DRS MARKETS RISK DISCLOSURE NOTICE
This notice provides you with information about the risks associated with the types of investments and products which you may invest in through the services provided to you by DRS Markets Limited (DRS) . DRS provides investment services in relation to equities and contracts for difference (CFDs). Each investment product and service has its own distinct risks.
This notice provides a general description of the risks of the products that you are able to trade or invest in through DRS, and the services provided by us. This notice does not explain all of the risks involved in investing in the products offered or how such risks relate to your personal circumstances. It is important that you fully understand the risks involved before making a decision to enter into any investments. If you are in any doubt about the risks involved, you should seek professional advice.
In relation to each of type of investment you may make through the services we provide, the following risks just some that are applicable.
- You should not deal in investments or financial products unless you understand the nature of the contract you are entering into and the extent of your exposure to risk.
- Past performance of any investment should never be considered as a guide to its performance in the future.
- The value of investments can go down as well as up.
- There is no guarantee that you will get back all or any of the amount you invest. In relation to certain investments you may even lose more than your initial investment.
- Investments denominated in currencies other than your base currency will carry the risk of exchange-rate movements which may have unfavourable effects.
- Certain investments may be illiquid and it may be difficult to obtain reliable information about the value and extent of risks associated with such investments.
- This site does not provide nor offer advice.
INVESTMENT SPECIFIC RISKS
Shares, known as equities, represent a portion of a company’s share capital. The extent of your ownership in a company depends on the number of shares you own in relation to the total number of shares in issue.
Shares constitute an equity stake in a company. The value of shares is derived from dividing the value of a company by the number of shares which it has issued. Owning shares does not mean that the shareholder has direct control over the day-to-day operations of the company, however, depending on the class of share, it generally entitles to an equal distribution in any profits declared in the form of dividends.
The following are just some of the risks involved when investing in shares:
Price risk: the share price of a company can go down as well as up. The price may be affected by supply and demand, general market conditions and both general economic conditions and risks as well as conditions and risks specific to the industry that the company operates in. Such conditions and risks can be very difficult to foresee and may result in the share price of a company declining.
Dividend risk: a company may pay dividends out of its profits to its shareholders. Where the fortunes and profitability of a company deteriorate or the company needs to reinvest its profits, the company’s board of directors may decide to cut or cease to declare any dividends. In such a case shareholders will not receive the income stream from these profits which they may otherwise have come to expect. Furthermore, such a decision to cut or not declare a dividend may have a negative impact on the share price of a company.
Liquidity risk: Prices for shares traded on exchanges are usually available on daily basis. However, for various reasons trading might be temporarily disrupted and, thus, you might not be able to sell shares on short notice. It may also be the case that the market for shares in smaller companies or companies whose shares are listed on smaller exchanges may not be as liquid as those for larger companies or companies traded on larger exchanges. In such circumstances there may also be a larger gap between the buying and selling prices for the shares in such companies.
Interest rate risk: where there is a change in interest rates this can have a substantial negative impact on the prices of shares.
Foreign Exchange risk: where you hold shares in a company that is denominated in a foreign currency then an adverse change in your home currency against the foreign currency can have a materially negative impact on the value of your investment regardless of the performance of the company whose shares you own.
Dilution Risk: a company may from time to time raise further capital by issuing new shares. Where this occurs, any shareholder who does not buy more shares will see their existing proportionate shareholding in the company shrink (or diluted) which can have a negative impact on the value of the shareholders shares, as well as reducing the shareholders voting rights and dividends.
Insolvency risk: in the case of an insolvency and winding up of a company, the claims of the company’s shareholders are usually the last ones fulfilled.
CFDs are a type of derivative product, the purpose of which is to secure a profit or avoid a loss by reference to fluctuations in the value or price of underlying instruments such as shares, indices, commodities, currencies and treasuries.
CFDs are a leveraged product meaning that you do not purchase the whole of the underlying instrument to which the CFD relates. Instead you put down a small deposit to gain a much larger market exposure.
Investing in CFDs carries a higher degree of risk than for example, risks associated with investing in shares. This is because the ‘leverage’ or ‘gearing’ often obtainable means that a relatively small movement in the price of the underlying instrument can lead to a proportionately much larger movement in the value of your investment and this can work against you as well as for you; it is possible to lose more money than your initial deposit.
CFDs are complex products and you should only engage in CFDs if you understand their nature and how they work, how you make profit and loss and the extent of loss and the exposure you have to loss.
The following are just some of the risks involved in entering into CFDs:
Margin risk: when you enter into a CFD you are required to place margin with us (being a specific percentage of the underlying value of the instrument to which the CFD relates). If the market moves against you, you will be required, at short notice, to pay further margin to keep your positions open. This means that you may be exposed to large losses over and above you initial deposit paid to enter into the CFD. Failure to pay further margin when required will result in your positions being closed out. You will be liable to us for any amounts owing as a result of your positions being closed out.
Magnified market volatility: due to the gearing of CFDs, volatility in markets are magnified and large losses can be quickly accrued. It is essential therefore to closely monitor all of your open positions.
Long term investments: because of the nature and of CFDs and their underlying volatility, they are not suitable for investors who wish to buy and hold their investments for long periods without having to monitor them on a regular basis.
Cash Settlement: When entering into a CFD you do not acquire any interest in the underlying instrument to which the CFD relates, whether it be a share, commodity or currency. Accordingly CFDs can only be settled in cash.
Over the counter trading: when entering into a CFD you are dealing directly with a single counterparty. You cannot transfer the CFD and you can only close out your position with the counterparty who you are dealing with. This involves greater risk than investing in financial instruments transferable on recognised exchanges and through central counterparties. Risk include, pricing risk as well as risk of failure of the counterparty who you are dealing with.
Currency risk: if a CFD is denominated in a currency other than your base currency, adverse currency exchange fluctuations will have a negative impact on your profit and losses.