Additional Risk Disclosure Statement for Trading in Payment Token Derivatives (“PTDs”)
Cryptocurrencies and their derivatives are volatile products with a high risk of losing money quickly. Therefore, trading in derivatives is not appropriate for all the investors. You cannot engage in trading on Synchro unless you meet the criteria of being an institutional or accredited investor, as per the Singapore laws and regulations. The information contained in this site is not directed to any party other than an institutional or accredited investor (for instance, a retail investor).
Payment token derivatives are not regulated by the MAS. Hence, the safeguards afforded under MAS’ regulatory framework may not apply to you while dealing with unregulated products, which means, should things go awry, you may not be able to recover your money, and you would not be protected by MAS’ regulations. It is therefore crucial that you fully understand the risks involved before deciding to deal with payment token derivatives.
You should always carefully consider whether dealing in payment token derivatives are consistent with your risk tolerance, investment objectives, investment experience, financial condition and personal circumstances and other considerations that may be relevant to you. You should carefully consider the products’ features, risk factors, fees and expenses before investing.
You should keep yourself informed and be aware of the trading risks generally, and in particular, the following (Please note that below statements are not exhaustive):
- Payment Token is a highly volatile asset class and is based on decentralised monetary protocols which are still in experimental stage and may change at any time. Payment Token derivative contracts based on cryptocurrency may pose specific risks. Such risks may arise from great volatility in prices resulting from a range of factors. Those risks could in turn affect financial outcomes associated with maintaining required margins or any losses at final contract settlement. The value and liquidity of cryptocurrency and cryptocurrency related products may fluctuate greatly as they are largely derived from, or highly dependent on the level and volume of participation from both buyers and sellers. These products may be restricted and subject to significant limitations on resales and transfers.
- Cryptocurrencies is a relatively new asset class and regulations, or a lack thereof, may have an impact on liquidity which in turn may result in unwanted price slippages. This is exacerbated in times of market volatility. Possible failure of cryptocurrency exchanges may also increase illiquidity.
- Cryptocurrencies are hard to value and are extremely volatile. Investing in them entails high risk as prices are prone to sudden sharp swings as a result of unanticipated events or changes in market sentiments, and could also be due to the lack of price transparency.
- Cryptocurrency derivatives are margin products, meaning losses or gains are increased. Before trading, you should be aware that trading in cryptocurrency derivatives allows you to take a larger position than you would otherwise be able to. As such, a relatively small negative or positive market movement can have a significant effect on your investment. Derivatives trading therefore involves a relatively high degree of risk. This makes the potential gain quite high, even if the deposit is relatively small. If your total exposure on margin trades exceeds your deposit, you risk losing more than your deposit.
- Inadequate regulatory oversight makes payment tokens vulnerable to cyber-attacks. Malicious individuals, groups or organisations may attempt to interfere with the trading platform in a variety of ways, including, but not limited to, malware attacks, denial of service attacks, which could negatively affect the operation of the Trading Platform, the availability of the Services and the value of contracts traded on the Trading Platform. In general, cyber incidents can result from deliberate attacks or unintentional events. Cyberattacks include but are not limited to gaining unauthorized access to systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. In the event of a cyberattack and theft of cryptocurrencies, it may result in drastic, adverse price movements as well.
- Trading the derivatives exposes you to liquidity risk. This is the risk that you suffer a loss because you cannot close out a derivative contract position because there is no demand to take the other side of that trade.