DISCLOSURE OF RISKS OF MARGIN TRADING
PART A DISCLOSURE OF RISK FOR MARGIN TRADING
Tiger Brokers(NZ) Limited (“Tiger Brokers”/“TBNZ”) is furnishing this document to you to provide some basic facts about purchasing securities on margin, and to alert you to the risks involved in trading with a margin account. “Margin trading” can mean engaging in a transaction in which securities are purchased partially through a margin loan extended to you by TBNZ, for which the securities act as collateral（also known as a “Long Sale”）, or engaging in a transaction in which securities are sold partially through a securities loan extended to you by TBNZ or the third party introduced by TBNZ, for which the margin or other securities act as collateral (also known as a Short Sale).
Before trading stocks in a margin account, you should carefully review the provisions of margin trading in the Client Agreement (“ Margin provisions”) provided by TBNZ and you should consult TBNZ regarding any questions or concerns you may have with your margin accounts.
When you purchase securities, you may pay for the securities in full or you may borrow part of the purchase price from TBNZ. If you choose to borrow funds from TBNZ, you will open a margin account with us. The securities purchased are TBNZ’s collateral for the loan to you. If the securities in your account decline in value, so does the value of the collateral supporting your loan, and, as a result, TBNZ can take actions, such as selling securities or other assets in any of your accounts held with TBNZ or issue a margin call, in order to maintain the required equity in the account.
When you sell securities, you may borrow some securities for sale. If you chose to borrow securities from TBNZ or the third party through TBNZ, you must also have a margin account with us and abide by the rules of margin trading.
You should understand that pursuant to the TBNZ Margin provisions, TBNZ generally will not issue margin calls, and that TBNZ will not credit your account to meet intraday margin deficiencies. In most circumstances, TBNZ will liquidate positions in your account in order to satisfy margin requirements without prior notice to you and without an opportunity for you to choose the positions to be liquidated or the timing or order of liquidation.
In addition, it is important that you fully understand the risks involved in trading securities on margin. These risks include the following:
I. You could lose more funds than you deposit in the margin account. A decline in the value of securities that are purchased on margin may require you to provide additional funds to TBNZ or you must put up margin (deposit more funds) to avoid the forced sale of those securities or other assets in your account(s).
II. TBNZ can force the sale of securities or other assets in your account(s). If the equity in your account falls below the maintenance margin requirements, or if TBNZ has higher “house” requirements, TBNZ can sell the securities or other assets in any of your accounts held with us to cover the margin deficiency. You also will be responsible for any shortfall in the account after such a sale.
III. TBNZ can sell your securities or other assets without contacting you. Some investors mistakenly believe that a firm must contact them for a margin call to be valid, and that the firm cannot liquidate securities or other assets in their accounts to meet the call unless the firm has contacted them first. This is not the case. As noted above, TBNZ generally will not issue margin calls and TBNZ reserves the right but not the obligation to immediately sell your securities without notice to you in the event that your account has insufficient margin.
IV. You are not entitled to choose which securities or other assets in your account(s) are liquidated or sold to meet a margin call. TBNZ has the right to decide which positions to sell in order to protect its interests.
V. TBNZ can increase its “house” maintenance margin requirements at any time and is not required to provide you with advance written notice. These changes in firm policy often take effect immediately. Your failure to maintain adequate margin in the event of an increased margin rate generally will cause TBNZ to liquidate or sell securities in your account(s).
VI. If TBNZ chooses to issue a margin call rather than immediately liquidating under-margined positions, you are not entitled to an extension of time on the margin call.
As a holder of a margin account at TBNZ, TBNZ requires you to have sufficient equity in your margin account to satisfy the margin required by the relevant exchange and regulators.
There are some special close- out risks for the Short Sale in margin accounts.
I. Customers holding short stock positions are at risk of having these positions bought-in and closed out by TBNZ oftentimes with little or no advance notice. This is a risk which is inherent to short sales and is generally outside your control. It is also subject to regulatory rules which dictate the timeframes by which we must act. While similar in their effect, the term “buy-in” refers to an action taken by a third party with a “close-out” being one taken by TBNZ. These actions typically result from one of three events：
1. The shares required to be delivered when a short sale settles cannot be borrowed。When stock is sold short, the broker must arrange for the shares to be borrowed at settlement, which in the case of U.S. securities is the second business day following the date of the trade (T+2).Prior to executing the short sale, TBNZ must make a good faith determination that shares will likely be available to borrow when needed and this is accomplished by verifying their current availability. Note that absent a pre-borrow arrangement, there is no assurance that shares available to borrow on the date of trade will remain available to borrow thereafter and the short sale may be subject to forced close-out if they are not. The processing timeline for determination of close-out is as follows:
a) T+2 (all times in ET)
14:30 – If TBNZ is far unable to borrow shares to meet settlement, and anticipates a substantial likelihood that it will not be able to borrow shares to meet settlement, a communication will be sent, on a best efforts basis, notifying you of the potential close-out. You will have until the end of extended hours trading that day to close out the short position(s) on their own to avoid forced close-out. If at any time TBNZ is able to borrow shares, an attempt will be made to communicate that information to you.
