trade over the counter cfds product disclosure statementground floor, tower 1 201 sussex street...
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YOU ARE WHAT YOU DO
Trade over The counTer cFdsproducTdisclosuresTaTemenTFOR REFERENCE ONLY.
OTC CFDs are currently unavailable. You will not be able to apply for this product at this time.
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WarningContracts for difference (CFDs) are speculative products that are highly leveraged and carry significantly greater risk than ungeared investments such as share trading. You should not invest in CFDs unless you are experienced in equity derivatives and understand and are comfortable with the risks of investing in CFDs. You should obtain your own financial, legal, taxation and other professional advice as to whether CFDs are an appropriate investment for you.This is a Product Disclosure Statement (PDS) prepared by Commonwealth Securities Limited (CommSec). The date of this PDS is 13 June 2011. This PDS relates to contracts for difference in respect of underlying instruments or securities which are quoted on a stock exchange in Australia, Hong Kong, Singapore, Japan, New York, London, New Zealand, and certain other jurisdictions agreed to by CommSec.
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 this product is suitable for them, before deciding whether to open a CFD account with CommSec and invest in CFDs.This PDS also contains other important information about the costs of OTC CFDs and the significant characteristics, features and benefits of OTC CFDs.About CommSecCommonwealth Securities Limited ABN 60 067 254 399 is the holder of Australian Financial Services Licence 238814.CommSec is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124.CommSec is a Participant of the ASX Group.CommSec’s registered office in Australia is located at:
Ground Floor, Tower 1201 Sussex StreetSydney NSW 2000
Telephone: 1300 307 853Facsimile: (02) 8292 5266Mail: CommSec, Locked Bag 22
Australia Square NSW 1215Internet: commsec.com.auEmail: [email protected]
Representations:CommSec does not guarantee the performance, return of capital from, or any particular rate of return of, an OTC CFD. OTC CFDs are a speculative financial product. Clients may lose more than the amount of funds in their OTC CFD account.Investments in OTC CFDs involve significant investment risk, including possible delays in payment and loss of income or capital invested. Clients should note that historical financial performance of any OTC CFD or any underlying instrument or security is no assurance of future financial performance.The information contained in this PDS is general advice only. In preparing the PDS CommSec has not taken into account your investment objectives, financial situation or particular needs. You should consider the appropriateness of opening an OTC CFD account and entering into OTC CFDs having regard to your objectives, situation and needs, and should obtain your own financial, legal, taxation or other professional advice.No aspect of this product has been endorsed or approved by Australian Stock Exchange Limited, the Australian Securities and Investments Commission or any party or market referred to in this PDS.The examples in this PDS are provided for illustrative purposes only and do not necessarily reflect CommSec’s actions or determinations, or your personal circumstances.Update of informationInformation in this PDS may be updated from time to time where that information is not materially adverse to clients. CommSec may provide updated information on the CommSec website: commsec.com.au. A copy of the updated information is also available upon request free of charge by contacting CommSec. CommSec 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 an OTC CFD account or invest in CommSec OTC CFDs. This PDS and any supplementary PDS are available in paper form and in electronic form from our website at commsec.com.au or by calling 1300 307 853.Foreign jurisdictionsThe distribution of the PDS in jurisdictions outside Australia may be restricted by law and therefore persons into whose possession those documents come 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 OTC 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 Unites States Securities Act of 1933, as amended, and may not be offered or sold directly in the United States.Opening an OTC CFD accountBefore you begin dealing through CommSec, you must complete, sign and return the OTC CFD Client Agreement and then have your application approved by CommSec. The offer or invitation to open an OTC CFD account and enter in CommSec OTC 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 for service when making their application to open an OTC CFD account. OTC CFD Client Agreements which do not specify an Australian address for service or which are accompanied by payment drawn from a foreign bank account may be rejected and returned. continued on inside back cover
We’re here To helpTo find out more, call us on 1300 307 853, 8 am to 5 pm Sydney time, Monday to Friday, or visit our web site at commsec.com.au.
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Features of OTC CFDs 2
1 Introduction 101.1 What is an OTC CFD? 10
1.2 Who trades OTC CFDs and why? 11
2 OTC CFDs issued by CommSec 12
2.1 The issuer 12
2.2 Significant characteristics 12
2.3 Opening an OTC CFD account 14
2.4 Establishing an OTC CFD position 14
2.5 Margins and free equity 15
2.6 Closing an OTC CFD 19
2.7 Adjustments for corporate actions 21
2.8 Dividends and distributions 21
2.9 Imputation credits on dividends 22
2.10 Contingent orders 22
2.11 Trading halts, suspensions and delistings 22
2.12 Stock bans 22
2.13 Voting rights 22
2.14 Default powers 23
2.15 Rights of CommSec 24
2.16 Hedging 24
2.17 Termination of the OTC CFD Client Agreement 24
3 Benefits 25
4 Risks 26
5 Amounts payable 30
5.1 Brokerage 30
5.2 Electronic trading charges 32
5.3 Stock borrowing fee 33
5.4 Interest 33
5.5 Currency conversions 36
6 Taxation 37
6.1 Gains or losses made on OTC CFDs 37
6.2 Interest and dividend adjustments 37
6.3 Treatment of other expenses 37
6.4 Interest on an OTC CFD account 37
6.5 Taxation Ruling 38
6.6 Taxation of Financial Arrangements (TOFA) 38
6.7 Foreign exchange gains and losses 38
6.8 Foreign currency considerations on interest, dividends and expenses 38
6.9 Tax File Number (TFN) Interest Withholding Tax 39
6.10 Goods and Services Tax 39
7 Other important information 39
7.1 Contractual terms 39
7.2 Trading 39
7.3 Confirmations and statements 39
7.4 Client funds 40
8 Examples of OTC CFDs 40
8.1 Long positions 40
8.2 Short position 46
8.3 Example currency fluctuations 52
8.4 Example where dividend is paid on the underlying instrument or security 53
9 Glossary 54
conTenTs
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2 | over-The-counTer cFds
FeaTures oF oTc cFdsWho is the issuer of this PDS and the OTC CFDs?
This PDS and the OTC CFDs are issued by Commonwealth Securities Limited (CommSec).
CommSec’s contact details are:
Commonwealth Securities Limited Locked Bag 22 Australia Square NSW 1215
Telephone: 1300 307 853
CommSec’s Australian Financial Services Licence number is 238814.
What is a CommSec OTC CFD?
A CommSec over-the-counter contract for difference or OTC CFD is an agreement with CommSec that allows you to make a profit or loss from fluctuations in the price of an underlying listed instrument or security, such as a share, without actually owning that instrument or security.
You are either entitled to be paid an amount of money, or required to pay an amount of money, depending on movements in the price or value of the underlying instrument or security.
The amount of any profit or loss made on an OTC CFD will be equal to the difference between the price of the underlying instrument or security when the OTC CFD is opened and the price of the underlying instrument or security when the OTC CFD is closed multiplied by the number of underlying instruments or securities to which the OTC CFD relates. Any profit or loss will also be affected by other payments applying to the OTC CFD such as fees, brokerage, stock borrowing charges, interest, and dividends or corporate actions on the underlying security. See Section 1.1.
The OTC CFD is issued ‘over the counter’. What does this mean?
The OTC CFD is a contract between you and CommSec. You cannot trade in the OTC CFD through a stock exchange; rather it is a private transaction between you and CommSec. Accordingly, you can only enter into the transaction by contacting CommSec. Once an OTC CFD is entered into, it can only be closed by contacting CommSec; it is not possible to close the OTC CFD by giving instructions to another broker or Australian financial services licensee.
What markets and underlying listed securities are OTC CFDs available on?
CommSec OTC CFDs are available in respect of underlying instruments or securities which are quoted on a stock exchange in Australia. In addition other international markets agreed to by CommSec are available if you elect to trade them including Hong Kong, Singapore, Japan and New Zealand. Extra market data fees may be payable in this case.
How do I open an OTC CFD account?
In order to open an OTC CFD account all applicants and authorities will need to have an existing CommSec share trading account. You can obtain an application form by contacting us on 13 15 19 or you may fill in an online application at commsec.com.au. You open an OTC CFD account by completing and signing the OTC CFD Client Agreement and returning it to CommSec or your advisor. CommSec reserves the right to refuse to open an OTC CFD account for any person. See Section 2.3.
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PRODuCT D ISCLOS u RE STATEMENT | 3
Is there a minimum OTC CFD account balance?
In order to activate your OTC CFD account you must deposit at least AuD5,000. Once the OTC CFD account has been opened there is no minimum account balance required. However, if you enter into an OTC CFD you must ensure that the amount in your OTC CFD account is sufficient to meet all payments when due. See Section 2.5.
What currency is my OTC CFD account denominated in?
You deposit Australian Dollars (AuD) into your OTC CFD account. This is all you need to trade OTC CFDs on Australian equities. A Foreign Currency Ledger is opened in the Relevant Currency for each international market in which you trade OTC CFDs. Each foreign currency balance held in your OTC CFD account is operated as a separate ledger.
How do I enter into an OTC CFD transaction?
You may do so by contacting CommSec either electronically via our Electronic Trading Platform, or by phone. See Section 2.4.
What are ‘long’ and ‘short’ positions?
Entering into a long OTC CFD position is similar to borrowing funds from CommSec to buy the underlying instruments or securities, and posting an amount of cash margin with CommSec. If you take a long position you generally profit from a rise in the underlying instrument or security’s price during the term of the OTC CFD and you generally make a loss if the underlying instrument or security’s price falls during the term of the OTC CFD.
Entering into a short OTC CFD position is similar to borrowing the underlying instrument or securities from CommSec, selling them on the market with a view to repurchasing them at a future date, and in the meantime investing the proceeds of the initial sale in a bank account, with a proportion of these proceeds being held as cash margin by CommSec. If you take a short position, you generally profit from a fall in the underlying instrument or security’s price during the term of the OTC CFD, and you make a loss if the underlying instrument or security’s price rises during the term of the OTC CFD. See Section 5.4.3.
In what currency are OTC CFD positions denominated?
The Contract Value of each OTC CFD and all debits and credits in respect of an OTC CFD and the Closing Value of an OTC CFD are denominated in the currency of the Contract Security (Relevant Currency). All debits and credits in respect of an OTC CFD are made to the Relevant Currency Ledger.
In order to determine the aggregate position of your OTC CFD account (that is, in respect of all your open OTC CFD positions), CommSec will also calculate the aggregate Gross Liquidation Value and the Free Equity of your OTC CFD account in AuD.
Examples of OTC CFDs
Some examples of OTC CFDs in respect of Australian shares and shares quoted on the Hong Kong Stock Exchange (SEHK) and Singapore Stock Exchange (SGX) are set out in Section 8.
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4 | over-The-counTer cFds
What margin is required?
There are three margin components:
• Initial Margin is payable for each OTC CFD you enter into and is determined by CommSec in its sole discretion. Initial Margin rates are generally set at 10% of the Contract Value of the OTC CFD, but these rates may vary depending on the volatility of the market for the relevant underlying security, and may go up to 100% of the Contract Value. Current rates are available from the Electronic Trading Platform. The amount of Initial Margin payable will also fluctuate daily depending on the Contract Value of the OTC CFD. Initial Margin is debited in the relevant Currency Ledger of your OTC CFD Account when you open the position.
• Variation Margin is the unrealised profit or loss on your open position and is payable in the Relevant Currency of the OTC CFD contract by you to CommSec or to you by CommSec at the end of each Business Day.
• Additional Margin will be payable by you to CommSec intra-day if your open OTC CFD position(s) move against you to the point where your OTC CFD account has Free Equity in aggregate that is negative and the amount by which it is negative is more than 5% of Gross Liquidation Value.
You must bring your account to positive Free Equity by 2 pm the next day, or such lesser time as CommSec may require. If you fail to do so, CommSec may close out open OTC CFD positions without further notice to you. CommSec will notify you that you are required to pay Additional Margin by SMS or phone or email or through account information on the Electronic Trading Platform.
The amount of Additional Margin deposited must be enough to get your account back to positive Free Equity.
See Sections 2.5 and 2.6.
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PRODuCT D ISCLOS u RE STATEMENT | 5
Daily payment of differences — Variation Margin
Variation Margin is the unrealised profit or loss on your open OTC CFD position. Variation Margin may be payable to you by CommSec, or by you to CommSec, depending on the value of your open positions at Business Close. CommSec will determine the Contract Value of the OTC CFD based on the value of the underlying instrument or security; this will normally be the closing price quoted by the exchange on which the underlying instrument or security is listed.
Variation Margin is calculated and credited or debited to your account in the Relevant Currency.
If you hold a long position and the Contract Value at Business Close is greater than the Contract Value determined on the previous Business Day, CommSec will credit you an amount equal to the increase in value. If the Contract Value at Business Close is less than the Contract Value determined on the previous Business Day, CommSec will debit you an amount equal to the decrease in value.
If you hold a short position and the Contract Value at Business Close is greater than the Contract Value determined on the previous Business Day, you will be debited an amount equal to the increase in value to CommSec. If the Contract Value at Business Close is less than the Contract Value determined on the previous Business Day, CommSec will credit you an amount equal to the decrease in value.
How are amounts paid by me?
All amounts payable by you to CommSec, for Initial Margin, Variation Margin, interest and fees, will be debited from the relevant Currency Ledger in your OTC CFD account.
You must ensure that the amount in your OTC CFD account (assessed on an aggregate basis across all Currency Ledgers) is sufficient to meet all required payments when due. If the balance in your OTC CFD account is insufficient to meet all required payments when due, CommSec may require you to transfer Additional Margin in AuD, in an amount determined by CommSec in its sole discretion, which is payable by you to CommSec by 2 pm the next day, or such lesser time as CommSec may require.
How are amounts paid to me by CommSec?
All amounts payable by CommSec to you, including interest and Variation Margin, dividends and profit, will be credited to the relevant Currency Ledger in your OTC CFD account.
Can I withdraw money from my OTC CFD account?
You may request a withdrawal from your OTC CFD account by contacting CommSec either by telephone or in writing. If CommSec receives a withdrawal request, it will determine in its absolute discretion whether to agree to such a withdrawal. You will only be able to make a withdrawal from your OTC CFD account in Australian Dollars and if you have available Free Equity in aggregate.
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6 | over-The-counTer cFds
Do I receive dividends on OTC CFD positions?
If a dividend or distribution is paid in respect of an underlying instrument or security while you hold a long position in an OTC CFD relating to that instrument or security, you will receive an amount equal to the cash dividend or distribution paid (if any) in local currency (less an amount representing any withholding tax, other local taxes or any other charges that would have been payable). The payment you receive will be based on the number of instruments or securities to which the OTC CFD relates on the Business Day immediately preceding the ex-dividend or distribution date, as applicable. The payment will not include any franking credits.
If a dividend or distribution is paid in respect of an underlying instrument or security while you hold a short position in an OTC CFD relating to that instrument or security, you must make a cash payment in local currency to CommSec equal to the value of the dividend or distribution (if any) (plus an amount representing any withholding tax, other local taxes or any other charges that would have been payable). The amount of the payment will be based on the number of instruments or securities to which the OTC CFD relates on the Business Day immediately preceding the ex-dividend or distribution date, as applicable. In some circumstances, the payment must include the value of any franking credits applicable to the dividend or distribution.
See Sections 2.8 and 2.9.
Please note that withholding tax or similar amounts may be payable for OTC CFDs relating to international securities. This may apply even if you would not have to pay this amount if you held the underlying securities directly. This is because CommSec may be required to pay these amounts. If so, we will pass on these costs to you.
