFGA, you must pay to MFGA the specified amount in AUD or the Relevant Currency in cleared funds within 24 hours, although in some situations MFGA may notify you that it requires payment within a shorter time period (for example when there is unusual volatility). If you fail to make Margin payments within the time specified by MFGA, MFGA may close out open Index and Commodity CFD positions without further notice to you. MFGA may in its discretion close out only some of the Index and Commodity CFDs relating to a particular Index and Commodity CFD position. For example, if you have an open position of 1,000 Index and Commodity CFDs, MFGA may close out your position in relation to 700 Index and Commodity CFDs, leaving an open position of 300 Index and Commodity CFDs. When MFGA is required to make a payment to you (for example, a payment of Variation Margin) MFGA will credit that amount to your CFD Account (and, in the case of a payment in a currency other than AUD, MFGA will credit the relevant Foreign Currency Ledger in your CFD Account). if the Free Equity in your CFD Account is not sufficient to meet all payments when due. The Free Equity balance of your CFD Account is the GLV less the Initial Margin, Additional Margin and any fees and interest amounts payable by you to MFGA in connection with an Index and Commodity CFD. Free Equity will be calculated by MFGA in AUD on an aggregate basis across all your open Index and Commodity CFD positions and can be utilised to enter into further Index and Commodity CFD positions or can be withdrawn from your CFD Account, in AUD or in a desired foreign currency, if MFGA consents in its sole discretion to such withdrawal. If you also enter into any other Index and Commodity CFD transactions with MFGA, any other open Index and Commodity CFD positions will also be included in determining the Free Equity in your CFD Account. The amount of Additional Margin called will generally be the amount required to make the Free Equity in your CFD Account positive Payment of Margin MFGA will notify you of any obligation you have to pay Initial Margin, Variation Margin or Additional Margin by telephone, electronic message or , or in any other manner acceptable to MFGA. If the funds in your CFD Account are sufficient to cover any amount payable by you to MFGA, MFGA will debit your account (and, if applicable, the relevant Foreign Currency Ledger) for the amount of Margin payable. 2.6 Closing an Index and Commodity CFD Index and Commodity CFDs may be closed in a variety of circumstances, as described below. A Last Dealing Time and MFGA Expiry Date will apply to Expiring CFDs. These concepts do not apply to Rolling CFDs. Please see section below for more information You wish to close an Index and Commodity CFD Since the Index and Commodity CFDs are issued by MFGA over the counter and not through a stock exchange or futures exchange, each Index and Commodity CFD is a contract between you and MFGA and can only be closed in accordance with the terms of the CFD Client Agreement or as otherwise agreed between you and MFGA. It is not possible to close an Index and Commodity CFD by giving instructions to another broker or Australian financial services licensee. To close an Index and Commodity CFD position, you should contact MFGA on a Local Business Day (during market hours of the Index and Commodity CFD as set out in the contract specifications on the MFGA website), either electronically, by telephone, fax or , or in any other manner acceptable to MFGA, to determine the Contract Price for the relevant Index and Commodity CFD. For Expiring CFDs this must be done before the Last Dealing Time for that Expiring CFD. Rolling CFDs are not subject to a Last Dealing Time and will not be closed until you or MFGA decide to close the Rolling CFD as discussed in this section 2.6. If you seek to close a CFD, MFGA will confirm the Contract Price and you will then decide whether to accept the price, and if so, you will 13

16 C instruct MFGA to close your open Index and Commodity CFD position on the basis of that price. You must confirm with us that instructions sent via or fax have in fact been received by MFGA. You may not be able to close out an Index and Commodity CFD if there is a suspension of trading or a trading halt in respect of the underlying Futures Contract to which an Index and Commodity CFD applies. In such a circumstance, MFGA may decide in its absolute discretion not to close an Index and Commodity CFD. See section 2.10 for more information MFGA wishes to close an Index and Commodity CFD MFGA has the right to close out an Index and Commodity CFD in certain circumstances. This includes: The Closing Price for an Expiring CFD closed out on the MFGA Expiry Date will be the Contract Price calculated by MFGA at that time. There is no MFGA Expiry Date in respect of Rolling CFDs Rolling CFDs rolling to the next underlying Futures Contract in a series If a Rolling CFD is not closed out as discussed elsewhere in section 2.6, MFGA will roll the Rolling CFD from the current Futures Contract to the next Futures Contract in the relevant series shortly before expiry of the current Futures Contract. For the avoidance of doubt, the process of rolling does not result in you entering into a new agreement and the existing Rolling CFD will continue to exist until it is closed out in accordance with the CFD Client Agreement. the occurrence of an adjustment event (see section 2.9 for more information); the occurrence of a default event (see section 2.14 for more information); if the aggregate amount of Variation Margin payable by you exceeds 50% of the Initial Margin in respect of that Index and Commodity CFD; if you have breached an exposure limit set by MFGA; if the GLV of your CFD Account falls below AUD1,000 (or foreign currency equivalent as determined by MFGA); MFGA s Hedge Counterparty