AXIOM RESEARCH AND TRADING, INC.
Axiom Research and Trading, Inc.
6631 Fiona Place
Carlsbad, CA 92011
Telephone Number: (760) 476-9301
Fax Number: (760) 476-9301
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS
OF PARTICIPATING IN THIS TRADING PROGRAM NOR HAS THE COMMISSION PASSED ON
THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT.
No person is authorized by Axiom Research and Trading, Inc. to give any information or make any
representations not contained herein. The delivery of this Disclosure Document does not imply
that the information contained herein is correct as of any time subsequent to the date set forth
The date of this Disclosure Document is August 1, 2010.
RISK DISCLOSURE STATEMENT
THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE
CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL
CONDITION. IN CONSIDERING WHETHER TO TRADE OR TO AUTHORIZE SOMEONE ELSE TO TRADE FOR YOU, YOU
SHOULD BE AWARE OF THE FOLLOWING:
IF YOU PURCHASE A COMMODITY OPTION YOU MAY SUSTAIN A TOTAL LOSS OF THE PREMIUM AND OF
ALL TRANSACTION COSTS.
IF YOU PURCHASE OR SELL A COMMODITY FUTURE OR SELL A COMMODITY OPTION, YOU MAY SUSTAIN
A TOTAL LOSS OF THE INITIAL MARGIN FUNDS AND ANY ADDITIONAL FUNDS THAT YOU DEPOSIT WITH YOUR
BROKER TO ESTABLISH OR MAINTAIN YOUR POSITION. IF THE MARKET MOVES AGAINST YOUR POSITION, YOU
MAY BE CALLED UPON BY YOUR BROKER TO DEPOSIT A SUBSTANTIAL AMOUNT OF ADDITIONAL MARGIN FUNDS,
ON SHORT NOTICE, IN ORDER TO MAINTAIN YOUR POSITION. IF YOU DO NOT PROVIDE THE REQUESTED FUNDS
WITHIN THE PRESCRIBED TIME, YOUR POSITION MAY BE LIQUIDATED AT A LOSS, AND YOU WILL BE LIABLE FOR
ANY RESULTING DEFICIT IN YOUR ACCOUNT.
UNDER CERTAIN MARKET CONDITIONS, YOU MAY FIND IT DIFFICULT OR IMPOSSIBLE TO LIQUIDATE A
POSITION. THIS CAN OCCUR, FOR EXAMPLE, WHEN THE MARKET MAKES A "LIMIT MOVE."
THE PLACEMENT OF CONTINGENT ORDERS BY YOU OR YOUR TRADING ADVISOR, SUCH AS A "STOP-
LOSS" OR "STOP-LIMIT" ORDER, WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS,
SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS.
A "SPREAD" POSITION MAY NOT BE LESS RISKY THAN A SIMPLE "LONG" OR "SHORT" POSITION.
THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY TRADING CAN WORK
AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS.
IN SOME CASES, MANAGED COMMODITY ACCOUNTS ARE SUBJECT TO SUBSTANTIAL CHARGES FOR
MANAGEMENT AND ADVISORY FEES. IT MAY BE NECESSARY FOR THOSE ACCOUNTS THAT ARE SUBJECT TO
THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR
ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS, AT PAGE 13, A COMPLETE DESCRIPTION OF EACH FEE TO BE
CHARGED TO YOUR ACCOUNT BY THE COMMODITY TRADING ADVISOR.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER SIGNIFICANT ASPECTS OF THE
COMMODITY MARKETS. YOU SHOULD THEREFORE CAREFULLY STUDY THIS DISCLOSURE DOCUMENT AND
COMMODITY TRADING BEFORE YOU TRADE, INCLUDING THE DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF
THIS INVESTMENT, AT PAGE 7.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY TRADING ADVISOR MAY ENGAGE IN TRADING
FOREIGN FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED
STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET MAY BE SUBJECT TO
REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION. FURTHER, UNITED STATES REGULATORY
AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES
OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE YOUR TRANSACTIONS MAY BE EFFECTED. BEFORE
YOU TRADE YOU SHOULD INQUIRE ABOUT AND ASK THE FIRM WITH WHICH YOU INTEND TO TRADE FOR DETAILS
ABOUT THE TYPES OF REDRESS AVAILABLE IN BOTH YOUR LOCAL AND OTHER RELEVANT JURISDICTIONS.
THIS COMMODITY TRADING ADVISOR IS PROHIBITED BY LAW FROM ACCEPTING FUNDS IN THE TRADING
ADVISOR'S NAME FROM A CLIENT FOR TRADING COMMODITY INTERESTS. YOU MUST PLACE ALL FUNDS FOR
TRADING IN THIS TRADING PROGRAM DIRECTLY WITH A FUTURES COMMISSION MERCHANT.
