Prime CFD - What is Prime CFD

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Prime CFD
CFDs have become a popular way to trade
South African share exposures on a leveraged basis

What is a CFD?                                                                      Rising share price          Falling share price
A contract for difference, or CFD, is an agreement
                                                               Long CFD             Profit                      Loss
which allows you to make a profit or loss from
fluctuations in the price of an underlying JSE-listed
                                                               Short CFD            Loss                        Profit
security, referred to as a Reference Security, without
actually owning that security.
The amount of any profit or loss made on a CFD will be        Leveraged Trading
equal to the difference between the price of the              A key feature of CFDs is leverage. Leverage is where
Reference Security when the CFD is opened, and the            you have investment exposure that is larger than
price of the Reference Security when the CFD is closed,       the amount of funds invested. CFDs only require a
multiplied by the number of Reference Securities to           small percentage of their position value to be held as
which the CFD relates. Any profit or loss made will           margin, as demonstrated in the example:
also be affected by certain other payments and receipts
such as dividend and interest amounts required to be           Opening Contract Value                          Prime CFD’s
made under the Prime CFD Terms and Conditions.
                                                               Quantity purchased                              10,000

                                                               Price                                           R20.00

                            Gearing                            CFD Value                                       R200,000.00
                         Up to 10 times
                        gearing available                      Initial outlay (margin @ 15%)                   R30,000.00

        Online CFD                           Guaranteed        Closing Contract Value                          Prime CFD’s
         Trading            PRIME            Macquarie’s
       Trade long and        CFD             Prime CFD         Quantity held                                   10,000
         short CFDs                         obligations are
           online                           guaranteed by      Closing price                                   R25.00
                                              its parent
                     Risk Management                           CFD Value                                       R250,000.00
                   Hedge share positions
                     with short CFDs                           Gross profit                                    R50,000.00

                                                               Gross return on initial outlay                  160%

Why trade CFDs?                                               Note: This illustrative example is calculated on a gross basis and does not
                                                              include any fees, interest or dividend adjustments or the effect of tax.

Profit from rising and falling markets                        Increased leverage with CFD’s can provide greater
With Prime CFDs it is as easy to buy a CFD (go long)          profits but at the same time it can magnify losses.
as it is to sell a CFD (go short) so you can profit from      Losses can be higher than your initial outlay.
both rising and falling share prices.
With Prime CFD, you can hedge and protect                                 In the example below, the long share position of
your shares with a short CFD position                                     10,000 shares is hedged with a short CFD position
                                                                          over the same number of shares. Theoretically, no
Prime CFD’s can be an ideal hedging tool as there                         additional margin is required for the CFD position
is no strike, no expiry date and no minimum size.                         because one position offsets the other.
                                                                          • As the share price drops, the short CFD position
Protect your shares with a short                                            generates a profit for the exact amount that the
CFD position                                                                share position has decreased.
CFDs are a flexible hedging tool that can help you                        • You are said to be “hedged” against future
to protect your share portfolio. CFDs have no strike,                       movements in the share price because no net
no expiry date, no minimum size and you also earn                           profit or loss will be generated on the share value
interest on short positions.                                                while the hedge is in place.
A long position profits when the share price moves up                     • A CFD position will neutralise your equity risk by
and short position profits when the share price moves                       giving you an equal but opposite exposure to the
down.                                                                       same underlying share. Accordingly, as the share
                                                                            price increases, the short CFD position generates
If you hold a position in an underlying share, you can
                                                                            a loss for the exact amount that the share position
protect your position without selling the shares, but
                                                                            has increased.
by opening a corresponding short CFD position in
Prime CFD.

                                             Share Position                               CFD Position
                                                              Loss                                          Profit
                                                            (R20,000)                                     (R20,000)
       XYZ Share Price


                                     Share                    Share              CFD                        CFD
                                    Value =                  Value =            Value =                    Value =
                                   R200,000                 R180,000           R200,000                   R180,000

                                     Day 1                    Day 2               Day 1                      Day 2
                                                 Price                                         Price
                                  » 10,000 XYZ   (R2,00)   » 10,000 XYZ       » Short 10,000   (R2,00)   » Short 10,000
                                    shares                   shares             CFDs                       CFDs
                                  » Value =                » Value =          » Value =                  » Value =
                                    R200,000                 R180,000           R200,000                   R180,000

