Macquarie Contracts for Difference - Product Disclosure Statement
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Macquarie Contracts
for Difference
Product Disclosure Statement
15 JUNE 2015
Macquarie Bank Limited.
ABN 46 008 583 542. Australian Financial Services Licence No. 237502.
1This PDS Representations
This product disclosure statement (‘PDS’) is dated This PDS has been prepared and issued by Macquarie.
15 June 2015 and has been prepared by Macquarie Bank Potential investors should only rely on information in this PDS.
Limited (ABN 46 008 583 542, AFSL number 237502) No person, including any distributor of this PDS, is authorised
(‘Macquarie’, ‘we’ or ‘us’). This PDS (including the Updated to give any information, or to make any representation, in
Information defined in ‘Currency of information’ below) and connection with our invitation to apply to trade CFDs that is
the Application Form contain the only terms on which retail not contained in this PDS. Any information or representation
clients in Australia will be invited to apply for Contracts for not in this PDS must not be relied on as having been
Difference (‘CFDs’). To the extent permitted by law, we accept authorised by Macquarie.
no liability whatsoever for any loss or damage arising from you
Nothing in this PDS is an express or implied endorsement
relying on any other information when investing. Under this
by Macquarie of an investment in or through the Macquarie
PDS, Macquarie invites you to apply to trade CFDs issued by
Prime Facility or the shares of any Listed Entity.
Macquarie.
Your liability Electronic copies
This PDS is available from us online at the Prime Website.
Your potential liability under the Macquarie Prime Facility
Any person receiving this PDS electronically should note that
is not limited to the balance deposited in your Prime
applications can only be accepted if Macquarie receives a
Account or the value of Financial Instruments held
completed Application Form which was accompanied by the
through the Macquarie Prime Facility and we may ask you
electronic copy of this PDS.
to pay amounts in excess of these amounts to cover any
outstanding monies, especially where you have a short
position in relation to a share or are leveraged (eg have a Glossary
Loan Facility or hold CFDs). At the end of this PDS is a Glossary in which various
You should read all of this PDS and any other Transaction words and phrases used in this PDS are defined. If you do
Document to which you are a party carefully and seek not understand a word or phrase, you should refer to the
professional legal, taxation and financial advice to Glossary. Capitalised words that are used in this PDS have
determine whether any given investment in, or held the meaning given to those words in the Glossary, unless the
through, the Macquarie Prime Facility is appropriate context requires otherwise.
for you. Unless stated otherwise:
(i) all dollar amounts in this PDS are quoted in Australian
Offers made in Australia
dollars; and
This offer is open to persons receiving this PDS, whether
(ii) all references to time are to time in Sydney.
in paper or electronic form, in Australia. This PDS is not an
offer or invitation in any place outside Australia where, or to
any person to whom, it would be unlawful to make such an Further advice recommendation
offer or invitation. The distribution of this PDS (electronically An investment in a Macquarie Prime Facility, including in
or otherwise) in any jurisdiction outside Australia may be CFDs, involves financial and other risks. Before making an
restricted by law and persons outside Australia who come investment in a Macquarie Prime Facility, you should:
into possession of this PDS should seek advice on, and
observe, any such restrictions. Any failure to comply with such •• carefully read all of this PDS;
restrictions may constitute a violation of applicable law. •• seek professional legal, taxation and financial advice to
determine whether an investment in, or held through, the
Currency of information Macquarie Prime Facility is appropriate for you; and
This PDS is current as at its date (see ‘This PDS’ above). •• carefully consider the potential benefits and the risks
Macquarie may vary this PDS by issuing a supplementary involved in investing in the Macquarie Prime Facility.
PDS. Where information changes that is not materially
adverse to investors, Macquarie may update the information As well as considering the risks, you should also consider
by posting a notice online at the Prime Website. You may how any investment in, or held through, the Macquarie
access this information at any time. Alternatively, you can call Prime Facility fits into your overall investment portfolio.
the Prime Client Service Team on 1800 187 434. Macquarie By diversifying your investment portfolio, you can reduce
will provide, on request and without charge, a paper copy your exposure to failure or underperformance of any one
of any updates that are posted to the Prime Website or any investment, counterparty or asset class.
supplementary PDS (‘Updated Information’) to investors.
2Contents
At a Glance 2
ASIC Disclosure Benchmarks 9
Section 1 Investment Overview 13
Section 2 Details of CFD Trading 15
Section 3 Cashflows and Margin 22
Section 4 Fees and Other Costs 25
Section 5 Worked Examples 27
Section 6 Significant Risks You Should Consider 32
Section 7 Taxation for Australian Residents 39
Section 8 Additional Information 41
Section 9 About the Issuer – Macquarie Bank Limited 43
Section 10 How to Apply 44
Section 11 Terms and Conditions 45
Section 12 Glossary 56
Section 13 Interpretation 62
1At a Glance
This Section of the PDS contains the highlights and key features of CFDs. To find information on the topics listed below, see the
Section number listed or document described where applicable. These ‘Highlights’ indicate the kind of information you can find
in this PDS, but are not intended to be a complete summary. You should read all of this PDS carefully and seek professional legal,
taxation, and financial advice to determine whether an investment in CFDs is appropriate for you.
Is a CFD suitable for you?
CFDs are complex and potentially highly geared products that are only suitable for experienced and sophisticated traders that
are able to constantly monitor their Positions.
You should ensure that you have considered whether or not a CFD is suitable for you. In particular, you should consider
whether:
•• you have sufficient liquid assets to be able to post Margin on very short notice;
•• you are an experienced share trader who is familiar with the share market;
•• you have the ability to tolerate a high level of risk; and
•• you are confident in your own investment ability and fully understand the way CFDs work, as well as the risks involved in
using CFDs.
You should also understand that your potential losses on a CFD can be substantial, and in the case of a Short CFD, your
potential losses can be unlimited.
Topic Highlights More Information
Who is the issuer This PDS and the CFDs are issued by Macquarie Bank Limited (‘Macquarie’). Section 9:
of this PDS and the About the Issuer
Macquarie’s contact details are set out on the back cover of this PDS.
CFDs? – Macquarie Bank
Limited.
What is offered? You are invited to apply to trade in CFDs with Macquarie by giving Orders, Section 2:
including GSL Orders, on the terms outlined in this PDS, using your Prime Details of CFD Trading.