Axiom Research and Trading, Inc. Page 2
TABLE OF CONTENTS
Risk Disclosure Statement 2
Contact Information 4
Quad Program 6
Risk Factors 7
Conflicts of Interest 13
Fees of the Advisor 13
Brokerage Arrangements 14
Opening an Account 15
Past Performance of the Axiom S&P Stock Index Program 15
Additional Information 17
Axiom Research and Trading, Inc. Page 3
Axiom Research and Trading, Inc. (the value of one contract is US$50 times the
"Advisor"), a Nevada corporation, manages value of the S&P 500 stock index..
commodity trading accounts for qualified investors
• Robust. The program has been developed
pursuant to its Quad Program, a proprietary trading
to be robust, i.e., to be effective in a variety
program developed and refined by the Advisor and its
of market conditions, including bull and bear
sole principal, Rob Mitchell.
Rob Mitchell is the founder of the Advisor.
• Technical Analysis. The Advisor’s program
He holds a degree in Experimental Psychology and
will use "technical" analysis based on the
has experience in the research, development and
theory that a study of the markets
implementation of trading models. He formed the
themselves provides a means of anticipating
Advisor under Nevada law in April 2007 in order to
manage client assets.
• Multiple Trading Models. The Quad
Mr. Mitchell believes that the Advisor’s Quad
Program uses multiple proprietary trading
Program provides an attractive opportunity for clients
models to determine trade points in the
looking for an investment program with the following
• Risk Management. Effective risk
• Goal. The Advisor’s goal is to produce
management is a crucial aspect of the
above-average risk-adjusted returns for its
This Disclosure Document describes the
• Markets Traded. The Advisor will attempt to
trading management services offered by the Advisor,
achieve its goal by trading primarily, if not
its trading program and the risks associated
exclusively, in the E-Mini S&P, a stock
therewith. The Advisor intends to begin using this
market index futures contract traded on the
Disclosure Document on or after August 1, 2010.
Chicago Mercantile Exchange's Globex
electronic trading platform. The notional
You can contact us several ways: • Telephone Number: (760) 476-9301
• Mailing Address: 6631 Fiona Place, • Fax Number: (760) 476-9301
Carlsbad, CA 92011
• Email: email@example.com
Axiom Research and Trading, Inc. Page 4
Rob Mitchell is the President of the Advisor. 29, 2009, the Advisor re-registered with the CFTC as
He holds a degree in Experimental Psychology from a commodity trading advisor and Mr. Mitchell re-
the University of South Carolina. registered as a principal and associated person of the
Advisor. In addition, the Advisor re-applied for NFA
From July 1999 to November 2003 Mr.
membership and became a member on November 3,
Mitchell was principal of Creative Capital
Management, Inc., a firm registered with the
Commodity Futures Trading Commission (“CFTC”) as Mr. Mitchell is also an art dealer and has co-
a Commodity Trading Advisor. He was also a owned with his wife an art gallery called “Hallmark
registered associated person of such firm from Galleries, Inc.” in La Jolla, California since November
December 1999 to November 2003. From February of 2005.
2003 to July 2003 he was also an associated person
There has not been a material
of Abacus Systems Trading Inc, a registered
administrative, civil, or criminal action--whether
introducing broker. From November of 2003 to
pending, on appeal or concluded--against the Advisor
December of 2007, Mr. Mitchell conducted research
or its principal within the five years preceding the date
and trading for his own accounts.
of this Disclosure Document.
The Advisor initially became registered as a
The Advisor and its principal trade
commodity trading advisor with the CFTC on
commodity interests for their own personal accounts.
December 2007, as well as a member of the National
Due to the proprietary, and often experimental nature
Futures Association (“NFA”). Its registration and
of such trades, the trading by the Advisor and its
membership were withdrawn in January 2009. During
principal will not be made available for inspection.
such period Mr. Mitchell was registered as a principal
and associated person of the Advisor. On October
Axiom Research and Trading, Inc. Page 5
The Advisor will invest the assets of its Technical Analysis
clients in accordance with its Quad Program, a
The Advisor places primary emphasis on
proprietary trading program developed and refined by
technical analysis in assessing market opportunities.
the Advisor and Mr. Mitchell, the President of the
Advisor. The Advisor’s goal is to produce attractive Technical analysis is the study of price
and sustained returns for its clients. movement in the context of statistical and probability
Trading Models outcomes. It is the study of historic price patterns,
market volatility, open interest and volume in order to
The Quad Program uses multiple proprietary increase the possibility of right predictions in the
methods of pattern recognition to determine trade future actions. Technical analysis identifies more
points in the market. The Advisor believes that favorable entry or exit points. Technical analysis also
diversification among trading models increases the reveals seasonal patterns based on historical market
number of market environments from which its data.
program can extract profits.
The Advisor’s trading decisions are based
The models can take swing position trades on a combination of technical analysis, trading
lasting days, or that scalp intraday depending on the discretion and money management considerations.
pattern seen in the market. The models will all The Advisor also has the right to employ any form or
typically hold over night positions if it has a position method of analysis that it deems appropriate.
going into the close. The models do not generally
trade outside normal New York market hours. The Risk Management
models, collectively, are capable of counter-trend Effective risk management is a crucial
trading or trend trading in various time frames. aspect of the trading program. With the goal of
The Advisor may also vary exposure by limiting potential loss, the Advisor uses calculated risk
varying contracts traded. This may also be assessment techniques. Account size, expectation,
accomplished by varying the selection of allocation to volatility of market traded and the nature of other
each of the program’s component systems. positions taken are all factors that may be taken
under consideration when deciding whether to take a
Markets Traded position and determining the amount of equity
The models all trade the E-Mini S&P futures committed to that position. Protective stops are used
contract and can take trades both long and short. to control risks. See “Risk Factors--Stop Order
The Advisor believes there is sufficient liquidity in the Limitations.”
