Asic Regulatory Guide 227

Benchmark 1: Client Qualification

In accordance with the RG 227 issued by ASIC, all our clients are required to complete
a 5 section questionnaire. The questionnaire will address the following criteria:

  • Previous trading experience in financial products;
  • Understanding of leverage, margins and volatility;
  • Understanding of the key features of the product;
  • Understanding the trading process and relevant technology;
  • Ability to monitor and manage the risks of trading; and
  • Understanding that only risk capital should be traded.

The questionnaire will be in the form of ten (10) multiple choice questions and
the client must answer a minimum of 60% of these correctly before they will be allowed
to trade. Should a client fail at the first attempt, we encourage the client to
practice on a Free Demo account and re-attempt another test after an agreed period
of time.

This questionnaire is sent to the client by email after they have completed the
online application form and have read and understood the “Full Risk Disclaimer”,
“Terms of Business”, “PDS”, “FSG” and “Privacy
Policy”. The client must submit the completed questionnaire to
customer@avatrade.com.au
to be assessed before their account will be opened.

Benchmark 2: Opening Collateral

As stated in Section 18 of the PDS – Funding your Trading Account, Ava only
accepts cleared funds as opening collateral. This could be in the form of bank transfer,
cheque, credit card, paypal, money bookers, net teller or webmoney. Ava DOES NOT
accept CASH deposits. Further, in accordance with the new guidelines issued by ASIC,
the client can use their credit card as opening collateral to a maximum of $ 1,000.00

Benchmark 3: Counterparty Risk – hedging

As detailed in Sections 11 & 13 of the PDS – Key risks of trading Margin
FX contracts and CFDs, Ava maintains that it is the counterparty to the client transactions.
Please note we do not undertake stress testing in relation to unhedged market exposures,
as we fully hedge all transactions with clients, with our parent company who fully
hedges transactions with reputable licensed third party financial services providers.
Ava maintains and applies a policy to manage our exposure to market risk from client
positions. This includes strict risk management controls to monitor and manage (hedge)
our trading exposures on an intraday basis, and includes a process for assessing
our hedging counterparties (to ensure they are of sufficient financial standing,
are licensed by a comparable regulator, and are of sound reputation).

Benchmark 4: Counterparty Risk – Financial Resources

As detailed in Sections 11& 13 of the PDS – Key risks of trading Margin
FX contracts and CFDs, Ava maintains and applies a written policy to ensure the
ongoing maintenance of adequate financial resources. We further maintain a detailed
Risk Register, in which the key risks of our business are addressed and reviewed.
Please note that we have a designated compliance officer who monitors our compliance
with our Australian Financial Services Licence conditions and ASIC RG 166 (financial)
obligations. We also receive review and input from our independent external legal
and accounting advisers. Further, our external independent auditor conducts an audit
at the conclusion of every financial year.

Benchmark 5: Client Money

As detailed in Section 21 of the PDS – Client Monies, all money deposited
into your account by you or by a person acting on your behalf, or which is received
by Ava on your behalf, will be held by Ava in one or more segregated accounts it
must maintain pursuant to the Corporations Act. Please note that individual client
accounts are not separated from each other, but may be co-mingled into one segregated
account (which is separate to Ava’s monies/assets).

Please note that monies provided by you to meet margins, deposits, fees, transaction
settlements, or other costs may be immediately on-forwarded by Ava to our licensed
third party clearing and execution providers, and applied against your margin, exchange,
fee and settlement obligations. Client monies which are held pending future transactions
and payments, are held in our segregated account in accordance with the Corporations
Act. It is important to note that holding your money in one or more segregated accounts
may not afford you absolute protection.

Ava does not accept payments from or make payments to any third parties who are
not listed on the account. In accordance with Australian anti-money laundering regulations,
Ava reports, where necessary, any suspect transactions to AUSTRAC.

Ava is entitled to retain all interest earned on client moneys held in segregated
accounts with a bank or approved deposit-taking institution. The rate of interest
earned by Ava on this account is determined by the provider of the deposit facility.

Benchmark 6: Suspended or Halted underlying assets

As detailed in Section 3 of the PDS – Terms and Conditions and also in the
Terms of Business, an underlying financial product may be placed in a trading halt
on the relevant exchange in various circumstances. Additionally, it may be suspended
or delisted in certain circumstances. Ava may, in its absolute discretion, cancel
your order in respect of a CFD transaction which has not yet been opened, or close
any open CFD, where the underlying financial product is the subject of a trading
halt, suspension or delisting.

If the CFD is over a security which ceases to be quoted on the Exchange or is suspended
from quotation for 5 consecutive Business Days on that exchange, we may elect to
close the CFD, rather than change the margin requirements or re-price the position.
When you place an order for a CFD with us, it is likely that we will place a corresponding
order to purchase or sell the relevant product to hedge our market risk. Ava has
the discretion as to when and if it will accept an order. Without limiting this
discretion, it is likely that we will elect not to accept an order in circumstances
where our corresponding order cannot be filled. Accordingly, Ava may at any time
determine, in our absolute discretion, that we will not permit the entry into CFDs
over one or more underlying financial products.

Benchmark 7: Margin Calls

Ava seeks to provide you with timely and sufficient notice of margin calls, to facilitate
your ability to meet them. However, please note that certain market conditions or
events may trigger extreme volatility, requiring urgent funds to be applied to retain
your open positions. Please note that all margin calls will be communicated to you
via the trading platform and it is your obligation to ensure you are always available
to receive and action such margin calls when you have open positions with us. However,
we reserve our full rights to immediately close positions in relation to which margin
calls have not been met, in order to protect against exposure to further losses
in the positions. We reiterate that trading in CFD and Margin FX products carries
a high level of risk and returns are volatile. The risk of loss in trading can be
substantial, and you can incur losses in excess of the capital you have invested.
Accordingly, you should only trade with risk capital ie money you can afford to
lose, and which is excess to your financial needs/obligations.