Risk Disclosure Statement
This notice provides you with information about some of the risks associated with the Qualifying Assets, which you may invest in through services provided to you by XDAT INTERNATIONAL LIMITED (the “Company” “We” “Us”). The Company provides services and products through the following accounts:
- Retail User Account.
- Professional User Account
To find out about some of the risks which are relevant to the account applicable to you, please see the relevant sections below:
- Section 1: Retail clients
- Section 2: Professional Clients and/or Eligible Counterparties
- Section 3: General Risks (applicable to all accounts)
This notice does not explain all of the risks involved in investing in the Qualifying Assets, or how such risks relate to your personal circumstances. It is important that you fully understand the risks involved before making a decision to create an account and trade on our platform. If you are in any doubt about the risks involved with your User Account, you should seek professional advice. If you choose to enter into a transaction on our platform, it is important that you remain aware of the risks involved, that you have adequate financial resources to bear such risks and that you monitor your positions carefully on an ongoing basis.
SECTION 1: RETAIL CLIENTS
The Qualifying Assets that are tradeable on the Trading Platform are complex instruments and come with a high risk of losing money rapidly due to market volatility, illiquidity and other contributing factors. You should consider whether you understand how the Qualifying Assets operate and how their values are derived, and whether you can afford to take the high risk of losing your money. Currently the company does not keep statistics and therefore it is not possible to determine an accurate figure as to what percentage of clients are losing money. However, as the value of the Qualifying Assets and Cryptocurrencies are extremely volatile, users are likely to experience large losses.
Qualifying Assets are Cryptocurrencies that are currently available to be traded on the Platform. They are subject to change without notice, and may in the future refer exclusively to Virtual Financial Assets (VFA). Virtual Financial Assets, as defined by the Virtual Financial Assets Act 2018 are any form of digital medium recordation that is used as a digital medium of exchange, unit of account, or store of value that is not a virtual token, electronic money or a financial instrument. Investing in a VFA carries a high degree of risk due to factors such as illiquidity, volatility, uninsurability of the asset and the multitude of risks associated with the issuer and the underlying distributed ledger. It is possible to lose all of the funds in your account.
Our services are provided on an execution-only basis. We do not provide investment advice in relation to the Qualifying Assets. We sometimes provide factual information or research recommendations about a market, information about transaction procedures and information about the potential risks involved and how those risks may be minimised. However, any decision to use our products or services is made by you. You are responsible for managing your tax and legal affairs including making any regulatory filings and payments and complying with applicable laws and regulations. We do not provide any regulatory, tax or legal advice. If you are in any doubt as to the tax treatment or liabilities of investment products available through your User Account, you should seek independent advice.
Before you start trading on an account, we urge you to make an assessment of whether the product(s) and/or services are appropriate for you, and to seek professional advice on any product or service and its corresponding suitability for you. Any decision to open an account and to use our products or services is yours. It is your responsibility to understand the risks involved with our products or services. During the application process, we will ask you for information about your financial assets and earnings. However, we do not monitor whether the funds you have sent to us or your profits or losses are consistent with that information. It is up to you to assess whether your financial resources are adequate for your activity with us and your risk appetite in the products and services you use.
RANGE OF PRODUCTS
The Qualifying Assets that are offered on our platform come from a variety of sources and the underlying entities that are responsible for issuing such, may have their own inherent risks, which you may be exposed to by investing through our platform. Although the prices at which you open Contracts are derived from the open market, the characteristics of our Contracts can vary substantially from the actual open market or instrument, due to factors including but not limited to contract size, last dealing time, settlement procedures, rollover procedures, commissions and fluctuations.
The Qualifying Assets on our exchange may be listed on other exchanges. The prices and other conditions are set by us in accordance with our obligation to provide best execution as set out in our order execution policy, to act reasonably and in accordance with the applicable User Agreement.
Each order you open with us results in you entering into a Contract with us. Although the peer-to-peer nature of the transaction will result in confirmation completed by yourself and a counterparty, these Contracts can be closed by us where we have obtained confirmation from both yourself and the counterparty. The Contracts and are not transferable to any other person. Contracts only provide rights which are associated with the Qualifying Assets that you have traded for. All Contracts you enter into with us are legally enforceable by both parties.