For instance, if the counterparty to a Hedge position is not a resident in Singapore, withholding tax may be payable for OTC CFDs over Singapore shares. This would apply even if you were a Singapore resident who would not normally pay withholding tax were you to hold the shares directly.
When do I receive interest?
You will receive interest from CommSec:
• On positive Free Equity balances; and
• If you hold an open short position in an OTC CFD overnight, on the OTC CFD Contract Value of that open position at the applicable funding rate.
See Section 5 for further information, including the applicable funding rates.
When do I pay interest?
Interest is payable by you if:
• Any Currency Ledger in your OTC CFD account is in debit. CommSec will charge you interest on the debit balance of such Currency Ledger.
• You fail to pay any amount payable when it is due. You will be charged interest on the overdue amount at the default rate set out in Section 5.
• You hold an open long position in an OTC CFD overnight. You will be charged interest on the OTC CFD Contract Value of that open position at the applicable funding rate.
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PRODuCT D ISCLOS u RE STATEMENT | 7
What fees are payable?
Brokerage
Brokerage is charged when you enter into an OTC CFD and when you close your OTC CFD position. See Section 5.1.
Foreign currency
When you instruct us to effect a conversion from one Currency Ledger to another Currency Ledger, CommSec will charge you a fee for each conversion. This fee is in the form of a spread on the exchange rate and will not exceed 50 points. See Section 5.5.
Electronic trading charges
A subscription or royalty and software fee is charged monthly to clients who use our Electronic Trading Platform.
Market data charges are payable to the ASX. In addition, if you choose to access international markets, market data charges are payable to the exchange concerned and an access fee is payable to Reuters. No fees are charged if you elect not to log on to the trading platform during a calendar month. See Section 5.2.
Stock borrowing fee
If you enter into a short OTC CFD position you may also be charged a stock borrowing fee relating to the stock borrowing charges incurred by CommSec in hedging its exposure to your OTC CFD. See Section 5.3.
You must ensure that you have sufficient Free Equity in your OTC CFD account (assessed on an aggregate basis across all Currency Ledgers) to meet all required payments when due.
Closing an OTC CFD position
OTC CFDs will not expire. You may close an OTC CFD at any time during the trading hours of the Relevant Exchange by instructing CommSec to close your open OTC CFD position. See Section 2.6.
CommSec also has the right to close out on OTC CFD in certain circumstances. See Section 2.6.2.
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8 | over-The-counTer cFds
What are the risks of OTC CFDs?
OTC CFDs can be highly leveraged and carry a high level of risk. Highly leveraged means that using them can greatly magnify gains or losses in the underlying asset or security. You should seek independent advice and consider carefully whether OTC CFDs are appropriate for you given your experience, financial objectives, needs and circumstances.
The significant risks involved in trading OTC CFDs include:
• Returns are volatile and leveraged. The high degree of leverage possible in OTC CFDs can work against you as well as for you. The use of leverage can lead to large losses as well as large gains.
• You are exposed to the risk that CommSec becomes insolvent and is unable to meet its obligations to you or that its operations are disrupted and you cannot trade when you wish.
• Financial markets and prices of securities can change rapidly. underlying instruments or securities may be suspended from trading or have their quotations withdrawn from the exchange where they are traded. These factors will directly affect an OTC CFD’s value.
• If you are trading OTC CFDs in foreign currency, your payments, profits, losses, debits and credits are calculated in the foreign currencies that are associated with the OTC CFD. This creates a risk, as foreign exchange markets can change quickly in a short amount of time and are affected by a number of factors, such as operational delays, interest rates, political events and even suspension of currency exchange. As a result, your trades could be affected by fluctuations in currency value.
• Currency values can also change between the time you open your OTC CFD position, and the time you close it and request the balance to be converted to another currency.
• You are warned that you can sustain a loss greater than the amount required to open an OTC CFD position. In addition you could be required to pay further funds to cover losses and other fees on your open and closed OTC CFD positions.
• If the underlying security price moves against your OTC CFD position you may be required, at short notice, to deposit substantial funds with CommSec to maintain your position. If you fail to provide additional funds when required, your position may be liquidated and you will be liable for any shortfall in your OTC CFD account.
• If you place a contingent order you should be aware that if the underlying security price moves suddenly, your order may not be filled, or may be filled at a different price to that specified by you, and you may suffer losses as a result.
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PRODuCT D ISCLOS u RE STATEMENT | 9
What are the risks of OTC CFDs? (continued)
• CommSec may require the payment of additional funds within 24 hours or such lesser time as required by CommSec during the term of an OTC CFD.
• If you fail to pay, or provide security for, amounts payable to CommSec or fail to perform any obligation included in the OTC CFD Client Agreement, CommSec has extensive powers to take steps to protect its position. These powers include the power to close out positions without your agreement and the power to charge default interest. See Sections 2.14 and 2.15 for further information.
• under the OTC CFD Client Agreement you indemnify CommSec and its employees, agents and representatives against certain losses and liabilities. CommSec’s liability to you is expressly limited.
• An open OTC CFD position is a risk until it is closed. under certain conditions, it may become difficult or impossible for you to close out a position.
See Section 4 of this PDS for further information on the significant risks of investing in OTC CFDs.
What are the benefits of OTC CFDs?
You can use OTC CFDs in a number of ways with significant potential benefits, including:
• Hedging of exposure to a position in the underlying security.
• Speculation with a view to profiting from market fluctuations.
• Leverage.
• Diversification.
See Section 3 of this PDS for further information on the significant benefits of investing in OTC CFDs.
What are the taxation implications of entering into OTC CFDs?
The general Australian taxation implications of OTC CFDs offered by CommSec are set out in Section 6.
What if I need further information?
Contact your financial, legal, taxation or other professional adviser, or contact CommSec on 1300 307 853.
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10 | over-The-counTer cFds
1 inTroducTion1.1 What is an OTC CFD?An over-the-counter contract for difference (OTC CFD) is an agreement which allows you to make a profit or loss from fluctuations in the price of an underlying listed instrument or security without actually owning that security. The OTC CFD is a contract between you and CommSec. You cannot trade in the OTC CFD through a stock exchange; rather it is a private transaction between you and CommSec. Accordingly, you can only enter into the transaction by contacting CommSec. Once an OTC CFD is entered into, it can only be closed by contacting CommSec; it is not possible to close the OTC CFD by giving instructions to another broker or Australian financial services licensee.
under the OTC 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 underlying instrument or security at the time the OTC CFD was entered into and the value of the underlying instrument or security at the time the OTC CFD is closed. During the term of the OTC CFD, it will be marked to market daily against the price of the underlying instrument or security, so that at the end of each Business Day during the term of the OTC CFD, a payment will generally have to be made by you to CommSec, or to you by CommSec, to reflect any changes in the value of the underlying instrument or security during that Business Day. See Section 2.5 for more information.
OTC CFD trading 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 cash deposit (known as the Initial Margin) as collateral. The amount of the Initial Margin fluctuates daily depending on the Contract Value of the OTC CFD.
Although an OTC CFD generally replicates the price movement of the underlying instrument or security, you have no right or obligation to acquire or deliver the instrument or security itself and no other rights of shareholders of the underlying instruments or securities, such as voting rights. Although you are not directly entitled to receive any dividends or other distributions which may be paid in respect of the underlying instrument or security, certain cash adjustments may be made to your OTC CFD account on or as a result of a dividend or other distribution in respect of the underlying instrument or security (see Sections 2.8 and 2.9 for more information).
CommSec deals in OTC CFDs in respect of underlying instruments or securities which are quoted on the Australian Securities Exchange (ASX) and various International exchanges, including the Hong Kong Stock Exchange (SEHK), the Singapore Stock Exchange (SGX), the Tokyo Stock Exchange (TSE) and the New Zealand Exchange (NZX).
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1.2 Who trades OTC CFDs and why?OTC CFDs are highly leveraged products that carry significant risk. They are traded by investors who are experienced in equity derivatives and understand and are comfortable with the risks of investing in OTC CFDs. Investors matching this profile may use OTC CFDs for a variety of reasons which may include:
Hedging Others trade OTC CFDs to hedge their exposure to the underlying instrument or security. For example, OTC CFDs can be used as a risk management tool to enable those with existing holdings of underlying shares to help reduce exposure to loss when the price falls by taking a short OTC CFD position. If the price of the underlying shares the investor holds falls, the short OTC CFD position will wholly or partly offset the losses incurred on the physical holdings.
Speculation Some people trade to speculate with a view to profiting from fluctuations in the price or value of the underlying instrument or security. For example, share OTC CFD traders may be short-term investors who are looking to profit from intra-day and overnight market movements in the underlying shares. OTC CFD traders may not wish to sell or purchase the underlying shares themselves, but may instead be looking to profit* from market movements in the shares concerned.
Diversification Trading OTC CFDs may potentially offer greater portfolio diversification through exposure to different asset classes such as foreign exchange and international equity markets.
Leverage OTC CFDs also allow people to trade on a leveraged basis. You are able to outlay a relatively small amount (in the form of an Initial Margin) to secure exposure to the underlying security.
*The risk of loss in trading in derivatives or leveraged products can be substantial. You should carefully consider whether trading in such products is appropriate for you in light of your objectives, financial situation and needs.
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2 oTc cFds issued bY commsec
2.1 The issuerThe OTC CFDs referred to in this PDS are issued by CommSec.
2.2 Significant characteristics
Minimum OTC CFD account opening balance
AuD5,000 (or equivalent amount in either HKD, SGD, JPY, uSD, NZD, EuR or such other currency agreed to by CommSec).
OTC CFD Account currency
The base currency of your account is Australian Dollars. This is all that is required to trade Australian OTC CFDs. If you trade international OTC CFDs we will open Foreign Currency Ledgers as required. Each foreign currency is operated as a separate Currency Ledger.
Underlying instruments or securities
The underlying instruments or securities may be shares or any other financial products quoted on the ASX, SEHK, SGX, TSE, NZX, or any other market or exchange in or outside Australia approved for OTC CFD trading by CommSec.
OTC CFD Contract Value
As at any Business Day, the OTC CFD Contract Value is the Contract Security Price multiplied by the Contract Quantity. The OTC CFD Contract Value is denominated in the currency of the Contract Security.
OTC CFD profit or loss
The OTC CFD profit or loss is the difference between the OTC CFD Contract Value when the OTC CFD is entered into and the OTC CFD Contract Value when the OTC CFD is closed. Whether you make a profit or loss in the Relevant Currency will depend on whether you take a short or long position and the movement in the value of the underlying instrument or security. Any profit or loss will also be affected by other payments applying to OTC CFDs such as dividends, fees, brokerages, stock borrowing charges and interest and will also be affected by foreign exchange rates for international OTC CFDs.
Initial Margin Initial Margin rates are generally set at 10% of the Contract Value of the OTC CFD. However, these rates may vary depending on the volatility of the market and may go up to 100% of the OTC CFD Contract Value. CommSec may determine the Initial Margin rate in its sole discretion. Initial Margins are debited in AuD from your OTC CFD account when you open an OTC CFD and credited to the currency of the OTC CFD contract. On closure of the OTC CFD they are released and credited back to AuD.
Variation Margin An amount will be payable by you to CommSec or by CommSec to you on each Business Day based on the difference between the Contract Value at Business Close on that Business Day, valued against the Contract Value at Business Close on the previous Business Day. Variation Margins are calculated and credited to your account in the currency of the OTC CFD.
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Interest rates or funding rates
There are four interest rates (or funding rates) applicable to an OTC CFD, as follows. Each is set by CommSec and communicated to you by CommSec or your adviser when you open your OTC CFD account and at any time CommSec varies any of the rates applicable to you.
• Interest rate paid by CommSec to you on OTC CFD account credit balances. In respect of an AuD credit balance which constitutes Free Equity, the interest rate is the overnight cash rate published by the Reserve Bank of Australia (RBA Rate) minus a maximum of 3.5% pa (see Section 5.4.1). In respect of a foreign currency credit balance which constitutes Free Equity, the interest rate is determined by CommSec in its sole discretion. It will depend on the currency money market rate in the jurisdiction of the currency (Applicable Base Rate), as well as the rate notified to CommSec by the Hedger minus a maximum of 3.5% pa.
• Interest rate charged by CommSec to you on OTC CFD account debit balances. In respect of AuD debit balances the interest rate is the overnight cash rate published by the RBA plus a maximum of 4% pa. For foreign currency debit balances, the interest rate is the current Applicable Base Rate plus a maximum of 4% per annum (see Section 5.4.1).
• Default interest rate paid by you to CommSec on any unpaid amount due by you to CommSec. This is the overnight cash rate published by the RBA plus a maximum of 3% pa (see Section 5.4.2). This is charged separately for each currency in which an amount is owed.
• Funding rate paid by CommSec to you on short open positions or by you to CommSec on open long positions. This is the overnight cash rate published by the RBA plus or minus a maximum of 3% pa (see Section 5.4.3).
Contract expiry OTC CFDs have no expiry date.
Closing out an OTC CFD by you
OTC CFDs can generally be closed out at any time during the trading hours of the market on which the underlying instrument or security is quoted, subject to CommSec giving you a quote for the Closing Price of the OTC CFD and you agreeing to accept that Closing Price. See Section 2.6.1.
Closing out an OTC CFD by CommSec
CommSec has the right to close out an OTC CFD in certain circumstances. These include:
• The occurrence of certain events in relation to the underlying instrument or security (see Sections 2.6.2, 2.7 and 2.11).
• Where a default event occurs in relation to you, as set out in Section 2.14.
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2.3 Opening an OTC CFD accountBefore you enter into any OTC CFD with CommSec you will be required to enter into the standard terms and conditions for OTC CFD trading (please refer to the OTC CFD Client Agreement) and open an OTC CFD account. You open an OTC CFD account by completing and signing the OTC CFD Client Agreement and returning it to CommSec or your adviser. Copies of those documents are available at commsec.com.au or from your adviser. CommSec reserves the right to refuse to open an OTC CFD account for any person. You must pass a client Knowledge Test and deposit at least AuD5,000 into your OTC CFD account to activate it. All applicants and authorities on the OTC CFD account must also have a CommSec share trading account. If a share trading account does not exist, an online application may be completed at commsec.com.au.
2.4 Establishing an OTC CFD positionTo enter into an OTC CFD transaction (by opening or establishing an OTC CFD position), you can contact CommSec via our Electronic Trading Platform or by phone to determine the price of an underlying instrument or security. You select the relevant underlying instrument or security in relation to which you want to enter into an OTC CFD. The total OTC CFD Contract Value is then determined by multiplying the number of underlying instruments or securities to which the OTC CFD applies by the price of the underlying instrument or security quoted on the Relevant Exchange. CommSec will inform you of the relevant price and the Initial Margin rate and you may make an offer to enter into an OTC CFD transaction with CommSec based on that price. You must provide the Initial Margin before your position will be opened.
You may only offer to enter into an OTC CFD with CommSec and establish an OTC CFD position during the trading hours of the Relevant Exchange on a Local Business Day. CommSec will confirm any OTC CFD transaction it enters into with you.
under the OTC CFD Client Agreement, CommSec has sole discretion whether or not to accept an offer from you to enter into an OTC CFD. CommSec may refuse to enter into an OTC CFD for a variety of reasons, including, for example, where you have exceeded limits imposed by CommSec on your OTC CFD account or where CommSec does not hold sufficient cleared funds from you for the amount of the Initial Margin.
CommSec may at any time notify you of an exposure limit beyond which you may not be authorised to enter into further OTC CFDs.
You can take both long and short OTC CFD positions. If you take a long position, you profit from a rise in the underlying instrument or security’s price, and you will make a loss if the underlying instrument or security’s price falls. Conversely, if you take a short position, you profit from a fall in the underlying instrument or security’s price, and you make a loss if the underlying instrument or security’s price rises.
