The prices of commodities fluctuate, sometimes dramatically. The price of a commodity may move up or down, and may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying and selling commodities. The Customer’s position on various Transactions may be liquidated at a loss and the Customer will then be liable for any resulting deficit.
Under certain circumstances, it may be difficult to liquidate an existing position, assess the value, determine a fair price or assess its exposure to risk. The specifications of outstanding contracts may also be modified by a clearing house to reflect changes in the underlying asset.
If the Customer enters into an off-exchange/OTC Transaction, GAI may be acting as the Customer's counterparty. Off-exchange/OTC Transactions may be less regulated or subject to a separate regulatory regime, compared to on-exchange Transactions.
Because prices and characteristics of off-exchange/OTC financial instruments are often individually negotiated, there may be no central source for obtaining prices and there can be inefficiencies in the pricing of such instruments.
Off-exchange/OTC Transactions may also involve greater risk than dealing in exchange traded products because there is no exchange market through which to liquidate the Customer's position, to assess the value of the product or the exposure to risk. Bid and offer prices need not be quoted and it may be difficult to establish what is a fair price.
Transactions on markets in other jurisdictions may expose the Customer to additional risk. Such markets may offer different or diminished investor protection. Before the Customer trades, the Customer should make enquiries with GAI about any rules relevant to the Customer's particular Transactions. The Customer's local regulatory authority will be unable to compel the enforcement of the rules of the regulatory authorities or markets in other jurisdictions where the Customer's Transactions have been affected. The Customer should ask GAI for details about the types of redress available in both the Customer's home jurisdiction and other relevant jurisdictions before the Customer starts to trade. Any imposition by a country of exchange controls or other limitations or restrictions may cause payments to be made in the local currency instead of the original invested currency, or may result in the inability to affect outward remittances of funds from such country, which can affect the value of the Customer's investment or the Customer's ability to enjoy its benefit.
Investments in assets in "emerging markets", including those located in Asia, Latin America and eastern Europe, may yield high returns but may also carry high investment risks. Such risks include political risks, risks of economic instability, heightened levels of the general risks described above, greater prevalence of unsavoury market practices and laws and regulations which afford inadequate protection and safeguards to investors. Generally, less information is publicly available with respect to emerging markets issuers and obligors and many emerging markets companies are subject to less rigorous accounting and reporting requirements than those applicable in developed markets.
Adverse market conditions may result in the Customer not being able to affect Transactions, liquidate all or part of its investments, assess a value or its exposure or determine a fair price, as and when it requires.
Placing contingent orders, such as “stop-loss” or "stop-limit" orders, will not necessarily limit the Customer's losses to the intended amounts, as it may be impossible to execute such orders under adverse market conditions. Strategies using combinations of positions, such as spread and straddle positions, may be as risky as taking simple long or short positions.
The normal pricing relationships between a derivative and the underlying assets may not exist in certain circumstances. For example, this can occur when an asset underlying an option is subject to price limits while the option is not.
Most open-outcry and electronic trading facilities are supported by computer-based systems for the order-routing, execution, matching, registration or clearing of trades. As with all facilities and systems, they are vulnerable to temporary disruption or failure. The Customer’s ability to recover certain losses may be subject to limits on liability imposed by the system provider, the market, the clearing house and/or member firms. Such limits may vary. Before conducting any Transactions through such facilities or systems, the Customer should understand the details in this respect. Further, trading on an electronic trading system may differ not only from trading in an open-outcry market but also from trading on other electronic trading systems. If the Customer undertakes Transactions on an electronic trading system, it will be exposed to risks associated with the system including the failure of hardware and software. The result of any system failure may be that the Customer’s order is either not executed according to its instructions or not executed at all.
Fluctuations in foreign currency rates will have an impact on the Customer's profit and loss where a Transaction involves a foreign currency element.