Facility.
Section 11:
Terms and Conditions.
What is a CFD? A contract for difference, or CFD, is a derivative which allows you to make Section 2:
a profit or loss from fluctuations in the price of an underlying ASX-listed Details of CFD Trading.
security, referred to as a Reference Security, without actually owning that
Section 11:
security.
Condition 4 of the
The amount of any profit or loss made on a CFD will be equal to the Terms and Conditions.
difference between the price of the Reference Security when the CFD is
opened, and the price of the Reference Security when the CFD is closed,
multiplied by the number of Reference Securities to which the CFD relates
(the ‘CFD Quantity’). Any profit or loss made will also be affected by certain
other payments required to be made under the terms of the CFDs, including
fees and payments relating to dividends declared in relation to the underlying
Reference Security and interest. Profit or loss will also be affected by any
payments you direct us to make to your adviser on your behalf.
A CFD is designed for experienced traders.
2Topic Highlights More Information
What are ‘Long CFD’ You can enter into a ‘Long CFD’ or a ‘Short CFD’. Section 2:
and ‘Short CFD’ Details of CFD Trading.
If you hold a Long CFD, you have the potential to profit from a rise in the
positions?
price of the Reference Security. A Long CFD is similar to borrowing funds Section 11:
from Macquarie to buy Reference Securities, and posting an amount of Condition 4 of the
cash as security for this position. In this situation, you are identified as the Terms and Conditions.
‘Long Party’, being the party who has notionally purchased the Reference
Securities and Macquarie is identified as the ‘Short Party’. Where you are
the Long Party, you may make a profit if the Reference Price rises while your
CFD is open. Conversely, you will generally make a loss if the Reference
Price falls while your CFD is open.
If you hold a Short CFD, you have the potential to profit from a fall in the
price of the Reference Security. A Short CFD is similar to borrowing the
Reference Securities from Macquarie, selling them on the market with a
view to re-purchasing them at a future date, and in the meantime investing
the proceeds of the initial sale in a bank account, with a proportion of these
proceeds being held as security for this position. In this situation, you are
identified as the ‘Short Party’, being the party who has notionally sold the
Reference Security and Macquarie is the ‘Long Party’. Where you are the
Short Party, you may make a profit if the Reference Price falls while your CFD
is open. Conversely, you will generally make a loss if the Reference Price
rises while your CFD is open.
Although a CFD replicates the buying and selling of Reference
Securities, you do not actually acquire or deliver the Reference
Securities and you have no shareholder rights with respect to the
Reference Securities, such as voting rights.
3Topic Highlights More Information
What are the Significant risks include: Section 6:
significant risks of Significant Risks You
•• An adverse movement in the value of the Reference Securities:
investing in CFDs? Should Consider.
The value of the Reference Securities, which in turn affect the value of
your CFD, may go up or down by a material amount, even over a short
period of time. Since July 2007, equity markets have generally become
more volatile; indeed, over this period, volatility in some markets has
been at very high levels. Investing in such highly volatile conditions
implies a greater level of risk for investors than an investment in a more
stable market. You should carefully consider this additional volatility risk
before making any investment.
You are responsible for selecting Financial Instruments for any Position
that you enter into and as such the performance of that Position will
mainly depend on your own investment decisions.
•• Gearing:
CFDs are speculative and can be highly geared. They carry a significantly
higher level of risk than non-geared assets (eg shares). You should not
invest in CFDs unless you are experienced in equity derivatives and
understand and are comfortable with the risks of investing in CFDs
(including the risks associated with gearing).
•• Unlimited loss:
Your potential loss on entering into Short CFDs may be unlimited.
•• You may lose more money than the amount in your Prime Account:
Your potential losses on a CFD can be substantial and may the amount
of Margin that is designated to support a CFD and even the total funds in
your Prime Account.
•• Counterparty risk:
The risk that Macquarie will not meet its obligations under the CFD.
There are other significant risks associated with investing in CFDs.
You should read Section 6 of this PDS before you apply to trade CFDs.
How do I trade ‘Trading’ a CFD involves entering into, or Closing-out, a derivative contract Section 11:
CFDs? with Macquarie. While CFD prices are referable to Reference Securities Terms and Conditions.
that trade on the ASX, there is no secondary market in Macquarie CFDs Part 4 of the Prime
themselves and you cannot transfer them to another party. We use the Client Agreement.
phrase ‘trade CFDs’ in this PDS for simplicity’s sake, and are referring only
to the Opening, altering and Closing-out of a CFD.
Your CFD trading will be conducted via the Macquarie Trading Platform.
As such, you will need to have the use of a computer with internet access.
See Part 4 of the Prime Client Agreement for information regarding the
Trading Platform.
Please note that CFDs are traded subject to the terms of this PDS rather
than the Prime Trading Terms contained in the Prime Client Agreement.
What Margin is Each Open CFD and most Orders placed by you require the posting of Section 3.1:
required? an amount of cash as security (or ‘Margin’). You will need to ensure that Margin.
this Margin amount is covered by the funds in your Prime Account prior to
Section 11:
placing your Order.
Condition 6 of the
Terms and Conditions.
4Topic Highlights More Information
What are ‘Mark-To- Mark-To-Market Payments are payments required to be made by you to Section 3.2.1:
Market Payments’? Macquarie or vice versa depending on how the Reference Price moves. Mark-To-Market
Mark-To-Market Payments reflect the loss or profit with respect to the CFD, Payments.
which would be realised if the CFD were Closed-out immediately.
Section 11:
If the Reference Price increases while the CFD is open, the Short Party must Condition 4.2 of the
pay the amount of the corresponding increase in the CFD Face Value to the Terms and Conditions.
Long Party. Conversely, if the Reference Price decreases while the CFD is
open, the Long Party must pay the amount of the corresponding decrease in
the CFD Face Value to the Short Party.
Mark-To-Market Payments are either deducted from, or credited to, your
Prime Account and are paid each Business Day. You will need to ensure
that the Available Funds in your Prime Account are sufficient to meet your
required Mark-To-Market Payments at all times, not just at the relevant
Closing Time.
The deduction of Mark-To-Market Payments from your Prime Account may
affect your ability to meet your Margin Obligations. A failure to maintain
sufficient funds in your Prime Account to meet Margin Obligations can lead
to a Close-out of your Positions.
