While some off-exchange markets are highly liquid, transactions in off-exchange such as FX cash markets may involve greater risk than investing in on-exchange derivatives because there is no exchange market on which to close out an open position. It may be impossible to liquidate an existing position, to assess the value of the position arising from an off-exchange transaction or to evaluate the exposure to risk. Bid prices and offer prices need not be quoted, and, even where they are, they will be established by dealers in these instruments, and consequently it may be difficult to establish what a fair price is. YOU ARE LIMITED TO YOUR DEALER TO OFFSET OR LIQUIDATE ANY TRADING POSITIONS SINCE THE TRANSACTIONS ARE NOT MADE ON AN EXCHANGE OR MARKET, AND YOUR DEALER MAY SET ITS OWN PRICES.
Counterparty risk refers to the possibility that one party to a particular transaction, could potentially end up defaulting. When used in the context of forex (FX), counterparty risk typically relates to the possibility that the brokerage or trading venue utilized by a trader could default or collapse, leading to significant losses for the trader. Counterparty risk is something that FX traders should be aware of and incorporate into their decision-making process.
DEALING DESK RISK
The off-exchange foreign currency trading you are entering into is not conducted on an interbank market, nor is it carried out on a futures exchange subject to regulation as a designated contract market by the Commodity Futures Trading Commission. The foreign currency trades you transact are trades with the futures commission merchant or retail foreign exchange dealer as your counterparty. WHEN YOU SELL, THE DEALER IS THE BUYER. WHEN YOU BUY, THE DEALER IS THE SELLER. As a result, when you lose money trading, your dealer may be making money on such trades, in addition to any fees, commissions, or spreads the dealer may charge.
EFFECTS OF LEVERAGE
Spot Forex and Futures transactions carry a high degree of risk. The amount of Initial margin is small relative to the value of the Spot Forex and Futures contract so that transactions are ‘leveraged’ or ‘geared’. A relatively small market movement will have a proportionately larger impact on the funds you have deposited or will have to deposit: this may work against you as well as for you. You may sustain a total loss of initial margin funds and any additional funds deposited with the firm to maintain your position. If the market moves against your position or margin levels are increased, you may be called upon to pay substantial additional funds on short notice to maintain your position. If you fail to comply with a request for additional funds within the time prescribed, your position may be liquidated at a loss and you will be liable for any resulting deficit.
AN ELECTRONIC TRADING PLATFORM FOR RETAIL FOREIGN CURRENCY TRANSACTIONS IS NOT AN EXCHANGE. IT IS AN ELECTRONIC CONNECTION FOR ACCESSING YOUR DEALER. THE TERMS OF AVAILABILITY OF SUCH A PLATFORM ARE GOVERNED ONLY BY YOUR CONTRACT WITH YOUR DEALER.
Any trading platform that you may use to enter off-exchange foreign currency transactions is only connected to your futures commission merchant or retail foreign exchange dealer. You are accessing that trading platform only to transact with your dealer. You are not trading with any other entities or customers of the dealer by accessing such platform. The availability and operation of any such platform, including the consequences of the unavailability of the trading platform for any reason, is governed only by the terms of your account agreement with the dealer.
Optimus FX receives a volume-based referral fee for its services. Trading in the off-exchange Foreign Exchange market (FX, Forex) is very speculative in nature, involves considerable risk and is not appropriate for all investors. Therefore, before deciding to participate in off-exchange Foreign Exchange trading, you should carefully consider your investment objectives, level of experience and risk appetite. Investors should only use risk capital when trading forex because there is always the risk of substantial loss. Most importantly, do not invest money you cannot afford to lose. Losses may exceed deposits. Any mention of past performance is not indicative of future results. Account access, trade executions and system response may be adversely affected by market conditions, quote delays, system performance and other factors. There is considerable exposure to risk in any off-exchange foreign exchange transaction, including, but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair. Moreover, the leveraged nature of Forex trading means that any market movement will have an equally proportional effect on your deposited funds. This may work against you as well as for you. Please note that Optimus FX LLC is not an NFA Member or registered with the CFTC. Optimus Futures LLC is a member of the NFA and registered with CFTC.