The Contract Value of an OTC CFD, all debits and credits in relation to an OTC CFD and the Closing Value of an OTC CFD are denominated in the Relevant Currency. When you first open an international OTC CFD position, if you don’t have a Currency Ledger balance in your OTC CFD account, CommSec will establish one in the Relevant Currency. This is in order to record all debits and credits regarding your open OTC CFD positions in this currency. Any credits we make, or funds you hold in, your OTC CFD account in a Relevant Currency will be recorded in the Currency Ledger.
Some of the Relevant Exchanges have rules which state that some contracts can only be purchased in specified amounts. Please see the CommSec OTC CFD Country Guide, which can be downloaded from commsec.com.au, for more information.
You will be charged brokerage on establishing an OTC CFD position. See Section 5.1.
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2.5 Margins and free equity
2.5.1 MARGInS
Entry into OTC CFDs involves the payment of a margin. There are three margin components:
Initial Margin The Initial Margin which is payable for an OTC CFD will fluctuate daily depending on the Contract Value of the OTC CFD and will be debited from your OTC CFD account in the Relevant Currency. It will be converted to the currency of the OTC CFD. The Initial Margin represents the security deposit that you are required to provide to CommSec when you first open an OTC CFD position and that you must maintain throughout the term of an OTC CFD. The Initial Margin rate applicable to each OTC CFD is determined by CommSec in its sole discretion. It is typically 10% of the Contract Value of the OTC CFD but may be as low as 5% or as high as 100% of the Contract Value depending on the volatility of the relevant market and the liquidity of the underlying instrument or security. On closure of the OTC CFD it is credited back and you may request that any non-AuD excess be converted back to AuD.
An indication of the Initial Margin which may apply to certain types of OTC CFD transactions can be obtained from our Electronic Trading Platform or the CommSec web site at commsec.com.au, or by calling 1300 307 853 or your adviser.
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Variation Margin The Variation Margin is the unrealised profit or loss on your open position in its Relevant Currency.
Following Business Close during the term of an OTC CFD, CommSec (as the calculation agent) will determine the Contract Value of the OTC CFD as at Business Close on that Business Day. This will ordinarily be determined by the closing price quoted by the Relevant Exchange. Where CommSec determines that the closing price cannot be determined on that basis, it will determine the value in its discretion. Where trading in the underlying instrument or security is suspended or halted by the Relevant Exchange, the OTC CFD position will be valued and a closing price will be determined by CommSec in its sole discretion.
If the Contract Value at Business Close on a Business Day is greater than the Contract Value determined at Business Close on the previous Business Day and you hold a long position in the OTC CFD, CommSec will credit the difference between the Contract Values to the relevant Currency Ledger in your OTC CFD account. If the Contract Value is less than the Contract Value as at Business Close on the previous Business Day, CommSec will debit the difference between the Contract Values from the relevant Currency Ledger in your OTC CFD account.
If the Contract Value at Business Close on a Business Day is greater than the Contract Value determined at Business Close on the previous Business Day, and you hold a short position in the OTC CFD, CommSec will debit the difference between the values from the relevant Currency Ledger in your OTC CFD account. If the Contract Value is less than the Contract Value at Business Close on the previous Business Day and you hold a short position, CommSec will credit the difference between the Contract Values to the relevant Currency Ledger in your OTC CFD account.
Any such amounts debited or credited to your account are referred to as Variation Margin.
When a payment for Variation Margin is made, CommSec will credit to the Relevant Currency Ledger in your OTC CFD account any amount payable by CommSec. If an amount is payable by you, CommSec will debit that amount from the Relevant Currency Ledger in your OTC CFD account. If the aggregate funds in your OTC CFD account are insufficient to cover any amount payable by you, you must pay to CommSec the specified amount in AuD in cleared funds within 24 hours (or such lesser time as CommSec may determine) of being advised of that amount payable.
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Additional Margin You may be required to pay Additional Margin during the term of the OTC CFD contract, in addition to the Initial Margin and Variation Margin. If your OTC CFD account in aggregate has Free Equity that is negative, and the amount that it is negative by is greater than 5% of Gross Liquidation Value (GLV), you will have to pay an Additional Margin (a margin call). You must pay the Additional Margin in AuD. You must pay sufficient Additional Margin to return your OTC CFD account to a position where Free Equity is positive. See Example 2.5.4.
CommSec will notify you that you are required to pay Additional Margin by SMS or phone or email or through account information on the Electronic Trading Platform.
Margin calls for Additional Margin must be met by 2 pm the next day, or such lesser time as CommSec may require. In some situations CommSec may require payment within a shorter time period (for example, when there is unusual volatility). If you fail to make margin payments in respect of Additional Margin within the time specified by CommSec, CommSec may close out open OTC CFD positions without further notice to you. Alternatively, CommSec may partially close out an open OTC CFD position by closing it out in respect of some (but not all) of the underlying instruments or securities to which the OTC CFD applies without further notice to you. For example, if you have an open long position in respect of an OTC CFD where the underlying security is 1,000 shares in XYZ Ltd, CommSec may close out your position in relation to 500 of the underlying shares in XYZ Ltd and the OTC CFD will remain open in respect of the remaining 500 shares in XYZ Ltd.
2.5.2 GROSS LIqUIDATIOn VALUE
The Gross Liquidation Value (GLV) is the amount of money you would have in your OTC CFD account if you closed out all positions at the current market price (excluding any transaction charges or adjustments). This is calculated by CommSec on an aggregate basis across all your open OTC CFD positions and in AuD.
2.5.3 FREE EqUITy
The Free Equity balance of your account is the aggregate GLV less any margin. Free Equity can be used to enter into further OTC CFD positions or can be withdrawn from your OTC CFD account (in AuD) if CommSec consents in its discretion to such a withdrawal.
2.5.4 ExAMPLE — ADDITIOnAL MARGIn (MARGIn CALL)
Sophie is a sophisticated trader. She wants to purchase 5,000 XYZ Ltd shares in expectation of a favourable interim results announcement due in two days.
Sophie buys 5,000 XYZ Ltd OTC CFDs at $20, requiring an Initial Margin deposit of 5% ($5,000). Brokerage is 0.125%.
In the first day of trading, the market trades significantly down. Sophie’s Free Equity moves into negative, and she receives a call for Additional Margin (a margin call) from CommSec’s OTC CFD desk when the amount of her negative Free Equity reaches more than 5% of the Gross Liquidation Value of her position.
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Note that Additional Margin is not the same as Variation Margin. Variation Margin is the profit or loss on your position at the end of the day, and payment of Variation Margin may be due from you to CommSec or CommSec to you. The amount of Additional Margin that you must deposit to your account when intra-day movements on the market have moved your Free Equity to negative by more than 5% of the Gross Liquidation Value of your position is that required to bring Free Equity back to a positive amount.
Item Interest rate Amount notes
Open long position
Time of trade 10.35 am
Buy quantity 5,000
Price $20.00
Contract Value $100,000 Buy quantity x Price
Initial Margin 5% ($5,000) Contract Value x Initial Margin rate
Brokerage 0.125% ($125) Contract Value x Brokerage
GST $0
Initial outlay ($5,125) Initial Margin + Brokerage
Market moves against position
Time of trade 2:23 pm
Price $19.60
Contract Value $98,000 Buy quantity x last traded Price
Sophie’s OTC CFD account will have the following entries (assuming Sophie does not enter into any other OTC CFD transactions).
Description Total cash Additional Margin
Gross Liquidation Value
Initial Margin
Free Equity
Day 1
Deposit on opening of account
$6,000 $6,000
Order filled at $20 $6,000 $5,000 $1,000
Brokerage posted (debit $125)
$5,875 $875
Price of XYZ Ltd at 2:23 pm is $19.60
$5,875 $2,000 payable by Sophie
$3,875 $4,900 ($1,025)
Sophie needs to provide at least an additional $1,025 to be taken out of margin call. To create positive Free Equity she will need to provide more than that amount.
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2.6 Closing an OTC CFDOTC CFDs do not have an expiry date. Rather, they remain open until they are closed in accordance with the terms of the OTC CFD Client Agreement.
2.6.1 WHEn yOU WISH TO CLOSE An OTC CFD
Since the OTC CFDs are issued by CommSec over the counter and not through a stock exchange, the OTC CFD is a contract between you and CommSec and can only be closed in accordance with the terms of the OTC CFD Client Agreement or as otherwise agreed between you and CommSec. It is not possible to close the OTC CFD by giving instructions to another broker or Australian financial services licensee. To close an OTC CFD position you should contact CommSec, either by telephone or by our Electronic Trading Platform, on a Local Business Day during market hours of the Relevant Exchange, to determine the current market price quoted on the Relevant Exchange for the underlying instrument or security. CommSec will confirm the current market price and you will then decide whether to accept the price and, if so, you will instruct CommSec to close your open position on the basis of that price. The total closing value is then determined by multiplying the number of underlying instruments or securities to which the OTC CFD applies by the price of the underlying instrument or security.
You may not be able to close out an OTC CFD if there is a suspension of trading or a trading halt in respect of the underlying instrument or security to which an OTC CFD applies. In such a circumstance, CommSec may decide in its absolute discretion not to close an OTC CFD. See Section 2.11 for further information.
2.6.2 WHEn COMMSEC WILL CLOSE OUT yOUR OTC CFD
CommSec has the right to close out an OTC CFD in certain circumstances, including:
• Where certain events in relation to the underlying instrument or security occur (see, for example, Sections 2.7 and 2.11);
• Where the Gross Liquidation Value (GLV) in your account falls below $1,000 or 1% of the Contract Value;
• Where Free Equity is negative and the amount by which it is negative is greater than 50% of Gross Liquidation Value;
• Where Gross Liquidation Value is less than 35% of Initial Margin;
• Where a default event occurs in relation to you, as set out in Section 2.14;
• Where the Hedger is no longer able to maintain the Hedge position; or
• Where you have breached any exposure limit set by CommSec.
For example, in the case of short OTC CFDs, where the Hedger has entered into a stock lending agreement, if it is no longer possible to borrow stock or the lender recalls the stock under the relevant stock lending agreement, CommSec has the right to close out the OTC CFD to which such Hedge Position relates, at any time.
Refer to the OTC CFD Client Agreement for further information.
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2.6.3 COnSEqUEnCES OF CLOSInG An OTC CFD
As at Business Close on the day that the OTC CFD is closed out, CommSec will calculate the remaining payment rights and obligations based on the difference between the Closing Value of the OTC CFD and the Open Contract Value of the OTC CFD. The amount payable by you to CommSec or by CommSec to you on close-out of the OTC CFD will be determined by CommSec 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 OTC CFD account in respect of that OTC CFD.
CommSec will credit to the Relevant Currency Ledger in your account any amounts payable by CommSec to you. In the event there is a corporate action affecting the underlying security at the time you close an OTC CFD, there may be a delay in CommSec crediting your account until the effect of the corporate action is determined.
If an amount is payable by you to CommSec it will be debited from your OTC CFD account. If you don’t have a credit balance in the Relevant Currency Ledger or the funds in your OTC CFD account are insufficient to cover the payment, you must pay the amount owing to CommSec within 24 hours of being advised (or within such lesser period as CommSec may determine in its discretion). You should note that CommSec may set off any money owed to you under the OTC CFD Client Agreement or any other agreement against any money owed by you to CommSec.
The determination of the date on which an OTC CFD is closed and the Closing Value of an OTC CFD may be affected by certain events including, but not limited to:
• If the OTC CFD is over shares in a company which becomes externally administered, the OTC CFD is generally taken to be closed upon the appointment of an external administrator under the provisions of the Corporations Act. However, if the company continues to exist and CommSec can determine a Closing Price having regard to any factors it considers appropriate, including, for example, the last traded price of the underlying instrument, the OTC CFD may continue.
• If the OTC CFD is over an instrument or security which ceases to be quoted on the Relevant Exchange or which is suspended from quotation for three or more consecutive Local Business Days (or such lesser period as may be agreed with you), CommSec may elect to close the OTC CFD, or call for Additional Margin (as determined by CommSec), or both. If CommSec elects to close the OTC CFD, CommSec will determine the Closing Price and, in making such a determination, will, in its discretion, have regard to a number of factors including the last traded price of the underlying instrument or security on the Relevant Exchange.
• If the OTC CFD is over shares in a company which becomes the subject of a takeover offer, CommSec may give notice of its intention to close the OTC CFD. If this happens, CommSec will determine the Closing Price in its discretion. The Closing Price will usually be determined based on the terms of the takeover offer.
• If the OTC CFD is over an instrument or security in respect of which there is a suspension of trading or a trading halt on the Relevant Exchange, CommSec will determine the Closing Price in its discretion. If you hold a long position, the Closing Price determined by CommSec 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 OTC CFD, you will be required to pay CommSec an amount representing the Contract Value of the underlying instrument or securities at the time you opened the OTC CFD.
• If an amount payable by you in relation to an OTC CFD exceeds 50% of the Initial Margin in respect of that OTC CFD, CommSec may close out the OTC CFD as if a default event has occurred. For further information on default events, see Section 2.14.
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2.6.4 CURREnCy COnVERSIOnS
If an amount is payable by CommSec to you on the close-out of an OTC CFD, CommSec will credit this amount to the Relevant Currency Ledger for that OTC CFD position. Where this is not AuD you may then request CommSec to transfer the amount to AuD.
These conversions will involve the entry into foreign exchange contracts within the meaning of the Corporations Act. CommSec will arrange these.
Any conversion will be at the Exchange Rate quoted by CommSec. CommSec will charge you a fee in respect of each conversion which will be debited from your OTC CFD account. See Section 5.5.
2.7 Adjustments for corporate actionsWhen an underlying security is affected by a corporate action (such as a special dividend, subdivision, consolidation, bonus issue of shares, or any analogous event which dilutes or concentrates the value of the underlying security), or if any other event occurs in respect of which CommSec determines in its discretion that an adjustment is appropriate, CommSec has a broad discretion to deal with your orders and OTC CFD positions and may vary the terms of your orders and OTC CFDs. under the terms of the OTC CFD Client Agreement, CommSec may determine the appropriate adjustment to the Contract Value of an underlying security which is affected by a corporate action or other adjustment event, the related quantity of securities to which the OTC CFD relates, or both. Any determination CommSec makes in relation to corporate actions is binding on you. You should be aware that if CommSec determines that it is not reasonably practicable in the circumstances to make an adjustment to the OTC CFD, CommSec may give you notice of its intention to close the OTC CFD.
2.8 Dividends and distributionsHolders of long OTC CFD positions receive from CommSec the value of cash dividends or distributions (without franking credits, if applicable) paid to holders of the underlying instrument or security. The amount you receive is based on the number of securities to which the OTC CFD relates at Business Close on the Business Day immediately preceding the ex-dividend or distribution date.
Holders of short OTC CFD positions must make a cash payment in the Relevant Currency to CommSec equal to the value of the dividend or distribution (plus, in some circumstances, the value of any franking credits applicable to that dividend or distribution) paid to the holders of the underlying instrument or security. The amount of the payment is based on the number of securities to which the OTC CFD relates at Business Close on the Business Day immediately preceding the ex-dividend or distribution date.
Amounts referred to above will be debited or credited, as applicable, by CommSec as soon as reasonably practicable following the relevant ex-dividend date, and this may take up to 10 Sydney Business Days to effect.
In some cases withholding tax or similar amounts may be payable even if you would not be required to pay such amounts if you were to hold the underlying securities directly. That is because either CommSec or the Hedger may be required to pay such amounts, the cost of which will be passed on to you. For example, if the Hedger is not resident in Singapore, withholding tax may be payable in relation to CFDs over Singapore shares, even if you are a Singapore resident who would not pay withholding tax were you to hold the shares directly.