Derivatives are financial contracts for which the price is derived from an underlying asset or benchmark, such as a share or share index. Derivatives may be comprised of a number of different elements and this often makes them difficult to understand. The Customer should not deal in derivatives unless it asks about and understands the nature of the contract it is entering into, the terms and conditions of the contract and the extent of its exposure to risk. While the following sections of this risk disclosure statement describe the principal risks relevant to certain derivatives products, such as options, warrants, futures and forwards, it does not disclose all of the risks and other significant aspects of these products or other derivatives products.
There may be a number of counterparties and/or intermediaries (including other brokers, dealers, market-makers, exchanges, clearing houses or other third parties) that may be involved with Transactions entered into by GAI on the Customer's behalf. The Customer acknowledges and agrees that Transactions entered into on the Customer's behalf with or through such counterparties and/or intermediaries are subject to the prevailing terms and conditions as may be specified by such counterparties and/or intermediaries and are dependent on the performance, settlement or delivery by such counterparties and/or intermediaries.
Any wrongdoing, act, omission, insolvency, negligence, breach of duty, misconduct, fraud, wilful default or any other failure or default by or in respect of any such counterparty and/or intermediary may result in Losses to the Customer (including the loss of any Margin, investments, property or other documents of title belonging to the Customer and/or held in respect of the Customer's Transactions) or lead to the Customer's positions being liquidated or closed out without prior notice to or consent from the Customer and, by trading through or with GAI, the Customer acknowledges and understands that any and all such Losses will be for the Customer's own account. In certain circumstances, the Customer may not even get back (in whole or in part) the actual cash and/or assets which the Customer may have deposited with GAI (whether as Margin or otherwise) or the Customer may have to accept cash in lieu of the delivery of any available assets.
Upon an insolvency or other default of any such counterparty or intermediary (the “Defaulting Intermediary”), it may sometimes be possible to transfer the Customer’s open positions to another appropriate counterparty or intermediary (the “Replacement Intermediary”). However, there may be occasions where the Customer’s margins, cash and/or assets deposited with the Defaulting Intermediary may not be transferred to the Replacement Intermediary together with the transferred open positions. In such a scenario, the Customer's margins, cash and/or assets deposited with the Defaulting Intermediary (“Original Margin”) may continue to be retained by the Defaulting Intermediary and the Customer may be required to provide fresh or additional margin, cash and/or other assets to the Replacement Intermediary (“Replacement Margin”) in order for the Customer’s open positions to be transferred to the Replacement Intermediary. In such a situation, GAI may, if permitted by Applicable Law, and whether with or without notice to the Customer, provide to the Customer an advance or a loan for the purpose of meeting the Replacement Margin requirements so as to facilitate and support the transfer of the Customer's open positions from the Defaulting Intermediary to the Replacement Intermediary. The Customer will have to repay GAI in full for any such advance or loan granted by GAI. Any and all Original Margin subsequently received by GAI from the Defaulting Intermediary may be used by GAI to repay all such advances and loans granted by GAI. While GAI will generally endeavour to notify the Customer of the insolvency or default of a Defaulting Intermediary, the possibility of transferring the Customer’s open positions to a Replacement Intermediary and the Replacement Margin requirements, the Customer accepts that it may not always be possible or feasible for GAI to do so given prevailing market conditions and that it may not be in the Customer's interest for there to be any delay in the transfer of its open positions to a Replacement Intermediary. So long as GAI acts in good faith and in a commercially reasonable manner, GAI will accept no liability or responsibility for any Loss suffered by the Customer and the Customer will be required to indemnify GAI against all Losses (including legal costs on a full indemnity basis) suffered or incurred by GAI in connection with any act, omission or step taken by GAI in good faith in connection with the insolvency or other default of the Defaulting Intermediary and the transfer of open positions to a Replacement Intermediary and the grant of any advances or loans for Replacement Margin. The Customer acknowledges and accepts that the foregoing risks are inherent in trading with or through GAI which requires Transactions to be placed with or executed through counterparties or intermediaries.