It is important that you understand the risks associated with trading in Qualifying Assets because fluctuations in the price of the underlying market will affect your instruments and the profitability of your trades. Past performance is not an indication of future performance. The value of investments can go down as well as up. Movements in the price of markets can be volatile. This will have a direct impact on your profits and losses. Knowing the volatility of a market will help guide you as to where any stops should be placed. It should be noted that volatility can be unexpected and unpredictable.
General Product Risks: the value of many of the Qualifying Assets, may depend largely on the underlying issuer’s ability to create and develop a successful and fully functional blockchain platform. There are various risks associated with this nascent technology. An issuer could also find difficulties in acquiring or setting up various operational logistics, which would in turn delay the implementation of their business plan, and in turn cause delays to the intended revenue streams which the issuer is expected to generate.
Risks Relating to Blockchain Technology and Ethereum: Blockchain-based technologies, Ethereum, and other associated and related technologies are not exclusively controlled by the issuer and adverse changes in market forces or the technology, broadly construed, may prevent or compromise the issuer’s performance and the issuance itself.
Unforeseeable Risks: There may be additional risks that cannot be anticipated or foreseen due to the incipience of crytographic token technology, Blockchain-based technology, Ethereum and related technologies, together with the constantly changing laws and regulations.
Dependence on Key Personnel: An issuer is dependent on its Board of Directors and executive management, and the loss of one or more key personnel or an inability to attract and retain highly skilled personnel may impair its ability to achieve the objectives set out in their respective business plans.
No Operating History: An issuer may be a relatively new incorporated entity, with little to no operating history that you can evaluate.
Concentration Risk: this may arise because of lack of diversification in the underlying issuer’s business that may lead to excessive exposures or concentration in one counterparty or group of connected counterparties.
Foreign Exchange Risk: An issuer may be exposed to foreign exchange risks which may affect the monetary assets or the liabilities of an issuer that are not denominated in the functional currency of the issuer.
Liquidity Risk: An issuer may be unable to meet its obligations as they become due because of an inability to liquidate assets or obtain adequate funding or because it cannot easily unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or market disruptions.
Operational Risk: An issuer’s activities are exposed to the potential that inadequate information systems, operations problems, breaches in internal controls, fraud, or unforeseen catastrophes will result in unexpected losses.
IT Risk: The integrity, reliability, and operational performance of an issuer’s IT systems may be critical to an issuer’s operations. An issuer’s IT systems may be damaged or interrupted by spikes in usage, human error, unauthorised access, natural hazards or disasters or similarly disruptive events. An issuer is exposed to risks which may arise from inadequate information technology and processing, inappropriate IT strategy and policy or inadequate use of an issuer’s IT.
Legal Risk: An issuer may be subject to legal risks which arise from the possibility that unenforceable contracts, lawsuits, or adverse judgements can disrupt or otherwise negatively affect the operations or condition of that issuer.
Regulatory Risk: The regulation of tokens, cryptocurrencies (including Ethereum), blockchain technologies, and cryptocurrency exchanges is currently undeveloped and likely to rapidly evolve, and vary significantly among international, federal, state and local jurisdictions and is subject to significant uncertainty. Failure by an issuer to comply with any laws, rules and regulations, some of which may not yet exist or are subject to interpretation and may be subject to change, could result in a variety of adverse consequences, including civil penalties and fines.
Risk of Data Protection Failure and Fraud: An issuer is likely to be subject to significant regulation regarding the use of personal customer data. The issuer may be at risk from cyber-crime, meaning that this data could be wrongfully appropriated, lost or disclosed, stolen or processed in breach of data protection and privacy laws and regulations.
Compliance Risk: This is the risk of not complying with local and international laws and regulations including but not limited to Anti-Money Laundering and Anti-Terrorism Financing laws and regulations, and reporting requirements amongst others.
Reputational Risk: Negative publicity regarding an issuer’s business practices, whether true or not, could be particularly damaging for the issuer since the nature of its business requires maintaining the confidence of depositors, creditors, regulatory authorities and of the general marketplace.
Strategic and Business Risk: Improper strategic choices or the actual implementation of strategic decisions can have a serious and significant impact on prospective profit and capital results. This may have an effect on the value of the Qualifying Asset.
External Factors: An issuer’s performance may be adversely affected by external factors beyond the issuer’s control.
Issuer’s Solvency: In the case of insolvency of an issuer, the holders of their respective Qualifying Assets may suffer direct and materially adverse consequences, including loss of their entire investment.