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2.9 Imputation credits on dividendsWhere you hold a short OTC CFD position in relation to an Australian-based underlying instrument or security, CommSec will make a reasonable endeavour to hedge CommSec’s exposure to that short position by borrowing stock from an offshore lender who is not a resident of Australia for Australian tax purposes. However, if offshore borrowing is unavailable and an Australian-based underlying instrument or security pays a franked dividend or a distribution which includes a franked dividend, the relevant dividend amount debited to your OTC CFD account will include the value of any related franking credit, as well as the value of the cash dividend.
2.10 Contingent ordersContingent orders are orders that you can create which will be placed in the market when specific market conditions are met. For example, you can create a contingent order to sell when a security falls to a certain price. This is known as a ‘Stop Loss’ order, and may be used to help manage your OTC CFD positions. You must be aware, however, that contingent orders are not guaranteed. It the underlying security price moves suddenly, your order may not be filled, or may be filled at a different price to that specified by you, and you may suffer losses as a result.
You should note that when you place contingent orders on the Electronic Trading Platform, there may be a number of reasons (including technical reasons or restrictions or requirements which may apply in a particular jurisdiction) which may mean that your contingent order is not processed, even though the parameters of the order may have been met. Therefore you should monitor whether your contingent order is processed and contact CommSec if you believe your order has not been processed. CommSec will not be liable for any contingent orders which are not processed.
2.11 Trading halts, suspensions and delistingsAn underlying instrument or security may be placed in a trading halt on the Relevant Exchange in various circumstances. Additionally, a security may be suspended or delisted in certain circumstances. CommSec may, in its absolute discretion, cancel your order in respect of an OTC CFD transaction which has not yet been opened, or close any open OTC CFD, where the underlying instrument or security is the subject of a trading halt or suspension, or is delisted. In addition, as set out in Section 2.6 above, if the OTC CFD is over an instrument or security which ceases to be quoted on the Relevant Exchange or is suspended from quotation for three consecutive Local Business Days on that exchange (or such lesser period agreed between you and CommSec), CommSec may elect to close the OTC CFD.
2.12 Stock bansCommSec may at any time determine, in its absolute discretion, that it will not permit the entry into OTC CFDs over one or more underlying financial instruments or securities.
2.13 Voting rightsOTC CFDs do not entitle you to any voting rights in connection with the underlying instrument or security.
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2.14 Default powersCommSec has extensive powers under the OTC CFD Client Agreement to take action if a range of default events occur. Default events include situations where:
• Any money owing by you under the OTC CFD Client Agreement or any other agreement, or owing by you on any other account you hold with CommSec, is not paid to CommSec when it is due.
• You fail to duly and punctually perform and observe any obligation under the OTC CFD Client Agreement or any other agreement, or any obligation you have on any account you hold with CommSec.
• 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, a receiver and manager or administrator is appointed to you or any of your assets.
• 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.
• Any security created by any mortgage or charge binding upon you or your assets becomes enforceable and the mortgagee or chargee takes steps to enforce the security.
• Any guarantee of or security for your obligations is, without the consent of CommSec, withdrawn or becomes defective or insufficient.
• Any of your debts become immediately due and payable, or become capable of being declared due and payable, before their stated maturity, by reason of your or any other person’s default.
• You are not contactable by telephone for 24 hours in order for CommSec to obtain instructions with respect to an OTC CFD and you do not make alternative arrangements.
• You are in breach of any exposure limit set by CommSec.
If any default event occurs in relation to you, CommSec has the right and power (but not the obligation) to take any one or more of the following actions without giving you prior notice:
• Terminate the OTC CFD Client Agreement.
• Close out all or any of your OTC CFD positions.
• Treat all or any OTC CFDs as having been closed out by you.
• Terminate any other agreement between you and CommSec or any other CommSec account.
• Cancel any outstanding orders in order to close your OTC CFD account or other accounts.
• Satisfy any obligation you have to CommSec out of any property, money or security belonging to you in CommSec’s control or custody.
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• Satisfy any obligation you have to CommSec by transferring funds from your other accounts with CommSec.
• Exercise any other power or right which CommSec may have under the OTC CFD Client Agreement or in law or in equity, or take such other action as a reasonably prudent financial services licensee would take in the circumstances.
2.15 Rights of CommSecCommSec may at any time, without notice to you, apply all or part of any monies held by CommSec in your OTC CFD account in such manner as CommSec thinks fit. CommSec may also combine or consolidate all or any of your accounts held with CommSec and it may convert any currency held by you into a currency in which a payment is due by you in order to settle any payments that are due.
For the purpose of determining any amount in AuD (including, without limitation, the GLV or Free Equity in your OTC CFD account) or any other currency in connection with an OTC CFD, CommSec may convert any amount into another currency. CommSec may use any widely recognised and published foreign exchange rate selected in its sole discretion. In the absence of any obvious error, such conversions will be binding on you and CommSec.
2.16 HedgingCommSec may hedge the exposure it has to clients under OTC CFDs by entering into back-to-back OTC CFD contracts with an external party (the Hedger).
2.17 Termination of the OTC CFD Client AgreementEither you or CommSec may terminate the OTC CFD Client Agreement by giving two Business Days notice. The OTC CFD Client Agreement will continue to apply in relation to any open OTC CFDs, but you must notify CommSec within five Business Days of the date of termination of the OTC CFD Client Agreement that you wish to close all existing OTC CFDs. If any OTC CFD is not closed out within five Business Days, CommSec may close out that OTC CFD as if a default event had occurred.
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3 beneFiTsPotential benefits of OTC CFDs may include:
Hedging You can use OTC CFDs to hedge exposure to a position in the underlying instrument or security.
Speculation You can use OTC CFDs for speculation with a view to profiting from market fluctuations. OTC CFDs allow you to take a position with exposure to a particular underlying instrument or security without the need to buy or sell the underlying instrument or security.
Diversification You have potential for greater portfolio diversification when trading OTC CFDs over foreign securities through exposure to different asset classes (FX, commodities, Australian equities and international equity markets).
Leverage OTC CFDs involve a high degree of leverage. OTC CFDs enable you to outlay a relatively small amount of money (in the form of Initial Margin) to secure exposure to the underlying instrument or security.
For example, if you have a positive view about the prospects of XYZ Ltd, you can either buy 10,000 XYZ Ltd shares at $1.00 and pay your broker $10,000 (plus costs), or you could buy the XYZ Ltd OTC CFD and use an Initial Margin at the time the OTC CFD is entered into of, for example, 10% or $1,000, plus costs. (Note that the amount of Initial Margin will fluctuate depending on the Contract Value of the OTC CFD and could increase or decrease.) For the experienced investor, this leverage provides an attractive means of gaining exposure to the performance of the underlying instrument or security without the need to invest in the physical product.
This leverage can work against you as well as for you. The use of leverage can lead to large losses as well as large gains. See Section 4 for further information on risks.
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4 risksInvestment in OTC CFDs is speculative and carries a high level of risk. Returns are volatile. You should seek independent advice and consider carefully whether OTC CFDs are appropriate for you given your experience, financial objectives, needs and circumstances.
Some of the significant risks involved in trading OTC CFDs include:
Credit risk You are subject to CommSec’s credit risk. If CommSec were to become insolvent, it might be unable to meet its obligations to you.
Operational risk Operational risk is inherent in every OTC CFD transaction. For example, disruptions in CommSec’s or the Hedger’s operational processes (such as communications, computers and computer networks) or external events may lead to delays in the execution and settlement of a transaction.
External market forces
Financial markets can change rapidly. Prices of instruments and securities, including shares, depend on a number of factors, such as interest rates, demand and supply, actions by the company or issuer concerned and actions of government. International share markets may be more volatile than the Australian market, particularly developing markets. In some cases underlying instruments or securities may be suspended from trading or have their quotations withdrawn from the exchange where they are traded. These factors will directly affect an OTC CFD’s value.
Loss of margin
(your collateral)
You could sustain a loss substantially greater than the Initial Margin required to establish and maintain an OTC CFD position. In addition you could be required to pay further funds representing losses and other fees on your open and closed OTC CFD positions. For example, if the Initial Margin for an OTC CFD position in respect of XYZ shares is $1,000, and the market moves against your position, the effect of leverage magnifies losses and you could lose far more than the initial $1,000 you outlaid to open the position.
Payment of losses and Variation Margin
If the underlying instrument or security price moves against your OTC CFD position, you may be required, at short notice, to deposit a Variation Margin with CommSec in order to maintain your position. The amount of the Variation Margin may be substantial. If you fail to provide those additional funds when required, your position may be liquidated at a loss and you will be liable for any shortfall in your OTC CFD account resulting from that failure. Positions are marked to market on a daily basis with payments being settled daily to account for market movements.
Additional Margin CommSec may require the payment of Additional Margin during the term of an OTC CFD, in addition to the Initial Margin and Variation Margin. Additional Margin must be paid to CommSec within 24 hours or such lesser time as required by CommSec.
Leverage The high degree of leverage that is involved in OTC CFDs because of small margin requirements can work against you as well as for you. The use of leverage can lead to large losses as well as large gains.
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CommSec’s powers on default, indemnities and limitations on liability
If you fail to pay or provide security for amounts payable to CommSec, or fail to perform any obligation included in the OTC CFD Client Agreement, CommSec has extensive powers to take steps to protect its position. These powers include the power to close out positions and the power to charge default interest. See Section 2.14 for further information. under the OTC CFD Client Agreement you also indemnify CommSec and its employees, agents and representatives against certain losses and liabilities. Further, CommSec’s liability to you is expressly limited as set out in the OTC CFD Client Agreement. You should read the OTC CFD Client Agreement carefully to understand these matters.
Liquidity under certain conditions, it may become difficult or impossible for you to close out a position. This can happen when there is a significant change in the underlying share price over a short period. Also, if you close an OTC CFD while the underlying security is subject to a corporate action, there may be a delay before any proceeds are credited to your account. Some international markets may have lower trading volumes than the primary international markets. This may increase the risk that the liquidity of a Contract Security is decreased or removed.
Political risk Political changes in a country can have a significant impact on the value of instruments or securities quoted on an exchange in such country. Political risks may arise, for example, from a change in government, change in economic policy, trade restrictions, nationalisation of industries or instability in the region.
Regulatory environment
The level of government regulation in a country in which a Contract Security is quoted may be less than the level of regulation which applies in Australia. This may lead to increased fluctuations in, and may adversely affect, the value of a Contract Security.
Interest rate fluctuations
The interest and funding rates that are payable in relation to your OTC CFD account balance and open OTC CFD positions will be affected by fluctuations in the applicable interest rate.
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Local market taxes By entering into an OTC CFD you may be affected by local market taxes such as withholding tax, stamp duty and other charges that may apply to the Contract Security. These taxes and charges will affect the payments that you need to make, or are entitled to receive, in respect of an OTC CFD. The amount of any local taxes and whether they are applicable may depend on a number of factors such as the financial market in which the Relevant Exchange is located, the Relevant Exchange and the Contract Security itself.
When entering into a Hedge Position, CommSec or the Hedger may be subject to local taxes and charges, including withholding tax, in respect of that Hedge Position. CommSec may charge you for any such charges and taxes.
In relation to withholding taxes, you should note that in certain circumstances you may need to pay CommSec up to 100% of applicable withholding taxes. The amount of tax you will need to pay may depend on the factors mentioned above, and on CommSec’s counterparty to the Hedge Position, as well as the location of CommSec’s counterparty to any Hedge Position (see also Section 2.8).
As at the date of this PDS, the withholding tax rates which will apply to dividend and interest payments for OTC CFDs where the Contract Security is quoted on the ASX, SEHK, SGX, TSE or NZX are generally 15% for dividends and 10% for interest but may be up to 50% of such dividend and interest amounts. As described in the above paragraph, CommSec may charge you up to 100% of the applicable withholding taxes on dividends and interest that CommSec has to pay in respect of a Hedge Position, which may be up to 50% of the dividend and interest amounts.
This PDS does not provide advice in respect of withholding tax. You should make your own inquiries as to the amount of withholding tax which may be payable.
Foreign exchange exposure
When you enter into an OTC CFD, all Initial Margin, Variation Margin, profits, losses, debits and credits that relate to the OTC CFD are calculated, and are payable, in the Relevant Currency. Accordingly you will be exposed to foreign exchange rate fluctuations during the term of an international OTC CFD.
In addition, upon closing an OTC CFD position you will be able to request that the foreign currency balance is converted to AuD or another foreign currency agreed to by CommSec. Any conversion will be at the Exchange Rate quoted by CommSec. until the foreign currency balance is converted to AuD or another currency at your request, fluctuations in the relevant foreign exchange rate may affect your ultimate profit or loss made on the OTC CFD position in AuD or other currency. See Section 8.3 for illustrations of this.
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Foreign exchange exposure (continued)
Dealing in foreign currency-related transactions can expose you to foreign exchange risks between the time the transaction is entered into and the time the relevant conversion of currencies occurs. Foreign exchange markets can change rapidly. Exchange rates depend on a number of factors including, for example, interest rates, currency supply and demand and actions of government. In some situations, exchanges of currency may be suspended. There is always operational risk in a foreign exchange transaction. For example, disruptions in our operational processes, such as communications, computers and computer networks, or external events may lead to delays in the execution and settlement of a transaction. You should be aware of these risks when considering OTC CFD transactions.
Involuntary close-out
CommSec has the right to close out an OTC CFD without your agreement in a number of circumstances. See Section 2.6.2 for further information. Accordingly, you may not be able to anticipate or control the time at which an OTC CFD position is closed out. It is possible that close-out may occur when you have insufficient funds in your OTC CFD account to cover payment of any amounts payable by you, based on the difference between the Closing Value of the OTC CFD and the Contract Value of the OTC CFD at Business Close on the previous Business Day (including interest and any other credits and debits).
Contingent orders Contingent orders such as stop loss orders are not guaranteed. If the underlying security price moves suddenly, your order may not be filled, or may be filled at a different price to that specified by you. You may suffer losses as a result.
In addition, due to technical reasons or other restrictions which apply in a particular jurisdiction, a contingent order you place on the Electronic Trading Platform may not be processed even where the parameters of the contingent order have been met. See Section 2.10.
Legal As Australia is a member state of the united Nations, we are obliged to implement united Nations Security Council sanctions. Consequently, CommSec may be prohibited from dealing with certain person or entities. This means that if it appears that you are, or act on behalf of, a proscribed person or entity, then CommSec may be required to suspend, cancel or refuse you services or close or terminate any arrangement with you. We may also be required to freeze assets of yours. You could incur significant costs as a result of these actions.
This is only a summary of the significant risks involved in trading OTC CFDs. CommSec strongly recommends that you obtain independent advice before proceeding with a transaction. You should also consider seeking independent advice before entering into the OTC CFD Client Agreement, as it is an important legal document.
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5 amounTs paYableIf you instruct CommSec that you wish to enter into an OTC CFD with CommSec, you must pay all transaction fees, brokerage, margins, settlements, interest and any other amounts due under the OTC CFD Client Agreement on demand by CommSec, either in cleared funds or as otherwise required under the terms of the OTC CFD Client Agreement.
All payments made by you are to be made without any set-off by you, counter-claim or condition, and without any deduction or withholding for any tax or any other reason, unless the deduction or withholding is required by applicable law. If you are required to make a deduction or withholding in respect of tax from any payment to CommSec, or if CommSec is required to pay any tax in respect of any payment made to you at your request, you indemnify CommSec against that tax and you must pay CommSec an additional amount to ensure CommSec receives an amount that is equal to the amount that CommSec would have received had a deduction, withholding or payment of tax not been made.
