Spreadbet, CFD, FX Risk Warning

You should note that Spread Bets and CFDs are leveraged financial instruments and are deemed to be high risk investment products. Spread Bets and CFDs are not suitable for all investors. It is solely your decision as to whether you apply for an account with us and you should ask a financial adviser as to whether Spread Bets and CFDs are suitable for you. You should ensure that you understand the nature and risks involved of trading in Spread Bets and CFDs contracts and that you fully understand the extent of your exposure to possible large losses from this form of trading.  It is entirely possible that you may lose more than the funds you have deposited into your account.

Before you apply for a Spread Bets and CFDs trading account, you should carefully consider whether using such volatile financial instruments is appropriate for you, this consideration should be with specific reference to your personal trading experience and in particular to your financial circumstances. YOU SHOULD ONLY COMMIT FUNDS THAT WOULD NOT SERIOUSLY IMPACT YOUR FINANCIAL CIRCUMSTANCES SHOULD THOSE FUNDS BE LOST.

Spread Bets and CFDs are derivatives and such markets can be highly volatile. The price of a Spread Bet and CFD and its underlying market (a share; currency; commodity; index etc) may change very quickly as a consequence of (amongst other reasons):

an unforeseen event, (i.e. an act of God, terrorism, FX revaluation etc)

an unexpected piece of economic data, (i.e. an unusually poor economic release from a major economy)

a corporate release (commonly called an RNS release) (i.e. an unexpected company profit warning) or

a sudden change in sentiment.

Each Spread Bet and CFD can involve different levels of risk and, when deciding whether to trade in such instruments, you should be aware of the following points:

1. Trading in Spread Bets and CFDs carries a high degree of risk. The gearing (leverage) used when trading Spread Bets and CFDs means that while a small initial margin payment may be required to open a Spread Bet and CFD position this can potentially lead to large losses, possibly significantly greater than the sums originally deposited by you. The nature of this gearing means that a relatively small movement in the price of the market in which you have a position can lead to a significant movement in the value of your trade. This can result in large losses.

2. Spread Bets and CFDs offered by us are off-exchange derivatives (commonly called OTC derivatives). This can involve greater risk than an on-exchange derivative as you are only able to open and close your positions with us and you will be unable to close a position with that you have opened us with a third party. This means that, should you be unable to access our trading platforms, you may be exposed to large losses.

3. There is the potential for you to incur losses (or make profits) in relation to your exposure to foreign exchange fluctuations when trading in a market denominated in a currency that is not the same as the base currency of your account. It is possible that any losses incurred by you may increase (or profits decrease) due to adverse exchange rate changes even if the price of the instrument to which the Spread Bet and CFD relates remains unchanged.

4. Spread Bets and CFDs are 'margined contingent liability transactions' which may require you to make a series of margin payments versus the purchase price and they may only be settled in cash. We will never deliver the underlying market asset to which your Spread Bet and CFD relates.

5. As mentioned earlier in this risk warning you may sustain a total loss of the monies that you have deposited with us when opening a Spread Bet and CFD position. If the market moves against your positions such that the monies which you have deposited with us are insufficient to support said positions we will close such positions as we see fit to bring your account back into a positive margin situation.

6. In certain trading conditions it may be difficult (or even impossible) to close a position held by you, even though you have insufficient margin to hold that position. This may occur, for example, at times of rapid price movement if the price rises or falls in one trading session to such an extent that trading in the underlying market is suspended or restricted. Or in the case of shares with low market liquidity where we may be unable to sell (or buy) the underlying stock. If either of these events occur your exposure to losses may be considerably greater than the monies deposited in your account.

7. You may place a Stop Loss Order against your position but this may not limit your losses to the amount indicated as market conditions may make it impossible to execute such an Order if the underlying market moves straight through the stop price requested by you. You may place a Guaranteed Stop loss order against your positions (if such an Order type is available for that market) but this will incur a fee.

