A contract for difference (CFD) is a form of derivative trading. It allows the trader to speculate on the rising or falling prices of shares and indices. The CFD involves gearing of your positions. Example. Your initial investment size will have significantly more exposure to the market than the original investment size. Ie R100000 investment size can have R300000 exposure to the market.

The risk of loss arising from trading in any local or international Derivative Instrument, which includes Single Stock Futures, Index Futures, Contracts for Difference, any Yield X or SAFEX products can be substantial. The FSP will carefully consider whether the client is suitable for such instruments. You should be aware of the following points:

• • If the market moves against your position, you may, in a relatively short time, sustain more than a total loss of the funds placed by way of security deposit with any registered derivative market. You may be required to deposit a substantial additional sum, at short notice, to maintain your minimum security deposit balance. If you do not maintain your margin balances your position may be closed out at a loss and you will be liable for any resulting deficit.

• • Under certain market conditions it may be difficult or impossible to close out a position. This may occur, for example, where trading is suspended or restricted at times of rapid price movement.

• • Where permitted, placing a stop-loss order will not necessarily limit your losses to the intended amounts, for market conditions may make it impossible to execute such orders at the stipulated price.

• • A spread or straddle position may be as risky as a simple long or short position and can be more complex.

• • Markets in Contracts for Difference can be highly volatile and investment in them, carry a substantial risk of loss. The high degree of “gearing” or “leverage” which is obtainable in trading these contracts stems from the payment of what is a comparatively modest security deposit when compared with the overall nominal value. As a result, a relatively small market movement can, in addition to achieving substantial gains where the market moves in your favour, result in substantial losses which may exceed your original investment where there is an equally small movement against you.
  • This brief statement cannot disclose all risks of investment in Single Stock Futures, Index Futures, Contracts for Difference and Yield X. They may also have tax consequences and you should consult your lawyer, accountant or other tax advisor in this regard.