BACERA CO PTY LTD

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RG 227

Regulatory Guide 227 (RG 227) issued by Australian Securities and Investment Commission sets out 7 disclosure benchmarks for over the counter contracts for difference. Product Disclosure Statements must address the benchmarks on an "if not, why not" basis.

As an issuer of OTC CFDs BACERA CO PTY LTD provides the information set out below to explain whether and how it addresses the benchmarks. These disclosures are a summary only and should not be relied upon solely. The Product Disclosure Statement (PDS) sets out the information in detail and is available on this website. Clients should ensure they review the PDS in full before deciding whether to acquire BACERA CO PTY LTD ’s products.

BENCHMARK

REQUIREMENT

EXPLANATION

BENCHMARK

CLIENT QUALIFICATION

REQUIREMENT

Yes

EXPLANATION

BACERA CO PTY LTD maintains and applies a written policy which sets out the minimum qualification criteria that prospective retail investors will need to demonstrate before we will open a trading account for you. BACERA CO PTY LTD also maintains a written policy/procedure to ensure such criteria are properly applied, and unsuitable investors are not accepted. We also maintain records of our assessments.

Please note that we do not provide personal advice regarding the suitability of trading in these products.

BACERA CO PTY LTD does not accept retail investors unless they are able to satisfactorily answer the Appopriateness Test in our trading account web application form which addresses the following criteria:

Previous trading experience in financial products
Understanding of leverage, margins and volatility
Understanding of the key features of the product
Ability to monitor and manage the risks of trading
Understanding that only risk capital should be traded

BENCHMARK

OPENING COLLATERAL

REQUIREMENT

EXPLANATION

While BACERA CO PTY LTD does not encourage trading using borrowed funds, we realize the additional funding option is appreciated by our clients.

To limit fraud risk, BACERA CO PTY LTD imposes a limit of $1,000 on initial account funding done via credit card, and we also limit overall credit card funding to $5,000 per month. Please note that exceptions may apply.

BACERA CO PTY LTD does not encourage the use of leverage products with borrowed funds. You should be aware that trading on leverage with borrowed money exposes you to greater credit risks and cash flow risks. This includes the risk of 'double leverage'.

BACERA CO PTY LTD does not accept “cash equivalents” as opening collateral (e.g. no securities as deposits).

BENCHMARK

COUNTERPARTY RISK - HEDGING

REQUIREMENT

Yes

EXPLANATION

Within BACERA CO PTY LTD ’s risk management framework we have assessed the market risk and counterparty risks arising from entering into OTC CFD transactions with customers and hedge counterparties and applied controls to mitigate those risks. Those controls include:

the enforcement of position limits based on the account equity of the client and the instruments being traded;
the enforcement of market risk limits on the net exposure and daily loss limits of BACERA CO PTY LTD ;
the selection of hedge counterparties, in sufficient number to give reasonable assurance that BACERA CO PTY LTD has adequate facilities and capacity to hedge its exposures; and
the selection and maintenance of hedge counterparty relationships based on, amongst other things, their financial capacity and resilience.

BACERA CO PTY LTD ’s selection of hedge counterparties is based on the following factors:

whether the funds placed by BACERA CO PTY LTD as collateral are subject to Segregation;
the counterparties’ financial strength and stability based on its credit rating and that of its parent (if any);
the regulatory status of the counterparties; and
the services it provides and the strength of its operational controls and systems.

BENCHMARK

COUNTERPARTY RISK - FINANCIAL RESOURCES

REQUIREMENT

Yes

EXPLANATION

BACERA CO PTY LTD maintains a written policy and procedure with regard to the management and ongoing monitoring of its financial resources. This written policy addresses the following matters, amongst other things:

the methodology employed by BACERA CO PTY LTD to measure and assess its regulatory financial requirements under its Australian Financial Services License;
linkages between the budgetary planning process and the financial requirements;
scenarios used to forecast the cash resources available to BACERA CO PTY LTD to meet its financial requirements; and
roles and responsibilities for measuring and monitoring the financial condition against the requirements.

We do not perform regular testing of our financial needs under stressed conditions due to the fact that exposures are subject to significant variation and the results generated at any point in time may not be applicable to our financial position at other points in time. To mitigate the risks of failing to satisfy the financial requirements, we have established a capital buffer based upon historical market moves and measure and monitor capital daily. Financial resources are also subject to external audit on an annual basis.

BENCHMARK

CLIENT MONEY

REQUIREMENT

Yes

EXPLANATION

This information is made available by BACERA CO PTY LTD to explain how client money is handled. The purpose is to provide clients with an insight into how client money is segregated and may be utilised by BACERA CO PTY LTD so that clients are better informed to assess the safety of their funds.

