TRADING & DEMAT ACCOUNT OPENING FORM - NJ PMS

RISK DISCLOSURE DOCUMENTorders either on the buy side or the sell side, or iftrading is halted in a security due to any action onaccount of unusual trading activity or stock hittingcircuit filters or for any other reason.1.8 System/Network Congestion: Trading onNSE/BSE is in electronic mode, based onsatellite/leased line based communications,combination of technologies and computer systems toplace and route orders. Thus, there exists a possibilityof communication failure or system problems or slowor delayed response from system or trading halt, or anysuch other problem/glitch whereby not being able toestablish access to the trading system/network, whichmay be beyond the control of and may result in delay inprocessing or not processing buy or sell orders eitherin part or in full. You are cautioned to note that althoughthese problems may be temporary in nature, but whenyou have outstanding open positions or unexecutedorders, these represent a risk because of yourobligations to settle all executed transactions.2. As far as futures and options segment isconcerned, please note and get yourselfacquainted with the following additional features:2.1 Effect of "leverage" or "gearing" : The amount ofmargin is small relative to the value of the derivativescontract so the transactions are 'leveraged' or 'geared'.Derivatives trading, which is conducted with a relativelysmall amount of margin, provides the possibility ofgreat profit or loss in comparison with the principalinvestment amount. But transactions in derivativescarry a high degree of risk.You should therefore completely understand thefollowing statements before actually trading inderivatives trading and also trade with caution whiletaking into account one's circumstances, financialresources, etc. If the prices move against you, you maylose a part of or whole margin equivalent to theprincipal investment amount in a relatively short periodof time. Moreover, the loss may exceed the originalmargin amount.a) Futures trading involves daily settlement of allpositions. Every day the open positions are marked tomarket based on the closing level of the index. If theindex has moved against you, you will be required todeposit the amount of loss (notional) resulting fromsuch movement. This margin will have to be paid withina stipulated time frame, generally beforecommencement of trading the next day.b) If you fail to deposit the additional margin by thedeadline or if an outstanding debt occurs in youraccount, the broker/member may liquidate a part of orthe whole position or substitute securities. In this case,you will be liable for any losses incurred due to suchclose-outs.c) Under certain market conditions, an investor mayfind it difficult or impossible to execute transactions. Forexample, this situation can occur due to factors such asilliquidity i.e. when there are insufficient bids or offers orsuspension of trading due to price limit or circuitbreakers etc.d) In order to maintain market stability, the followingsteps may be adopted: changes in the margin rate,increase in the cash margin rate or others. These newmeasures may also be applied to the existing openinterests. In such conditions, you will be required to putup additional margins or reduce your positions.e) You must ask your broker to provide the full details ofthe derivatives contracts you plan to trade i.e. thecontract specifications and the associated obligations.2.2 Currency specific risksa) The profit or loss in transactions in foreign currencydenominatedcontracts, whether they are traded in yourown or another jurisdiction, will be affected byfluctuations in currency rates, where there is a need toconvert from the currency denomination of the contractto another currency.b) Under certain market conditions, you may find itdifficult or impossible to liquidate a position. This canoccur, for example when a currency is deregulated orfixed trading bands are widened.c) Currency prices are highly volatile. Pricemovements for currencies are influenced by, amongother things changing: supply-demand relationships,trade, fiscal, monetary, exchange control programs andpolicies of governments, foreign political and economicevents and policies; changes in national andinternational interest rates and inflation; currency25