E-Mini S&P market for substantial growth of its
trading program from current equity levels.
Although the Advisor’s primary focus will be The Advisor’s trading program may have
the E-Mini S&P futures contract, the Advisor may high margin requirements. To maintain open
trade other futures and option contracts listed on positions, margin requirements may be as high as
exchanges all over the world, including other stock 50% to 75% of account equity on a regular basis. This
index futures contract. In short, the markets in which is, however, not a guaranteed or fixed level of margin
the Advisor will trade may grow and there are no percentage and is subject to change as dictated by
restrictions on such growth. The preference of a account size and market and performance conditions.
trade will depend upon which market the Advisor High margin requirements may increase the likelihood
determines will provide the best opportunities for of a margin call.
profit. General Considerations
Trading decisions will require the exercise of
judgment by the Advisor. Therefore, the success of
Axiom Research and Trading, Inc. Page 6
trading depends largely on the trading ability, technical or fundamental indicators. There have been
knowledge and judgment of the Advisor. The Advisor periods in the past when there were no such market
will exercise its judgment and discretion in interpreting indicators, and those periods may recur.
and applying its trading program and will make all
The Advisor believes that the development
decisions regarding the trading of commodity
of the trading program is a continual process. As a
interests. In addition, the Advisor will determine the
result of further analysis and research, changes have
time at which orders are to be placed with and
been made from time to time in the specific manner in
executed by a broker, the method by which orders are
which the trading program evaluates price
to be placed, the types of orders that are to be placed
movements in various markets, and it is likely that
and the overall leverage for the portfolio.
similar revisions will be made in the future. As a result
Decisions made by the Advisor will be based of such modifications, a trading strategy that may be
on an assessment of available facts. However, used by the Advisor in the future will differ from that
because of the large quantity of facts at hand, the used by the Advisor in the past and might differ from
number of available facts that may be overlooked and that presently being used. It is impossible to predict
the variables that may shift, any investment decision how such changes may affect trading on your behalf.
must, in the final analysis, be based on the judgment
The trading program utilized by the Advisor
of the Advisor.
is proprietary and confidential. The foregoing
The decision by the Advisor not to trade description is of necessity general and is not intended
certain markets or not to make certain trades may to be exhaustive. Consequently, clients of the
result at times in missing price moves and hence Advisor will not be able to determine the full details of
profits of great magnitude, which other trading this method, or whether this method is being followed.
managers who are willing to trade these commodities There can be no assurance that any trading strategy
may be able to capture. The Advisor's approach is of the Advisor will produce profitable results or will not
dependent in part on the existence of certain result in losses.
Futures trading is a high risk investment that may depend on anticipating trends in the volatile price
should be made only after consultation with movements of stock index futures contracts.
independent qualified sources of investment and tax
advice. Among the risks involved are the following:
Futures Trading is Volatile
A principal risk in futures trading is the
Stock Index Futures Contract
traditional volatility (or rapid fluctuation) in the market
Since the Advisor will concentrate its trading prices of commodities. The volatility of futures trading
in the stock index market, an account may not may cause your account to lose all or a substantial
maintain a variety of diverse positions. Concentration amount of its assets in a short period of time. Prices
of trading will subject an account to relatively greater of futures contracts are affected by a wide variety of
volatility. complex and hard to predict factors, such as political
and economic events, weather and climate conditions
Price movements of these contracts are
and the prevailing psychological characteristics of the
influenced by a wide variety of complex and hard to
predict factors, such as: government trade, fiscal,
monetary and exchange control programs and Substantial Leverage
policies; national and international political and
economic events; changes in interest rates; and Futures contracts are traded on margins that
typically range from about 2% to 20% of the value of
prevailing psychological characteristics of the
the contract. Low margin provides a large amount of
marketplace. The profitability of the Advisor's trading
leverage, i.e., commodity futures contracts for a large
number of units (bushels, pounds, etc.) of a
Axiom Research and Trading, Inc. Page 7
commodity, having a value substantially greater than volatile market, the market price may be declining (or
the margin, may be traded for a relatively small rising) so rapidly that there is no opportunity to
amount of money. Hence a relatively small change in liquidate a position at the stop price. Under these
the market price of a commodity can produce a circumstances, the broker's only obligation is to
corresponding large profit or loss. If the Advisor execute the order at the best price that is available.
invested a substantial portion of the assets in your
account in such a situation, a substantial change, up
High Margin Requirements
or down, in the value of the account would result. For The Advisor’s trading program has high
example, if at the time of purchase 5% of the price of margin requirements. To maintain open positions,
a futures contract is deposited as margin, a 5% margin requirements may be as high as 50% to 75%
decrease in the price of the futures contract would, if of account equity on a regular basis. If the market
the contract were then closed out, result in a total loss value of a particular open position changes to a point
of the margin deposit. Brokerage commissions and where the margin on deposit in a client’s account
other expenses also would be incurred and would does not satisfy the applicable maintenance margin
have to be paid despite the loss. Thus, like other requirement imposed by the broker, the client, and
leveraged investments, any trade may result in losses not the Advisor, will receive a margin call from the
in excess of the amount invested. broker. If the client does not satisfy the margin call
within a reasonable time (which may be as brief as a
Trading May be Illiquid
few hours) the broker will close out the client’s
It is not always possible to execute a buy or position, probably at a loss.
