Clauses for Cash Segment
Whereas the MEMBER is registered as TRADING MEMBER OF National Stock Exchange of India Ltd. on the Cash Market segment with SEBI Registration No. INB 230647033. Whereas the CONSTITUENT is desirous of investigating/trading in those securities admitted for dealing on the Exchange as defined in the Bye-Laws of the Exchange. Whereas the CONSTITUENT has satisfied itself of the MEMBER to deal in securities and wishes to execute his orders through him and CONSTITUENT shall continue to satisfy itself of such capability of the MEMBER before executing orders through him. Whereas the MEMBER has satisfied and shall continuously satisfy himself about the genuineness and financial soundness of the CONSTITUENT and investment objectives relevant to the service to be provided.
Risk Disclosure Document
This document should be read by each and every constituent before entering into derivatives trading and should read in conjunction with clause 4.3.3 of the NSE (futures & options) trading regulations of the National Stock Exchange of India Limited (NSEL) NSEL has not passed the merits of participating in this trading segment not has NSEL passed the adequacy or accuracy of this disclosure document. The brief statement does not disclose all the risks and other significant aspects of trading. In light of the risk you should undertake such transactions only if you understand the nature of the contract (and contractual relationships) into which you are entering and the extent of your exposure to risk.
Risk involved in Trading in Derivatives Contracts
We Effect of “leverage “or “gearing” The amount of margin is small relative to the value of the derivatives contract so the transactions are “leveraged “or “geared”. Derivatives trading which is conducted with a relatively small amount of margin provides the possibility of great profit or loss in comparison with the principal investment amount. But transaction in derivatives carries a high degree of risk. You should therefore completely understand the following statements before actually trading in derivatives trading and also trade with caution while taking into account one’s circumstances, financial resources, etc.
Risk - Reducing Orders or Strategies
The placing of certain orders (e.g. “stop – loss” orders, or “stop-limit” orders) which are intended to limit losses to execute such orders. Strategies using combinations of positions, such as “spread” positions, may be as risky as taking simple “long” or “short” positions. Suspensions or restriction of trading and pricing relationships Market conditions (e.g. illiquidity) and/or operation of the rules of the certain markets (e.g. the suspension of trading in any contract or contract month because of price limits or “circuit breakers”) may increase the risk of loss due to inability to liquidate/offset positions.
Deposited Cash and Property
You should familiarize yourself with the protections accorded to the money or other property you deposit particularly in the event of a firm insolvency or bankruptcy. The extent to which you may recover your money or property may be governed by specific legislation or local rules. In some jurisdiction, property which has been specifically identifiable as your own will be pro-rated in the same manner as cash for purposes of distribution in the event of a shortfall. In case of any dispute with the member, the same shall be subject to arbitration as per the byelaws/regulation of the exchange.
Risk of Option Holders
An option holder runs the risk of losing the entire amount paid for the option in a relatively short period of time. This risk reflects the nature of an option as a wasting asset which becomes worthless when it expires. An option holder who neither sells his option in the secondary market nor exercise it prior to its expiration will necessarily lose his entire investment in the option. If the price of the underlying does not change in the anticipated direction before the option expires to an extent sufficient to cover the cost of the option, the investor may lose all or a significant part of his investment in the option.
Risk of Option Writers.
Transactions that involve buying and writing multiple options in combination with buying or selling short the underlying interests, present additional risks to investors. Combination transactions, such as option spreads, are more complex that buying or writing a single option. And it should be further noted that, as in any area of investing, a complexity not well understood is, in itself a risk factor. While this is not to suggest that combination strategies should not be considered, it is advisable, as is the case with all investments in options, to consult with someone who is experienced and knowledgeable with respect to the risk and potential rewards of combination transactions under various market circumstances.
