Risk Warning Notice
It is the policy of Capital Index to provide all of our clients with the following risk warning notice in relation to dealing in margined products such as contracts for difference (CFDs) and spread betting. This document explains many of the risks associated with margined products, but it cannot explain all of the risks.
CFDs and spread bets are complex instruments and come with a high risk of losing money rapidly due to leverage.
77% of retail investor accounts lose money when trading CFDs and spread bets with this provider.
You should consider whether you understand how CFDs and spread bets work and whether you can afford to take the high risk of losing your money.
As margined products carry a high level of risk, you should not deal in these products unless you understand their nature and the extent of your exposure to risk. You should also be satisfied that the product is suitable for you in the light of your circumstances and financial position and that you only speculate with funds you can afford to lose.
Although margined products can be utilised for the management of investment risk, it may not be suitable for some investors. In deciding whether to trade in margined products, you should be aware of the following points:
Most margined products can only be settled in cash. Investing in CFDs and Spread Bets carries the same risks as investing in a futures or an options contract or other margined products. Transactions in margined products may also have a contingent liability and you should be aware of the implications of this as set out below.
Past performance should not be considered as a guarantee of future performance as the future performance of underlying markets or funds is uncertain.
Margined products require you to make a series of payments against the purchase price, instead of paying the whole purchase price immediately. If you trade in margined products, you may rapidly sustain a total loss of the margin you deposit to establish or maintain a position. If the market continues to move against you, you may be called upon to pay substantial additional margin at short notice (which in some cases could be a matter of minutes) to maintain the position. If you fail to do so within the required time, your position may be liquidated at a loss. If you are a Professional Client you will be responsible for the resulting deficit, meaning your losses can exceed your deposits. If you are a Retail Client, although you benefit from negative balance protection, you can still lose the entire value of your investment. This means that as a Retail Client, your aggregate liability for all Transactions connected to an account will be limited to the funds in that account. This means that, if the net balance of the profit and loss attributable to any open Transactions is at or near zero, we will close out any open Transactions to avoid the balance in your account becoming negative. In certain circumstances, your Margin rates and/or notional trading requirements could be increased without notice, resulting in additional Margin deposit that you will require to have on your account to maintain that trade.
If you are classified as a Retail Client, we will close out one or more of your open Transactions when the sum of funds and the unrealised net profits in your account falls to less than half of the total Initial Margin Protection for all of the open Transactions.
Trades in margined products are off-exchange (also known as an over-the-counter, or OTC) transactions which are non-transferable. This means you will enter into trades directly with us and those trades can only get closed with us. You will not be able to transfer or sell your open positions to other brokers or spread betting providers.
Before you begin trading, you should obtain details of all commissions and other charges for which you will be liable. If any charges are not expressed in money terms (but, for example, as a percentage of contract value), you should obtain a clear and written explanation, including appropriate examples, to establish what such charges are likely to mean in specific money terms. For example in the case of CFDs, when a commission is charged as a percentage, it will normally be as a percentage of the total contract value, and not simply as a percentage of your initial payment.
We do not offer guaranteed stop loss orders. Although orders are generally filled at the level of your order, if there is any gapping or slippage you may receive a fill worse than your stop level. Gapping or slippage can occur when the underlying market is unusually volatile and the market price moves rapidly past your stop loss price. In those circumstances, you will receive the next available price. For example if you had a long position in the FTSE Index at say 6680 with a good until cancelled stop loss order in place at 6660, and over the weekend there was an extremely negative announcement that caused the market price to open at 6655, you would receive a fill at (your sale price of) 6655 and not 6660.
Spread betting in the UK is currently free from capital gains tax but this may change in the future. We do not guarantee that no tax or stamp duty (other than trading duty) will be payable. There is currently no tax payable on any gains made, or allowable for either income or capital gains tax against losses incurred. This can be advantageous if your spread bets are profitable or disadvantageous if you incur losses. You are responsible for any stamp duty or tax in respect of your trades.
As we do not provide our clients with tax advice, you are responsible for your own tax affairs.
Our trading platform enables you to trade CFDs or place spread bets and communicate with us via electronic means. Whereas electronic communication is normally a reliable means of communication, no electronic communication is guaranteed to be reliable at all times. Electronic communications can occasionally fail, and there can occasionally be delays. If there is a failure on our platform, you should telephone our trading desk. Please note however that the lines might be busy at these times.
We will place Retail Clients funds in a segregated client money bank account separate from our money; however, this may not provide complete protection in the event of an insolvency of our bank.
All profits and losses that are made on CFDs and Spread Betting are legally enforceable by both parties.