sell order at the desired price, or to close out an open
position due to market conditions and/or price
Clients Personally Liable for
fluctuations. As an example of this latter risk, it Losses in Their Accounts
should be noted that when the market price of a You are directly and personally liable for the
futures contract reaches its daily price fluctuation limit losses in your trading account. Your potential loss is
no trades or only a limited number of trades can be by no means limited to the amount of assets which
executed. Daily price fluctuation limits are you deposit in your account. For example, in a
established by the exchanges and approved by the market in which the Advisor is unable to liquidate
Commodity Futures Trading Commission ("CFTC"). positions, you could lose well in excess of the
The holder of a futures contract may therefore be maximum amount that you committed to your
locked into an adverse price movement for several account.
days or more and lose considerably more than the
initial margin paid to establish a position. In certain Increased Risk With the
commodities, the daily price fluctuation limits may Use of Notional Funds
apply throughout the life of the contract, and hence You may instruct the Advisor to use notional
the holder of a futures contract who cannot liquidate funds to trade your account.
his position by the end of trading on the last trading
day may be required to make or take delivery of the Trading leverage generally consists of two
commodity. Another instance of difficult or impossible different components, cash and notional funds. Cash
execution occurs in thinly traded markets or markets is the actual dollars given to the Advisor for use within
which lack sufficient trading liquidity. As a result, no an account. Notional funds are the increase in
assurance can be given that the Advisor's orders will dollars, above cash, which the Advisor is instructed
be executed at or near the desired price. by you to consider itself to be managing in your
Stop Order Limitations
The use of notional funds to increase the
The Advisor may use “stop orders” to trade leverage at which the Advisor will trade can be
your assets. Stop orders are often used in an effort to expected to increase the rapidity of drawdowns and
limit trading losses if prices move against a position. the volatility of an account; however, the use of
There can be no guarantee, however, that it will be notional funds has the potential of increasing trading
possible under all market conditions to execute the profits. There can be no assurance as to which effect
stop loss order at the price specified. In an active, the leverage adjustments may have on the
Axiom Research and Trading, Inc. Page 8
performance of the Advisor or on the performance of Rates of Return at Certain Funding
your account. If the Advisor uses notional funds for Fully Level
additional leverage, the equity in an account will Funded
erode much more quickly than if it does not use 50% 75% 100%
notional funds in the event the account experiences Cash/50% Cash/25% Cash/0%
losing trades. Notional Notional Notional
The Advisor cautions prospective investors 20% 40% 27% 20%
to take seriously the following warnings required by
10% 20% 13% 10%
both the Commodity Futures Trading Commission
and the National Futures Association: 5% 10% 7% 5%
You should request the Advisor to advise 0% 0% 0% 0%
you of the amount of cash or other assets (actual
funds) which should be deposited to the -5% -10% -7% -5%
Advisor's trading program for your account to be -10% -20% -13% -10%
considered "fully funded." This is the amount
upon which the Advisor will determine the -20% -40% -27% -20%
number of contracts traded in your account and
should be an amount sufficient to make it unlikely For example, a rate of return of –20% for a fully
that any further cash deposits would be required funded account would translate to a rate of return
from you over the course of your participation in of –40% for an account that is funded 50% with
the Advisor's program. cash and 50% with notional funds.
You are reminded that the account size 4. The management fee paid to the
you have agreed to in writing (the "nominal" or Advisor will be calculated based partly on the
"notional" account size) is not the maximum notional funds in the client’s account. As a result,
possible loss that your account may experience. the use of notional funds will increase the amount
of management fees that the Advisor will receive
You should consult the account
from the client for trading the same amount of
statements received from your futures
cash or actual funds.
commission merchant in order to determine the
actual activity in your account, including profits, 5. The nominal account size shall be
losses, and current cash equity balance. To the increased or decreased to reflect trading gains or
extent that the equity in your account is at any losses in the account, fees and expenses charged
time less than the nominal account size, you to the account and additions to or withdrawals
should be aware of the following: from the account.
1. Although your gains and losses, fees, 6. The matrix which follows the
and commissions measured in dollars will be the performance tables allow the conversion of the
same, they will be greater when expressed as a fully funded rates of return included in the tables
percentage of account equity. to the effective rates of return that would have
been experienced by a notionally funded account.
2. You may receive more frequent and
larger margin calls. Reliance on the Trading Program
3. You must understand that if you use Employed by Advisor
notional funds for additional leverage, the equity The Advisor may base its trading decisions
in your account will erode much more quickly on technical analysis. The technical factors that can
than if you do not use notional funds in the event be evaluated by a trader are limited in that they must
the account experiences losing trades. This be quantifiable in order to be processed by the trader.
matrix allows one to convert monthly rates of Technical trading programs may also be unsuccessful
return for fully funded accounts (vertical axis) to both because the market models employed are not in
corresponding rates of return for different funding fact reliable indicators of future price trends and
levels (horizontal axis).