Financial transactions may sometimes involve a high degree of leverage. This can work against the Customer as well as for the Customer. A small market movement can produce large losses as well as gains.
The risk of loss in financing a Transaction by deposit of collateral is significant. The Customer may sustain losses in excess of its cash and any other assets deposited as collateral with the licensed or registered person. Market conditions may make it impossible to execute contingent orders, such as "stop-loss" or "stop-limit" orders. The Customer may be called upon at short notice to make additional margin deposits or interest payments. If the required margin deposits or interest payments are not made within the prescribed time, the Customer's collateral may be liquidated without its consent. Moreover, the Customer will remain liable for any resulting deficit in its account and interest charged on its account. The Customer should therefore carefully consider whether such a financing arrangement is suitable in light of its own financial position and investment objectives.
Before the Customer begins to trade, the Customer should obtain a clear explanation of all commissions, fees and other charges for which it will be liable. These charges will affect the Customer's net profit (if any) or increase its loss and must be considered in any risk assessment made by the Customer.
The Customer should familiarise itself with the protections given to money or other property it deposits for domestic and foreign Transactions, particularly in the event of a counterparty's or an intermediary's insolvency or bankruptcy. The extent to which the Customer may recover its money or property may be governed by specific legislation or local rules. In some jurisdictions, property which had been specifically identifiable as the Customer's will be pro-rated in the same manner as cash for purposes of distribution in the event of a shortfall.
Futures entail the obligation to deliver or take delivery on a specified expiration date of a defined quantity of an underlying asset at a price agreed on the contract date. Futures are standardized contracts traded on-exchange. Futures involve a high degree of risk: the "gearing" or "leverage" often obtainable in futures trading means that a small deposit or down payment can lead to large losses as well as gains.
On buying or (short) selling an underlying asset on the futures market, the Customer must supply a specified initial margin on agreement of the contract. This is usually a percentage of the total value of the contracted instruments. In addition, a variation margin is calculated periodically during the life of the contract. This corresponds to the book profit or loss arising from any change in value in the contract or underlying instrument. In the event of a book loss, the variation margin can be several times as large as the initial margin.
Transactions in options carry a higher degree of risk. Buyers and sellers of options should familiarize themselves with the type of options (i.e. put or call) which they contemplate trading, the style of exercise, the nature and extent of rights and obligations and the associated risks. You should calculate the extent to which the value of the options would have to increase for your position to become profitable, taking into account the premium paid and all transaction costs. You should also inform yourself of the exercise and expiration procedures and your rights and obligations upon exercise or expiry. Please note that Option transactions may be exchange-traded, exchange-cleared or transacted bilaterally with GAI.
A person should not buy any option unless he is able to sustain a total loss of the premium and transaction costs of buying the option. The buyer of options may offset its position by trading in the market or exercise the options or allow the options to expire. A person who buys an option should be aware that in order to realize any value from the option, it will be necessary either to offset the option position or to exercise the option. The buyer of an option should be aware that some option contracts may provide only a limited period of time for exercise of the option (e.g. an American-style option), and some option contracts may provide for the exercise of the option on a specified or stipulated date (e.g. a European-style option). The exercise of an option results either in a cash settlement or in the buyer acquiring or delivering the underlying interest. If the option is on a futures contract or leveraged foreign exchange transaction, the buyer will have to acquire a futures contract or leveraged foreign exchange position, as the case may be, with associated liabilities for margin. If the purchased options expire worthless, you will suffer a total loss of your investment which will consist of the option premium paid plus transaction costs. If you are contemplating buying deep-out-of-the-money options, you should be aware that, ordinarily, the chance of such options becoming profitable is remote. It may sometimes even be impossible to acquire the necessary underlying asset.
