TARGET MARKET DETERMINATION – SPOT FOREIGN EXCHANGE CONTRACTS

17 December 2021

Tiger Brokers (AU) Pty Limited (“TBAU”) issues spot foreign exchange (“FX”) contracts to its retail clients. Detailed information is available in the TBAU Spot FX Product Disclosure Statement, available on www.tigerbrokers.com.au under Agreements and Disclosures.

In compliance with our obligations under Part 7.8A of the Corporations Act 2001 (Cth), which relates to the product design and distribution obligations (DDO), TBAU has prepared the following target market determination (TMD) relating to the issue of spot FX contracts to our clients.

This TMD is available to the public free of charge.

DDO REQUIREMENT

APPLICATION TO SPOT FX CONTRACTS

Class of retail clients that comprise the target market for this product – s 994B(5)(b)

1. Description of the likely objectives, financial situation and needs of consumers in the target market

Background

Tiger Brokers (AU) Pty Limited (“TBAU”) is an online broker that provides financial product trading services to retail and wholesale clients. We are authorised and regulated by the Australian Securities and Investments Commission (ASIC), with licence number 300767 and business office located at Suite 28.01, 25 Bligh Street Sydney, NSW 2000.

TBAU does not employ any advisers or brokers who manage client accounts. Trades are entered by the client or the client’s self-selected financial representative on a personal computer or mobile device and transmitted over the internet to TBAU for execution on various market centres. All trading in an TBAU client account is self-directed by the client. TBAU client service personnel are specifically prohibited from providing any investment or trading or tax advice to clients.

 The DDO aim to assist Clients to obtain appropriate financial products by requiring product issuers and distributors to have a consumer- centric approach to the design and distribution of financial products.

If you are a retail client, you should refer to the relevant Product Disclosure Statement (PDS) before deciding whether to acquire or continue to hold the relevant product.  You can get a copy of the relevant PDS from our website.

You should not base any decision to trade on the contents of this TMD, and this document is not suitable for the purpose of deciding whether to open an trading account or trade in the financial products offered by TBAU.

Target Market

Clients who satisfy each of the following criteria:

  • Clients above the age of 18;
  • Clients who understands the nature of the products in relation to trading in spot FX contracts; and
  • Clients who could accept the risk of spot FX contracts defined in the TBAU Spot Foreign Exchange PDS.

For those Clients who satisfy the above criteria

Those Clients who satisfy the above criteria and wish to trade in spot FX contracts when repatriating overseas profit or trading proceeds in foreign currencies back to Australia and/or settling payment of securities or derivatives transactions in a foreign currency, including one or more of the following purposes:

  • cash flow certainty
  • exchange protection
  • foreign exchange speculation

Additional details regarding the target market for our products are set out below

Client needs

  • Clients who does not require instant currency exchange settlement and wish to agree to a spot exchange rate within a T+2 settlement timeframe.

Retail clients for whom our products are unsuitable

Our products are generally unsuitable for the following classes of retail clients

  • Clients who are natural persons below the age of 18;
  • Clients who do not wish to accept or have low tolerance to the risk associated with trading spot FX contracts;
  • Clients who have low levels of financial literacy and technological literacy;
  • Clients who reside in a country which restricts or prohibits in trading in spot FX contracts.

2. Description of spot FX contracts (including its key attributes)

Spot FX contracts have the following key attributes:

  • Foreign exchange contracts (which are not settled immediately) with a settlement date that is up to 2 days after the date on which the contract was entered into, are spot contracts. Reference in this TMD to spot contracts or spot FX contracts incorporate value today, value tomorrow and spot FX transactions.
  • TBAU only offers spot FX contracts using spot exchange rates, which is the rate TBAU is quoting at which it will exchange currencies on the  settlement date.
  • Spot FX contracts are synthetic products in which TBAU faces the client in all spot FX contracts it issues.
  • There are two situations in which TBAU issues spot FX contracts to its clients:
    • The spot FX contracts that TBAU is deemed to issue when it (i) undertakes a conversion of currency on the client’s behalf in order to meet the margin or settlement obligations due for the client’s dealing in financial products or (ii) converts the proceeds (if any) upon closing out a position which is in a foreign currency back to Australian dollars (AUD) or another foreign currency. This service is automatic and offered in order to simplify how clients can trade financial products in international financial markets.
    • TBAU facilitates dealings in FX in a range of currencies for its Australian clients including but not limited to AUD, USD, SGD and HKD. For example, TBAU offers its clients the ability to trade Spot FX contracts which convert AUD to USD or USD to AUD; essentially, selling Australian Dollars against buying US Dollars or selling US Dollars against buying Australian Dollars.