Axiom Research and Trading, Inc. Page 9
because the markets are from time to time dominated Disruptions can occur in any market traded by the
by fundamental factors. Any factor which may lessen Advisor due to unusually high trading volume, political
major price trends (such as governmental controls intervention or other factors. The imposition of
affecting the markets) may reduce the prospect for controls by government authorities might also limit off-
future trading profitability. Any factor which would exchange trading to less than that which the Advisor
make it difficult to execute trades, such as reduced would otherwise recommend, to the possible
liquidity or extreme market developments resulting in detriment of your trading account. Market illiquidity or
limit moves, could also be detrimental to profits. In disruption could result in major losses to the your
addition, technical analysis does not generally focus account.
on the forces directly affecting the markets. These markets also do not have the
In short, no assurance can be given that the safeguard mechanisms of a clearing organization
Advisor’s program will be profitable. The best trading which, in effect, guarantee every exchange-traded
program will not be profitable if there are no instrument. In contrast to exchange-traded futures
fundamental or technical indicators of the kind it contracts, over-the-counter instruments rely on the
seeks to follow. dealer or counterparty being contracted with to fulfill
its contract. Failure by a counterparty to fulfill its
Electronic Trading contractual obligations could expose the client to
The Advisor expects to execute trades by unanticipated losses. If a counterparty becomes
buying and selling contracts through the use of on- bankrupt or insolvent, or otherwise defaults on its
line electronic exchanges. Trading on such obligations, a client may not receive any or only a
exchanges may subject a client to various additional portion of amounts owing from such party.
risks. There is, for example, the increased risk of
Reliance on Key Personnel of the Advisor
computer failure. Electronic exchanges may also
have difficulties with execution, especially during The services of Rob Mitchell are essential to
periods of high volume. In addition, some contracts the Advisor’s business. If his services were no longer
traded on electronic exchanges may be thinly traded, available, or if he were unable to provide his services,
potentially making it difficult for the Advisor to dispose the continued ability of the Advisor to operate would
of a position at the time or price desired. Moreover, in be subject to substantial uncertainty and could be
periods of extreme market volatility, the bid/ask terminated. In addition, he devotes to the affairs of
spreads for some contracts (which are ordinarily the Advisor, and will devote to the trading affairs of
liquid) may widen, making it difficult or undesirable to any particular account, only such time as he, in his
offset a position. sole discretion, deems necessary.
Off-Exchange Transactions Because the Advisor’s trading methodology
is discretionary, it is possible that performance will
The Advisor may trade your account in
suffer during vacations or other periods of Mr.
forward contracts and other derivatives. Unlike
Mitchell’s “down time.” Although the Advisor will take
futures contracts, these contracts are not traded on
certain actions to prevent or mitigate such losses--
exchanges; rather banks and dealers act as principals
such as automatic stop losses, decisions to limit
in these markets. Such trading is substantially
position size or buy option protection--there is no
unregulated; there is no limitation on daily price
assurance that such actions will be successful or will
movements and speculative position limits are not
not result in further losses. In addition, potential
applicable. The principals who deal in the these
opportunities to enter profitable trades most likely will
markets are not required to continue to make markets
not be seized.
in the commodities they trade and these markets can
experience periods of illiquidity, sometimes of Changes in Trading Approaches and
significant duration. There have been periods during Commodities Traded
which certain participants in these markets have
The Advisor believes that the development
refused to quote prices for certain commodities or
of a trading program is a continual process. As a
have quoted prices with an unusually wide spread
result of further analysis and research into the
between the price at which they were prepared to buy
performance of its program, changes may be made
and that at which they were prepared to sell.
Axiom Research and Trading, Inc. Page 10
from time to time in the specific manner in which the such as that utilized by exchanges in the U.S., market
program evaluates price movements in various disruptions may be more likely to occur on non-U.S.
commodities. As a result of such modifications, the exchanges.
trading program that may be used by the Advisor in
the future will differ from that used by the Advisor in
Trading in Options on Futures
the past and might differ from that presently being The Advisor may trade your account in
used. In addition, the Advisor may abandon its options on futures contracts. Options on futures are
program altogether if the Advisor perceives unique speculative and highly leveraged. The purchaser of
market conditions. Consequently, the actual trading an option risks losing the entire purchase price of the
program applied by it may differ substantially from option. The seller (writer) of an option risks losing the
that described herein and you may not be informed difference between the premium received for the
prior to such changes. option and the price of the futures contract underlying
the options which the writer must purchase or deliver
The Advisor may trade any futures or
upon exercise of the option, which could subject the
options contracts that are traded now, or may be
writer to an unlimited risk of loss in the event of an
traded in the future, on exchanges located in the
increase in the price of the contract to be purchased
United States and abroad. In particular, the number of
markets available for trading has increased or delivered. See “Selling Options on Futures
substantially during recent years (a process which is
expected to continue), and the markets in which your Commencement of Trading
account trades can be expected to change
significantly in the future, perhaps with adverse An account managed by the Advisor will
consequences. encounter a start-up period during which it will incur
certain risks relating to the initial investment of its
Contracts on Non-United States Exchanges assets. An account may commence trading
The Advisor may engage in the trading of operations at an unpropitious time, such as shortly
before a period during which markets have few or no
contracts on exchanges located outside the United
price trends. Moreover, the level of diversification
States. Investors should note that non-U.S.