8. While your transactions will not take place on any exchange you are still liable to all laws pertaining to market manipulation and insider trading. Mercor Index is regulated and Authorised by the Financial Conduct Authority and all client transactions will be reported to a depositary that is accessible by them.

9. Mercor Index will not give advice relating to future market activity and we will not make recommendations of any kind. Any statements made by a member of staff of Mercor Index concerning market activity are his personal opinion and are not the opinion of Mercor Index.  We will comment, if we are able to do so, on past market activity, on matters of fact (i.e. dividend dates, economic data releases etc) and on the mechanics of how a Spread Bet and CFD works.

Mercor Index will not give you any personal financial advice. Any general financial comment or technical data that we supply does not take into account your personal objectives or financial situation and has not been prepared with reference to any specific requirement of yours.

You should obtain independent financial and legal advice before you open an account with Mercor Index. No statement of ours should be taken as a recommendation to trade in any financial product, either with us or with any third party.

In agreeing to the Terms and Condition you agree that every trading decision made by you is subject solely to your personal judgement. Mercor Index will not be liable for any losses, costs, expenses or damages suffered by you arising from any inaccuracy or mistake in any information we give to you in the absence of fraud, wilful default or gross negligence.

Your money is deposited in to a separate trust account

Any money that you deposit with us will be held separately from our money, in a trust account (Commonly called a Client , and held and dealt with in accordance with FCA rules. As permitted under FCA rules your money may be co-mingled into one or more trust accounts with our other customers' money, which is also held on trust.

Other FX risks

Unrealised profits and losses in currencies other than the base currency of your account may result (when realised and converted back into your base currency) in a greater than expected loss (or a lower profit) being debited from (credited to) your account. Significant movements in the currency of any open positions versus your base currency may all require extra margin from your account.

For example let us assume that you have a Sterling Base Currency account and that the current GBP/USD rate was 1.5000. If you were holding a Spread Bet and CFD in the EUR/USD and the margin requirement was USD 300 per contract this would mean that we would require GBP 200 (300/1.5) in margin. But if the GBP/USD exchange rate were to fall to 1.2500 then, although we would still require USD 300, this would now equate to GBP 240 (i.e. 20% more).  The same effect may impact any realised or unrealised profits or losses that you make in any market that is not denominated in your base currency.

A profit or loss that is realised in a currency other than your base account currency will be immediately converted into the base currency of your account at a rate no worse than 0.5% from the current spot rate of that currency versus your base currency.

You may choose the base currency of your account to be Euros, US Dollars or Sterling.

Shorting individual share Spread Bets and CFDs

Shorting a Spread Bet and CFD in individual share (i.e. selling a share Spread Bet and CFD that you do not own) carries additional risks that, usually, will never apply to clients who are long of share Spread Bets and CFDs. The most common of these risks are mentioned below but this list does not encompass all extra risks.

You may be forced to close your position by us due to changes in regulatory restrictions (i.e removal of permission to be short in certain types of stocks) or if our ability to borrow such stock becomes impracticable;

The application by us of a higher than usual stock borrowing rate on your position. Where we can neither borrow the stock economically nor close out your positions such rates can (in extremis) reach extremely high levels.; and

If you have a short position in an individual equity you may be obliged to incur the other side of a corporate event (such as a rights issue) which is afforded to clients who are long of the same stock. This may result in you being forced to go even further short of the Spread Bet and CFD at unfavourable market prices. 

Please be aware that that corporate events are frequently announced at very short notice (and often outside of Mercor Index's quoting hours). Giving you no opportunity to close positions out thus avoid participation.

General Information

Should Mercor Index suffer an insolvency (or default) event then this may result in your positions being closed without notice to you. As all retail client monies deposited with us is held in a regulated trust account (commonly called a client segregated money account) those funds attract the regulatory protections afforded to such accounts. Funds held in such accounts will include net unrealised client profits and these would be held to your benefit as well.

There is no clearing house for Spread Bets and CFDs and any price quoted by Mercor Index may be significantly different to that quoted by an exchange or clearing house.