All amounts due to CommSec or payable by CommSec to you are payable in the Relevant Currency, except that:
1. as set out in Section 5.4, interest on an AuD credit balance in your OTC CFD account which constitutes Free Equity is payable in AuD;
2. you may request a withdrawal from the Free Equity in your OTC CFD Account in AuD;
3. you may request that any amount payable by CommSec on close-out of a OTC CFD is paid in AuD.
The OTC CFD Client Agreement governs all payments made in respect of OTC CFDs. You should also be aware that CommSec may set off any money owed to you under the OTC CFD Client Agreement against any money owed by you to CommSec under the OTC CFD Client Agreement or any other agreement that you have in place with CommSec.
5.1 BrokerageBrokerage is charged on each OTC CFD transaction when you enter into an OTC CFD position and when you close your OTC CFD position, in much the same way as if you were buying or selling shares. Brokerage payable is debited from your OTC CFD account.
The tables below show brokerage rates for advised and non-advised trades. Non-advised trades are trades for which no advice is given; that is, trades performed on an execution-only basis.
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AUD-denominated trades
Brokerage payable on opening and on closing an OTC CFD
Example
non-advised
Internet trades
0.125% of the Contract Value of the OTC CFD, subject to a minimum of AuD14.95.
Where the Closing Value is AuD100,000 when you close your OTC CFD position, the brokerage payable on close will be AuD125.00.
Telephone trades
0.25% of the Contract Value of the OTC CFD, subject to a minimum of AuD54.60.
Where you enter into an OTC CFD with a Open Contract Value of AuD100,000, the brokerage payable when you enter into the OTC CFD will be AuD250.00.
Advised
Not more than 1% of the Contract Value, subject to a minimum of AuD70.
You agree with your adviser that the brokerage rate on your OTC CFD account will be 0.25% and you enter into an OTC CFD with an Open Contract Value of AuD100,000. The brokerage payable when you enter will be AuD250.00.
non-AUD trades
Brokerage payable on opening and on closing an OTC CFD
non-advised Internet Phone
Japan 0.14% of the Contract Value of the OTC CFD, subject to a minimum of JPY1500.
0.25% of the Contract Value of the OTC CFD, subject to a minimum of JPY3000.
Singapore 0.14% of the Contract Value of the OTC CFD, subject to a minimum of SGD19.95.
0.25% of the Contract Value of the OTC CFD, subject to a minimum of SGD39.90.
New Zealand 0.185% of the Contract Value of the OTC CFD, subject to a minimum of NZD19.95.
0.25% of the Contract Value of the OTC CFD, subject to a minimum of NZD39.90.
Hong Kong 0.25% of the Contract Value of the OTC CFD, subject to a minimum of HKD90.00.
0.30% of the Contract Value of the OTC CFD, subject to a minimum of HKD120.00.
New markets For new international markets that CommSec makes available, the rate at which brokerage is charged will be advised to you at the time of trading but will not be more than:
• Internet trades: 1.00% of the Contract Value of the OTC CFD, subject to a minimum of uSD100.00.
• Telephone trades: 1.50% of the Contract Value of the OTC CFD, subject to a minimum of uSD100.00.
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Advised
Not more than 2.00% of the Contract Value, subject to a minimum of uSD100.00.
Some international markets have trading charges. CommSec will pay local market trading charges on your behalf where they are applicable.
If you place an order with CommSec to enter into an OTC CFD and CommSec fulfils such order by entering into more than one OTC CFD over the course of more than one Local Business Day, you will be required to pay the minimum brokerage in respect of each Local Business Day on which CommSec executes OTC CFD transactions to fill the order. In other words, if your order is filled by CommSec executing OTC CFDs over two Local Business Days, even though you gave one order to us, you will be required to pay two minimum brokerage amounts.
If you enter into OTC CFD transactions with CommSec on a frequent basis, a discount to the commission charged may be offered. You should contact us if you wish to discuss this.
5.2 Electronic trading chargesunder the terms of the OTC CFD Client Agreement, if you have access to a trading platform, CommSec is permitted to deduct any charges associated with that platform from your OTC CFD account or nominated bank account.
The following charges apply:
CommSecIRESS
Subscription fee A subscription fee charged for clients who use our trading platform at a maximum of AuD$82.50 per month (inc. GST).
No subscription fee is charged if eight or more Australian confirmations are generated for the month or brokerage incurred is $220 or more for the month.
The subscription fee is not payable if you elect not to log on to the Electronic Trading Platform during the month.
WebIRESS (Select Traders*)
Software fee A royalty and software fee charged for clients who use our trading platform at a maximum of AuD$40.70 per month (inc. GST).
Platform data fee An ASX royalty fee charged at 2.53 cents per minute between 9.30 am and 5.00 pm on weekdays, up to a maximum of AuD$41.25 per month (inc. GST) for live ASX equity prices.
Only the software fee is charged if eight or more Australian confirmations are generated for the month. No software fee or platform data fee is charged if 16 or more Australian confirmations are generated for the month.
Neither the software fee nor the platform data fee is payable if you elect not to log on to the Electronic Trading Platform during the month.
* Eligibility criteria must be met. Details regarding these criteria can be obtained by contacting 1300 307 853.
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International Markets Data
To access live prices on a foreign stock exchange via the Electronic Trading Platform, you will be required to enter into a Reuters Service Contract, please contact the CFD Desk on 1300 307 853 to obtain a copy.
International Markets
For international markets that you nominate to receive data on the following charges (including GST) will be incurred in the nominated currency, but charged against your account in AuD equivalent. These fees are payable even if you do not log on to the Electronic Trading Platform during the month.
Exchange fees
Country Exchange Exchange fees Currency Period
Japan – Tokyo TSE 2310 JPY per month
Japan – Osaka OSE 1155 JPY per month
Hong Kong SEHK 231 HKD per month
Singapore SGX 51.98 SGD per month
New Zealand NZX Access Fee 27.50 AuD per month
New Zealand NZX 82.50 NZD per month
Reuters charges
number of exchanges
Market data cost Currency Period
1–2 11.00 uSD per month
3–5 16.50 uSD per month
6–10 22.00 uSD per month
We will advise you of the fees payable for any additional international market that becomes available at the time you request access to the international market concerned. If you wish to cancel your international market access you must advise CommSec, and receive email confirmation, at least three days prior to the calendar month end.
5.3 Stock borrowing feeIf you enter into a short OTC CFD position, you may also be charged a stock borrowing fee relating to the stock borrowing charges incurred in hedging exposure to your OTC CFD. Stock borrowing relating to an underlying instrument or security quoted on a non-Australian stock exchange may be higher than fees which apply to Australian quoted instruments or securities.
Stock borrowing fees are usually determined as a percentage of the value of the stock borrowed and ought not exceed 10%. The actual stock borrowing fee which will apply to an OTC CFD and which you are required to pay to CommSec may not be known until up to 10 Local Business Days after you enter into the OTC CFD.
5.4 InterestInterest is calculated and paid separately for each currency held in your OTC CFD account. You should note that as a result, even if in aggregate credit, you must still pay interest on those currencies in debit.
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34 | over-The-counTer cFds
The Applicable Base Rate for Australia is equal to the overnight cash rate published by the Reserve Bank of Australia from time to time, referred to as the RBA Base Rate. You will be charged the RBA Base Rate plus or minus a margin, as set out below. You can find the current overnight cash rate on the Reserve Bank of Australia web site at rba.gov.au or contact us.
The applicable interest rate for debit and credit balances in a Relevant Currency at any time is the Applicable Base Rate plus or minus a margin, as set out below.
The actual interest rate margins payable will be set by CommSec and communicated to you when you open your OTC CFD account and at any time CommSec varies any of the rates applicable to you. See examples in Section 8.
5.4.1 InTEREST On OTC CFD ACCOUnT BALAnCES
The rate of interest paid by CommSec in respect of a credit balance of the Free Equity in your OTC CFD account for AuD balances is the RBA Base Rate minus a maximum of 3.5% pa. The rate of interest charged by CommSec in respect of a AuD debit balance of the Free Equity in your OTC CFD account is the RBA Base Rate plus a maximum of 4% pa. The actual interest rate margin is set by CommSec in its discretion and CommSec reserves the right to adjust the margin. You can find the current overnight cash rate published by the Reserve Bank of Australia at rba.gov.au or by contacting us.
In respect of a foreign currency credit balance which constitutes Free Equity, the interest rate is determined by CommSec in its sole discretion. It will depend on the currency money market rate in the jurisdiction of the currency (Applicable Base Rate), as well as the rate notified to CommSec by the Hedger minus a maximum of 3.5% pa. The interest rate charged by CommSec to you on OTC CFD account foreign currency debit balances is the current Applicable Base Rate plus a maximum of 4% pa. If you do not bring your OTC CFD account to nil or credit by the time required under the OTC CFD Client Agreement, default interest is payable instead of debit balance interest (see Section 5.4.2).
Interest is calculated daily and posted monthly.
5.4.2 DEFAULT InTEREST
CommSec is entitled under the terms of the OTC CFD Client Agreement to charge interest on any amount which you fail to pay when it is due to be paid to CommSec. Default interest will be charged in respect of each amount owing in the currency in which such amount is payable from the date the amount becomes due until the date that the amount, together with interest, is paid in full. Default interest is calculated daily and compounded monthly at a maximum rate of the RBA Base Rate plus 3% pa for AuD. For non-AuD the Applicable Base Rate plus 3% pa applies. The actual default interest margin is set by CommSec in its discretion.
5.4.3 FUnDInG RATES On COnTRACT VALUE OF LOnG AnD SHORT OPEn POSITIOnS
The funding rate you must pay CommSec in the event you hold a long position in AuD is the RBA Base Rate plus a maximum of 3% pa of the Contract Value of the long position.
The funding rate CommSec must pay you if you hold a short position overnight in AuD is the RBA Base Rate less a maximum of 3% pa of the Contract Value of the short position.
The funding rate you must pay CommSec in the event you hold a long position in a foreign currency is the Applicable Base Rate plus a maximum of 3% pa of the Contract Value of the long position.
The funding rate CommSec must pay you if you hold a short position overnight in a foreign currency is
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PRODuCT D ISCLOS u RE STATEMENT | 35
the Applicable Base Rate less a maximum of 3% pa of the Contract Value of the short position.
The interest calculation for open positions at the close of the relevant Local Business Day is set out below. This is calculated as the number of underlying instruments or securities to which an OTC CFD applies, multiplied by the closing price, then multiplied by the applicable funding rate divided by the applicable day count fraction for the Relevant Currency.
No funding rate is paid or received if you open and close a position on the same day.
The funding rate is usually calculated daily and debited or credited to your OTC CFD account on the following Sydney Business Day. The funding rate payable by you is in addition to any Variation Margin, debit interest or any other amounts which you are required to pay (see Sections 2.5 and 2.6).
LOnG POSITIOnS
If you hold a long OTC CFD position overnight, you will pay interest at the funding rate on the open position Contract Value.
The interest amount you will pay is calculated daily and is based on the quantity of OTC CFDs you hold multiplied by the closing market price for the underlying security on that day. For example, if you were paying a long OTC CFD funding charge of 3% over the Applicable Base Rate (say, 3.5% pa in Singapore) you would be paying a funding rate of 6.5% pa. If the contract was for 4,000 XYZ Ltd OTC CFDs and the closing price was SGD3.25 per share, the open position value would be SGD13,000. The funding charge would be approximately SGD2.35* for every day the contract is maintained (SGD13,000 x 6.5% = SGD845 ÷ 360).
* The exact amount of the interest paid will vary each day, depending upon such factors as the closing price of the underlying instruments or securities in your oTc cFd portfolio, changes to the holdings within your oTc cFd portfolio and/or movements in the applicable base rate and changes by commsec to the margin that is applied to the commsec base rate.
SHORT POSITIOnS
If you hold a short OTC CFD position overnight, CommSec will pay you interest at a funding rate on the open position at market value. This is usually paid at the Applicable Base Rate less 3%. For example, if are you being paid a short OTC CFD funding rate of 3% under the Applicable Base Rate (say, 4.75% in the uK) you would be paid a funding rate of 1.75% pa. If the contract was for 10,000 XYZ Ltd OTC CFDs and the closing price was GBP1.33 per share, the open position value would be GBP13,300. The funding rate you would receive would be approximately GBP0.64* for every day the contract is maintained (GBP13,300 x 1.75% = GBP232.75 ÷ 365).
* The exact amount of the interest paid will vary each day, depending upon such factors as the closing price of the underlying instruments or securities in your oTc cFd portfolio, changes to the holdings within your oTc cFd portfolio and/or movements in the applicable base rate and changes by commsec to the margin that is applied to the commsec base rate.
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36 | over-The-counTer cFds
5.5 Currency conversionsYou may request that we convert a balance in your OTC CFD account from one currency to another including from AuD to a foreign currency, or from a foreign currency to another foreign currency to hold as a balance in your OTC CFD account. To withdraw money from your OTC CFD account you must have aggregate Free Equity and convert such balances to AuD.
These conversions will involve the entry into foreign exchange contracts within the meaning of the Corporations Act. CommSec will arrange these.
As set out in Section 2.6.4, whenever CommSec converts any currency in your OTC CFD account to another currency, you will be charged a fee for this conversion. The fee will be debited from your OTC CFD account. The fee payable by you for 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 from converting AuD to uSD is uSD/AuD 0.75, the Exchange Rate CommSec may quote you could be as low as 0.7450.
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PRODuCT D ISCLOS u RE STATEMENT | 37
6 TaxaTionThis summary is provided as a general outline of the potential Australian income tax implications for an Australian resident investor who enters into an OTC CFD in the course of carrying on a business or otherwise with the intention of making a profit. The taxation consequences for other investors including investors who entered into an OTC CFD for the purpose of hedging other investments or investors who hold an OTC CFD as trading stock are not addressed in this summary.
This section is based on the law in force and administrative practice as at 1 July 2010. However, you should be aware that the ultimate interpretation of the taxation law rests with the courts and that the law, and the way the Commissioner of Taxation (The Commissioner) administers the law, may change at any time.
CommSec does not provide taxation advice. Taxation law is complex and this summary is necessarily general in nature and does not take into account the specific taxation circumstances of each individual investor nor does it take account of all OTC CFDs. Potential investors should seek their own independent advice on the taxation implications relevant to their own circumstances before making any investment decisions.
6.1 Gains or losses made on OTC CFDsAny gains derived or losses incurred from an OTC CFD should be assessable or deductible to investors. The gain or loss is determined at Closing Date by taking into account the difference between the Closing Value and the Open Contract Value of the OTC CFD.
Losses from a non-commercial business activity carried out by an individual taxpayer, may in some cases, not be offset against other assessable income in the year in which the loss is incurred. Such losses may be carried forward to be offset in a future year when there is a profit from the non-commercial activity. A business of trading OTC CFDs may be considered a non-commercial activity for these purposes.
6.2 Interest and dividend adjustmentsVarious other amounts including dividend equivalent payments or receipts (including the value of franking credits in certain circumstances), interest on open OTC CFD positions paid or received by investors and stock borrowing fees will also be included in the net gain derived or loss incurred from the OTC CFD.
6.3 Treatment of other expensesWhere the gain or loss from a financial OTC CFD is assessable or deductible to an investor, any fees (other than stock borrowing fees, which are included in the gain or loss calculation), charges or brokerage should be allowable as a deduction to the investor at the time they are incurred.