in a Hedge Position unwinds or closes out the Hedge Position or for any other reason MFGA is unable to establish a Hedge Position or no longer able to maintain the Hedge Position; if the CFD Client Agreement is terminated; or if it becomes illegal or impractical for MFGA to continue to make Index and Commodity CFDs available to you. You should refer to the CFD Client Agreement for more information Expiring CFDs - Close out of an Expiring CFD at MFGA Expiry Date If you do not elect to close out an Expiring CFD before the Last Dealing Time for that CFD, MFGA will close out the CFD on the MFGA Expiry Date. Please refer to the MFGA website or call the MFGA dealing desk to find out the Last Dealing Time and MFGA Expiry Date for any given Expiring CFD contract. This process of rolling into the next Futures Contract in the relevant series will continue until the CFD is closed out by you or MFGA as described in this PDS Consequences of an Index and Commodity CFD being closed out On the day the Index and Commodity CFD is closed out, MFGA will calculate, in the Relevant Currency, the remaining payment rights and obligations of you and MFGA based on the difference between the Closing Value of the Index and Commodity CFD and the Open Contract Value of the Index and Commodity CFD. The amount payable by you to MFGA or by MFGA to you on close out of the Index and Commodity CFD will be determined by MFGA in the Relevant Currency after taking into account the Initial Margin, any Variation Margin and any Additional Margin which has already been debited from or credited to your CFD Account in respect of that Index and Commodity CFD. This amount is payable in the Relevant Currency. Under the terms of the CFD Client Agreement MFGA will credit to the relevant AUD or Foreign Currency Ledger in your CFD Account any amounts payable by MFGA to you. If there is an adjustment event affecting the underlying Futures Contract at the time an Index and Commodity CFD is closed out, there may be a delay in MFGA crediting your account. See the CFD Client Agreement for more information. If an amount is payable by you to MFGA it will be debited from your CFD Account. If you do not have a credit balance in the relevant AUD or Foreign Currency ledger or such balance is insufficient to cover the amount payable, MFGA may apply any credit balance in any other Foreign Currency ledger, or AUD ledger, in your CFD Account to the outstanding amount. Any conversion will be at the Exchange Rate determined by MFGA. 14

17 If the funds in your CFD Account are insufficient to cover any amount payable by you to MFGA, you must pay such amount to MFGA, within 24 hours of being so advised (or within such lesser period as MFGA may determine in its discretion) and in such currency as MFGA may require. You should note that MFGA may set off any money owed to you under the CFD Client Agreement or any other agreement against any money owed by you to MFGA. The determination of the date on which an Index and Commodity CFD is closed and the Closing Value of an Index and Commodity CFD may be affected by certain events including but not limited to: Index and Commodity CFD at the time you opened the Index and Commodity CFD. 2.7 Currency Conversions If an amount is payable by MFGA to you on the close out of an Index and Commodity CFD, you may request that MFGA converts such amount from the Relevant Currency into AUD. You may also request that MFGA converts a balance in your CFD Account from AUD to a foreign currency or from a foreign currency into AUD, either to hold as a balance in your CFD Account or for the purposes of withdrawal (in each case with MFGA s consent). if MFGA has entered into a Hedge Position in relation to the Index and Commodity CFD, MFGA may take into account whether its Hedge Counterparty closes the Hedge Position and the price at which the Hedge Counterparty does so in determining whether to close the Index and Commodity CFD with you and the Closing Price of your Index and Commodity CFD; if the Index and Commodity CFD is over an underlying Futures Contract which ceases to be quoted on the Relevant Exchange or is suspended from quotation for two consecutive Local Business Days (or such lesser period as may be agreed with you), MFGA may elect to close the Index and Commodity CFD and/or call Additional Margin as determined by MFGA. If MFGA elects to close the Index and Commodity CFD, MFGA will determine the Closing Price and in making such determination, will, in its discretion, have regard to a number of factors including the last traded price of the underlying Futures Contract on the Relevant Exchange. If you hold a long position, the Closing Price determined by MFGA may be zero. If the Closing Price is zero, through payment of the Initial Margin, Variation Margin and payments due on close out of the Index and Commodity CFD, you will be required to pay MFGA an amount representing 100% of the Contract Value of the Index and Commodity CFD at the time you opened the Index and Commodity CFD; and if the Index and Commodity CFD is over an underlying Futures Contract in respect of which there is a suspension of trading or a trading halt on the Relevant Exchange at the time at which the Index and Commodity CFD is to be closed out, MFGA will determine the Closing Price in its discretion. If you hold a long position, the Closing Price determined by MFGA may be zero. If the Closing Price is zero, through payment of the Initial Margin, Variation Margin and payments due on close out of the Index and Commodity CFD, you will be required to pay MFGA an amount representing 100% of the Contract Value of the These conversions will involve foreign exchange contracts within the meaning of the Corporations Act. MFGA is authorized under its Australian financial services licence to deal in foreign exchange contracts. Any conversion will be at