Key Information Document – CFD on Energies
This document provides you with key information about this investment product. It is not marketing material. The information is required by law to help you understand the nature, risks, costs, potential gains and losses of this product and to help you compare it with other products.
Manufacturer:
Vector Financial Services (Pty) Ltd Registration Number 2018/221248/07 (FSP No. 49977)
Principal place of Business:
26 BAKER STREET, ROSEBANK, JOHANNESBURG, GAUTENG, 2196, SOUTH AFRICA
Supervised Authority:
Financial Sector Conduct Authority of South Africa (‘FSCA’).
Riverwalk Office Park, Block B, 41 Matroosberg Road, Ashlea Gardens, Pretoria, 0081
You are about to purchase a complex product that is difficult to understand and carries high risk of loss of your entire invested capital
CFD – Product Description
Contracts For Differences (CFDs), are complex financial products in accordance with the applicable law.
They are traded on an ‘over-the-counter (‘OTC’) basis and not through a regulated market. CFDs, are agreements to exchange the difference in value of a particular underlying instrument between the time at which the agreement is entered into and the time at which it is closed, allowing the investors to replicate the economic effect of trading in particular currencies or other asset classes without requiring actual ownership.
An investor has the choice to buy the CFD to benefit from rising OIL prices, or to sell the CFD to benefit from falling OIL prices.
When trading CFDs there is no physical exchange of assets; therefore, financial settlement results from the difference at the time the position is closed and the price of the underlying asset (formulated by the Counterparty) at the time the position is opened.
The most common underlying assets include stocks, commodities, currencies, and market indices.
The amount of any profit or loss made on a CFD trade will be determined by:
- The difference between the opening trade price and the price when you close the trade;
- The units traded;
- Any adjustments in respect of the CFD, for example, where a dividend is paid on an underlying share/index;
- Any holding costs or commissions relating to the CFD;
- The tick or pip value of the traded instrument;
In order for a position to be opened, an investor should have sufficient funds in their trading account to cover the required margin for that position.
The margin required for the various CFDs can be found on our website and/or platform.
When a position is closed, the investor gains the difference between the market value of the underlying asset at the time of closing the position, if:
When holding a long position (buying a CFD), the price at the time the position closes is higher than the price at the time the position was opened, which is automatically converted to the trading account currency; or
When holding a short position (selling a CFD), the price, at the time the position closes, is lower than the price at the time the position was opened, which is automatically converted to the trading account currency
To close an open ‘buy’ or ‘long’ CFD you sell it, and to close an open’short’ or ‘sold’ CFD you buy it.
With most CFDs you can hold the position for as long as you like which may be for less than a day, or for months.
The Closing Level will be the last available price at or before the close or the applicable official closing quotation or value in the relevant underlying market as reported in the platform; minus any commission or spread which is applied to the CFD when it is closed.
Leverage and Margin CFDs are leveraged financial instruments, which allow the investor to trade on higher exposures on the underlying assets compared to the invested amounts. With CFDs, you only have to put in a portion of the market value of the underlying instrument when making a trade.
The leverage usually is specified as a ratio, such as 1:25, 1:50, 1:100 or 1:200. This means that you can trade with amounts proportionally higher than you could invest in a particular CFD.
The initial margin is the amount required by the investor to open a certain position in CFDs and is expressed as a percentage of the nominal exposure. The lower the percentage, the higher the financial leverage.
Examples:
An investor wishes to purchase 1 Lot of USOIL at price USD 63.45 with a margin requirement 10% (which is equal to 1:10 leverage) for that instrument. This requires for the investor to place a margin of
1000 contracts * market price USD 63.45 / leverage (10) = USD 634.
Or equivalently:
1000 contracts * market price USD 63.45 * margin requirement (20%) = 634 USD
This margin requirement is then converted to Account Currency.
Intended retail investor
Trading in this product will not be appropriate for everyone.
This product would commonly be used by persons who want to generally gain short-term exposures to financial instruments/markets; are using (trading with) money that they can afford to lose; have a diversified investment and savings portfolio; have a high-risk tolerance; and understand the impact of and risks associated with margin trading.
What are the risks, and what could I get in return?
Risk Indicator
The risk indicator assumes that you may not be able to buy or sell your CFD at the price you wanted to due to the volatility of the market or you may have to buy or sell your CFD at a price that significantly impacts how much you will get in return.