6.4 Interest on an OTC CFD accountInterest is receivable or payable by investors in respect of an OTC CFD account credit or debit balance. Interest received by an investor in respect of an OTC CFD account credit balance should be included in the investor’s assessable income generally at the time the interest is credited to the OTC CFD account held with CommSec. Interest payable by an investor in respect of their OTC CFD account debit balance (including default interest) should be allowable as a deduction at the time it is debited against the OTC CFD account held with CommSec.
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38 | over-The-counTer cFds
6.5 Taxation RulingThe summary above is in accordance with the public ruling TR2005/15 issued by the Australian Taxation Office, which outlines its view on the taxation treatment of OTC CFDs generally. A copy of this ruling is available at ato.gov.au.
6.6 Taxation of Financial Arrangements (TOFA)For the following entities, the TOFA legislation applies only to “qualifying securities” that will end more than 12 months after the entity becomes a party to the arrangement:
• individuals;
• superannuation entities with assets of less than $100 million; and
• companies with an aggregated annual turnover of less than $100 million, assets valued at less than $300 million and financial assets valued at less than $100 million.
It is unlikely that an OTC CFD will be a “qualifying security”. Consequently, for the above mentioned investors it is unlikely that the TOFA rules will apply unless they elect for the TOFA rules to apply to all of their financial arrangements.
For all other Investors, the TOFA rules are likely to apply. Gains and losses resulting from OTC CFDs may be calculated in various ways in the TOFA rules. The calculation will be dependent on the elections made by a taxpayer.
Investors who are subject to the TOFA regime, or who are considering electing into the TOFA regime, are advised to obtain independent tax advice.
6.7 Foreign exchange gains and lossesInvestors may derive foreign exchange gains or losses, particularly in relation to securities which are denominated in currencies other than Australian dollars. Generally, these gains and losses should be treated as assessable income and allowable deductions at the time of a realisation event under the foreign exchange rules. An example of a realisation event is where you have a foreign currency account and the exchange rate varies over time so that you would receive a greater or lesser Australian dollar amount. Any such gain or loss will be assessable or deductible to you when you cease to have the right to receive the foreign currency. This would usually occur when you withdraw the funds or the funds are applied for some other purpose, such as entering into further transactions.
However, these rules are complex and a variety of elections are available. Therefore, investors should ensure they receive their own advice in relation foreign exchange gains and losses.
6.8 Foreign currency considerations on interest, dividends and expenses
Payments received or incurred by the investor will need to be translated into AuD at the exchange rate on the day of payment.
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PRODuCT D ISCLOS u RE STATEMENT | 39
6.9 Tax File number (TFn) Interest Withholding Tax Where an investor does not provide their tax file number to CommSec, any interest payments should be subject to 46.5% withholding tax. CommSec will withhold this amount from the payment made to the investor and remit the amount to the Australian Taxation Office. The investor should obtain a credit for the amount when they lodge their Australian tax return.
6.10 Goods and Services TaxWith the exception of Electronic Trading Charges, amounts payable under Section 5 are not subject to goods and services tax, in accordance with Australian Taxation Office ruling GSTD2005/3, available at ato.gov.au.
7 oTher imporTanT inFormaTion7.1 Contractual termsThe relationship between you and CommSec is governed by the OTC CFD Client Agreement that you are required to enter into before you open an OTC CFD account. CommSec will send you an OTC CFD Client Agreement to be executed by you and returned to CommSec. You should note that the OTC CFD Client Agreement provides an indemnity by you to CommSec and its employees, agents and representatives in respect of the execution of your instructions, the occurrence of a default event, CommSec exercising any of its rights or powers upon the occurrence of a default event, any amount payable by you under the terms of the OTC CFD Client Agreement and anything lawfully done by CommSec. For a copy of the OTC CFD Client Agreement at any time please contact CommSec by calling 1300 307 853.
7.2 TradingOnce you have opened your OTC CFD account and deposited the minimum account balance into your OTC CFD account, you can request quotes during trading hours of the Relevant Exchange on a Local Business Day, via an Electronic Trading Platform operated by CommSec, over the phone, or a combination of these methods.
7.3 Confirmations and statementsConfirmations, trading statements and month-end summary statements per currency are sent via email. You must review any confirmation or statement we send to you immediately upon receipt to ensure its accuracy and report any discrepancies to us.
CommSec will charge you for the following administration services where requested by you or your representative. The current rate which is normally charged is set out below. However, CommSec reserves the right to increase these charges in its discretion without notice and you should contact CommSec or your adviser to confirm the applicable charge.
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40 | over-The-counTer cFds
Charge Amount
Duplicate hard copy account statements AuD15 per page
Copies of taped conversations AuD55 per hour of tape per retrieval
Transcripts of taped conversations AuD55 per hour of time taken to prepare transcript
Returned cheque fees AuD30 per cheque
7.4 Client fundsAll money paid to CommSec by you or a person acting on your behalf, or which is received by CommSec on your behalf, will be held by or on behalf of CommSec in one or more segregated accounts in accordance with the requirements of the Corporations Act 2001 (Cth).
It is important to note that holding your money in one or more segregated accounts may not afford you absolute protection. The purpose of segregated accounts is to separate client funds from those of CommSec or any third party holding the funds on CommSec’s behalf. Within the segregated account, all client funds are pooled together, so an individual client balance may not be protected if there is a default in the overall segregated account balance. In order to minimise this risk, CommSec would normally deposit its own company funds into the segregated funds account to cover any client balance shortfall caused by a client default.
CommSec reports, where necessary, all transactions in compliance with relevant Australian anti-money laundering and financing of terrorism legislation, as amended from time to time.
CommSec is entitled to retain any interest it earns on client money held by CommSec in the segregated accounts it maintains with a bank or approved deposit-taking institution. The rate of interest is determined by the organisations at which the client funds are held.
8 examples oF oTc cFds8.1 Long positions
8.1.1 ExAMPLE 1 — LOnG POSITIOn OVER An AUSTRALIAn SHARE WHICH REALISES A PROFIT
The situation > Sophie is a sophisticated trader. She wants exposure to 5,000 XYZ Ltd shares on the Australian Securities Exchange in expectation of a favourable interim results announcement due in two days.
Sophie buys 5,000 XYZ Ltd OTC CFDs at $3.75, requiring an Initial Margin deposit of 10%. Brokerage is 0.125%. A funding rate of 3% over the RBA Base Rate (say, 5.25%)* is applied.
Sophie holds her position for three days and closes her position on the fourth day.
* The rba base rate and margin are subject to change as outlined in section 5.4.
Market movement > The closing price of XYZ Ltd shares on the fourth day has risen by 25 cents to $4.00.
The result > Sophie makes a profit of $1,188.40, giving her a return of 62.59% compared to the movement in XYZ Ltd shares over the same period of 6.67%.
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PRODuCT D ISCLOS u RE STATEMENT | 41
Item Rate Amount notes
Open long position
Buy quantity 5,000
Price $3.75
Contract value $18,750 Buy quantity x price
Initial margin 10% ($1,875) Contract Value x Initial Margin rate
Brokerage 0.125% ($23.44) Contract Value x brokerage rate
GST $0
Initial outlay ($1,898.44) Initial Margin + brokerage
Close long position
Sell quantity 5,000
Price $4.00
Contract value $20,000 Sell quantity x price
Variation Margin/Profit or Loss
$1,250.00 Open Contract Value + losing Contract Value
Brokerage 0.125% ($25.00) Contract Value x brokerage rate
GST $0
Financing cost Base rate + 3% ($13.16) Open Contract Value x Interest Rate ÷ 365 x number of days the contract is held/open. Calculated each day, using the settlement price of the Contract Security each day the contract is held, and posted daily.
Profit (credit) $1,188.40 Brokerage on the open and close of the trade + financing + profit of the trade
Return on outlay 62.59%
Sophie’s OTC CFD account will have the following entries in Example 1 (assuming Sophie does not enter into any other OTC CFD transactions).
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42 | over-The-counTer cFdsD
escr
ipti
on
Tota
l ca
shV
aria
tio
n M
arg
inG
ross
Li
quid
atio
n V
alue
Init
ial
Mar
gin
Free
E
qui
ty
Day
1
Depo
sit on
open
ing of
acco
unt
$5,00
0$5
,000
Orde
r fille
d at $
3.75
$5,00
0($
1,875
)$3
,125
Brok
erag
e pos
ted.
(deb
it $2
3.44)
$4,97
6.56
$3,10
1.56
OTC C
FD po
sition
at en
d of D
ay 1
revalu
ed at
settl
emen
t pric
e of $
3.80
$4,97
6.56
$250
(Net
Varia
tion M
argin
paya
ble by
Com
mSe
c)$5
,226.5
6($
1,900
)$3
,326.5
6
Day
2
Finan
cing (
at a
fund
ing ra
te of
8.25
%) po
sted o
n ope
n OTC
CFD
posit
ion us
ing th
e pr
eviou
s Bus
iness
Day’s
phys
ical s
ettle
men
t pric
e of $
3.80 (
debit
$4.29
).$4
,972.2
7$3
,322.2
7
OTC C
FD po
sition
at en
d of D
ay 2
revalu
ed at
settl
emen
t pric
e of $
3.90
$4,97
2.27
$750
.00(N
et Va
riatio
n Marg
in pa
yable
by Co
mm
Sec)
$5,72
2.27
($1,9
50)
$3,77
2.27
Day
3
Finan
cing (
at a
fund
ing ra
te of
8.25
%) po
sted o
n the
open
OTC
CFD
posit
ion us
ing
the p
reviou
s Bus
iness
Day’s
phys
ical s
ettle
men
t pric
e of $
3.90 (
debit
$4.41
)$4
,967.8
6$3
,767.8
6
OTC C
FD po
sition
at en
d of D
ay 3
revalu
ed at
settl
emen
t pric
e of $
3.95
$4,96
7.86
$1,00
0(N
et Va
riatio
n Marg
in pa
yable
by Co
mm
Sec)
$5,96
7.86
($1,9
75)
$3,99
2.86
Day
4
OTC C
FD po
sition
clos
ed at
$4.00
($1,2
50 pa
yable
by Co
mm
Sec,
being
the d
iffer
ence
be
twee
n the
Ope
n Con
tract
Value
and t
he Cl
osing
Value
).
The n
et Va
riatio
n Marg
in (u
nrea
lised
prof
it) is
now
realis
ed pr
ofit a
nd is
cred
ited
to to
tal ca
sh.
The I
nitial
Mar
gin is
relea
sed a
nd Fr
ee Eq
uity i
s inc
reas
ed by
$1,97
5.
$6,21
7.86
$6,21
7.86
$6,21
7.86
Finan
cing (
fund
ing ra
te of
8.25
%) po
sted o
n the
open
OTC
CFD
posit
ion us
ing th
e pr
eviou
s Bus
iness
Day’s
phys
ical s
ettle
men
t pric
e of $
3.95 (
debit
$4.46
)$6
,213.4
0$6
,213.4
0
Brok
erag
e pos
ted (
debit
$25.0
0)$6
,188.4
0$6
,188.4
0
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PRODuCT D ISCLOS u RE STATEMENT | 43
8.1.2 ExAMPLE 2 — LOnG POSITIOn OVER A HOnG KOnG SHARE WHICH REALISES A LOSS
The situation > Sophie is a sophisticated trader. She wants to purchase 4,000 Hang Lung Ltd shares in expectation of a favourable interim results announcement due in two days.
Sophie buys 4,000 Hang Lung Ltd CFDs at HKD15.90, requiring an Initial Margin deposit of 10%. Brokerage is 0.25%. A funding rate of 3% over the Applicable Base Rate (say, 3.5%)* is applied.
Sophie holds her position for three days and closes her position on the third day.
The closing price of Hang Lung Ltd shares on the fourth day has fallen by 75 cents to HKD15.15.
The result > Sophie makes a loss of HKD3,332.94 giving her a return of –51.13% compared to the movement in Hang Lung shares over the same period of –4.72%.
* The applicable base rate and margin are subject to change as set out in section 5.4.
Profitable trade notes
Buy quantity 4,000
Price HKD15.90
Contract value HKD63,600.00 Buy Quantity x Price
Initial margin – 10% (HKD6,360.00) Contract Value x Initial Margin Rate
Brokerage – 0.25% (HKD159.00) Contract Value x Brokerage
GST 0.00
Initial outlay (HKD6,519.00) Initial Margin + Brokerage
Sell quantity 4,000
Price HKD15.15
Contract value HKD60,600.00 Sell Quantity x Price
Variation Margin/Profit or Loss
HKD3,000.00 Closing Contract Value – Open Contract Value
Brokerage – 0.25% (HKD151.50) Contract Value x Brokerage
GST 0.00
Financing (Base rate +3%) Cost
(HKD22.44) Open Contract Value x Interest Rate ÷ 365 x number of days the contract is held/open calculated each day using the settlement price of the Contract Security each day the contract is held and posted daily.
Loss (Debit) (HKD3,332.94) Loss on the trade + interest – (Brokerage on the open and close of the trade + financing)
Return on outlay (51.13%)
Sophie’s OTC CFD account will have the following entries in Example 2 (assuming Sophie does not enter into any other OTC CFD transactions).
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44 | over-The-counTer cFdsA
UD
HK
D (
Loca
l Cur
renc
y)
Des
crip
tio
nTo
tal
Cas
hFr
ee
Eq
uity
Acc
rued
E
qui
ty
Inte
rest
5.
0%
Tota
l C
ash
Var
iati
on
Mar
gin
G
LVIn
itia
l M
arg
in
Free
E
qui
tyA
ccru
ed
Eq
uity
In
tere
st
- 7.
75%
Day
1
Depo
sit of
AUD
on op
ening
of ac
coun
t$2
5,000
.00$2
5,000
.00
Orde
r fille
d at H
KD15.
90$0
.00$0
.00($
6,360
.00)
($6,3
60.00
)
Broke
rage p
osted
(deb
it HKD
159)
($159
.00)
($6,5
19.00
)
OTC C
FD po
sition
at en
d of D
ay 1
revalu
ed at
settl
emen
t pric
e of
HKD1
5.60
($159
.00)
($1,2
00.00
)
(Vari
ation
Marg
in pa
yable
to Co
mm
Sec)
($1,35
9.00)
($6,2
40.00
)($
7,599
.00)
Day
2
Finan
cing (
fund
ing ra
te of
6.50
%)
poste
d on o
pen O
TC CF
D po
sition
using
th
e prev
ious B
usine
ss Da
y’s ph
ysica
l se
ttlem
ent p
rice o
f HKD
15.90
(deb
it HK
D11.3
3)
($170
.33)
($7,6
10.33
)
Free E
quity
inter
est a
ccrue
d dail
y, po
sted m
onth
ly us
ing pr
eviou
s Bu
sines
s Day
’s ph
ysica
l sett
lemen
t pr
ice
$3.42
($1.6
1)
OTC C
FD po
sition
at en
d of D
ay 2
revalu
ed at
settl
emen
t pric
e of
HKD1
5.30
($170
.33)
($2,4
00)
(Vari
ation
Marg
in pa
yable
to Co
mm
Sec)
($2,57
0.33)
$6,12
0.00
($8,6
90.33
)
![Page 47: Trade over The counTer cFds producT disclosure sTaTemenTGround Floor, Tower 1 201 Sussex Street Sydney NSW 2000 Telephone: 1300 307 853 Facsimile: (02) 8292 5266 Mail: CommSec, Locked](https://reader034.vdocuments.net/reader034/viewer/2022050512/5f9c78467c16db2cc34c0f44/html5/thumbnails/47.jpg)
PRODuCT D ISCLOS u RE STATEMENT | 45A
UD
HK
D (
Loca
l Cur
renc
y)
Des
crip
tio
nTo
tal
Cas
hFr
ee
Eq
uity
Acc
rued
E
qui
ty
Inte
rest
5.
