Leveraged Foreign Exchange Trading

Leveraged Foreign Exchange contract is “geared” investment. Investors can buy or sell a foreign currency on margin in the expectation that its exchange rate against another foreign currency will rise or fall.  Whether the investor makes a profit or suffers a loss depends on the difference between the exchange rates at which the investor opens and closes the position. 

Leveraged foreign exchange is traded on a contract basis. The amount of currency covered by a contract is agreed between the investor and BOCI Securities Limited.  Profit and loss of a contract depends on how the exchange rate of the specific currency against the USD (or another relevant base currency) changes after a position is opened.  Before the contract is closed out, any profit or loss would only be unrealized and would only be realized upon closing out the contracts. Even if the investor has unrealized profit today, this may turn into losses tomorrow.

Leveraged foreign exchange contracts offered by BOCI Securities Limited are traded on a non-discretionary basis covering the following range of major currency contracts and cross currency contracts:

Currency Contracts and Contract Size
  

Interest

Due to the fact that different foreign currencies bear different interest rates, investors may have the opportunity to earn interests in addition to the trading profit.

Order Placing

Customer can contact Investment Service Department of BOCI Securities Limited or their Account Manager to place daily limit order. All daily limit orders will be expired at the end of each business day (i.e. 03.30 am)

Currently, there are two daily orders are available for trading:

    - Limit Order: an order to buy or sell a currency pair at a pre-specified price level

    - Stop-loss order: an order to restrict loss at a pre-specified price level
      (i.e. when the market price reaches or exceeds a certain level, the specified buy/ sell order will become a market order)(only available for position liquidation)

Trading Hours

H.K. time Monday to Friday, 8.00a.m. to 3.30a.m.

(Trading hour may change during public holiday or under special circumstances).

Settlement

Currency contract is usually settled on T+2 (except for USD/CAD which is on T+1). Realized profit and loss of the currency contract will be converted to USD and be credited or debited to the customer account on the settlement date.

Margin Requirement

Customer must deposit no less than 5% of the currency contract value to the account as initial margin prior to opening a position. When the margin falls below 3% of the currency contract value, customer is required to top up the account balance to the initial margin level within the timeframe as required by BOCI Securities Limited. If the customer’s margin falls to 1.5% or below the outstanding contract value, BOCI Securities Limited reserves the right without further notice to the customer to liquidate all customer’s position. Customer shall be responsible for any outstanding liabilities that may be incurred or arise as a result of such liquidation.

Commission

Please consult the Account Manager for details of the commission rates.

Profit and Loss Calculation

A customer bought 4 contracts EUR/USD at 1.4220.  Two days later, the customer sold out the position at 1.4290. Suppose the interest rate earned on buying EUR is 0.4% and the interest rate charged on selling USD is 1.2%, the profit for such trading and the interest earned would be calculated as follow:

Profit: EUR 50,000 x (1.4290 – 1.4220) x 4 = USD 1,400

Interest from Long Position: EUR 50,000 x 4 x 0.4 % x 2 / 360 = EUR 4.44 ( base on EUR/USD exchange rate of 1.4250, equivalent USD = USD6.33)

Interest from Short Position: USD 50,000 x 1.4220 x 4 x (-1.2%) x 2 / 360 = USD -18.96

Actual Profits (in USD)= Profit +/- Interest Margin= 1,400 + 6.33 - 18.96 = USD 1,387.37

Currency Interest (for reference only)

Currency interest is calculated based on the specified interest rates identified after market close and be converted into USD.

Currency interest is calculated based on the specified interest rates identified after market close and be converted into USD.

Risk Disclosure Statement

The risk of loss in leveraged foreign exchange trading can be substantial. Investors may sustain losses in exceeds of the initial margin. Placing contingent orders, such as “stop-loss” or “stop-limit” orders, by investors will not necessarily limit losses to the intended amounts. Market conditions may make it impossible to execute such orders. Investors may be called upon at a very short notice to deposit additional margin. If the required funds are not deposited within the prescribed timeframe, investor’s position may be liquidated without further notice. Investors will remain liable for any resulting deficit in their accounts. Investment involves risk. Investors should therefore carefully consider whether such trading is suitable in light of their own financial position and investment objectives. Investors should read carefully the relevant risk disclosure statement and seek independent and professional advice if they are uncertain of or have not understood any aspect of the risk disclosure statement or the nature and risks involved in trading such product.