PRODUCT DISCLOSURE STATEMENT
Tiger Brokers (AU) Pty Limited
ABN 12 007 268 386
SPOT FOREIGN EXCHANGE
Date of Issue: 17 December 2021
1. GENERAL INTRODUCTION 4
1.1 Important Information 4
1.2 Purpose of this PDS 4
1.3 About Tiger Brokers (AU) Pty Limited 5
2. KEY FEATURES OF FOREIGN EXCHANGE 6
2.1 What is an FX contract? 6
2.2 What services does TBAU offer in respect of FX contracts? 6
2.3 What currencies are offered 6
2.4 Uses of FX Contracts 7
2.5 Spot exchange rates 7
2.6 How does an FX Contract work? 7
2.7 Margin requirements 8
3. SIGNIFICANT RISKS OF FX CONTRACTS 8
3.1 TBAU does not provide live quote prices at which it may enter into a FX contract with you 8
3.2 Opportunity loss 8
3.3 Market risk 9
3.4 Credit risk 9
3.5 Operational risk 9
3.6 Legal, tax and regulatory risks 9
3.7 The price at which TBAU can execute a FX contract may not be the best available price 9
3.8 Cooling off period 10
3.9 Other risks 10
4. SIGNIFICANT BENEFITS OF FX CONTRACTS 10
5. TRADING FX WITH TBAU 11
5.1 How to instruct TBAU to deal in FX Contracts 11
5.2 Nature of Foreign Exchange Transaction between Customer and TBAU 12
6. FEES AND CHARGES 12
6.1 Commissions 12
6.2 Other fees and charges 12
7. CLIENT MONEY 12
8. DISPUTE RESOLUTION SYSTEM 13
9. TAXATION IMPLICATIONS 13
9.1 Goods and Services Tax(GST) 13
9.2 US Foreign Account Tax Compliance Act (“FATCA”) 13
1. GENERAL INTRODUCTION
1.1 Important Information
The information in this Product Disclosure Statement (PDS) does not take into account your personal objectives, financial situation and needs. Before instructing Tiger Brokers (AU) Pty Limited to deal in a foreign exchange contract on your behalf, you should read this PDS and be satisfied that such dealing is appropriate in view of your objectives, financial situation and needs.
We recommend that you consult your financial adviser before trading in foreign exchange.
1.2 Purpose of this PDS
This PDS has been prepared by Tiger Brokers (AU) Pty Limited (TBAU), the issuer of the foreign exchange (FX) contracts offered under this PDS. TBAU’s contact details are set out at section 1.3 below. When we use terms ‘we’, ‘us’ or ‘our’ in this PDS, the reference is to TBAU.
This PDS sets out the significant features of FX contracts, including the risks, benefits and costs involved in trading these products. This PDS is designed to assist you in deciding whether the FX contracts offered under this PDS are appropriate for your needs and to assist you in comparing it with other financial products you may be considering. This PDS is an important document and we recommend you contact us should you have any questions.
Although the information in this PDS is up to date as at the date of publication, it is subject to change from time to time. Where such information is not materially adverse, we may provide updates on our website at www.tigerbrokers.com.au under Agreements and Disclosure. A paper copy is also available on request at no charge to you.
We may also be required to issue a new PDS or a supplementary PDS as a result of certain changes, in particular where the changes are materially adverse to retail clients. Any supplementary PDS will be posted on our website at www.tigerbrokers.com.au. A paper copy will also available on request at no charge to you.
The offer of FX Contracts under this PDS is only available to persons receiving this PDS (electronically or otherwise) in Australia. This PDS does not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation.
If you require any legal, taxation or other advice we strongly recommend that you seek such advice prior to opening an account with TBAU and or trading the Spot FX contract described in this PDS.
When we use terms ‘we’, ‘us’ or ‘our’ in this PDS, the reference is to TBAU.
1.3 About Tiger Brokers (AU) Pty Limited
(a) The issuer – Tiger Brokers (AU) Pty Limited
TBAU is the issuer of the FX contracts offered under this PDS.
TBAU holds an Australian Financial services License, number 300767, which authorises TBAU to deal in FX contracts.
Tiger Brokers (AU) Pty Limited is a subsidiary of UP Fintech Holding Limited, known as "Tiger Brokers" (NASDAQ: TIGR), a leading online brokerage firm focusing on global investors. Founded in 2014, Tiger Brokers became one of the major players dealing with US equity trading, among trading platforms catered to global investors in less than two years.