0%
Tota
l C
ash
Var
iati
on
Mar
gin
G
LVIn
itia
l M
arg
in
Free
E
qui
tyA
ccru
ed
Eq
uity
In
tere
st
- 7.
75%
Day
3
Finan
cing (
fund
ing ra
te of
6.50
%)
poste
d on o
pen O
TC CF
D po
sition
us
ing th
e prev
ious B
usine
ss Da
y’s
phys
ical s
ettlem
ent p
rice o
f HKD
15.60
(d
ebit H
KD11.1
1)
($181
.44)
($8,7
01.44
)
Free E
quity
inter
est a
ccrue
d dail
y, po
sted m
onth
ly us
ing pr
eviou
s Bu
sines
s Day
’s ph
ysica
l sett
lemen
t pr
ice
$3.42
($1.8
5)
OTC C
FD po
sition
clos
ed at
HKD
15.15
(HKD
3,000
.00 pa
yable
to Co
mm
Sec
being
diffe
rence
betw
een O
pen
Cont
ract V
alue a
nd Cl
osing
Value
)
($3,18
1.44)
Varia
tion M
argin
(unre
alise
d los
s) is
now
realise
d los
s and
debit
ed to
To
tal Ca
sh (ie
$3,00
0.00 b
eing t
he
differ
ence
betw
een t
he Op
en Co
ntrac
t Va
lue an
d the
Clos
ing Va
lue)
($3,18
1.44)
Initia
l Mar
gin
is re
lease
d ($
3,181.
44)
Brok
erag
e pos
ted (
debit
HKD
151.50
)($3
,332.9
4)($
3,332
.94)
Soph
ie ins
tructs
to co
nver
t the
HKD
ba
lance
back
to AU
D at
AUDH
KD =
6.000
0, ie
HKD3
,332.9
4 = AU
D555
.49
$24.4
44.51
$24,4
44.51
$0.00
$0.00
Total
Free
Equit
y Int
erest
is ac
crued
for
the m
onth
and p
osted
to yo
ur
OTC C
FD ac
coun
t on t
he fir
st bu
sines
s da
y of t
he fo
llowi
ng m
onth
$6.84
($3.4
6)
![Page 48: Trade over The counTer cFds producT disclosure sTaTemenTGround Floor, Tower 1 201 Sussex Street Sydney NSW 2000 Telephone: 1300 307 853 Facsimile: (02) 8292 5266 Mail: CommSec, Locked](https://reader034.vdocuments.net/reader034/viewer/2022050512/5f9c78467c16db2cc34c0f44/html5/thumbnails/48.jpg)
46 | over-The-counTer cFds
8.2 Short position
8.2.1 ExAMPLE 3 — SHORT POSITIOn On A SInGAPORE SHARE WHICH REALISES A PROFIT
The situation > Sophie is a sophisticated trader. She wants to sell 10,000 Bonvest Holdings Ltd shares in expectation of an unfavourable interim results announcement due in two days.
Sophie sells 10,000 Bonvest Holdings Ltd OTC CFDs at SGD1.38, requiring an Initial Margin deposit of 10%. Brokerage is 0.14%. A funding rate of 3% below the Applicable Base Rate (say, 4.75%)* is applied.
Sophie holds her position for three days and closes her position on the third day.
* The applicable base rate and margin are subject to change as set out in section 5.4.
Item Rates Amount notes
If the forecast is correct and the price falls SGD0.05
Open Short position
Sell quantity 10,000
Price SGD1.38
Contract value SGD13,800 Buy Quantity x Price
Initial margin 10% (SGD1,380) Contract Value x Initial Margin Rate
Brokerage 0.14% (SGD19.32) Contract Value x Brokerage
GST 0.00
Initial outlay (SGD1,399.32) Initial Margin + Brokerage
Close Short Position
Buy quantity 10,000
Price SGD1.33
Contract value SGD13,300 Sell Quantity x Price
Variation Margin/Profit or Loss
SGD500.00 Closing Contract Value – Open Contract Value
Brokerage 0.14% (SGD18.62) Contract Value x Brokerage
GST 0.00
Financing Credit Base rate – 1.75%
SGD1.29 Open Contract Value x Interest Rate ÷ 365 x number of days the contract is held/open calculated each day using the settlement price of the Contract Security each day the contract is held and posted daily.
Profit (Credit) SGD463.35 Profit on the trade + interest – (Brokerage on the open and close of the trade + financing)
Return on outlay 33.11%
Sophie’s OTC CFD account will have the following entries in Example 3 (assuming Sophie does not enter into any other OTC CFD transactions).
![Page 49: Trade over The counTer cFds producT disclosure sTaTemenTGround Floor, Tower 1 201 Sussex Street Sydney NSW 2000 Telephone: 1300 307 853 Facsimile: (02) 8292 5266 Mail: CommSec, Locked](https://reader034.vdocuments.net/reader034/viewer/2022050512/5f9c78467c16db2cc34c0f44/html5/thumbnails/49.jpg)
PRODuCT D ISCLOS u RE STATEMENT | 47A
UD
SGD
(Lo
cal C
urre
ncy)
Des
crip
tio
nTo
tal
Cas
h Fr
ee
Eq
uity
A
ccru
ed
Eq
uity
In
tere
st
5.0
%
Tota
l C
ash
Var
iati
on
Mar
gin
GLV
Init
ial
Mar
gin
Fr
ee
Eq
uity
A
ccru
ed
Eq
uity
In
tere
st
-6.7
5%
Day
1
Depo
sit of
AUD
on op
ening
of ac
coun
t$2
5,000
.00$2
5,000
.00
Orde
r fille
d at S
GD1.3
8$0
.00$0
.00($
1,380
.00)
($1,38
0.00)
Brok
erag
e pos
ted (
debit
SGD1
9.32)
($19
.32)
($1,39
9.32)
OTC C
FD po
sition
at en
d of D
ay 1
revalu
ed at
se
ttlem
ent p
rice o
f SGD
1.35
($19
.32)
$300
.00
(Var
iation
Mar
gin pa
yable
by
Com
mSe
c)
$280
.68($
1,350
.00)
($1,06
9.32)
Day
2
Finan
cing (
fund
ing ra
te of
1.75%
) pos
ted on
op
en OT
C CFD
posit
ion us
ing th
e prev
ious
Busin
ess D
ay’s
phys
ical s
ettlem
ent p
rice o
f SG
D1.35
(cred
it SG
D0.65
)
($18.
67)
($1,06
8.67)
Free E
quity
inte
rest
accru
ed da
ily, p
oste
d m
onth
ly us
ing pr
eviou
s Bus
iness
Day’s
phys
ical
settl
emen
t pric
e
$3.42
($0.2
0)
OTC C
FD po
sition
at en
d of D
ay 2
revalu
ed at
se
ttlem
ent p
rice o
f SGD
1.34
($18.
67)
$400
.00
(Var
iation
Mar
gin pa
yable
by
Com
mSe
c)
$381.
33( $
1,340
.00)
($95
8.67)
![Page 50: Trade over The counTer cFds producT disclosure sTaTemenTGround Floor, Tower 1 201 Sussex Street Sydney NSW 2000 Telephone: 1300 307 853 Facsimile: (02) 8292 5266 Mail: CommSec, Locked](https://reader034.vdocuments.net/reader034/viewer/2022050512/5f9c78467c16db2cc34c0f44/html5/thumbnails/50.jpg)
48 | over-The-counTer cFdsA
UD
SGD
(Lo
cal C
urre
ncy)
Des
crip
tio
nTo
tal
Cas
h Fr
ee
Eq
uity
A
ccru
ed
Eq
uity
In
tere
st
5.0
%
Tota
l C
ash
Var
iati
on
Mar
gin
GLV
Init
ial
Mar
gin
Fr
ee
Eq
uity
A
ccru
ed
Eq
uity
In
tere
st
-6.7
5%
Day
3
Finan
cing (
fund
ing ra
te of
1.75
%) po
sted o
n op
en O
TC CF
D po
sition
using
the p
reviou
s Bu
sines
s Day
’s ph
ysica
l set
tlem
ent p
rice o
f SG
D1.34
(cre
dit SG
D0.64
)
($18.
03)
($95
8.03)
Free E
quity
inte
rest
accru
ed da
ily, p
oste
d m
onth
ly us
ing pr
eviou
s Bus
iness
Day’s
ph
ysica
l set
tlem
ent p
rice
$3.42
($0.1
8)
OTC C
FD po
sition
clos
ed at
SGD1
.33 (S
GD50
0.00
paya
ble by
Com
mSe
c bein
g diff
eren
ce
betw
een O
pen C
ontra
ct Va
lue an
d Clos
ing
Value
)
$481.
97Va
riatio
n Mar
gin (u
nrea
lised
pr
ofit)
is no
w re
alise
d pro
fit
and i
s cre
dited
to To
tal C
ash
(I.e.
$500
.00 be
ing di
ffere
nce
betw
een t
he O
pen C
ontra
ct Va
lue
and t
he Cl
osing
Value
)
$481.
97Ini
tial M
argin
is
relea
sed a
nd
Free E
quity
is
incre
ased
by
$1,34
0.00
$481.
97
Brok
erag
e pos
ted (
debit
SGD1
8.62)
$463
.35$4
63.35
Soph
ie ins
tructs
to co
nver
t the
SGD
balan
ce
back
to A
UD by
notif
ying u
s SGD
AUD
= 1.29
05,
ie SG
D463
.35 =
AUD3
59.05
$25,3
59.05
$25,3
59.05
$0$0
Tota
l Fre
e Equ
ity In
tere
st is
accru
ed fo
r the
m
onth
and p
oste
d to y
our O
TC CF
D ac
coun
t on
the f
irst b
usine
ss da
y of t
he fo
llowi
ng m
onth
$6.84
($0.3
8)
![Page 51: Trade over The counTer cFds producT disclosure sTaTemenTGround Floor, Tower 1 201 Sussex Street Sydney NSW 2000 Telephone: 1300 307 853 Facsimile: (02) 8292 5266 Mail: CommSec, Locked](https://reader034.vdocuments.net/reader034/viewer/2022050512/5f9c78467c16db2cc34c0f44/html5/thumbnails/51.jpg)
PRODuCT D ISCLOS u RE STATEMENT | 49
The closing price of Bonvest Holdings Ltd shares on the fourth day has fallen by 5 cents to SGD1.33.
The result > Sophie makes a profit of SGD463.35 giving her a return of 33.11% compared to the movement in Bonvest Holdings shares over the same period of –3.62%.
8.2.2 ExAMPLE 4 — SHORT POSITIOn On A US SHARE WHICH REALISES A LOSS
Sophie is a sophisticated trader. She wants to sell 1,000 MCD Ltd shares in expectation of unfavourable interim results announcement due in two days.
Sophie sells 1,000 MCD Ltd CFDs at uSD40.00, requiring an Initial Margin deposit of 10%. Brokerage is 4 cents per CFD. A funding rate of 3% below the Applicable Base Rate (say, 5.25%)* is applied.
Sophie holds her position for three days and closes her position on the third day.
* The applicable base rate and margin are subject to change as set out in section 5.4.
Item Rate Amount notes
If the forecast is incorrect and the price rises USD2.50
Open Long Position
Sell quantity 1,000
Price uSD40.00
Contract value uSD40,000 Buy Quantity x Price
Initial margin 10% (uSD4,000) Contract Value x Initial Margin Rate
Brokerage (uSD40.00) Contract Value x Brokerage
GST 0.00
Initial outlay (uSD4,040.00) Initial Margin + Brokerage
Open Short Position
Buy quantity 1,000
Price uSD42.50
Contract value uSD42,500 Sell Quantity x Price
Variation Margin/Profit or Loss
uSD2,500 Closing Contract Value – Open Contract Value
Brokerage (uSD40.00) Contract Value x Brokerage
GST 0.00
Financing Credit Base rate – 3%
uSD5.21 Open Contract Value x Interest Rate ÷ 360 multiplied by the number of days the contract is held
Loss (Debit) uSD2,574.79 Brokerage on the open and close of the trade + financing + loss of the trade
Return on outlay -63.73%
![Page 52: Trade over The counTer cFds producT disclosure sTaTemenTGround Floor, Tower 1 201 Sussex Street Sydney NSW 2000 Telephone: 1300 307 853 Facsimile: (02) 8292 5266 Mail: CommSec, Locked](https://reader034.vdocuments.net/reader034/viewer/2022050512/5f9c78467c16db2cc34c0f44/html5/thumbnails/52.jpg)
50 | over-The-counTer cFdsA
UD
USD
(Lo
cal C
urre
ncy)
Des
crip
tio
nTo
tal
Cas
hFr
ee
Eq
uity
A
ccru
ed
Equi
ty
Inte
rest
5.
00
%
Tota
l C
ash
Var
iati
on
Mar
gin
G
LV
Init
ial
Mar
gin
Fr
ee
Eq
uity
A
ccru
ed
Equi
ty
Inte
rest
7.
35%
1
Day
1
Depo
sit of
AUD
on op
ening
of ac
coun
t$2
5,000
.00$2
5,000
.00
Orde
r fille
d at U
SD40
.00$0
.00$0
.00($
4,000
.00)
($4,00
0.00)
Brok
erag
e pos
ted (
debit
USD
40.00
)($
40.00
)($4
,040.0
0)
OTC C
FD po
sition
at en
d of D
ay 1
revalu
ed at
settl
emen
t pric
e of
USD4
1.10
($40
.00)
$1,10
0.00
(Var
iation
Mar
gin pa
yable
to
Com
mSe
c)
($1,14
0.00)
($4,1
10.00
)($5
,250.0
0)
Day
2
Finan
cing (
fund
ing ra
te of
2.25
%)
poste
d on o
pen O
TC CF
D po
sition
using
th
e prev
ious B
usine
ss Da
y’s ph
ysica
l se
ttlem
ent p
rice o
f USD
41.10
(cre
dit
USD2
.57)
($37
.43)
($5,24
7.43)
Free E
quity
inte
rest
accru
ed da
ily,
poste
d mon
thly
using
prev
ious B
usine
ss Da
y’s ph
ysica
l set
tlem
ent p
rice
$3.42
($1.0
7)
OTC C
FD po
sition
at en
d of D
ay 2
revalu
ed at
settl
emen
t pric
e of
USD4
1.90
($37
.43)
$1,90
0.00
(Var
iation
Mar
gin pa
yable
to
Com
mSe
c)
($1,93
7.43)
($4,1
90.00
)($6
,127.4
3)
1. T
he
us
use
s a
day
s o
f th
e ye
ar c
onv
enti
on
of
36
0 d
ays
for
inte
rest
.