Involuntary Macquarie may Close-out your Positions, including your Open CFDs, and Section 11:
Close-out cancel your Orders in a number of circumstances, including where you have Condition 7 of the
insufficient funds in your Prime Account to meet your obligations to provide Terms and Conditions
Margin for any of your Transactions or where you exceed your Risk Limit.
This may cause you financial loss.
In some cases this may occur without you receiving any prior notice from
Macquarie; for example, in the case of a sudden and dramatic adverse
movement of the value of the Reference Securities.
In particular:
•• In the case of Short CFDs, it is important to realise that Macquarie
has the right to Close-out Short CFDs at any time without prior
notice to you even if you are meeting your Margin Obligations and
have not exceeded your Risk Limit.
•• Where you breach a Margin Obligation and there is a shortfall in your
Margin Obligations that is equal to or greater than 50% of the aggregate
of all your Margin Obligations (ie where the amount that is required to
comply with the Margin Obligations is equal to or greater than 50%
of those Margin Obligations), Macquarie may immediately commence
Closing-out any or all of your Positions and/or cancel your Orders to
rectify the breach. This can also occur where you exceed your Risk Limit
by more than 5% or where the breach of your Risk Limit occurs as a
result of the expiry of a Guaranteed Stop-Loss Order (however, in the
case of expiry of a Guaranteed Stop-Loss Order, the Close-out is limited
to the Position to which the Guaranteed Stop-Loss Order applies).
•• Further, even if the shortfall in your Margin Obligations is below 50% of
the aggregate of all your Margin Obligations, or if you exceed your Risk
Limit by less than 5%, you must act immediately, as Macquarie may
Close-out your Open Positions and/or cancel your Orders if you have
not rectified the breach by 2pm on the next Business Day after the day
on which Macquarie gave you notice of the breach. Notwithstanding the
provision of this notice, Macquarie still has the right to Close-out your
Positions in certain circumstances, before the 2pm deadline, for example
where there is a further fall in the value of your Positions and the shortfall
in your Margin Obligation is greater than 50% of the aggregate of all your
Margin Obligations.
5Topic Highlights More Information
A Close-out of your Positions may result in financial loss.
It is important that you monitor at all times the level of funds in your Prime
Account, as well as your total Margin and Utilised Risk Limit, and make
additional deposits to your Prime Account when necessary to meet your
Margin Obligations and any other payment obligations you have under your
Prime Facility and to avoid exceeding your Risk Limit.
Additionally, the Positions that are Closed-out may be unrelated to
the Margin Obligation in respect of which the breach occurred (for
example, Macquarie may Close-out your CFDs in order to rectify a
breach of your obligations to provide Margin in respect of your Loan
Facility).
Macquarie’s rights to Close-out Positions under the Transaction
Documents are held solely for the purpose of securing your
obligations to Macquarie. Macquarie may choose not to Close-out
your Positions and you cannot rely on Macquarie’s ability to Close-
out as a way to limit your exposure to further loss.
Macquarie’s Close-out rights are an important factor in how Macquarie
calculates the Margin Rates that it offers to Investors.
Do I receive If you hold an Open Long CFD at the close of business on the day prior to Section 3.2.2:
dividends on CFDs? the ex-dividend date of the underlying Reference Security, you will receive Dividends.
an amount equal to the ordinary cash dividend on that Reference Security,
Section 11:
excluding any franking credits.
Condition 4.3 of the
If you hold an Open Short CFD on the close of business on the day prior to Terms and Conditions.
the ex-dividend date, you must pay an amount equal to the ordinary cash
dividend to Macquarie. In limited circumstances, you may also be required to
pay the value of any franking credits applicable to the dividend.
Do I pay or receive If you hold an Open Long CFD overnight, you will be charged interest on the Section 3.2.3:
interest? CFD Face Value of that Open position. Conversely, if you hold an Open Short Interest paid and
CFD overnight, you will receive interest on the CFD Face Value of that Open received on Open
position. This interest is calculated and payable on each Business Day and is CFDs.
paid to (or debited from) your Prime Account.
Section 3.2.4:
If you fail to pay when due any amount payable, interest on the overdue Default Interest.
amount may be payable and will be calculated at the Default Interest Rate.
Section 11:
Condition 5 of the
Terms and Conditions.
6Topic Highlights More Information
What are the interest The applicable interest rates are equal to the Benchmark Rate plus or Section 3.2.3:
rates? minus a margin. The Benchmark Rate is the interbank overnight cash rate Interest paid and
published by the Reserve Bank of Australia from time to time. received on Open
CFDs.
The rate of interest you must pay Macquarie in the event you hold an Open
Long CFD overnight (‘Long Position Funding Rate’) is the Benchmark Section 3.2.4:
Rate plus up to a maximum of 6.00%pa. Default Interest.
The rate of interest Macquarie must pay you if you hold an Open Short CFD Section 11:
overnight (‘Short Position Funding Rate’) is the Benchmark Rate minus up Condition 5 of the
to a maximum of 6.00%pa. No interest will be payable by either party if the Terms and Conditions.
Short Position Funding Rate is negative.
Part 6 of the Prime
You may also be liable to pay Default Interest if you fail to pay any amount Client Agreement.
payable when due as provided under the General Conditions contained in
the Prime Client Agreement.
Standard interest rates are published on the Prime Website and are subject
to change at Macquarie’s discretion. The interest rate that you pay may also
differ if you have directed us to pay your adviser a service fee calculated as a
proportion of, and debited with, the interest that you pay.
What fees and other In addition to any fees and charges payable by you under other Transaction Section 4:
costs are payable? Documents, including the Prime Client Agreement: Fees and Other Costs.
Trading Fee: You will be charged a Trading Fee each time you trade a CFD, Section 11:
payable in two instalments: the first on the Opening, and the second on Conditions 4.4, 4.5,
the Close-out of the CFD. Each instalment of this fee will be equal to the 4.6, 4.7 and 4.8 of the
greater of: Terms and Conditions.
(a) the CFD Face Value on the Opening or Close-out of the CFD multiplied
by the Trading Fee Rate applicable at that time (the Trading Fee Rate will
not be greater than 2.00%); and
(b) the minimum amount specified or agreed by Macquarie applicable at that
time (that amount will not be greater than $200).