15:15 – A communication will be sent, on a best efforts basis, in the event you have not closed out the short position(s) and TBNZ has not borrowed shares. You will still have until the end of extended hour trading that day to close out the short position(s) to avoid forced close-out.
16:50 – If TBNZ was unable to borrow shares to meet settlement, you will be sent, on a best efforts basis, a communication informing you that TBNZ was unable to borrow shares by close of business on T+2 and that a final attempt will be made up until 09:00 on T+3.
09:00 – If TBNZ is unable to borrow shares by 09:00, close-out will commence upon the market open at 09:30 ET. The close-out will be reflected within the TIGER TRADE APP trades window at an indicative price.
09:30 – TBNZ initiates close-out using a volume weighted average price order (VWAP) scheduled to run over the entire trading day. The indicative price reflected within the TIGER TRADE APP trades window will be updated with the actual price upon completion of the close-out.
2. The shares which were borrowed and delivered at settlement are later recalled. Once a short sale has settled (i.e., stock has been borrowed and used to deliver the sales sold short to the buyer), the lender （which might be TBNZ or the third party）of the shares reserves the right to request their return at any time. Should a recall occur, TBNZ will attempt to replace the previously borrowed shares with those from another lender. If shares cannot be borrowed, the lender reserves the right to issue a formal recall which allows for a buy-in in your name to take place in the event TBNZ doesn’t return the recalled stock. Given the volume of formal recalls which we receive but are not later acted upon, TBNZ does not provide you with advance warning of these recall notices.
3. A failure to deliver with the clearinghouse occurs. A failure to deliver occurs when a broker has a net short settlement obligation with the clearinghouse and does not have the shares available within its own inventory or cannot borrow them from another broker in order to meet the delivery obligation. TBNZ will close-out your holding short positions to satisfy the delivery obligation.
II. You should note that on any day on which you have been closed out, you are required to end the day as a net purchaser in aggregate across all of your account(s) with TBNZ of at least the number of shares you were closed out on (in the security you were closed out on). For the remainder of the trading day on which you were closed out, you will not be permitted to (i) short sell the stock you were closed out in, (ii) write in-the-money call options on the stock you were closed out in, or (iii) exercise put options on the stock you were closed out in (the "Trading Restrictions"). If you nevertheless do not end the day as a net purchaser of the required number of shares for the stock you have been closed out in (for example, as the result of being assigned on call options previously written)—in aggregate across all of your accounts with TBNZ, TBNZ will perform another close-out in the account on the next trading day for the number of shares that, when added to your aggregate net trading activity in such stock on the close-out date, would have been required to make you a net purchaser of the required number of shares of such stock that day, and you will again be required to remain a net purchaser across all of your accounts of that many shares and again subject to the Trading Restrictions for the remainder of that day.
III. You should be aware that based on the manner in which TBNZ is required to execute a close-out and a third party allowed to execute a buy-in, significant differences between the price at which the transaction was executed and the prior day's close may result. These differences may be especially pronounced in the case of illiquid securities. You should be aware of these risks and manage their portfolio accordingly.
PART C INTRODUCTION OF THE MARGIN SYSTEM
An automated electronic system (“Margin System”) by TBNZ is designed to set, renew and enforce margin requirements, and operate with respect to margin transactions in your account.
TBNZ’s Margin System provides pre and post-execution controls by:
I. testing your orders to ensure that your account holds enough equity to support the execution of the order, rejecting the order if equity is insufficient or directing the order to an execution destination if equity is sufficient; and
II. continuously updating your account’s equity and margin requirements and, if your account’s equity falls below its minimum margin requirements, issuing liquidating orders in a sequence generally intended to minimize the impact on account equity.
III. Protections in the TBNZ Margin System prevent you from withdrawing an intraday amount which would cause your account equity to fall below the applicable margin requirements for any position in the account or the minimum available equity level set by the firm, any exchange or other regulator.
Recognizing that you are an experienced investor, TBNZ expects you to manage your positions proactively. TBNZ provides credit manager software in the Tiger Trade Terminals of TBNZ for you to monitor your account equity on a real-time or near real-time basis through your trading screens, and you are obligated to monitor your account equity and manage your trading risks.
This Disclosure shall be written in English and Chinese languages. If there is any difference or inconsistency between the Chinese and English version, the English version shall prevail.
I ACKNOWLEDGE THAT MY ELECTRONIC SIGNATURE BELOW FOR RECEIPT OF THIS DISCLOSURE IS THE EQUIVALENT OF MY HAND-WRITTEN SIGNATURE.