Lower risk Higher risk
The summary risk indicator is a guide to the level of risk of this product compared to other products.
It is shown how you may experience losses, due to volatility of the CFDs. We have classified this product as 7 out of 7, which is the highest risk class.
This rates the potential losses from the future performance of the product at a very high level.
CFDs are traded on margin and carry a risk of losing all your invested capital. Before deciding to trade on margin products, you should consider your investment objectives, risk tolerance and your level of experience on these products.
Trading with a high leverage level can either be against you or for you. You should be aware of all risks associated with regard to products that are traded on margin and seek independent advice, if necessary.
Account Performance Scenarios
Market developments in the future cannot be accurately predicted. The scenarios shown below are only an indication of some of the possible outcomes based on recent returns. Actual returns could be lower.
The scenarios below demonstrate how your investment could perform in different events.
The results below should not be considered as exact indicators or recommendations whatsoever and do not include different types of charges that may apply to your account.
Therefore, your account performance (positive or negative) depends on various factors, for instance how long you hold your position(s).
| Energies CFD | USOIL | |
| Opening Price | P | 63.45 |
| Trade size (per CFD) | TS | 100 |
| Margin percentage | M | 10% |
| Margin Required | MR=P x TS x M | USD 634 |
| The notional value of the trade | TN=MR/M = P x TS | |
| Profit & Loss calculation: USD (Variable | ||
| Account Currency | currency) | |
| USD | ||
| LongPerformance Scenario | Account Performance | Closing Price | Profit/Loss(Account currency) | ShortPerformanc e Scenario | Account Performance | Closing price | Profit/Loss(Account Currency) |
| Favorable | 1.5% | 64.40 | 95.18 | Favorable | 1.5% | 62.50 | 95.18 |
| Moderate | 0.80% | 63.96 | 50.76 | Moderate | 0.80% | 62.94 | 50.76 |
| Unfavorable | -1.5% | 62.50 | -95.17 | Unfavorable | -1.5% | 64.40 | -95.18 |
| Stress | -6% | 59.64 | -380.70 | Stress | -6% | 67.26 | -380.70 |
Trading Charges/Fees
Before you start trading CFDs on Energies you should familiarize yourself with all costs associated with trading.
These charges will reduce any net profit or increase your losses.
More information can be found in our website and/or platform.
| One-off costs | Spread | The difference between the buy and sell price is called the spread. This cost is realized each time you open and close a trade. |
| Commissions | This is a commission charged when you buy or sell a CFD on an Energies based on the notional value of the trade. An investor opened and closed 1,000 Contracts of USOIL. For example, the Company charges USD 6, as commissions, per completed Lot (1,000 Contract = 1 lot), open and closed 1,000 Contracts for USOIL. Therefore, the investor will be charged every time with USD 6 per completed Lot (10 lots will be charged 60 USD). The calculation used is ‘Trade size in base currency converted in USD X USD 6 (to be converted in the account currency). | |
| On-going costs | Financing costs (swaps) | Swaps are charges, that are incurred when a trade is kept overnight, to reflect the cost of funding your trade. Both long (‘buy) and short (‘sell) positions are subject to daily swap, which may be in favor of the client or against him/her depending on the instrument. Example: A Client, has a long position of 1 lot of USOIL and his account is denominated in USD. The swap rates are 6.12 points for a short position and -32.95 for long position. Therefore, the calculation will be as follows: The calculation form for swaps is as follows Swap: Lot Size * Swap Rate * Number of nights = 1 * 6.12 * 1 = 6.12 USD |
How long should I hold it and can I take money out early?;
There is no recommended holding period, no cancellation period, and therefore no cancellation fees. You can open and close a CFD at any time during market hours.
How can I complain?
The retail investors may submit their complaints or grievances in relation to CFDs, using the Complaint Form, to the Head of the Compliance department.
The “Complaint Form” may be submitted to the Company by email [email protected], or by post (P O BOX 787502, SANDTON, JOHANNESBURG, GAUTENG, 2146, SOUTH AFRICA). For further details, the investors should refer to the Complaint Handling Form in the Company’s website.
Other relevant information
The retail investors must ensure that they have read and understood all the Legal Documents of the Company such as the Privacy Policy, FAIS Disclosure, Complaints and Dispute Policy, Conflict of Interest Policy, and Service Disclosure Notice displayed in the legal section of our website.
These are important documents for you to read and understand prior to opening an account and start trading with the Company.