(b) Contact details
Our contact details are below:
Tiger Brokers (AU) Pty Limited
Suite 28.01, 25 Bligh Street
Sydney, NSW 2000
+61 02 9169 6999
2. KEY FEATURES OF FOREIGN EXCHANGE
2.1 What is an FX contract?
A “foreign exchange contract” is defined in s761A of the Corporations Act 2001 (Cth) as a contract to (a) buy or sell currency; or (b) to exchange one currency for another currency.
In general, a FX contract allows you to exchange one currency for another at an agreed exchange rate. Exchange rates may be quoted as value today exchange rates, value tomorrow exchange rates, spot exchange rates or forward exchange rates.
A value today exchange rate applies to an FX contract with a settlement date that is on the same date as the trade date. This type of FX transaction is commonly referred to as Value Today.
A value tomorrow exchange rate applies to an FX contract with a settlement date that is 1 business day after the trade date. This type of FX transaction is commonly referred to as Value Tomorrow.
A spot exchange rate applies to an FX contract with a settlement date that is 2 business days after the trade date. This type of FX transaction is commonly referred to as Spot.
A forward exchange rate applies to an FX contract with a settlement date that is more than 2 business days after the trade date. This type of FX transaction is commonly referred to as a Forward.
Reference in this PDS to Spot FX contracts or FX contracts incorporate value today, value tomorrow and spot FX transactions.
2.2 What services does TBAU offer in respect of FX contracts?
TBAU’s Australian clients may only instruct TBAU to arrange an FX transaction for one of two purposes: either clients may instruct TBAU to arrange for the payment of their securities or derivatives transactions in a foreign currency or to convert a foreign currency balance into Australian dollars (AUD) or another foreign currency. These types of FX transactions settle within 2 business days after trade date (e.g. they are Spot FX contracts).
TBAU acts as riskless principal in these transactions.
2.3 What currencies are offered
Subject to 2.2, TBAU facilitates dealings in FX in a range of currencies for its Australian clients including but not limited to the following:
UNITED STATES DOLLARS
NEW ZEALAND DOLLARS
HONG KONG DOLLARS
2.4 Uses of FX Contracts
TBAU does not make a market in FX contracts, and may only deal in these financial products on your behalf (refer to 2.6 below). This may limit how you may use FX contracts offered under this PDS. The FX contracts offered under this PDS may still be useful for the purposes of or in relation to:
a) Repatriation of overseas profit or interest in foreign currencies back to Australia;
b) Settlement payment of securities or derivatives transactions in a foreign currency; and
c) Foreign currency investing
2.5 Spot exchange rates
When TBAU arranges a dealing in an FX contract, TBAU determines the spot exchange rates taking into account a number of factors, including but not limited to the following:
(a) the market spot exchange rate or rates available to it;
(b) a volatility factor;
(c) the transaction amount; and
(d) an allowance for TBAU's costs.
2.6 How does an FX Contract work?
In the following example assume only that you maintain a long AUD balance, have a zero USD balance and you are settling a USD securities transaction.
If you instruct TBAU to buy USD$1,000,000.00 worth of stock listed in the US and your order trades, you will owe USD $1,000,000.00 as a settlement obligation. If you do not have a sufficient available USD required to settle the transaction, you will be taken to have instructed TBAU to enter into a FX contract with you in order to convert an amount of the long AUD balance into USD to make this payment at the same time as when you execute an order to buy the US securities.
TBAU determines the AUD amount required to settle the trade by dividing the required USD amount by the AUD/USD spot exchange rate or rates which are available to it. In this example assume that the FX spot is AUD/USD0.9560, this would mean you would be that instructing TBAU to execute a spot FX contract for AUD$1,046,025.10 (i.e. USD$1,000,000.00 ÷ AUD/USD0.9560)).
By entering into this FX Contract with TBAU, on settlement date, you will be buying USD$1,000,000.00 from TBAU in exchange for AUD$1,046,025.10. TBAU will use the USD balance to settle your securities trade.
Examples are used for illustrative purposes only. The actual spot exchange rate will depend on the actual market rates and on the date of calculation. The above example does not include transaction costs. For a discussion on transaction costs see section 6 of this PDS.
2.7 Margin requirements
TBAU currently only offers cash account. As such, you will not be able to execute a transaction, if doing so would cause your account to go into deficit. For an FX contract this means that you must have the full payment required for the FX contract in advance.