Client money is held with Australian Authorised Deposit-taking Institutions (ADIs) in compliance with the Corporations Act Regulations. BACERA CO PTY LTD currently holds client segregated trust accounts with Commonwealth Bank of Australia and Bank of China Australia.

Funds are not held in individual segregated accounts but are pooled with other client’s funds. BACERA CO PTY LTD maintains client segregated trust accounts in a number of currencies for this purpose.

Funds held in trust on behalf of a retail client may only be withdrawn by BACERA CO PTY LTD as permitted under the Australian Client Money Rules, as set out in the Product Disclosure Statement and Client Agreement.

Funds held in trust on behalf of a wholesale client may be used by BACERA CO PTY LTD to meet its obligations incurred in connection with margining, guaranteeing, securing, transferring, adjusting or settling dealings in derivatives, including dealings on behalf of other clients.

A daily and a monthly reconciliation of client funds held in client segregated trust accounts is performed. On the basis of which BACERA CO PTY LTD either pays to or withdraws money from the segregated trust accounts reflecting the net settlement of all obligations to its clients.

We are solely entitled to any interest or earnings derived from Client Money being deposited in a trust account or invested by us in accordance with the Australian Client Money Rules, with such interest or earnings being payable to us from the relevant trust account or investment account.

BENCHMARK

SUSPENDED OR HALTED UNDERLYING ASSETS

REQUIREMENT

Yes

EXPLANATION

An underlying financial product may be placed in a trading halt on the relevant exchange in various circumstances. Additionally, it may be suspended or delisted in certain circumstances. 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.

BACERA CO PTY LTD , in its absolute discretion, cancel your order in respect of a transaction which has not yet been opened, or close any open Position, where the underlying financial product is the subject of a trading halt, suspension or delisting.

When you place an order for a CFD with us, it is likely that we will place a corresponding order to purchase or sell the relevant product to hedge our market risk. BACERA CO PTY LTD has the discretionas to when and if it will accept an order. Without limiting this discretion, it is likely that we will elect not to accept an order in circumstances where our corresponding order cannot be filled. Accordingly, BACERA CO PTY LTD may at any time determine, in our absolute discretion, that we will not permit the entry into a CFD over one or more underlying assets.

BENCHMARK

MARGIN CALLS

REQUIREMENT

Yes

EXPLANATION

BACERA CO PTY LTD establishes minimum margin requirements for all instruments. These margin requirements are set out in the Contract Specifications available on the website.

The ST5 trading system monitors the margin requirements of all open positions for each client against the client’s account equity. Clients can monitor their margin requirements and the margin ratio within the ST5 trading application.

Where account equity falls below the total margin requirement a margin call is generated and a notification is sent to the email address provided by the client to BACERA CO PTY LTD . Clients are advised that it is their responsibility to ensure they maintain sufficient equity to meet the total margin requirement at all times.

BACERA CO PTY LTD is under no obligation to allow time for clients to forward funds to meet margin calls as markets can be volatile and BACERA CO PTY LTD may without notice, in its discretion, close out all or some positions if the margin requirements are not satisfied.

Clients must ensure that they monitor their margin requirements as BACERA CO PTY LTD cannot guarantee that margin call notifications will be received by clients so clients should not rely on this.

If a client’s free equity falls below the Stop-out Level BACERA CO PTY LTD 's Trading Platform will automatically begin to liquidate open orders when the client's Total Equity balance falls below 50% of the Initial Margin Requirement. The trading platform will liquidate individual positions until the remaining Client Total Equity is sufficient to support existing open position(s). In deciding what positions will be individually liquidated the largest losing position will be closed first during liquidation.

Risk Disclosure Addendum

BACERA CO PTY LTD is the trading name of BACERA CO PTY LTD , Australian Company Number 130 877 137, Australian Financial Services Licence Number 328794.

BACERA CO PTY LTD recommends that prospective clients read our Product Disclosure Statement and the Financial Services Guide, as well as seek independent professional advice, before making any decision concerning BACERA CO PTY LTD 's products. Please note that if BACERA CO PTY LTD ’s financial services are being provided from a location outside of Australia, BACERA CO PTY LTD ’s AFSL and Australian regulation only applies to the financial services provided to Australian residents only. Due to regulatory restrictions BACERA CO PTY LTD does not accept applications from US citizens.

Prior to applying for an account the Client should consider carefully whether trading in derivative Contracts-for-Difference is suitable for him in the light of his circumstances and financial resources. Trading in derivative Contracts-for-Difference entails the use of leverage. In considering whether to engage in this form of trading, the Client should be aware of the following:

Risks associated with transactions in derivative Contracts-for-Difference

The Client should unreservedly acknowledge and accept that, regardless of any information which may be offered by the Company, the value of the Contracts-for-Difference provided by the Company may fluctuate downwards or upwards and it is even probable that the investment may become of no value.