the Exchange Rate quoted by MFGA. MFGA will charge you a fee in respect of each conversion which will be debited from your CFD Account. The fee payable by you in respect of each conversion will be in the form of a spread on the Exchange Rate, known as a bid/ offer spread. The bid/offer spread will not exceed 50 points. For example, if the published exchange rate for converting AUD to USD is USD/AUD 0.75, the Exchange Rate MFGA may quote to you could be as low as Deposits and Withdrawals In order to activate your CFD Account you must deposit at least the Minimum Deposit Amount into your CFD Account. Once the CFD Account has been activated there is no minimum account balance required. However, if you enter into an Index and Commodity CFD you must ensure that the amount in your CFD Account is sufficient to meet all payment obligations when due. You may request a withdrawal of funds from your CFD Account by contacting MFGA either electronically, by telephone, fax or , or in any other manner acceptable to MFGA. If MFGA receives a withdrawal request it will determine in its absolute discretion whether to agree to such a withdrawal. In particular, MFGA may not permit the withdrawal of funds if you did not have sufficient Free Equity in your CFD Account, if you had outstanding payment obligations to MFGA such that the withdrawal would result in the Free Equity being insufficient to cover such obligations and also if MFGA considers that the volatility of your CFD positions is such that a revaluation of your positions at then current market prices would, or would be likely to, result in MFGA calling further Margin from you. 15

18 C Adjustments / Corporate Actions If an adjustment is made to a Futures Contract by a Relevant Exchange or its clearing facility, MFGA will generally make a corresponding adjustment to any Index and Commodity CFDs over that Futures Contract. MFGA has a broad discretion under the CFD Client Agreement to adjust the parameters of an Index and Commodity CFD in such circumstances. Any such adjustment will be made by MFGA, having regard to a variety of factors including the adjustment made by the Relevant Exchange or clearing facility, any adjustment made by MFGA s Hedge Counterparty, and what MFGA considers a reasonable position to ensure the Index and Commodity CFD, as adjusted, reflects as nearly as reasonably practical the adjusted Futures Contract. Separately from the adjustments referred to above, Rolling CFDs are also subject to Dividend Adjustments. See section 5.4 for more information Trading Halts, Suspensions and Delistings An underlying Futures Contract may be suspended, delisted or subject to a trading halt on the Relevant Exchange in various circumstances. In these circumstances, MFGA may, in its absolute discretion, cancel your order in respect of an Index and Commodity CFD transaction which has not yet been opened, may close any Index and Commodity CFD, or may refuse to close an Index and Commodity CFD, if you make such a request Tax See section 6 of this PDS for a general summary of the Australian taxation issues relevant to Index and Commodity CFDs offered by MFGA Bans in respect of particular Futures Contracts MFGA may at any time determine, in its absolute discretion, that it will not permit the entry into Index and Commodity CFDs over one or more underlying Futures Contracts Conditional Orders It is important to understand that conditional orders (including stop loss orders) are not guaranteed and there may be times when MFGA does not execute your order despite the underlying Futures Contract trading at the level specified in the order. This may occur due to, for example, the application of the MFGA Spread (and, in the case of Rolling CFDs, Fair Value) or volatile movements in the price of the underlying Futures Contract. Also, if the price of a Futures Contract moves suddenly, MFGA may be unable to execute an order at the level specified, or may execute your order at a level different to that specified by you. You may suffer losses as a result. You should monitor your conditional orders and contact MFGA if you believe that your order has not been executed correctly or the parameters of your order have been met. MFGA will not be liable for any orders, including any conditional orders, which are not executed Default Powers MFGA has extensive powers under the CFD Client Agreement to take action in a range of default event situations. It is a default event if: any money owing by you under the CFD Client Agreement, any other agreement or on any other account you hold with MFGA is not paid to MFGA when it is due; you fail to duly and punctually perform and observe any obligation under the CFD Client Agreement, any other agreement or any obligation you have on any account you hold with MFGA; you make a misleading or incorrect representation; you stop payments of your debts or cease or threaten to cease to carry on a business; you enter into or propose to enter into any scheme of arrangement or compromise with your creditors or call a meeting to discuss a contemplated scheme of arrangement or compromise; you become insolvent or, if you are a corporate client, a receiver or a receiver and manager or administrator is appointed to you or any of your assets; A conditional order is an order that will only be executed when a specified condition(s) are met. For example, you could place an order to enter into an Index and Commodity CFD when the Contract Price reaches a certain level. Alternatively, you may enter an order to close out an Index and Commodity CFD when the Contract Price falls to a certain level (commonly known as a stop loss order). if you are a corporate client, a resolution is passed or a petition is presented or an order is made for your winding up or liquidation; you die or become unsound of mind or a bankruptcy notice is issued against you; 16