3. Explanation of why spot FX contracts, including its key attributes, is likely to be consistent with the likely objectives, financial situation and needs of consumers in the target market

  • Spot FX contracts can be used for a variety of purposes, including hedging, speculation, cash flow certainty, exchange rate protection and generating trading profits, hence consumers with purposes defined in section 1 hereabove will likely be within the target market.
  • Given that spot FX contracts can be used for speculation, some clients trading TBAU issued spot FX contracts will incur losses while others incur profits.

Conditions and restrictions relating to the distribution of this product – s 994B(5)(c)

4. Outline of the conditions and restrictions relating to distribution of spot FX contracts

  • The products are distributed by TBAU and Various third parties who may be involved in the distribution of the products, including various introducing brokers (each a Distributor, and together, the Distributors).
  • TBAU has a high degree of control over the distribution of its spot FX contracts. In particular, TBAU only issues spot FX contracts to clients who directly open accounts with TBAU and personally satisfy all of the target market criteria.
  • All Distributors that wish to distribute TBAU’s spot FX contracts must ensure that the potential client or client introduced is within the target market.
  • TBAU will also seek regular statements and data from Distributors to ensure that the Distributors are complying with the requirement to distribute TBAU’s spot FX contracts only to persons within the target market.

5. Explanation of why these distribution conditions and restrictions will make it more likely that the consumers who acquire the spot FX contracts are in the target market

  • TBAU will use reasonable endeavours to prevent any person that directly opens an TBAU account and who is not within the target market from accessing TBAU issued spot FX contracts.
  • Similarly, TBAU will contractually require that any Distributors that distributes TBAU issued spot FX contracts ensures that they are only distributed to persons that satisfy the target market. TBAU will regularly monitor the performance of distributors in complying with this distribution condition.

Reviews

6. Outline of the events and circumstances that would reasonably indicate to TBAU that the TMD for spot FX contracts is no longer appropriate (i.e. "review triggers" – s 994B(5)(d)

Review Triggers when:

  • There are significant dealings in issuing spot FX contracts, which are not consistent with the target market or this TMD.  This trigger occurs where significant distribution is occurring outside the target market, and does not refer to any one particular dealing in spot FX Contracts.
  • Distributor has reported a large volume of complaints related to spot FX contracts.
  • TBAU has received a large volume of complaints in relation to spot FX contracts, indicating that the nature and risks of spot FX contracts are not well understood.
  • Significant compensation paid out in relation to spot FX contracts.
  • TBAU has detected significant issues with the distribution of spot FX contracts through monitoring of our day-today activities, or the monitoring and supervision of our Distributors.

7. The period of time between the start of the day this TMD is made and the day that the first periodic review of the TMD will conclude – s 994B(5)(e)

The first periodic review of this TMD will occur in December 2022.

8. The period of time between the conclusion of a periodic review of the TMD and the start of the next periodic review – s 994B(5)(f)

TBAU will review the appropriateness of its target market on an annual basis

Reporting period for reporting information about the number of complaints about the product – s 994B(5)(g)

9. The reporting period in which the distributors of TBAU's financial products are required to provide information about the number of complaints received about the product

TBAU will require that Distributors report information about the number and nature of complaints received about the product and whether any persons not in the target market were distributed TBAU issued spot FX contracts, among other things, on a bi-annual basis.

Information Sharing

10. Outline of the kinds of information that TBAU will require from distributors to promptly identify that the TMD for spot FX contracts is no longer appropriate – s 994B(5)(h)

In order to promptly determine if the target market continues to be appropriate, TBAU will require that the Distributor provide TBAU with the following information on a bi-annual basis:

  • The number and nature of complaints about spot FX contracts;
  • Client feedback about the spot FX contract product and / or the target market;
  • Requests for information that the Distributor has received from clients in relation to the suitability of the product.

11. The distributors that will be required to provide the information specified above

– s 994B(5)(h)(i)

TBAU will require all of the above data from all Distributors. No party may engage in the distribution of TBAU’s spot FX contracts unless they have entered into a service level agreement with us.

12. The reporting period for the relevant distributors to provide the information specified above – s 994B(5)(h)(ii)

TBAU will require the information specified above on a bi-annual basis.