may be lower during the start-up period than in later
exchanges are not regulated by the Commodity
periods characterized by the commitment of a greater
Futures Trading Commission or any other
government agency of the United States and, thus, percentage of assets to trading in certain commodity
interests. No assurance can be given that the
such trading may involve risks not applicable to
approach which the Advisor chooses to adopt as a
trading on U.S. exchanges. In addition, contracts
means of moving toward full portfolio commitment will
traded on non-U.S. exchanges are typically
be successful or will not result in substantial losses
denominated in the local currency, which introduces
an additional price variable not applicable to contracts which might have been avoided by other means of
initiating such trading.
traded on domestic exchanges. Therefore, unless an
account hedges itself against fluctuations in exchange Block Orders
rates between the U.S. dollar and the currencies in
which trading is done on such foreign exchanges, any The Advisor will also use "block" orders to
profits which an account might realize in such trading trade your account. A block order combines trading
could be eliminated by adverse changes in exchange orders for your account along with the orders of other
rates or an account could incur losses as a result of accounts that the Advisor manages when the orders
any such changes. Some non-U.S. exchanges, in are called into the executing firm. The Advisor will
contrast to exchanges in the U.S., are “principals’ only use block orders for multiple accounts if the
markets” similar to the forward markets, in which order is for the same commodity and month of a
responsibility for performance is only that of the futures contract or for the same commodity, month
individual member with whom a trader has entered and strike price of an option contract. After the block
into a transaction, and not of an exchange or order is executed, the executing broker will use its
exchange clearing house. Because some foreign breakdown procedures to allocate the trades to your
exchanges generally lack a clearing house system clearing broker and your clearing broker will use its
Axiom Research and Trading, Inc. Page 11
price allocation and account breakdown procedures Under CFTC regulations, futures
to allocate the trades to your account. commission merchants are required to maintain
clients’ asset in segregated accounts. If your
Potential Inability to Trade brokerage firm (which is registered as a futures
Due to Systems Failure commission merchant with the CFTC) fails to
The Advisor is dependent to a significant segregate client assets, you may be subject to a risk
degree on the proper functioning of its internal of loss of your funds in the event of the broker’s
computer systems. Accordingly, systems failures, bankruptcy. Also, under certain circumstances such
whether due to third party failures upon which such as the inability of another client of your broker or the
systems are dependent or the failure of the Advisor's broker itself to satisfy substantial deficiencies in such
hardware or software, could disrupt trading or make other client’s account, you may be subject to a risk of
trading impossible until such failure is remedied. loss of your funds even if such funds are properly
Such failures may result from events including "acts segregated. In the case of any such bankruptcy or
of God'' and domestic or international terrorism. Any client loss, you might lose all or recover only a portion
such failure, and consequential inability to trade (even of your funds.
for a short time), could, in certain market conditions, THE FOREGOING LIST OF RISK
cause the Advisor to experience significant trading FACTORS DOES NOT PURPORT TO BE A
losses or to miss opportunities for profitable trading. COMPLETE EXPLANATION OF THE RISKS
Institutional Risks INVOLVED IN FUTURES TRADING. YOU SHOULD
READ THE ENTIRE DISCLOSURE DOCUMENT
Institutions, such as brokerage firms and
AND CONSULT WITH YOUR OWN FINANCIAL AND
banks, have custody of your assets. These entities
TAX ADVISORS BEFORE DECIDING TO INVEST.
may encounter financial difficulties that could impact
Axiom Research and Trading, Inc. Page 12
CONFLICTS OF INTEREST
An investment in an account managed by equality of treatment cannot be assured in all
the Advisor involves risks due in part to certain situations.
inherent or potential conflicts of interests. Among • The Advisor will pay a portion of the fees it
such conflicts are the following: receives from client accounts to Optimus
• The Advisor and its principal, Mr. Mitchell, Trading Group LLC. As a result, such firm
will organize or become involved in other will have an incentive to introduce a client
business ventures. Such other ventures will account based on the payments it receives
compete for their time and attention. In from the Advisor.
addition, Mr. Mitchell devotes to the affairs of • It is possible that orders for the account of
the Advisor and its managed accounts only the Advisor or its principal may be entered in
such time as he, in his sole discretion, advance of a client account for legitimate
deems necessary. and explainable reasons such as a neutral
• The Advisor will advise other trading order allocation system, a different trading
accounts. In addition, the Advisor and its program, or a higher risk level of trading.
principal will trade for their own accounts, However, any such proprietary trading is
including, among other things, in order to subject to the duty of the Advisor to exercise
test a new system and other research and good faith and fairness in all matters
development purposes. These accounts may effecting client accounts.