The minimum amount and the Trading Fee Rate may vary depending on
what method you use to place your Order (eg whether by phone or via the
Trading Platform) and whether or not you have an adviser and have directed
us to pay your adviser for services your adviser provides to you.
GSL Premium (GSLs only): Where you have Guaranteed Stop-Loss
protection over a CFD, you will be charged a GSL Premium. The GSL
Premium will be quoted to you at the time you place your GSL Order and is
payable immediately if the GSL Order is accepted.
Adviser payments: You may direct us to pay your adviser service fees
calculated as a proportion of the following fees relating to your CFDs:
(a) Trading Fees charged to you; and
(b) interest on your Open long CFDs.
Your adviser should disclose benefits they receive to you. Please refer to
Section 4.4 for more information.
You will need to ensure that the Available Funds in your Prime Account
are sufficient to meet all required fees and payments when due (including
amounts payable to your adviser). Failure to maintain sufficient funds in your
Prime Account may result in the closure of some or all of your Positions and/
or your Facility (at the sole discretion of Macquarie).
7Topic Highlights More Information
How do I You may place an Order requesting the Close-out of an Open CFD at any Section 2.4:
Close-out a CFD? time. Please note that, like an Order to open a CFD, an Order to Close-out a How do I Close-out
CFD may be rejected by Macquarie. a CFD?
Section 11:
Condition 7 of the
Terms and Conditions.
What are The taxation consequences of trading CFDs depend on your personal Section 7:
the taxation circumstances and you should obtain independent professional taxation Taxation
consequences of advice. Macquarie does not provide taxation advice. Considerations.
investing in CFDs?
How can I obtain For more information, please contact us by:
further information?
Telephone: 1800 187 434
Email: prime@macquarie.com.au
Internet: macquarie.com.au/prime
Alternatively, you can speak to your financial adviser.
How do I apply to You can apply online at the Prime Website: macquarie.com.au/prime. Section 10:
trade CFDs? How to Apply.
You must ensure that you have read and fully understood this PDS before
applying to trade CFDs in your Prime Facility.
What do I need to To trade in Macquarie CFDs, you must open a Macquarie Prime Facility and Macquarie Prime
read and agree to a Macquarie Prime Account. Account PDS
so that I can trade and Prime Client
The Macquarie Prime Facility is an online investment platform that allows you
CFDs? Agreement.
to buy and sell financial products, including Macquarie CFDs.
You must maintain a Macquarie Prime Account in order to provide cash to
be blocked as Margin and otherwise to support your payment obligations in
respect of your CFDs and Orders.
You need to apply under the separate Macquarie Prime Account PDS and
Prime Client Agreement to open a Macquarie Prime Facility. The terms of the
Macquarie Prime Account are set out in the Macquarie Prime Account PDS.
The terms of the Macquarie Trading Platform are set out in the Prime Client
Agreement. The Macquarie Prime Account PDS and Prime Client Agreement
are available on the Prime Website: macquarie.com.au/prime.
You should note that your trading of CFDs and your Prime Facility are
interrelated. Your rights and obligations relating to the Macquarie Prime
Facility will be affected by your rights and obligations under your CFDs.
8ASIC Disclosure Benchmarks
ASIC has developed a series of disclosure benchmarks for CFDs to assist investors in understanding some of the risks associated
with CFDs and to decide whether investments in CFDs are suitable for the investor.
The disclosure benchmarks should be read in conjunction with the other disclosures contained in this PDS, and in particular with
Section 6 of this PDS which sets out the significant risks you should consider before applying for or investing in CFDs.
Topic Highlights More Information
Investor CFDs are complex and potentially highly geared products that are only Section 6:
qualification: suitable for experienced and sophisticated traders that are able to constantly Significant risks you
monitor their Positions. should consider
What type of
investors are CFDs Before allowing you to trade CFDs with Macquarie, Macquarie will require you
appropriate for? to answer a series of questions to assess your qualification to trade CFDs,
the market in which CFDs operate, and the key risks associated with CFDs.
In addition, where you apply for a Risk Limit Macquarie will carry out a credit
assessment of you.
If you do not meet the qualification criteria set by Macquarie under the
qualification questions or under the credit assessment, Macquarie may not
issue the CFD product to you.
During the application process Macquarie also requires you to make a self
assessment of your suitability to trade and invest in CFDs and make certain
representations to Macquarie about your understanding of the key risks
associated with trading and investing in CFDs.
Therefore it is important that you carefully consider all the risks associated
with trading CFDs, your experience in trading complex derivative products,
and appetite for risk, prior to applying for a CFD trading facility.
Opening Margin To open a CFD Position Macquarie requires you to post Margin. Macquarie Section 6:
usually requires this Margin to be in the form of cash held in your Macquarie Significant Risks You
What assets will
Prime Account. Should Consider
Macquarie accept in
order for you to open The Macquarie Prime Facility makes the necessary calculations for your Section 8 of the
a CFD Position? Margin Obligations on a facility level, across all of the products you hold Macquarie Prime
through the Prime Facility. Consequently, where you have an optional Loan Account PDS
Facility, Loan Approved Financial Instruments transferred into your Prime
Section 5 of the Loan
Facility may be treated as a cash equivalent, which you can then use as
Facility PDS
Margin to open a CFD Position.
If you are in breach of your Margin Obligation, Macquarie may Close-out
positions that are unrelated to the Margin Obligation in respect of which the
breach occurred, including Shares where you have an optional Loan Facility.
If you borrow money outside of the Macquarie Prime Facility to buy shares
(for example by drawing down on a mortgage or by using a credit card) and
use these shares to fund your CFD Margin, then you are ‘double gearing’.
Double gearing carries a significantly higher risk than if you fund your CFD
positions with cash.
9Topic Highlights More Information
Counterparty risk The issuer of the Macquarie CFD facility is Macquarie Bank Limited, a Section 9:
– financial resources diversified financial institution. Performance by Macquarie Bank Limited of its About the Issuer
obligations to CFD holders is dependent on how it manages its risks across – Macquarie Bank
a range of products and services, and not just in relation to its CFD business. Limited
Capital held by Macquarie Bank Limited is held in amounts designed to
ensure it has sufficient funds to absorb potential losses and to meet all its
obligations. Macquarie Bank Limited is well capitalised and holds a buffer
against market volatility.