Trading in Contracts-for-Difference and other leveraged products may involve a significant level of risk and is not suitable for all investors. Before undertaking any such transactions you should ensure that you fully understand the risks involved and you should seek independent advice if necessary. The Client should not engage in any dealings in Contracts-for-Difference, directly or indirectly, unless you know and understand all of the risks involved.

The Client should unreservedly acknowledge and accept that he runs a great risk of incurring losses and damages as a result of the dealing in Contracts-for-Difference and accepts and declares that he is willing to undertake this risk.

The high degree of leverage is a particular feature of derivative Contracts-for-Difference. This stems from the margining system applicable to such trades, which generally involves a comparatively modest deposit or margin in terms of the overall contract value, so that a relatively small movement in the underlying market can have a disproportionately dramatic effect on the Client’s trade.

The Contracts-for-Difference available for trading with the Company are ‘non-deliverable spot transactions’ giving an opportunity to make profit on changes in currency rates, commodity, stock market indices or share prices called the underlying instrument. If the underlying instrument movement is in the Client’s favor, the client may achieve a good profit, but an equally small adverse market movement can not only quickly result in the loss of the Clients’ entire deposit but also any additional commissions and other expenses incurred.

Volatility of price and limitation on the available market

The Contracts-for-Difference provided by the Company are derivative securities, where their price is derived from the price of the underlying reference instruments in which the Contracts-for-Difference refer to. Derivative securities/markets can be highly volatile. The prices of derivative Contracts-for-Difference and the Underlying Reference Instruments and Indices may fluctuate rapidly and over wide ranges and may reflect unforeseeable events or changes in conditions, none of which can be controlled by the Client or the Company. Under certain market conditions it can be impossible to execute any type of Clients order at declared price. Therefore Stop Loss order cannot guarantee the limit of loss.

The prices of derivative Contracts-for-Difference will be influenced by, amongst other things, changing supply and demand relationships, governmental, agricultural, and trade programs and policies, national and international political and economic events and the prevailing psychological characteristics of the relevant marketplace.

Transactions in derivative Contracts-for-Difference provided by the Company are not undertaken on a recognized exchange, rather they are undertaken through the Company’s Trading Platform and, accordingly, they may expose the Client to greater risks than regulated exchange transactions. The terms and conditions and trading rules are established solely by the counterparty which in this case is the Company. The Client is obliged to close an open position of any given Contracts-for-Difference during the opening hours of the Company’s Trading Platform.

Margin requirements

Clients are required to deposit an Initial Margin Deposit with BACERA CO PTY LTD in order to open a position. The Margin requirement will depend on the underlying instrument of the derivative Contracts-for-Difference, level of leverage assigned and the value of position to be established.

BACERA CO PTY LTD will attempt to notify the Client when the account total equity balance is at or near 100% of the Initial Margin Requirement for open positions. BACERA CO PTY LTD has the discretionary right to liquidate individual positions until the remaining Client Total Equity is sufficient to support existing open position(s). In deciding what positions will be individually liquidated the largest losing position will be closed first during liquidation.

BACERA CO PTY LTD guarantees that there will be no negative balance in the account when trading Contracts-for-Difference provided by BACERA CO PTY LTD .

Other additional obligations

Before the Client begins to trade, he should obtain details of all commissions and other charges for which the Client will be liable and which may be found through BACERA CO PTY LTD ’s Website and Client Agreement. If any charges are not expressed in money terms (but for example as a dealing spread), the Client should obtain a clear written explanation, including appropriate examples, to establish what such charges are likely to mean in specific money terms.

The value of open positions in the Contracts-for-Difference provided by BACERA CO PTY LTD is subject to Swap fees. Swap fees are based on prevailing market interest rates, which may vary over time. Details of daily swap fees applied are available on BACERA CO PTY LTD ’s Trading Platform.

The Client should take the risk that his trades in Contracts-for-Difference may be or become subject to tax and/or any other duty for example because of changes in legislation or his personal circumstances. BACERA CO PTY LTD does not warrant that no tax and/or any other stamp duty will be payable. The Client should be responsible for any taxes and/or any other duty which may accrue in respect of his trades.

This notice cannot and does not disclose or explain all of the risks and other significant aspects involved in dealing in Contracts-for-Difference and was designed to explain in general terms the nature of the risks particular to dealing in the Contracts-for-Difference provided by BACERA CO PTY LTD and to help the Client to take investment decisions on an informed basis. This notice should be read together with BACERA CO PTY LTD ’s Product Disclosure Statement and Financial Services Guide.

Risk Disclosure Addendum download

Should you have a question about the Risk Disclosures set forth herein please direct your questions to our Compliance Department: [email protected]

Target Market Determination

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Target Market Determination download