This means TBAU will not accept an order from you to enter into a FX contract (for example to purchase a financial product denominated in a currency in which you have a zero balance or to repatriate foreign currencies back in AUD) if you do not have the full amount required for that FX contract in cleared funds in the relevant currency.
3. SIGNIFICANT RISKS OF FX CONTRACTS
Starting from the time at which you enter an FX Contract with TBAU, risk factors may lead to changes in financial outcomes that are unfavourable to you.
Monitoring of any risks associated with this product is your responsibility (subject to the responsibility of TBAU for its own operational systems under "Operational risk" – see section 3.5).
Prior to entering into FX Contracts, you should carefully consider the following risk factors as well as other information either contained in this PDS or of which you are otherwise aware and consider whether entering into FX Contract is suitable for you, given your individual objective and circumstances. We recommend that you obtain independent advice on the suitability of trading FX Contract for you.
3.1 TBAU does not provide live quote prices at which it may enter into a FX contract with you
TBAU is not licensed to, and does not, quote prices for the FX currencies pairs at which it will enter into an FX Contract with you. This means that when you instruct TBAU to enter into a FX contract with you, you will not know the exact spot rate at which you will be exchanging currency under the terms of the contract. You will only be able to confirm the FX spot rate at which the FX contract was executed when TBAU confirms the execution of the contract. TBAU endeavours to achieve the best available prices for you and generally the FX contract spot prices will be close to those available in the interbank market, but this is not guaranteed (refer below).
3.2 Opportunity loss
You will forgo any benefit of a favourable FX movement between the time you enter into an FX Contract and the settlement date.
The rate achieved with an FX Contract may not be as favourable as the rate you could have achieved if you had not entered into an FX Contract at all.
3.3 Market risk
Markets can be volatile and are subject to a host of factors, including economic conditions, government regulations, legislations, market sentiment, local and international political events and environmental and technological issues.
Market risk is the risk that the value of your FX transaction will change as a result of a movement in the underlying market price. Exchange rates between foreign currencies can change rapidly due to a wide range of economic, political and other conditions, exposing you to risk of exchange rate losses in addition to the inherent risk of loss from trading the underlying financial product. If you deposit funds in a currency to trade products denominated in a different currency, your gain or loss on the underlying investment therefore may be affected by changes in the exchange rate between the currencies.
3.4 Credit risk
Credit risk (also known as counterparty risk) is common to all financial markets products that you may hold with TBAU. You are reliant on TBAU’s ability to meet its obligations to you under the terms of each FX transaction.
3.5 Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, systems or external events.
You are reliant on the ability of TBAU to price and settle your transaction in a timely and accurate manner. TBAU in turn is dependent on the reliability of its own operational processes that include communications, computers and computer networks. Disruptions in TBAU's processes may lead to delay in the execution and settlement of your transaction. Such disruptions may result in contractual outcomes that are less favourable to you.
However, once you have entered into a transaction, the management of risks associated with its own operational processes is the responsibility of TBAU.
3.6 Legal, tax and regulatory risks
Legal, tax and regulatory changes could occur during the term of an FX Contract, which may adversely affect the FX transaction. You should seek independent tax advice before entering into an FX transaction.
3.7 The price at which TBAU can execute a FX contract may not be the best available price
TBAU has access to FX prices supplied by FX Liquidity Providers. Nonetheless, the prices quoted to TBAU are subject to changing market conditions and therefore quote prices and size can and do change rapidly. In addition, TBAU’s other clients may place orders for FX contracts before you do and which may therefore trade ahead of your order.
Further, TBAU always attempts to obtain the best price for your orders, but because of the inherent possibility of transmission delays between and among yourself, TBAU and FX Liquidity Providers, the fact that prices and orders sizes do change rapidly, and the fact that TBAU's FX Liquidity Providers will try to earn a spread profit on transactions with TBAU (differential between the bid and ask prices quoted for various currencies).
Although TBAU attempts to obtain the best price for your orders on Spot FX contracts, because of the inherent possibility of transmission delays between and among yourself, TBAU and FX Providers, or other technical issues, execution prices may be worse than the quotes displayed on TBAU’s platform.
To execute your order, TBAU engages in back-to-back transactions with one or more counterparties. These counterparties on occasion may cancel or adjust FX trades with us in the event of market or technical problems. In these cases we may have to cancel or adjust Spot FX contracts that you have executed.