Macquarie Bank Limited is an Authorised Deposit-taking Institution
regulated by the Australian Prudential Regulation Authority (APRA). As an
APRA regulated entity, Macquarie Bank Limited is required to hold capital
in accordance with APRA’s capital adequacy requirements and to comply
with APRA’s prudential standards. In complying with these requirements,
Macquarie Bank Limited also meets the financial resources requirements of
its Australian Financial Services Licence.
Macquarie’s risk management approach is based on examining the
consequences of worst case outcomes and determining whether these are
acceptable. This approach is adopted for all material risk types and is often
achieved by stress testing. In particular, Macquarie’s market risk framework
is based primarily on the application of stress tests, rather than statistical
models.
Information relating to the Macquarie Group Structure and the Macquarie
Group’s risk management framework can be found in the Macquarie Group
Annual Report available at macquarie.com.au/investorrelations.
Macquarie will provide a copy, free of charge, of its most recent publicly
available financial reports and interim reports to any person who requests
such copies by contacting Macquarie (see the Directory for details).
Counterparty risk Macquarie operates a ‘direct market access’ model for CFDs. This means Section 2.7:
– hedging that when you place an Order in relation to a Reference Security, it is Macquarie operates a
Macquarie’s policy to place a corresponding order to purchase or sell that ‘Direct Market Access’
How does Macquarie
Reference Security to hedge its market risk. model for CFDs.
manage its exposure
to market risk and All hedging of Macquarie CFD Positions uses a Macquarie Group entity What does this mean?
how does this impact as broker and all transactions are entered into in the name of Macquarie
Section 6.8A:
your CFD Positions? Bank Limited. Accordingly, all hedge positions are held on balance sheet by
Settlement Failure
Macquarie Bank Limited without any ongoing reliance with any other hedging
counterparties. Section 6.10:
Our obligations
Except for the money held in your Prime Account, Macquarie’s obligations
in respect of a CFD are not deposit liabilities of Macquarie, and they are
not guaranteed by any party. They are unsecured contractual obligations
of Macquarie, which will rank equally with Macquarie’s other unsecured
contractual obligations and with its unsecured debt other than liabilities
mandatorily preferred by law.
In this regard, the Banking Act 1959 provides that, in the event of Macquarie
becoming unable to meet its obligations, the assets of Macquarie shall be
available to meet its liabilities in relation to deposits and other protected
accounts and certain costs of the Australian Prudential Regulation Authority
relating to those accounts in priority to all other liabilities of Macquarie,
including the obligations of Macquarie under any CFDs.
You must make your own assessment of our ability to perform our
obligations. A description of Macquarie is set out in Section 9 to assist you in
making this assessment.
10Topic Highlights More Information
Client money The Macquarie Prime Account is a bank account with Macquarie Bank Section 2.2:
Limited, and all funds held in this account are held in your name and as How will my Macquarie
How does Macquarie
deposit liabilities with Macquarie Bank Limited. These funds may be covered Prime Account be
treat the money you
by the Australian Government Guarantee. All Margin held by Macquarie affected by my trading
deposit as Margin?
to secure your CFD Positions is held as Blocked Funds in your Macquarie in CFDs?
Prime Account.
Section 3:
The monies held in your Macquarie Prime Account are not used by Cashflows and Margin
Macquarie to hedge its obligations to you under the CFD and are not used
Section 8.2.6 of the
by Macquarie to meet the margin requirements of any other client. The
Macquarie Prime
Margin held in your Macquarie Prime Account is used solely to secure your
Account PDS
obligations to Macquarie.
For more on how the Macquarie Prime Account operates and the risks you
face in depositing money into that account, please read the Macquarie Prime
Account PDS.
Suspended or Macquarie will not accept a CFD Order to open a new CFD Position if trading Section 2.7:
halted Reference in the Reference Security has been suspended, halted or delisted. Macquarie operates a
Securities ‘Direct Market Access’
An ASX-listed security may be placed in a trading halt in circumstances that
model for CFDs.
How does a trading include the existence of price sensitive information (including a takeover bid)
halt or suspension of relating to that security. Additionally, a security may be suspended or delisted What does this mean?
a Reference Security in circumstances including a failure by the Listed Entity to abide by the ASX
Section 2.8:
affect your CFD listing requirements.
How are Reference
Positions?
Orders in relation to suspended or delisted securities are generally removed Prices Determined?
from ITS (a process described as ‘purging’). Macquarie may cancel your
Section 2.9:
CFD Order if it has not been completed before the Reference Security
What is a Market
becomes subject to a trading halt, suspension or delisting.
Disruption Event?
In certain circumstances, including where trading on ASX has been disrupted
Section 2.10:
or impaired, where the market for a Reference Security is illiquid or limited,
How do Market
or where trading in the Reference Security is subject to a suspension or
Disruption Events
delisting (known as a Market Disruption event) Macquarie may adjust the
affect GSLs when
Reference Price of the Reference Security, this includes determining that the
they expire?
References Price is less than the last traded price, and potentially zero.
Section 2.11:
Macquarie may also adjust the Reference Price when a Potential Adjustment
How do Potential
Event occurs, including as a result of a distribution, consolidation or
Adjustment Events
cancellation of the Reference Security.
affect CFDs?
Macquarie may also adjust the Margin Rate applicable to your CFD
Section 3.1:
Positions.
Margin
Adjustments to the Reference Price of a Reference Security, or an
adjustment to the Margin Rate may have several consequences, including
triggering a Guaranteed Stop Loss, or allowing Macquarie to Involuntarily
Close-out and terminate your CFD Positions.
11Topic Highlights More Information
Breach of Margin Providing Margin to secure your CFD Positions is an ongoing obligation. You Section 3:
Obligation may trigger a breach of your Margin Obligation if the value of your Reference Cashflows and Margin
Security changes or where Macquarie changes the Margin Rate of the
What happens if you Section 6.7:
Reference Security.
are in breach of your Involuntary Close-out
Margin Obligation? The Macquarie Prime Platform operates in real time and continuously and termination
calculates your total Margin Obligation across each of the products you hold
Section 6:
through your Prime Facility. Consequently the amount of Margin may change
Significant Risk You
from time to time and even second to second. The amount of Margin we
Should Consider
require you to hold at any time will be published on the Macquarie Trading
Platform.