be traded with the same strategy and • The Advisor does not receive soft dollars
compete with execution of the same trades. from a clearing broker, although it may in the
In addition, the Advisor may have a financial future. Such services or products may
incentive to favor certain accounts because include research reports or analysis,
they pay a higher fee structure. Please note, publications, database software and
however, that the Advisor will attempt to act services, quotation equipment and other
in a fair and reasonable manner in allocating products or services that may enhance the
suitable investment and trading opportunities Advisor’s investment decision making.
among client accounts that it manages, but
FEES OF THE ADVISOR
The Advisor receives an annual commodity positions, the settlement price determined
management fee of 5%, calculated and paid in 4 by the exchanges on which such positions are
quarterly installments equal to 1.25% of the account’s maintained and, with respect to United States
Net Asset Value as of the close of business on the Treasury Bills, their cost plus accrued interest. If
last day of each Quarterly Period. In addition, the there are no trades on the date of the calculation due
Advisor will charge its clients an accounting fee of to the operation of the daily price fluctuation limits or
$20 per account per month. due to closing of the exchange on which positions are
Net Asset Value shall mean an account's maintained, the contract will be valued at the
total assets (including notional funds, if any) less total settlement price as determined by the exchange on
liabilities. Net Asset Value will include the sum of all the first subsequent day on which the position could
cash and any unrealized profit or loss on securities be liquidated.
and open commodity positions. All securities and Fees will be billed by the Advisor, with the
open commodity positions shall be valued at their billing sent directly to your broker to be paid out of
then market value which means, with respect to open your account. You are required to execute a Fee
Axiom Research and Trading, Inc. Page 13
Payment Authorization directing your broker to deduct have not been paid since the commencement of the
the fees from your account upon presentation to the Annual Period in which the agreement is terminated.
broker by the Advisor of a certificate setting forth the For example, assume that the Advisor and a
amount of the fees payable to the Advisor. client enter into an advisory relationship on April 10.
Management fee paid to the Advisor will be The initial 12 month Annual Period would commence
calculated based partly on the notional funds, if any. on April 10 and run through March 30 of the following
As a result, the use of notional funds will increase the year and the Quarterly Periods would end on the last
amount of management fees that the Advisor will day of June, September, December and March. If the
receive for trading the same amount of cash or actual advisory agreement terminated on August 6 and the
funds. For example, if the Advisor receives a 5% account’s Net Asset Value was $100,000, the client
management fee and an account is fully funded, then would owe a management fee equal to $100,000
the Advisor will receive a management fee of 5% times 1.25% times 3 (the number of quarterly
based on the actual funds in the account. If the installments that have not been paid since the
account, however, is funded at only 50%, i.e., one commencement of the Annual Period in which the
half actual funds and one half notional funds, the 5% agreement is terminated).
management fee, expressed as a percentage of Likewise, if a withdrawal of assets or funds is
actual funds, would be 10%. made by the Client from the Account, management
If either party terminates the advisory fees payable to the Advisor will be calculated as if the
agreement, management fees payable to the Advisor date of withdrawal were the end of the Quarterly
will be calculated as if the date of termination were Period and shall be equal to 1.25% times the amount
the end of the Quarterly Period and shall be equal to being withdrawn and that number shall be multiplied
1.25% times the account’s Net Asset Value as of the by the number of quarterly installments that have not
date of termination and that number shall be been paid since the commencement of the Annual
multiplied by the number of quarterly installments that Period in which the withdrawal is made.
Clients of the Advisor are required to use Optimus is a guaranteed introducing broker
Optimus Trading Group LLC ("Optimus") as their of Vision Financial Markets LLC (“Vision”). Generally,
introducing broker and Vision Financial Markets LLC a registered introducing broker must maintain a
as their futures commission merchant. certain level of net capital pursuant to the regulations
of the CFTC. The CFTC regulations provide,
Optimus is registered with the CFTC as an
however, that the minimum net capital requirements
introducing broker. There has not been a material
do not apply to an introducing broker which elects to
administrative, civil, or criminal action--whether
enter into a guarantee agreement with a futures
pending, on appeal or concluded--involving Optimus
commission merchant registered under the
or its principal within the five years preceding the date
Commodity Exchange Act. Optimus has entered into
of this document.
a guarantee agreement with Vision which, among
The Advisor will pay 25% of the fees it other things, relieves Optimus from having to maintain
receives from client accounts to Optimus. As a result, any net capital pursuant to the CFTC regulations. As
Optimus may have an incentive to introduce a client a result, Optimus has only minimal capital.
account based on the payments they will receive from
Axiom Research and Trading, Inc. Page 14
OPENING AN ACCOUNT
You must read, sign and return to the in order to service the Advisor and its clients. Also,
Advisor its Commodity Advisory Agreement and the the Advisor does not disclose any nonpublic
Fee Payment Authorization. You may also sign and information about its clients or former clients to third
return to the Advisor the Arbitration Agreement, parties except as permitted by law, such as lawyers,
although you are not required to sign such agreement accountants, auditors and regulators.
in order to retain the services of the Advisor. You
The minimum initial investment for an
must also complete the standard package of
account managed by the Advisor is recommended to
customer account agreements of your broker.
be at least $50,000, although the Advisor may, in
In order to invest with the Advisor, clients certain circumstances, agree to manage a smaller
must provide it with personal information, such as amount.