TBAU cannot guarantee that the execution price for any particular FX contract will reflect the best available FX rate available at any given time.
3.8 Cooling off period
There are no cooling-off arrangements for FX Contracts.
3.9 Other risks
There are other risks that relate to trading in FX, foreign securities, and options transactions involve exposure to a combination of the following risk factors: market risk, credit risk, settlement risk, liquidity risk, operational risk and legal risk. For example, there can be serious market disruptions if economic or political or other unforeseen events locally or overseas affect the market. Also, the settlement date of FX trades can vary due to time zone differences and bank holidays. When trading across FX markets, this may necessitate borrowing funds to settle FX trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets. The FX Liquidity Provider (as counterparties) may, on occasion, cancel or adjust FX trades with us in the event of market or technical problems and in these cases we may have to cancel or adjust FX Contracts that you have executed. In addition to these types of risk there may be other factors such as accounting and tax treatment issues that you should consider.
4. SIGNIFICANT BENEFITS OF FX CONTRACTS
The benefits of entering into FX Contracts will depend on how it satisfies your risk management strategy and financial circumstances. Various uses of FX Contracts were discussed at section 2.4 of this PDS.
The benefits of an FX Contract include:
(a) Provides cash flow certainty – FX Contracts allow you to lock in an exchange rate for the purchase or sale of foreign currency amounts on a certain date, eliminating exchange rate uncertainty.
(b) Provides exchange rate protection – FX Contracts can help provide you with protection against unfavourable FX movements between the time you enter into an FX Contract and settlement date.
5. TRADING FX WITH TBAU
5.1 How to instruct TBAU to deal in FX Contracts
You may instruct TBAU to deal in a FX Contract on your behalf through the Tiger Trade Trading platform (Tiger Trade platform). TBAU recommends that prior to instructing TBAU to deal in real FX contracts, you open a demo trading account to conduct simulated trading to become familiar with the platform. When trading you should keep aware of all risks and benefits of trading FX Contracts (refer to sections 3 and 4).
The following are examples of how you may enter into an FX contract with TBAU.
TBAU is an online-only broker and customers submit orders to TBAU through Tiger Trade platform by logging in through a secure username and password. You acknowledge that TBAU does not know whether someone entering Orders with your user name/password is you. Unless TBAU is notified and agrees, you will not allow anyone to access your Account. You are responsible for the confidentiality and use of your user name/password and agree to report any theft/loss of such user name/password, or any unauthorised access to your Account, immediately by telephone or email to TBAU. You remain responsible for all Transactions entered using your user name/password. You acknowledge and agree that any communication transmitted by you or on your behalf is made at your risk and you authorise TBAU to rely and act on, and treat as fully authorised and binding on you, any communication that we reasonably believe to have been transmitted by you or on your behalf by any agent who we reasonably believe to have been duly authorised by you.
If you instruct TBAU to deal in financial product which is denominated in a foreign currency (e.g. USD), and you do not currently hold sufficient USD to meet the settlement obligations of that dealing, you will be taken to have instructed TBAU to enter into an FX contract with you in order to meet those settlement obligations (refer to section 2.3 above for an example).
You may submit an order to enter into an FX contract or contract(s) to convert balances in currencies other than AUD back into AUD.
The execution of an FX contract is subject to you having sufficient funds in your account. Similarly, the execution of certain dealings in financial products denominated in other currencies will also be subject to having sufficient balances in other currencies to cover the costs of such dealing.
Subject to the terms and conditions of the FX Contract, on the settlement date the currencies in the currency pair are exchanged. You must ensure that you have sufficient funds in your Account to settle the FX Contract and you will generally not be able to withdraw any funds from your account which are otherwise required to settle a dealing in a financial product or pay TBAU’s commission.
Please note that the above examples are used for illustrative purposes only and are not a recommendation or solicitation to engage in any form of FX trading. Commissions, if any, could be payable on FX contracts – please refer to section 6 of this PDS.