In most cases, Macquarie will notify you when you are in breach of your
Margin Obligations and need to provide additional monies. We will notify
you via the Macquarie Trading Platform and we may send an email to your
designated email address. Consequently, you must constantly monitor your
Positions and always be available to receive any notification that you are in
breach of your Margin Obligation.
In some situations, we are able to Close-out your CFDs to rectify your breach
of a Margin Obligation prior to notifying you of the breach. This can arise
when the movement in the value of the Reference Security is large enough to
put you into breach of your Margin Obligation.
As a result, it is critical for you to monitor your Positions and ensure you have
sufficient Available Funds at all times to meet any changes in your Margin
Obligations, including your CFD Margin.
Section 6.7 of this PDS outlines the circumstances in which Macquarie may
Close-out your Positions and/or cancel your Orders. You must carefully
review and understand your ongoing obligation to provide Margin, and the
circumstances in which Macquarie may take action, including Closing-out
your Positions and/or cancelling your orders.
Trading in CFDs involves the risk of losing substantially more than the initial
investment, and small movements in the price of a Reference Security may
lead to a large change in the value of your CFD Position.
12Section 1
Investment Overview
This PDS contains important terms and conditions for you to Highly flexible: access real-time market prices
consider. Before completing the Application Form, you should
and multiple order entry options
read and ensure you understand this entire PDS. In particular,
you should note the risks outlined in Section 6 of this PDS. The Trading Platform gives you access to real-time pricing
The following is only a brief description of some of the key and market depth information. You have the ability to enter
benefits and significant risks involved in investing in CFDs. into CFDs in real-time over the internet, with the flexibility of
utilising Market-To-Limit, Trigger, Stop-Loss and Guaranteed
Stop-Loss Orders.
1.1 What are the key features
Dividends and interest
and benefits of Contracts for
Holders of Open Long CFDs also receive the benefit of any
Difference? ordinary cash dividends paid to holders of the underlying
Reference Securities, but are charged interest on the CFD
Leverage / gearing: gain access to larger Face Value of their Open CFD.
amounts of trading capital Conversely, holders of Open Short CFDs must pay cash equal
to the value of any ordinary cash dividend1 paid to holders of
CFDs offer a potentially large amount of gearing. You are able
the underlying Reference Securities, but receive interest on
to outlay a relatively small amount (in the form of Margin) to
the CFD Face Value of their Open CFD.
secure an exposure to the Reference Security. This will
have the effect of magnifying any profits or losses and
so consequently carries significant risk (see Section 6.1
for details). 1.2 What are the key significant
risks of CFDs?
Trading any market direction: ability to take
short positions Gearing magnifies losses
If you believe that a Reference Price may fall, Macquarie CFDs can be highly geared and can carry a high degree of
CFDs enable you to open a short position in relation to the risk. If you are considering trading in CFDs, you should be
Reference Security. Compared to opening long positions, experienced in equity derivatives and understand and be
opening short positions in listed securities has traditionally comfortable with the risks of gearing. Gearing can magnify
been a difficult exercise and CFDs offer a means of taking your losses, just as it can also magnify your gains (see Section
such short positions. 6.1 for details).
Optional Guaranteed Stop-Loss protection: Short CFDs
limit potential downside If your application is accepted, you will be able to place
A large adverse movement in a Reference Price can give rise Orders for Short CFDs. If you do not take out Guaranteed
to large losses on Open CFDs. Placing Guaranteed Stop-Loss Stop-Loss protection, your potential losses on a Short CFD
(‘GSL’) protection on a CFD allows you to limit your potential are unlimited. Gearing can magnify the level of losses on a
losses arising from sudden market movements by giving you Short CFD (see Section 6.2 for details).
a guaranteed Close-out price during the GSL Period on that
CFD (see Section 2.6.2 relating to GSL Orders for details). You may lose more money than the amount
in your Prime Account
Your potential losses on a CFD can be substantial and may
exceed the amount of Margin that is designated to support a
CFD and even the total funds in your Prime Account. Where
your liability to us exceeds the funds in your Prime Account,
we have recourse to you for any outstanding amount as a
debt (see Section 6.3 for details).
1
Plus, in limited circumstances, the value of any franking credits applicable to the dividend. Please refer to Condition 4.3 of the CFD Terms and Conditions
for more information.
13Providing Margin is an ongoing and constant However, note that Macquarie has the right to Close-out
Short CFDs at any time without prior notice to you even
obligation
if you are meeting your Margin Obligations and have not
As with any other Margin Obligations you may have under exceeded your Risk Limit. (see Section 6.7 for details)
your Prime Facility, you must meet Margin Obligations on your
CFDs at all times and may be required to deposit additional Macquarie’s discretion, indemnities and
funds into your Prime Account at any time and on short
notice. Among other things, failure to meet Margin Obligations limitations on liability
may result in us Closing-out your Open CFDs without any We have discretions that can affect your Orders or CFDs,
prior notice to you (see Section 6.4 for details). For this including certain powers to accept or refuse any Order you
reason, you should monitor your Positions closely. place, close your Prime Facility or Close-out any CFD. You
do not have the power to direct us about the exercise of any
Systems infrastructure may be disrupted discretion (see Section 6.8 for details).
Your ability to trade CFDs depends on the continued These and other key risks relating to CFDs are described
operation of, among other things, the Trading Platform, the in greater detail in Section 6 ‘Significant Risks You Should
internet, and your personal computer. A fault, delay or failure Consider’, which you should read carefully.
of any of these things could prevent you from making Orders
and may result in losses on your Open positions (see Section
6.5 for details).
Investment decisions
You are responsible for the selection of the Reference Security
for any CFD that you take out. As such, the performance of
any CFD will depend mainly on investment decisions made by
you. CFDs may be speculative (see Section 6.6 for details).
Involuntary Close-out
Macquarie may Close-out your Positions, including your
Open CFDs, in a number of circumstances, including where
you have insufficient Available Funds in your Prime Account
to meet your obligations to provide Margin for any of your
Transactions or where you exceed your Risk Limit. This may
cause you financial loss.
In some cases, this Close-out may occur without you
receiving any prior notice. In light of this, it is your
responsibility to monitor at all times the level of funds in your
Prime Account, as well as your total Margin and Utilised Risk
Limit, and make additional deposits to your Prime Account
when necessary to meet your Margin Obligations and any
payment obligations you may have under your Prime Facility
and to avoid exceeding your Risk Limit.
