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Risk Disclosure

Level2 (hereafter the “Company”) provides this notice to inform clients about the risks associated with trading financial products. This notice does not and cannot disclose or explain all the risks and other significant aspects involved in trading Contracts for Difference (CFDs) or other financial derivatives. Before engaging in trading, you should carefully consider whether these risks are suitable for you and may wish to seek independent advice.

  1. Product Description
  • A Contract for Difference (CFD) is a financial instrument that allows traders to speculate on the price movements of underlying assets (such as currencies, commodities, indices, or shares) without owning the asset itself.
  • CFDs are leveraged products, meaning traders can gain exposure to markets by depositing only a fraction of the total trade value as margin. This leverage magnifies both potential profits and losses. Traders can take positions in both rising markets ("going long") and falling markets ("going short").
  • When a CFD position is closed, the trader either receives or pays the difference between the opening and closing prices of the asset. If the market moves in their favor, the trader makes a profit. If the market moves against them, they incur a loss.While CFDs can be used for risk management purposes, they are complex financial instruments that carry a high degree of risk and may not be suitable for all traders.
  1. Trading Is Considered Risky and Speculative
  • Trading CFDs and other financial derivatives involves significant risk. Due to the leveraged nature of these products, losses can exceed initial deposits, and traders may lose their entire investment.
  • You, as the client, are fully responsible for any losses in your account. Therefore, you should only trade with funds you can afford to lose.
  1. Gearing and Leverage
  • Before opening a CFD or any other financial derivative position, traders are required to maintain a margin. Margin represents a small fraction of the total contract value, enabling trading with “leverage” or “gearing.”
  • Leverage allows traders to control a larger position with a smaller capital outlay. While this magnifies potential profits, it also significantly increases risk. Even a small market movement can lead to a disproportionately large impact on the value of an open position—either in favor of or against the trader. The higher the leverage, the greater the exposure to risk.
  • Traders must ensure they have sufficient equity in their accounts at all times, factoring in both running profits and losses to meet margin requirements. If market prices move unfavorably and the account balance is insufficient to maintain the required margin, the trader must deposit additional funds to avoid a margin call. If margin requirements are not met, Level2 reserves the right to close one, multiple, or all open positions at its discretion, regardless of whether the trader agrees with the decision.
  1. Appropriateness
  • As part of the account opening process, Level2 conducts an appropriateness assessment to evaluate whether CFD trading or other financial derivative products are suitable for the client. Based on the information provided, if trading these instruments is deemed inappropriate for a client’s profile, Level2 will issue a warning. However, the final decision to proceed with trading remains the client's responsibility.
  1. Off-Exchange Transactions
  • When trading CFDs with Level2, clients enter into an off-exchange (OTC) derivative transaction, executed through Level2’s trading platform. OTC transactions differ from exchange-traded products as there is no centralized exchange to facilitate closing an open position. As a result, traders must open and close positions directly with Level2, and these positions cannot be transferred to another party.
  • OTC trading carries counterparty risk—the possibility that Level2 may default on its obligations. While Level2 adheres to strict regulatory standards and maintains segregated client funds, this does not offer absolute protection against counterparty risk. Clients should consider this risk before engaging in OTC derivative trading.
  1. Underlying Market Volatility
  • CFDs and other financial derivatives allow traders to speculate on price movements in underlying markets. Level2’s prices are derived from these underlying instruments/markets.
  • Market fluctuations can significantly impact the value of a CFD position, affecting potential profits or losses. Traders should also be aware of “gapping,” where an asset's price opens at a different level than its previous close. This can lead to substantial, unexpected gains or losses. Gapping may occur due to major news events, economic announcements, or market closures.
  1. Stop Loss Limits
  • Stop-loss orders are designed to help traders limit losses by automatically closing positions at a predetermined level. However, in certain circumstances, stop-loss orders may not be effective. - During periods of high volatility, rapid price movements, or market closures, the execution price of a stop-loss order may differ significantly from the requested price. This means stop-losses cannot always guarantee protection from losses.
  1. Liquidity Risk
  • Liquidity risk affects a trader’s ability to enter or exit positions. Certain market conditions—such as low trading volumes, reduced price availability, or extreme volatility—can impact liquidity. In some cases, traders may be unable to execute trades at desired prices or obtain real-time valuation for specific financial instruments. Limited liquidity may also lead to wider spreads, increasing trading costs.
  1. Execution Risk
  • Execution risk refers to potential delays or slippage in trade execution. When placing an order, there may be a time lag before it is executed, during which market prices may change. As a result, the final execution price may differ from the expected price.
  • Additionally, trading outside of regular market hours can lead to greater price discrepancies compared to the last closing price of the underlying asset. Wider spreads may also occur in these conditions, increasing trading costs and execution risk.
  1. The Importance of Active Monitoring
  • Trading CFDs and other leveraged instruments requires continuous attention. These products are not suitable for long-term, passive investing. Market volatility and leverage can cause rapid changes in your position, requiring immediate action to manage risk or meet margin requirements. Holding positions overnight increases exposure to market fluctuations and may incur additional costs. If you cannot actively monitor your trades, these instruments may not be suitable for you.
  1. Costs and Charges
  • All applicable costs and charges are outlined on Level2’s website. Traders should be aware of these costs, as they directly impact profitability.
  • In addition to potential profits or losses, CFD trading involves transaction-related costs, including commissions, bid-offer spreads, overnight financing fees, account maintenance fees, and applicable taxes. These costs can be complex to calculate and, in some cases, may exceed the gross profit from a trade.
  1. Swap Rates and Overnight Charges
  • Holding a position overnight incurs a swap charge, which is influenced by interest rates and Level2’s associated fees. Swap rates are updated periodically and published on Level2’s website. Traders accept these charges upon account registration and are responsible for staying informed about any changes. Before placing trades, clients should review the latest swap rates to ensure they align with their trading strategy.
  1. Complex Instrument Warning
  • CFDs and other derivative products are complex financial instruments with unique risks. This notice serves as a risk disclosure in compliance with regulatory guidelines but does not cover all potential risks. Traders should fully understand these products, their associated risks, and their suitability before engaging in CFD trading. It is essential to assess whether these instruments align with your financial position, experience, and risk tolerance.
  • While complex instruments can be used to manage investment risk, they are not suitable for all investors. Each product carries varying levels of risk exposure, and it is essential to understand these risks before trading. If you are uncertain whether such instruments align with your financial goals and risk tolerance, you should seek independent financial advice.
  • Important Reminder: Never invest in CFD products with funds you cannot afford to lose.
  1. Client Acknowledgement
  • By engaging in trading with Level2, you acknowledge that you have read, understood, and accept the following risks:
  • The value of financial instruments (CFDs or other derivatives) can fluctuate significantly, potentially resulting in losses that exceed the original investment. In extreme cases, the entire investment may be lost.
  • Past performance of a financial instrument does not guarantee future performance. Historical data should not be relied upon as an indicator of future returns.
  • Certain financial instruments may lack liquidity due to market conditions, making them difficult to sell or value accurately.
  • Trading instruments in foreign currencies exposes you to exchange rate fluctuations, which can impact the value and performance of your investment.
  • Foreign markets may present different risks than domestic markets, and exchange rate movements can further influence potential profits or losses.



The Level2 Team