![Page 53: Trade over The counTer cFds producT disclosure sTaTemenTGround Floor, Tower 1 201 Sussex Street Sydney NSW 2000 Telephone: 1300 307 853 Facsimile: (02) 8292 5266 Mail: CommSec, Locked](https://reader034.vdocuments.net/reader034/viewer/2022050512/5f9c78467c16db2cc34c0f44/html5/thumbnails/53.jpg)
PRODuCT D ISCLOS u RE STATEMENT | 5 1A
UD
USD
(Lo
cal C
urre
ncy)
Des
crip
tio
nTo
tal
Cas
hFr
ee
Eq
uity
A
ccru
ed
Eq
uity
In
tere
st
5.0
0%
Tota
l C
ash
Var
iati
on
Mar
gin
G
LV
Init
ial
Mar
gin
Fr
ee
Eq
uity
A
ccru
ed
Eq
uity
In
tere
st
7.35
%1
Day
3
Finan
cing (
fund
ing ra
te of
2.25
%)
poste
d on o
pen O
TC CF
D po
sition
using
th
e prev
ious B
usine
ss Da
y’s ph
ysica
l se
ttlem
ent p
rice o
f USD
41.90
(deb
it US
D2.62
)
$34.7
9)($6
,124.7
9)
Free E
quity
inte
rest
accru
ed da
ily, p
oste
d m
onth
ly us
ing pr
eviou
s Bus
iness
Day’s
ph
ysica
l set
tlem
ent p
rice
$3.42
($1.2
5)
OTC C
FD po
sition
clos
ed at
USD
42.50
(U
SD2,5
00.00
paya
ble to
Com
mSe
c bein
g dif
feren
ce be
twee
n Ope
n Con
tract
Value
an
d Clos
ing Va
lue)
($2,53
4.79)
Varia
tion M
argin
(unr
ealis
ed
loss)
is no
w rea
lised
loss
and
is de
bited
to To
tal Ca
sh (i
e $2
,500.0
0 bein
g the
diffe
rence
be
twee
n the
Ope
n Con
tract
Value
and t
he Cl
osing
Value
)
($2,53
4.79)
Initia
l Mar
gin
is re
lease
d and
Fre
e Equ
ity is
inc
reas
ed by
$4
,190.0
0
$2,53
4.79)
Brok
erag
e pos
ted (
debit
USD
40.00
)$2
5,000
.00$2
5,000
.00($2
,574.7
9)($2
,574.7
9)
Tota
l Fre
e Equ
ity In
tere
st is
accru
ed fo
r the
m
onth
and p
oste
d to y
our O
TC CF
D ac
coun
t on
the f
irst b
usine
ss da
y of t
he fo
llowi
ng
mon
th
($2.3
2)
1. T
he
us
use
s a
day
s o
f th
e ye
ar c
onv
enti
on
of
36
0 d
ays
for
inte
rest
.
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52 | over-The-counTer cFds
8.3 Example currency fluctuations
HOW AUD FLUCTUATIOnS CAn AFFECT yOUR PROFIT OR LOSS
As set out in Section 4, when you enter into an OTC CFD, all Initial Margin, Variation Margin, profits, losses, debits and credits in relation to an OTC CFD are calculated, and are payable, in the Relevant Currency. Accordingly, you will be exposed to foreign exchange rate fluctuations during the term of the OTC CFD.
When you close your OTC CFD position, you will be able to request that the foreign currency balance is converted to AuD. Any conversion will be at the Exchange Rate quoted by CommSec. until the foreign currency balance is converted to AuD, fluctuations in the relevant foreign exchange rate may affect the ultimate profit or loss made on the OTC CFD position in AuD. The examples below illustrate this point.
AUD / JPy conversion
AUD/JPy JPy Profitable Trade JPy Losing Trade
JPY Profit/Loss ¥1,000,000.00 (¥1,000,000.00)
90.00 AuD Equivalent $11,111.11 ($11,111.11)
85.00 AuD Equivalent $11,764.71 ($11,764.71)
AuD Difference due to currency movement
$653.59 ($653.59)
In this case, if AuD/JPY moves from 90.00 to 85.00 you can see that profits will increase.
Conversely, losses will increase due to currency fluctuations.
AUD / HKD conversion
AUD/HKD HKD Profitable Trade HKD Losing Trade
HKD Profit/Loss $50,000.00 ($50,000)
5.85 AuD Equivalent $8,547.01 ($8,547.01)
6.00 AuD Equivalent $8,333.33 ($8,333.33)
AuD Difference due to currency movement
($213.68) $213.68
In this case, if AuD/HKD moves from 5.85 to 6.00 you can see that profits will be reduced.
Conversely, losses will be reduced due to currency fluctuations.
It is important to note that CommSec is not responsible for currency conversions. It is your responsibility to manage conversions. At your instruction, CommSec will convert a balance in your CFD account back to AuD.
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8.4 Example where dividend is paid on the underlying instrument or security
8.4.1 ExAMPLE 5 — DIVIDEnD PAID On THE UnDERLyInG
The situation > On 5 January, Sophie buys 5,000 XYZ Ltd OTC CFDs at $3.75, requiring an Initial Margin deposit of 10%. Brokerage is 0.125%. A funding rate of 3% over the RBA Base Rate of (say, 5.25%)* is applied.
Sophie holds her position for three days and closes her position on the fourth day.
On 6 January, XYZ Ltd announces a cash dividend of $0.10 per share with an ex-dividend date of 7 January.
* rba base rate is subject to change as it relates to the rba quoted overnight base rate.
Market movement > The closing price of XYZ Ltd shares on the fourth day has risen 25 cents to $4.00.
The result > Sophie makes a profit of $1,688.85, giving her a return of 88.96%.
Item Rate Amount notes
Open long position
Buy quantity 5000
Price $3.75
Contract Value $18,750 Buy quantity x price
Initial Margin 10% ($1,875) Contract Value x Initial Margin Rate
Brokerage 0.125% ($23.44) Contract Value x brokerage rate
GST $0
Initial Outlay ($1,898.44) Initial Margin + brokerage
Close long position
Sell quantity 5,000
Price $4.00
Contract Value $20,000 Sell quantity x price
Variation Margin/Profit or Loss
$1,250 Open Contract Value + Closing Contract Value
Brokerage 0.125% (25.00) Contract Value x brokerage rate
GST $0
Financing cost Base rate +3%
($12.71) Open Contract Value x Interest Rate ÷ 365 x the number of days the contract is held
Dividend (cash journal credit)
$500.00 Dividend amount x buy quantity
Profit (credit) $1,688.85 Brokerage on the open and close of the trade + financing + profit of the trade + dividend
Return on outlay 88.96%
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9 GlossarYAdditional Margin is the amount that you must pay into your account if your account in aggregate has negative Free Equity and the amount by which it is negative is greater than 5% of Gross Liquidation Value.
Applicable Base Rate means the currency money market rate in the jurisdiction of the currency.
AUD means the lawful currency of the Commonwealth of Australia.
Business Close means the time at which the financial market of the exchange on which the Contract Security is quoted normally closes on a Business Day.
Business Day means a day (other than a Saturday or Sunday or public holiday) on which banks and foreign exchange markets are or will be open for business in Sydney.
Closing Date means, in relation to an OTC CFD, the date on which you accept the Closing Price of the Contract Security, or on which a Closing Date is deemed to have occurred in accordance with the OTC CFD Client Agreement.
Closing notice means the notice given by one party to the other to close any OTC CFD.
Closing Price means the Contract Security Price as determined by CommSec at the time CommSec receives the Closing Notice.
Closing Value means the Closing Price multiplied by the Contract Quantity.
CommSec means Commonwealth Securities Limited.
Contract quantity means the number of Contract Securities to which the OTC CFD relates.
Contract Security means the underlying reference instrument or security that forms the subject of the OTC CFD.
Contract Security Price means the current price of the Contract Security quoted on the Relevant Exchange or as otherwise as determined by CommSec.
Contract Value means the Contract Security Price multiplied by the Contract Quantity.
Corporations Act means the Corporations Act 2001 (Cth).
Electronic Trading Platform refers to either CommSecIRESS or WebIRESS.
Exchange Rate in relation to any currency, means any widely recognised and published foreign exchange rate selected by CommSec (for this purpose, the bid/offer spread is the difference between the rate at which CommSec is able to buy or sell the Relevant Currency and the rate at which it will sell or buy the Relevant Currency to or from you, as applicable). The rate is selected in CommSec’s sole discretion.
Free Equity is the aggregate Gross Liquidation Value of your OTC CFD account less any Margin. It does not include intraday brokerage or fees that may be payable.
Currency Ledger If you trade international OTC CFDs, separate Foreign Currency Ledgers will be established for each Relevant Currency.
Gross Liquidation Value (GLV) is the amount of money you would have in your OTC CFD account in aggregate if all positions were closed out at the current market price. It does not include brokerage or other transaction fees incurred when closing the positions.
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PRODuCT D ISCLOS u RE STATEMENT | 55
Hedger means any party with whom CommSec enters into arrangements to hedge its exposure under an OTC CFD.
HKD means the lawful currency of the Hong Kong Special Administrative Region of the People’s Republic of China.
SEHK means Hong Kong Stock Exchange.
In aggregate is when all currencies in your account are notionally converted to AuD.
Initial Margin represents the security deposit that you are required to provide to CommSec when you first open an OTC CFD position and that you must maintain throughout the term of an OTC CFD.
JPy means the lawful currency of Japan.
Local Business Day means, in relation to an OTC CFD, a day (other than a Saturday, Sunday or public holiday) on which banks and foreign exchange markets are or will be open for business in the city in which the Relevant Exchange on which the Contract Security is quoted.
Long Entering into a long OTC CFD position is similar to borrowing funds from CommSec to buy the underlying instruments or securities (in this case you post a cash margin). If you take a long position you generally profit from a rise in the price of the underlying instrument or security during the term of the OTC CFD and make a loss if the price falls during that term.
Margin means Initial Margin, Additional Margin, Variation Margin or all three.
nZD means the lawful currency of New Zealand.
nZx means New Zealand Exchange.
Open Contract Value means the Contract Value at the time the OTC CFD is opened.
OTC CFD An over-the-counter contract for difference (OTC CFD) is an agreement which allows you to make a profit or loss from fluctuations in the price of an underlying listed instrument or security without actually owning that security.
OTC CFD account means an account established in your name by CommSec for the purpose of trading OTC CFDs.
OTC CFD Client Agreement means the contract between you and CommSec which governs each OTC CFD transaction entered into between you and CommSec, a copy of which can be obtained from your adviser.
RBA Base Rate is equal to the overnight cash rate published by the Reserve Bank of Australia from time to time.
Relevant Currency means the currency of the Contract Security.
Relevant Exchange means, in relation to a Contract Security, the financial market on which the Contract Security is quoted. If a Contract Security is quoted on more than one financial market, CommSec will advise you of the Relevant Exchange for the purposes of the OTC CFD, at the time the OTC CFD is entered into.
Short Entering into a short OTC CFD position is similar to borrowing the underlying instruments or securities from CommSec (with CommSec holding a cash margin), and selling them on the market with a view to repurchasing at a later date. If you take a short position you generally profit from a fall in the price of the underlying instrument or security during the term of the OTC CFD and make a loss if the price rises during that term.
SGD means the lawful currency of Singapore.
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SGx means Singapore Stock Exchange.
Sydney Business Day means a day (other than a Saturday or Sunday or public holiday) on which banks and foreign exchange markets are or will be open for business in Sydney.
TSE means Tokyo Stock Exchange.
USD means the lawful currency of the united States of America.
Variation Margin is the unrealised profit or loss on your open OTC CFD position in its Relevant Currency.
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PrivacyCustomer information and privacy Collection and verification of customer information “Customer information” is information about a customer. It includes personal information. The law requires us to identify our customers. We do this by collecting and verifying information about you. We may also collect and verify information about persons who act on your behalf. The collection and verification of information helps to protect against identity theft, money-laundering and other illegal activities. We use your customer information to manage our relationship with you, provide you with the products and services you request and also tell you about the products and services offered by the Commonwealth Bank Group (“Group”), affiliated providers and external providers for whom we act as agent. If you have given us your electronic contact details, we may provide marketing information to you electronically. The collection and verification of customer information may be carried out in different ways and we will advise you of the most acceptable methods of doing this. We may disclose your customer information in carrying out verification – e.g. we may refer to public records to verify information and documentation, or we may verify with an employer that the information you have given us is accurate. Depending on whether you are an individual or an organisation, the information we collect will vary. For instance, if you are an individual, the type of information we may collect and verify includes your full name, date of birth and residential address. If you are commonly known by 2 or more different names, you must give us full details of your other name or names. For instance, if you are a company, we may collect and verify information, including company incorporation and registration details, as well as details of the company’s officers and its major shareholders. If you are acting as a trustee, we may ask you for, amongst other things, information on the beneficiaries of the trust and evidence of the existence of the trust. If you are a partnership, we may require information including evidence of the fact that the partnership exists, as well as the full name of the partnership, the names of the partners and any business name owned by the partnership. For other organisations, the kind of information we collect and verify will depend on the type of organisation you are. In addition, during your relationship with us, we may also ask for and collect further information about you and about your dealings with us. You must provide us with accurate and complete information. If you do not, you may be in breach of the law and also we may not be able to provide you with products and services that best suit your needs. Protecting customer information We comply with the National Privacy Principles as incorporated into the Privacy Act 1988 (Cth). We disclose customer information to other members of the Group (including overseas members), so that the Group may have an integrated view of its customers and to facilitate the integrated treatment of its customers. It also enables other members of the Group to provide you with information on their products and services. Other disclosures At common law, banks are permitted to disclose customer information in the following circumstances:- (a) where disclosure is compelled by law; or (b) where there is a duty to the public to disclose; or (c) where our interests require disclosure; or (d) where disclosure is made with your express or implied consent. So that we can manage our relationships, customer information may be disclosed to: • brokers and agents who refer your business to us; • any person acting on your behalf, including your financial adviser, solicitor,
settlement agent, accountant, executor, administrator, trustee, guardian or attorney;
• financial institutions who request information from us if you seek credit from them;
• if you have borrowed from the Bank to purchase property valuers and insurers (so that the Bank can obtain a valuation of your property, and confirm that it is insured);
• if your have insurance: medical practitioners (to verify or clarify, if necessary, any health information you may provide), claims investigators and reinsurers (so that any claim you make can be assessed and managed), insurance
reference agencies (where the Bank is considering whether to accept a proposal of insurance from you and, if so, on what terms); and
• organisations to whom we may outsource certain functions. In all circumstances where the Bank’s contractors, agents and outsourced service providers become aware of customer information, confidentiality arrangements apply. Customer information may only be used by the Bank’s agents, contractors and outsourced service providers for our purposes. We may be required to disclose customer information by law, e.g. under Court Orders or Statutory Notices pursuant to taxation or social security laws or under laws relating to sanctions, anti-money laundering or counter terrorism financing. We may send customer information overseas if: • that is necessary to complete a transaction, or • we outsource certain functions overseas. We may also be permitted, as distinct from required, to disclose information in other circumstances. For more information, please refer to our Privacy Policy. Access to your personal information The law allows you (subject to permitted exceptions) to access your personal information. You can do this by contacting: Customer Relations
CommSecReply Paid 41 Sydney NSW 2001
We may charge you for providing access. Further informationFor further information on the Bank’s privacy and information handling practices, please refer to the Bank’s Privacy Policy, which is available at commbank.com.au or upon request from any branch of the Bank.Dispute resolutionIf you are not satisfied with the service or advice you receive from us, you are entitled to complain. We have established procedures to ensure that all enquiries and complaints are properly considered and dealt with. To save yourself valuable time, gather all the facts and documents you can gather about the complaint, think about the questions you want answered and decide what you want us to do. Next, contact the department that handled the matter and explain the problem. A quick call is all that is required to resolve most issues. If at this stage your complaint hasn’t been resolved to your satisfaction, please contact our Client Relations team:
CBA Group Customer Relations,Reply Paid 41,Sydney NSW 2001Phone: 1800 805 605Fax: 1800 025 542Email: www.commbank.com.au/feedback
If you are not satisfied with our response and wish to proceed further, you may refer the matter to an independent complaint handling body: Financial Ombudsman Service (FOS), a body recognised by the Australian Securities and Investments Commission. For further information please contact FOS at:
GPO Box 3Melbourne Vic 3001
Telephone: 1300 780 808Facsimile: (03) 9613 6399Email: [email protected]: www.fos.org.auDefined terms Defined terms used in this PDS are listed in the Glossary in Section 9 or elsewhere in this PDS where the context requires.
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MKTG538E 030611
1300 133 875 commsec.com.au