5.2 Nature of Foreign Exchange Transaction between Customer and TBAU
When you enter into an FX Contract on TBAU’s platform, TBAU, as the counterparty to your trade, may effectuate that transaction by entering into an offsetting transaction with one of TBAU's affiliates, or with a third party currency exchange provider(Collectively, TBAU's "FX Liquidity Providers"). In such transactions, TBAU is the principal to the contract with you as issuer. The FX Provider is not acting in the capacity of a financial adviser or fiduciary to you or to TBAU, but rather, is taking the other side of TBAU's offsetting trade in an arm's length contractual transaction. You should be aware that the FX Liquidity Provider may from time to time have substantial positions in, and may make a market or otherwise buy or sell instruments similar or economically related to, the FX Contracts entered into by you. TBAU's FX Liquidity Providers may also undertake proprietary trading activities, including hedging transactions related to the initiation or termination of FX Contracts with TBAU, which may adversely affect the market price or other factors underlying the FX Contract entered into by you and consequently, the value of such transaction.
6. FEES AND CHARGES
The following is a summary of the fees and charges associated with FX transactions with TBAU.
TBAU acts as riskless principal in these transactions.
When you enter into a FX contract with us, we may charge a fee in basis points(bps) that is included in the exchange rate quoted to you. For more details, visit https://www.tigerbrokers.com.au/commissions/fees/stocks_etf#us_stocks.
You should read the important information about the fees before making a decision. Go to https://www.tigerbrokers.com.au/commissions/fees/stocks_etf#us_stocks for more details. The material relating to the fees may change between the time when you read this PDS and the day when you acquire the product.
6.2 Other fees and charges
There may be other fees such as (but not limited to) platform fees and transaction fees that may apply. For more details, visit https://www.tigerbrokers.com.au/commissions/fees/stocks_etf#us_stocks and our Financial Services Guide.
You should read the important information about the fees before making a decision. Go to https://www.tigerbrokers.com.au/commissions/fees/stocks_etf#us_stocks and Financial Services Guide for more details. The material relating to the fees may change between the time when you read this PDS and the day when you acquire the product.
7. CLIENT MONEY
TBAU must deal with any money which you pay or give to TBAU, or which is otherwise received by TBAU for the Services provided by TBAU, in accordance with the Corporations Act and Applicable Laws. For instance, TBAU may be required to pay these monies in a client’s segregated account or into a trust account which complies with the requirements of the Corporations Act. You acknowledge that your monies and the monies of other clients of TBAU may be combined and deposited by TBAU in a client’s segregated account or a trust account. You also acknowledge that all monies credited to a client’s segregated account maintained by TBAU may be used by TBAU to meet the default of any other clients of TBAU.
You authorise TBAU to withdraw any or all monies to which you are otherwise entitled in any clients' segregated account or trust account maintained by TBAU to meet any liability, obligation or other Loss which you owe to TBAU.
You agree that TBAU is entitled to all interest earned on monies credited to a clients' segregated account or trust account unless you and TBAU have otherwise agreed in writing.
Please refer to Client Agreement for more details.
8. DISPUTE RESOLUTION SYSTEM
If you have any concerns or complaints about the financial service or financial products provided to you, you could let us know :
By email: email@example.com
By Post: Suite 28.01, 25 Bligh Street Sydney, NSW 2000
By phone: +61 02 9169 6999
If you are not satisfied with how your complaint is responded to by TBAU or 30 days have elapsed, you may direct your concerns in writing to the Australian Financial Complaints Authority (“AFCA”) which is an independent dispute resolution scheme of which TBAU is a member. The dispute resolution scheme offered by AFCA is provided to you free of charge. AFCA details are:
Australian Financial Complaints Authority
GPO Box 3, Melbourne, Victoria 3001
Telephone: 1800 931 678
9. TAXATION IMPLICATIONS
TBAU does not provide tax advice. It is important to note that a client’s tax position when trading FX contracts will depend on your individual circumstances and the trading strategies that you adopt.
We strongly recommend that you seek independent professional tax advice on the tax implications relevant to your circumstances before trading FX contracts.
9.1 Goods and Services Tax (GST)
The purchase and disposal by investors of Spot FX maybe subject to GST.
GST is not payable on brokerage and commissions charged by TBAU, where the FX transaction is to satisfy settlement obligations e.g. purchase of US shares, in a non AUD currency.
GST is payable on brokerage and commission charged by TBAU, where the FX transaction is not related to a settlement obligation e.g. a client decides they want to hold a position in USD.
9.2 INTERNATIONAL TAX INFORMATION SHARING
TBAU has certain obligations to report transaction information to the Australian Tax Office (ATO) on citizens of other countries, including in connection with the US Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS). We may also request you to provide certain information.
We do not provide taxation advice, or advice about FATCA or CRS. You should consult your personal tax adviser if you believe that you are impacted by FATCA or CRS obligations.