Selling (writing or granting) an option generally entails considerably greater risk than buying options. Although the premium received by the seller is fixed, the seller may sustain a loss well in excess of the amount of the premium received. The seller will be liable to deposit additional margin to maintain the position if the market moves unfavorably. The seller will also be exposed to the risk of the buyer exercising the option and the seller will be obligated to either settle the option in cash or to acquire or deliver the underlying interest. If the option is on a futures contract or a leveraged foreign exchange transaction, the seller of a put option will acquire a futures contract or leveraged foreign exchange position, as the case may be, with associated liabilities for margin. If the option is "covered" by the seller holding a corresponding position in the underlying futures contract, leveraged foreign exchange transaction or another option, the risk may be reduced. If the option is not covered, the risk of loss can be unlimited.
Terms and conditions of contracts: Before you conduct your transactions, you should understand the terms and conditions of the specific option which you are trading and the associated obligations (e.g. the expiration dates and restrictions on the time of exercise). Under certain circumstances, the specifications of outstanding contracts (including the exercise price of an option) may be modified by the exchange or clearing house to reflect changes in the underlying interest.
Before entering into any transaction involving a commodity option, you should thoroughly understand the nature and type of option involved and the underlying physical commodity. In addition to the risks set out above, you should note that specific market movements of the underlying physical commodity cannot be predicted accurately. The prices of commodities can and do fluctuate, and may experience up and down movements which would affect the value of the option.
Unlike "plain vanilla" put and call options, exotic options are subject to additional conditions and agreements. Exotic options come in the form of tailor-made over-the-counter options. Given the special composition of exotic options, their price movements can vary markedly from those of their "plain vanilla" cousins. You must also be aware that larger transactions can trigger price movements even shortly before expiration and that these can render an option worthless. There is no limit to the structures exotic options may take. We cannot go into detail here about the risks involved in any particular case. Before buying any exotic options, be sure to seek comprehensive advice about the particular risks involved.
There is no actual market for OTC forwards agreed individually, and hence such positions may only be closed out with the agreement of the counterparty.
Contracts for differences provide for adjustment between the parties based on the respective values or levels of certain Underlying Assetss at the time of the contracts and at an agreed future time. Such Underlying Assetss can be shares as well as commodities, securities, currencies, interest rate swaps, etc. There is no delivery on these contracts which can only be settled in cash.
Further, the relevant Underlying Asset may not have a ready market. Consequently, these contracts for differences may be very illiquid and therefore, you may sustain substantial losses as the bid/offer spreads may be very wide if the market moves against your position. Essentially, contracts for differences carry the same risks as investing in a futures contract, forward or an option and you should be aware of these as set out above.
In particular, transactions in contracts for differences have margin requirements and you should be aware of the implications of this as set out in the section above entitled "Margin and Leveraged Transactions". You should familiarise yourself with the margin requirements (which can vary with the Underlying Assets) and you will be responsible for monitoring your positions and knowing when you will be required to deposit additional margin.
Unless otherwise notified to you, all contracts for differences will be entered into with GAI transacting as principal. They are not transacted on a regulated exchange, and the terms and conditions of contracts for differences will be established solely by GAI. Your rights and obligations under a contract for difference are not assignable or transferable to any person, and the transaction can only be closed out with GAI during GAI‟s normal trading hours in accordance with the Agreement.
Before you trade, you should familiarise yourself with the details of all commissions and other charges for which you will be liable.
Under certain trading conditions it may be difficult or impossible to liquidate a position, even if the reference Underlying Assets for a contract for difference is the price on an exchange. For example, this may occur if the price of the Underlying Assets on an exchange rises or falls so rapidly that trading on the exchange is restricted or suspended. A "stop loss" order therefore cannot guarantee that your loss will be limited.
You should familiarise yourself with the protection accorded to any money or other property which you deposit as margin for such trades. GAI may onward deposit these with its hedging counterparty to cover margin requirement on your trades. While every attempt will be made to segregate margin deposits and assets from GAI’s own margin deposits and assets held with the counterparty, there may be instances when such segregation will not be recognized. In the unlikely event that GAI becomes insolvent, your ability to withdraw the deposit may be affected and you may be an unsecured creditor of GAI with respect to any shortfall.
