ISSUER DEFAULT RISK
In the event that a structured product issuer becomes insolvent and defaults on their listed securities, investors will be considered as unsecured creditors and will have no preferential claims to any assets held by the issuer. Investors should therefore pay close attention to the financial strength and credit worthiness of structured product issuers.
UNCOLLATERALIZED PRODUCT RISK
Uncollateralized structured products are not asset backed. In the event of issuer bankruptcy, investors can lose their entire investment. Investors should read the listing documents to determine if a product is uncollateralized.
GEARING RISK
Derivative warrants and callable bull/bear contracts (CBBCs) are leveraged and can change in value rapidly according to the gearing ratio relative to the underlying assets. Investors should be aware that their value may fall to zero resulting in a total loss of the initial investment.
The level of gearing embedded in an inline warrant depends on a variety of factors including but not limited to time-to-expiry and spot price of the underlying asset compared to the lower and upper strike prices. An inline warrant will be expected to have a high effective gearing when trading price close to the lower or upper strike price, and a relatively low effective
gearing in other cases. These differences in effective gearing
are amplified when inline warrants are close to expiry.
EXPIRY CONSIDERATIONS
Structured products have an expiry date after which the issue may become worthless. Investors should be aware of the expiry time horizon and choose a product with an appropriate lifespan for their trading strategy.
EXTRAORDINARY PRICE MOVEMENTS
The price of a structured product may not match its theoretical price due to outside influences such as market supply and demand factors. As a result, actual traded prices can be higher or lower than the theoretical price.
FOREIGN EXCHANGE RISK
Investors trading structured products with underlying assets not denominated in US dollars are also exposed to exchange rate risk. Currency rate fluctuations can adversely affect the underlying asset value, also affecting the structured product price.
LIQUIDITY RISK
The Exchange requires all structured product issuers to appoint a liquidity provider for each individual issue. The role of liquidity providers is to provide two-way quotes to facilitate trading of their products. In the event that a liquidity provider defaults or ceases to fulfill its role, investors may not be able to buy or sell the product until a new liquidity provider has been assigned.
VOLATILITY RISK
Prices of derivatives can increase or decrease in line with the implied volatility of underlying asset price. Investors should be aware of the underlying asset volatility.
FX TRADING RISK WARNING
Trading Foreign Exchange (FX) and Contract for Differences (CFD) on margin is highly speculative; it carries a high level of risk and may not be suitable for all investors. The high degree of advantage can work against you as well as for you. Before deciding to trade on margin and/or invest in FX or CFDs, you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some and/or all of your initial deposit(s) and/or investment(s) and may be required to deposit additional funds; therefore, you should not speculate with capital that you could not afford to lose. You therefore should be aware of all of the risks associated with trading FX and CFD and not invest money that you cannot afford to lose. You should be aware of all the risks associated with FX and CFD trading and seek advice and/or consultation from an independent financial advisor if you have any questions and you are in need of further clarification