14Section 2
Details of CFD Trading
This Section contains a brief summary only of certain material Your Net Equity is the value of all of your Long Positions, less
features relating to trading CFDs. More detailed information the value of all of your Short Positions (if any), plus your Prime
relating to trading CFDs can be found in Section 11 ‘Terms Account Balance.
and Conditions’.
Your Prime Account Balance is the sum of the Funds Balance
and the Blocked Funds in your account. The Funds Balance
is equal to all amounts that have been deposited into your
2.1 How do I start trading in Prime Account, less any amounts withdrawn/paid out of that
Macquarie CFDs? account and any Blocked Funds.
Your Risk Limit, Utilised Risk Limit, the Face Value of your
In order to trade CFDs with Macquarie, you must complete
Positions and Orders and your Net Equity can all be viewed
and submit online the Application Form available at
on the Macquarie Trading Platform.
macquarie.com.au/applyforprime. In addition, to provide
the Margin needed to support your CFDs, you will need If you have an assigned Risk Limit of zero, you are required to
to open a Macquarie Prime Facility and Macquarie Prime use GSL protection on every Short CFD that you enter into (see
Account in your name under the terms of the Macquarie Section 2.6.2 below relating to Guaranteed Stop-Loss Orders).
Prime Account PDS and Prime Client Agreement. Macquarie
If you have a Risk Limit of zero, you should also note that
will then require that an initial amount of at least $5,000
if, at any time, you hold a CFD that is not subject to GSL
(current as at the date of this PDS, but subject to change)
protection, including where the GSL Period for that protection
be deposited in your Prime Account, or such lower amount
has expired, your CFD to which the GSL Order applies may
that Macquarie may determine from time to time (‘Initial
be immediately Closed-out in order to ensure that your
Deposit’). Once the Initial Deposit is held in cleared funds in
Utilised Risk Limit no longer exceeds your Risk Limit of zero.
your Prime Account, you are able to place Orders and trade
This may occur prior to us notifying you of the breach of your
CFDs with Macquarie.
Risk Limit. Therefore, if you want to continue holding your
Please note that Macquarie retains the right to refuse CFD past the end of the GSL Period and avoid the Close-
any application to trade CFDs or to open a Macquarie out of the CFD, it is important that you purchase new GSL
Prime Facility. protection prior to the expiry of your existing GSL protection.
Regardless of your Risk Limit, you must maintain sufficient
Risk Limit Available Funds in your Prime Account to meet your Margin
When you open a Macquarie Prime Facility, we will place Obligations (see Section 3.1 for details).
a limit on the total exposure to any Financial Instruments
(including CFDs and shares) you are able to enter into using
the Macquarie Prime Facility (‘Risk Limit’). This Risk Limit will 2.2 How will my Macquarie Prime
be shared across any Financial Instruments you enter into
(not just CFDs). We retain the right to reject any Orders and/or Account be affected by my trading
Close-out CFDs in certain circumstances where you exceed
your assigned Risk Limit.
in CFDs?
While you are trading CFDs, amounts within your Prime
We may refuse to accept an Order in certain circumstances,
Account will be designated as either Available Funds or
including if the Order would increase your Utilised Risk Limit
Margin, depending on your Orders, CFDs and market
over and above your allocated Risk Limit. Additionally, if your
movements. Available Funds are the funds that can be
Utilised Risk Limit exceeds your Risk Limit, this can lead to
withdrawn from your Prime Account or used to meet payment
serious financial consequences for you, including refusal or
obligations under your Prime Facility.
cancellation of any Orders, Close-out of any Positions and/
or closure of your Prime Facility (see Sections 2.5 and 6.7 In addition to holding sufficient Available Funds in your
for more information), as well as us recovering from you any Prime Account (for example to meet any fees and charges
monies that you owe us. associated with your trading in CFDs as referred to in Section
4), you are required to make sufficient funds available to
At any time, you can view how much of this Risk Limit you
support your Margin Obligations on each of your existing
have used through your investment activities (the ‘Utilised
CFDs and on each Order to Open a CFD (being an amount
Risk Limit’). Your Utilised Risk Limit is calculated as the
equivalent to that held if the Order was accepted) (‘CFD
maximum of:
Margin’). Such Margin represents security held by Macquarie
(i) the Face Value of all Positions and Orders for all Financial for your Orders and CFDs. You will be notified of the CFD
Instruments within your Prime Facility less your Net Equity; Margin required at the time of your Order for the CFD and you
and should ensure that you have sufficient Available Funds in your
Prime Account to cover this Margin as well as the ongoing
(ii) zero.
CFD Margin (assuming we accept your Order).
15Your rights to deal with monies to the credit of your Prime
Account are restricted to your Available Funds (and are also
2.4 How do I Close-out a CFD?
subject to our rights to call due amounts under your Loan You may Close-out in whole or in part your CFD by placing
Facility, if you have one). Generally, if we hold any monies to a Market-to-Limit or Limit Order that is an Opposite Position
the credit of your account as CFD Margin, you will not be able to an existing CFD and that Order is accepted by Macquarie.
to deal with those monies. All CFD Margin for Orders that are Where this Order is for a smaller quantity than the existing
yet to be accepted are held in the Blocked Orders balance of CFD, the existing CFD will be split into two CFDs, with one
your Prime Account and all CFD Margin for existing CFDs are CFD equal in size to the Order being Closed-out and the other
held in the Blocked Funds sub-account of your Prime Account CFD remaining Open.
(see the Macquarie Prime Account PDS for more information
Your CFD will Close-out automatically if:
on these balances).
•• a related Stop-Loss Order is accepted by Macquarie; or
It is your responsibility to monitor at all times the level
of Available Funds in your Prime Account, as well as •• a related GSL Order is triggered.
your Margin Obligations, and make any necessary
deposits to ensure that you have sufficient Available
Funds in your Prime Account to cover any CFD Margin
and any other payment obligations you have under your
2.5 Can Macquarie close my CFDs
Prime Facility. or stop my ability to trade CFDs
Please refer to Section 3.1 for a further description as to how without my approval?
Margin is calculated.