Prime CFD offers risk management that                                     Stop-Loss Orders?
can help you effectively manage your risk                                 Prime allows you to place stop-loss orders. This is an
                                                                          Order requesting the Close-out of an existing Open
Direct Market Access (DMA)                                                CFD if the Reference Security reaches a price you
                                                                          specify in the Order (the “Stop-Loss Level”). We may
Prime CFD offers CFDs via the Direct Market
                                                                          accept this Order by Closing-out your CFD at the
Access model. We believe DMA offers you the most
                                                                          prevailing Reference Price when:
transparent pricing and cost structure. DMA ensures
that the CFD price will reflect the actual price of the                   • for a Long CFD, the Reference Price becomes
shares on the JSE.                                                          equal to, or less than, the Stop-Loss Level; or
                                                                          • for a Short CFD, the Reference Price becomes
Risk Management                                                             equal to, or greater than, the Stop-Loss Level.
Risk management is a vital part of any investment                         You should note that if the Reference Price moves
strategy. Prime CFD provides ways to help you                             suddenly, it is possible that Stop-Loss Orders may
effectively manage your risk and/or protect your                          not be filled, or may be filled at a different price to that
shares.                                                                   specified by you, and that you may suffer loss as a
Hedge Share Positions with CFDs                                           Stop-Loss Orders are valid until accepted by us or
Prime CFD allows you the opportunity to use CFDs                          cancelled by either party.
to protect your share positions. Direct Market Access
CFDs are a valuable hedging tool as there is no strike,
no expiry date, no minimum size and you also earn
interest on short CFD positions.
An integrated online investment solution for
your trading, risk management and cash

The Trading Platform offers:
• A convenient, online place to trade and manage
  your CFDs.
• Live JSE prices and news
• Straight through order processing
• Charting

The online reporting portal provides:
• Seamless access to comprehensive reporting.
• Trade history and account statements

CFDs are high risk products                                               and derivatives and it is important that you discuss
                                                                          investing in this product with your broker, prior to
A CFD is a leveraged, high risk product. Your potential                   making an investment.
losses on a CFD can be substantial and may exceed
                                                                          We also recommend that you read the Prime CFD
how much margin is designated to support a CFD
                                                                          Terms and Conditions (including the Risks section)
and even the total funds in your Prime CFD account.
                                                                          and the Frequently Asked Questions, both of which
This product is aimed at investors who have financial                     can be found on the Prime CFD Trading Platform,
knowledge and experience in investing in both shares                      before deciding to invest in this product.

Macquarie Securities South Africa (Pty) Limited is not an authorised deposit-taking institutions for the purposes of the Banking Act 1959
(Cth) of Australia, and Macquarie Securities South Africa (Pty) Limited’s obligations do not represent deposits or other liabilities of Macquarie
Bank Limited ABN 46 008 583 542. Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the
obligations of Macquarie Securities South Africa (Pty) Limited. Macquarie Securities South Africa (Proprietary) Limited does not conduct the
“business of a bank” as contemplated by the Banks Act, 1990.
Macquarie Securities South Africa (Proprietary) Limited does not provide, and this document does not constitute, financial advice in
relation to the trading of CFDs. None of the information in this document or on the Prime CFD Trading Platform takes into account your
personal objectives, financial situation or needs and you must determine whether the information is appropriate in terms of your particular
circumstances. Macquarie and any other member of the Macquarie Group, their agents and affiliates, are dealing with you exclusively on
the basis that you have sufficient knowledge, experience and/or professional financial, tax, legal and other advice to undertake your own
assessment of the information.
The CFDs contemplated by the Terms and Conditions have not been and will not be registered under the U.S. Securities Act of 1933, (the
“Securities Act”) and may not be offered or sold or delivered outside of South Africa or within the United States of America or to, or for the
account or benefit of, U.S. persons except in transactions exempt from the registration requirements of the Securities Act. In addition, the
trading in these CFDs has not been approved by the US Commodity Futures Trading Commission under the U.S. Exchange Act. Terms
used in this paragraph have the meanings given to them by Regulation S under the Securities Act.
Distribution of this information outside South Africa may be restricted by law and persons who come into possession of this document should
seek advice on and observe any restrictions. Any failure to comply with restrictions may constitute a violation of applicable securities law.
Macquarie Securities South Africa (Proprietary) Limited, FSP 33751, is a licensed financial services provider, licensed by the Financial Services
Board, to provide advice and intermediary services in terms of the FAIS Act. Investment products are market linked. Market fluctuations may
have an effect on the value, price or income of investments. Investment capital is not guaranteed, unless specifically stated. Past performance
is not a guide to future investment performance. Macquarie holds appropriate fidelity insurance and professional indemnity.
011 583 2002

011 583 2110 (Product & Trading Queries) (Application Queries) (Technical Support)

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