To the extent that the reference Underlying Assets is traded on a foreign market, this may expose you to risks that are greater than those in local markets, as described above in the section entitled "Country Risks".
When trading in FX, the investor takes a view on the development of the price of one currency relative to another, where one is sold and the other is purchased. By way of example, an investor may sell British pounds (GBP) against the US dollar (USD) if he expects that the USD will increase relative to the GBP.
FX is traded as a leveraged product, which means that for a small outlay, you can open and trade larger positions in the market. FX may be traded as FX Spot, FX Forward or FX Options. FX Spot is the purchase of one currency against the sale of another for immediate settlement on the spot date. FX Forward and FX Options transactions are settled on an agreed date in the future at prices which are agreed on the date of the transaction. FX Forward trading involves an obligation to enter into the transaction at the agreed price on the settlement date. A purchaser of FX Options has a right to enter into a transaction in the underlying FX Spot currency pair on the expiry date if the price is more favourable than the market price at this time. On the other hand, a seller of options has an obligation to enter into a transaction with the purchaser (GAI) on the settlement date if requested by the purchaser. Purchased options therefore involve a limited risk in the form of a premium which is payable when the contract is made, while options that have been sold involve unlimited risk in the form of changes to the price of the underlying FX Spot currency pair.
The currency exchange market is the world's largest financial market with 24-hour trading on working days. It is characterised, among other things, by a relatively low profit margin compared to other products. A high profit is therefore subject to a large trading volume, which is achieved for instance by margin trading as described above. When trading in FX, a gain realised by one market player will always be offset by another player's loss. FX transactions are always made with GAI as counterparty, and GAI quotes prices on the basis of prices that can be obtained in the market.
Please note that as FX is margin traded, it allows you to take a larger position than you would otherwise be able to base on your funds with GAI. As such, a relatively small negative or positive market movement can have a significant effect on your investment. FX trading therefore involves a relatively high level of risk. This makes the potential gain quite high, even if the deposit is relatively small. If your total exposure on margin trades exceeds your deposit, you risk losing more than your deposit.
The disclosures above (even when taken and read in conjunction with the risk disclosures statements in the Application Form) do not purport to disclose all of the risks and other material considerations associated with Transactions the Customer may enter into. The Customer specifically should not take the general disclosures herein as business, legal, tax or accounting or other advice or as modifying applicable law.
IF THE CUSTOMER IS IN ANY DOUBT ABOUT AN ACTUAL OR PROPOSED TRANSACTION, THE CUSTOMER SHOULD CONSULT ITS OWN BUSINESS, LEGAL, TAX, ACCOUNTING AND OTHER ADVISERS WITH RESPECT TO THE TRANSACTION AND IN ALL CASES THE CUSTOMER SHOULD REFRAIN FROM ENTERING INTO ANY TRANSACTION WITH OR THROUGH GAI UNLESS THE CUSTOMER HAS FULLY UNDERSTOOD THE TERMS AND RISKS OF THE TRANSACTION, INCLUDING THE EXTENT OF ITS POTENTIAL RISK OF LOSS AND IS WILLING AND ABLE TO SUSTAIN SUCH LOSS.
Risk Disclosure Statement
This risk disclosure statement provides a brief overview of some of the risks associated with holding and trading financial instruments. It is not exhaustive, and the Customer should
consult their own professional advisers before entering into any Transaction.
The Customer has read and understood this risk disclosure statement and accepts the risks.
PT Granjaya Asia Investama (Reg No. AHU-0066255) and is certified by the Commodity Futures Trading Supervisory Agency (BAPPEBTI) of the Ministry of Trade of the Republic of Indonesia as a Futures Trading Firm in Indonesia (Certification No. 004/UPTP/SEP/03/2023).
GAI is also a member of Jakarta Futures (Certification No. SPAB/181/BBJ/09/2022) and a Clearing Member of PT Kliring Berjangka Indonesia (Registration No. 13/AK-KBI/X/2022).