their occupation, income level and net worth. The
The Advisor strongly recommends that you
Advisor collects this information so that it can meet its
view a managed futures trading program as a long
obligations under certain laws and regulations. It is
term investment and, accordingly, should not
the Advisor's policy and practice to respect its clients'
withdraw capital for at least one year.
privacy and to protect all personal information
entrusted to it. The Advisor’s employees will only
have access to such information if they need to know
PAST PERFORMANCE OF THE AXIOM S&P STOCK INDEX PROGRAM
PLEASE NOTE THAT THE QUAD PROGRAM calculations for that period. There are different, and
IS A NEW TRADING PROGRAM AND HAS NO CLIENT entirely defensible, means by which the pro forma
PERFORMANCE HISTORY. adjustments could have been made.
The Advisor has in the past managed client Please note that Rob Mitchell, the principal
accounts but these accounts were not traded of the Advisor, has managed other client accounts but
pursuant to its Quad Program. Instead, these such performance is more than 5 years old.
accounts were traded pursuant to its Axiom S&P
Stock Index Program under CFTC Regulation 4.7, All customer trading accounts will generally
which provides an exemption for “qualified eligible be traded in parallel. However, all accounts managed
persons” or QEPs. Such performance is presented in by the Advisor may not have parallel results. Results
Table I. among accounts will vary depending on such factors
as the size of the accounts, commission rates and
No representation is being made that the advisory fees charged the accounts, the date the
Quad Program will or is likely to achieve profits or accounts started trading and the order in which trades
incur losses similar to those shown in Table I for the for the various accounts were entered. The size of an
Axiom S&P Stock Index Program. account may affect the relative size of positions
The Advisor has adjusted the figures set taken, the degree of diversification and the particular
forth in Table I to reflect a 5% annual management commodities traded.
fee paid in four quarterly installments. These pro PAST PERFORMANCE IS NOT
forma calculations are made on a month-to-month NECESSARILY INDICATIVE OF FUTURE
basis, i.e., the pro forma adjustments in one month do RESULTS.
not affect the actual figures which are used in the
following month for making similar pro forma
Axiom Research and Trading, Inc. Page 15
Axiom Research and Trading, Inc.
Axiom S&P Stock Index Program
Name of Advisor Axiom Research and Trading, Inc.
Name of Trading Program Axiom S&P Stock Index Program
Date Advisor Began Directing Client Accounts December 2009
Date Began Directing Client Accounts Pursuant to this Program December 2009
Assets Under Management of the Trading Advisor (Including Notional Funds) $228,043
Assets Allocated to Axiom S&P Stock Index Program (Including Notional Funds) $228,043
Worst Monthly Percentage Draw-Down -6.87% March 2010
Worst Peak-to-Valley Drawdown -8.18% January 2010 to March 2010
Number of Open Accounts 4
Number of Closed Profitable Accounts 0
Range of Lifetime Returns for Closed Profitable Accounts N/A
Number of Closed Unprofitable Accounts 0
Range of Lifetime Returns for Closed Unprofitable Accounts N/A
Rates of Return
Month 2010 2009
Year 15.32% -1.69%
“Draw-Down” means losses experienced by the program over the specified period.
The accompanying footnotes are an integral part of this table.
PAST PERFORMANCE IS NOT NECESSARILY
INDICATIVE OF FUTURE RESULTS
Axiom Research and Trading, Inc. Page 16
Notes to Tables
(1) “Worst Monthly Percentage Draw-Down” (3) The monthly rates are compounded to
means the largest monthly loss experienced by the arrive at the annual rate of return.
program in any calendar month expressed as a
(4) The following matrix allows the
percentage of the total equity in the account and
conversion of the fully funded rates of return included
includes the month and year of such draw-down.
in the table set forth above to the effective rates of
(2) “Worst Peak-to-Valley Draw-Down” return that would have been experienced by a
means the greatest cumulative percentage decline in notionally funded account.
month net asset value due to losses sustained by the
program trading pursuant to the program during which
the initial month-end net asset value is not equal to or
exceeded by a month-end net asset value.
Rates of Return
Based on Various Funding Levels
Rates of Funding Levels
Return 50% 75% 100%
20% 40% 27% 20%
10% 20% 13% 10%
5% 10% 7% 5%
0% 0% 0% 0%
-5% -10% -7% -5%
-10% -20% -13% -10%
-20% -40% -27% -20%
This matrix allows one to convert the range example, a rate of return of -20% for a 100% funded
of monthly rates of return on fully funded accounts account would signify a rate of return of -27% for an
(vertical axis) to corresponding rates of return for account that is 75% funded (50% with cash and 50%
different funding levels (horizontal axis). For with notional funds).
Additional information about the Advisor is firstname.lastname@example.org. You should also
available from it upon request. Inquiries should be consult with your personal tax or financial advisors to
directed to Rob Mitchell, President of the Advisor, at obtain an understanding of the impact of trading
6631 Fiona Place, Carlsbad, CA 92011. His commodity interests on your tax and financial
telephone number is (760) 476-9301 and fax number situations.
is (760) 476-9301. The email address is
Axiom Research and Trading, Inc. Page 17