The potential for loss associated with investing in spot foreign currency transactions may be great. It is ACM (USA) LLC's ("ACM") belief that our Clients should be aware of the risk of loss that may occur as a result of investing in such transactions. This disclosure statement is not intended to be comprehensive and instead serves as a means of providing the Client with information regarding the most significant and relevant factors associated with foreign currency exchange. Throughout this disclosure, Client is referred to as "you," "your," or "Client" and ACM as "us," "our," or "ACM."
In General
Any foreign currency contract that you enter into with ACM will be considered a privately negotiated contract with ACM as principle. ACM will, in turn, enter into "back-to-back" transactions with its Licensor. Foreign currency contract transactions are not executed on an exchange and are not cleared on a central clearing organization. The result is that any contract with ACM will be an obligation of ACM and you will not be afforded the regulatory and financial protections offered by exchange-traded contracts. You and ACM are required to perform the respective obligations under the terms of the transaction contained in the ACM (USA) LLC Client Agreement ("Client Agreement" or "Agreement"). The Client Agreement is applicable to every transaction you enter into with ACM. Your respective obligations under any transaction are not transferable without ACM's prior written consent. ACM is under no obligation to terminate or close out the transaction prior to the expiration date for that transaction. ACM may, but is not obliged to quote you a price for an early close out of a contract on request.
The transactions you are entering into with ACM are not traded on an exchange. Therefore, under the U.S. Bankruptcy Code, your funds may not receive the same protections as funds used to margin or guarantee exchange-traded futures and options contracts, which receive a priority in bankruptcy. Since that same priority has not been given to funds used for off-exchange forex trading, if ACM becomes insolvent and you have a claim for amounts deposited or profits earned on transactions with ACM, your claim may not receive a priority. Without a priority, you are a general creditor and your claim will be paid, along with the claims of other general creditors, from any monies still available after priority claims are paid. Even customer funds that ACM keeps separate from its own operating funds may not be safe from the claims of other general and priority creditors.
Types of Foreign Currency Contract Transactions and their Characteristics
A. Spot Contracts
Generally speaking, the over-the-counter foreign currency market is an unregulated market with an absence of rules to regulate valuation or settlement procedures, no minimum financial requirements for market participants, or limitation on daily price movements (unless levied by government or central bank authority). Spot transactions may be used to establish long or short positions in the market. You will be required to perform the obligations of the transaction under its terms. A spot contract is a cash market transaction to buy or sell immediately a specified quantity of currency for a physical settlement in no more than two days. The price terms and characteristics of spot contracts are privately negotiated. Subsequently, there is no centralized price source or presence of a clearinghouse for spot contracts. Depending on the specified terms of the spot contract, a cash settlement in which you may receive from or be obliged to pay ACM will occur at the defined settlement date of the contract. Unless prior arrangements have been with ACM, the physical delivery of currency will not be made. The amount of the cash settlement is dependent on the position you have established and the market movement over the duration of your position.
B. Leverage
As a result of low margin deposits, potentially high degrees of leverage are obtainable. Small market movements in foreign currency can have a proportionally large impact on the funds you have deposited, or will have to deposit. You may incur a substantial loss of initial margin funds and any additional funds deposited with ACM to maintain your position. In the case of any margin shortfall, ACM reserves the right to liquidate positions without notice.
C. Risk Reducing and Entry Order Strategies
Certain orders such as stop-order or limit-order, entry buy or entry sell, which are designed to reduce risk or enter positions may not be effective because market conditions may make it impossible to execute these orders. Client orders will become market orders when the level is reached.
D. Speculative Nature of Foreign Currency Trading
Due to the volatile nature of foreign currency markets, currency prices may fluctuate dramatically over relatively short periods of time. Foreign currency markets are influenced by many factors such as interest rates, domestic and international rates of inflation, and other types of various market disruptions. Ultimately, it is impossible to anticipate all risks in advance.
E. Contracting as Principal
In entering into foreign currency contract transactions you should understand that ACM is acting solely in the capacity of an arm's length contractual counterparty to you in connection with the transaction and not in the capacity of your financial adviser or fiduciary. Any proposed transaction, suggested hedging strategies, or other written material or oral communications from ACM should not be construed as investment recommendations, advice, or as expressing ACM's view as whether a particular transaction is suitable for you or meets your financial objectives. Any market or quote that ACM makes for you may be based solely on markets or quotes that are made or quoted to ACM by the counterparties with which it does business.
You should be advised that ACM and its affiliates may have significant positions in, and may make a market in or otherwise buy or sell instruments similar to foreign currency contract transactions entered into with you. ACM and its affiliates may also undertake proprietary trading activities, including hedging transactions related to the initiation or termination of a foreign currency contract transaction with you that may adversely affect the market price or other factors underlying the foreign currency contract transaction entered into with you and consequently, the value of such transaction.
F. ACM's Electronic Platform
You will conduct foreign currency contract trading through ACM's proprietary web based electronic trading system. This system is unlike trading on the open outcry market and in utilizing an electronic trading system you will be exposed to the certain electronic system associated risks. Such risks include, but are not limited to, the failure of hardware and/or software.
In addition, ACM does not, and cannot, warrant or manage the signal power, reception or routing though the Internet, configuration of equipment you choose to use and we cannot be held responsible for communication failures, distortion, or delays.