In some circumstances, Macquarie may Close-out a CFD
or suspend your ability to trade CFDs, including where you
2.3 How do I Open a CFD? exceed the Risk Limit or fail to maintain sufficient Available
Funds to meet Margin Obligations. This may cause you
You will need to place your Order through the Trading Platform financial loss. In some cases, the Close-out or suspension
electronically or by telephone. We will allow you access to the may occur without you receiving any prior notice from
Trading Platform if we accept your Application to trade CFDs Macquarie. It is important that you monitor at all times the
using your Prime Facility. level of funds in your Prime Account, as well as your total
Margin and Utilised Risk Limit. You may need to make
When you place an Order to open a CFD, you will need to
additional deposits to your Prime Account to meet your
specify certain information including the Reference Security
Margin Obligations and any payment obligations you may
and the CFD Quantity. Your Order will become an Open
have under your Prime Facility and to avoid exceeding your
CFD only if and when Macquarie has accepted your Order
Risk Limit.
in accordance with the Terms and Conditions. That is, when
Macquarie enters into arrangements to buy or sell Reference Additionally, in the case of Short CFDs, it is important to
Securities to hedge its exposure, or otherwise at the time it realise that Macquarie has the right to Close-out Short
records the transaction concerning the CFD in its records. CFDs at any time without prior notice to you even if you
are meeting your Margin Obligations.
If by Macquarie accepting your Order, you would exceed your
Risk Limit, your Order will not be accepted by Macquarie. See Condition 7 of the Terms and Conditions for more details.
Under the Terms and Conditions, Macquarie may choose not
to accept an Order in certain circumstances (see Condition
3.4). If Macquarie, in its discretion, accepts an Order, you 2.6 What types of CFD
should note that there is no guarantee that an Order (other
than a Guaranteed Stop-Loss Order) will be filled at a given
Orders exist?
price or time. You may cancel an Order at any time prior to The basic types of Orders you can place when Opening,
that Order being accepted and filled by Macquarie. altering or Closing-out a CFD are set out below.
If you have a Risk Limit of zero, you may need to place an Order
for a GSL at the same time as your Order (see Section 2.1).
This does not apply to an Order to Close-out a CFD.
2.6.1 Orders that can Open or Close-out
a position
You can Open or Close-out CFDs using a ‘Limit Order’,
‘Market-to-Limit Order’, or ‘Trigger Order’.
16Limit Order For example, XYZ is currently trading at $9.80. You would like
to Open a Long CFD at a Limit Price of $10.10, but only if XYZ
This is an Order to enter into a new CFD or Close-out an trades above $10.00. In this example:
existing CFD where the relevant Reference Price reaches a
specified level (the ‘Limit Price’). •• the Trigger Level is set at $10.00; and
If we accept this Order: •• if XYZ trades at $10.00 or greater, a Trigger Event
occurs and Limit Order to Open a Long CFD at $10.10
•• where you are the Long Party under the new CFD (or or less is placed.
requesting a Close-out of a CFD to which you are the
Short Party), the Order may be filled at the prevailing
Reference Price where that price is equal to, or less than, 2.6.2 Orders that can be used to limit losses
the Limit Price; or
Stop-Loss Order
•• where you are the Short Party under the new CFD (or
requesting a Close-out of a CFD to which you are the This is an Order requesting the Close-out of an existing Open
Long Party), the Order may be filled at the prevailing CFD if the Reference Security reaches a price you specify in the
Reference Price where that price is equal to, or greater Order (the ‘Stop-Loss Level’). We may accept this Order by
than, the Limit Price. Closing-out your CFD at the prevailing Reference Price when:
Limit Orders expire at the end of the Limit Order Period that •• for a Long CFD, the Reference Price becomes equal to,
you select unless cancelled by either party. or less than, the Stop-Loss Level; or
•• for a Short CFD, the Reference Price becomes equal to,
Market-to-Limit Order or greater than, the Stop-Loss Level.
This is an Order to enter into a new CFD or Close-out an You should note that if the Reference Price moves
existing CFD at the best prevailing price at which the Reference suddenly, it is possible that Stop-Loss Orders may not be
Security is being offered for sale or bought respectively on filled, or may be filled at a different price to that specified
the ASX. If there is not a sufficient quantity of the Reference by you, and that you may suffer loss as a result.
Security at the best prevailing offer or bid price matching your
Market-to-Limit Order, your Order for the remaining quantity will Stop-Loss Orders are valid until accepted by us or cancelled
remain unaccepted and will be treated as a Limit Order at that by either party.
original best prevailing offer or bid price.
Guaranteed Stop-Loss Order (over CFDs)
Market-to-Limit Orders are valid until accepted by us or
cancelled by either party. A Guaranteed Stop-Loss Order (‘GSL Order’) is a request to
enter into a binding commitment to Close-out a given CFD at
For example, you decide to place a Market-to-Limit Order to
Open 1,000 XYZ Long CFDs. The best current ‘offer’ price a specified price (the ‘GSL Level’) during the GSL Period if:
(ie the lowest price at which someone is prepared to sell an
•• for a Long CFD, the Reference Price is equal to or less
XYZ share on the ASX) is $10.00 per share. There are 600
than the GSL Level; or
XYZ shares available on the ASX at this price. Your Order may
be accepted for 600 XYZ Long CFDs at $10.00. The rest of •• for a Short CFD, the Reference Price is equal to or greater
your Order (ie for the 400 XYZ Long CFDs that have not been than the GSL Level.
accepted) will only be accepted if another offer is entered into
A GSL Premium is payable by you should your GSL Order
the market at $10.00 or lower.
be accepted. For more information on GSL Premiums, see
Section 4.3.
Trigger Order
When Opening or reviewing a CFD, you should consider
This is an Order requesting the placement of a Market-to- whether a Stop-Loss Order or GSL Order would be
Limit or Limit Order2� if a particular event (a ‘Trigger Event’) appropriate for that position.
occurs. You specify the Reference Security and a specified
Reference Price at which you would like the Trigger Event to The following are important matters you should consider
occur (the ‘Trigger Level’), and whether the Reference Price before placing a GSL Order:
must be above or below (or equal to) the Trigger Level for the
Trigger Event to occur. If a Trigger Event occurs, the Market-
to-Limit or Limit Order is placed as applicable and operates as
a normal Order of that type.
2
If these Order types are available.
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