Brexit: The United Kingdom’s exit from the European Union may have a direct or indirect impact on the business environment within which an issuer operates. The implications of Brexit are not entirely clear so the extent of the impact on an issuer cannot be assessed appropriately.
Funding Risk: Funding risk is the risk that an issuer may not be able to achieve the goals set out in its business plan and does not meet its targets in collecting sufficient monies from any of its capital raises. In such a case an issuer might struggle to implement the business plan or may need to adjust it materially in order to cater for a different reality than the one expected.
Risks Associated to Majority Shareholder: As many issuers may have one or very few shareholders, there may be a high dependency on them, whether for capital or funding, which always highlights the risk of ‘contagion’ if that shareholder were to find itself in financial difficulties.
NON-GUARANTEED STOPS/TAKE PROFITS/LIMITS
When a non-guaranteed stop/take-profit/limit is triggered, it has the effect of issuing an order from you to us to close your Contract. Your Contract is not closed immediately when the stop is triggered. We aim to deal with such orders fairly and promptly but the time taken to fill the order and the level at which the order is filled depends upon the underlying market and the number of client orders triggered. In fast-moving markets, a price for the level of your order might not be available or the market might move quickly and significantly away from the stop level before we are able to fulfil it.
Gapping is a sudden shift in the price of the market from one level to another. Various factors can lead to gapping (for example, economic events or market announcements). When these factors occur, the market liquidity may drastically change with no opportunity to sell your Qualifying Asset. A non-guaranteed stop will not protect you against the risk of gapping.
In setting our prices, spreads and the sizes in which we deal, we take into account the market or markets for the particular Qualifying Assets. Market conditions can change significantly in a very short period of time, so that if you wish to sell an asset or close a Contract, you may not be able to do so under the same terms as when you purchased or opened it. Under certain trading conditions it may be difficult or impossible to liquidate a position. This may occur, for example, at times of rapid price movement if the price rises or falls in one trading session to such an extent that under the rules of the relevant exchange, trading is suspended or restricted.
NEED TO MONITOR POSITIONS
It is important that you monitor all of your positions closely. It is your responsibility to monitor your positions and during the period that you have any open Contracts or transactions, you should always have the ability to access your Accounts.
We offer you the opportunity to deal and communicate with us via electronic means, for example through our dealing platform and, in certain circumstances, by email. Although electronic communication is often a reliable way to communicate, no electronic communication is entirely reliable or always available. If you choose to deal with us via electronic communication, you should be aware that electronic communications can fail, can be delayed, may not be secure and/or may not reach the intended destination.
The insolvency or default of any underlying issuers connected to your transaction, may lead to positions being liquidated or closed out without your consent. In certain circumstances, you may not get back the actual assets that you have invested, or you may have to accept any available payments in another Qualifying Asset. We accept no liability for any insolvency of, or default by, other firms, entities or persons involved with your transactions. At present, there exists no investor protection scheme which may cover a fixed value per user.
REGULATORY AND LEGAL RISK
This is the risk that a change in laws and regulations will materially impact investments in a sector or market. A change in laws or regulations made by the government or a regulatory body can increase the costs of operating a business, reduce the attractiveness of investment and/or change the competitive landscape and as such alter the profit potential of an investment. This risk is unpredictable and may vary from market to market. In emerging markets such risk may be higher than in more developed markets. For example in emerging markets the inadequacy or absence of regulatory measures can give rise to an increased danger of market manipulation and insider trading, while the absence of financial market supervision can affect the enforceability of legal rights.
SECTION 2: PROFESSIONAL CLIENTS
All of the considerations mentioned apply to professional clients as well. However, as a professional client, the Company is allowed to assume that you have the necessary levels of experience and knowledge to transact with us. Having said so, we do not monitor whether the amount of money you have sent to us or your profits or losses are consistent with that information. It is up to you to assess whether your financial resources are adequate for your activity with us and your risk appetite in the products and services you use.
SECTION 3: CONCLUDING REMARKS
Instructions to deal from you to us form a commitment which may only be subsequently revoked by you with our prior consent (such consent will not be unreasonably withheld) at any time before the instruction to deal is executed.
We do not provide tax advice and if you are in any doubt as to your tax obligations, you should seek independent advice.
XDAT INTERNATIONAL LIMITED
GROUND FLOOR, PALACE COURT,
CHURCH STREET, ST. JULIANS, STJ3049, MALTA.
Email: [email protected]