Product Disclosure

Statement

isclosure

Australia – June 2021 Statement Associated Foreign Exchange Australia Pty Ltd. ABN: 85 119 392 586 ACN: 119 392 586 AFSL: Number: 305246

Address: Suite D, Level 38, 2 Park Street, Sydney, NSW 2000 Web: www.afex.com Phone: 02 9268 7600 Fax: 02 9268 7698 Email [email protected]

Product Disclosure Statement June 2021

Table of Contents Purpose ...... 3 Changes to this PDS ...... 3 About Us ...... 3 Your Contract with AFEX ...... 4 What Financial Products Do We Offer? ...... 4 Spot Value Contracts ...... 4 Exotic Currency Spot Value and Forward Contracts……………………………………………………………………5 Value Today Contracts...... 5 Value Tomorrow Contracts…………………………………………………………………………………………………………5 Window Forward Contracts ...... 5 Outright Forward Contracts ...... 5 Vanilla Option ...... 6 Window Forward Extra……………………………………………………………………………………………………………….6 Participating Forward ...... …..7 Participating Forward Extra ...... 7 Collar Option ...... 7 Knock-out Forward ...... 8 Knock-out Ratio Forward ...... 8 Ratio Forward ...... 8 Ratio Forward Extra ...... 8 Target Accrual Redemption Forward ...... 9 Additional Products Offered ...... 9 Terms and Conditions ...... 17 Foreign Exchange Option Partial or Full Pre-Delivery ...... 17 Cancellation ...... 17 Client Money...... 18 Significant Benefits of Our Products ...... 18 Significant Risks of Our Products ...... 18 How to Open an Account with AFEX ...... 21 When Payment is Made ...... 21 Cost of Foreign Exchange Transactions ...... 22 Other Ways We Are Remunerated ...... 23 Confirmation of Foreign Exchange Transactions ...... 23 Taxation ...... 23 Consumer Complaints & Disputes ...... 24 Privacy Statement ...... 24 Glossary ...... 25

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Product Disclosure Statement June 2021

visiting the website, or otherwise contacting us Purpose and asking for a free electronic or paper copy. We may make other information about our The purpose of this Product Disclosure products available to you, and that information Statement (PDS) is to provide you with may also be accessed from our website or by information to enable you to make an informed contacting us by phone or email. decision about whether to purchase a financial product from Associated Foreign Exchange About Us Australia Pty Ltd (“AFEX”, “we”, “us”, “our”). AFEX is a wholly owned subsidiary of This PDS sets out the significant features of our Associated Foreign Exchange Holdings, Inc. financial products, including their risks, benefits, headquartered in the United States of America. costs and other related information. The business was established in 1979 to provide a better level of service to firms and This PDS will: individuals with a need for foreign exchange • help you make meaningful comparisons services. with similar products; • help you decide if the product meet your needs; Besides Australia and the United States, the and group has presence in the United Kingdom, the • explain the rights, terms, conditions, and Channel Islands, Ireland, Spain, Sweden, obligations as it relates to each product. Switzerland, Italy, Singapore, and Canada. We have established trading relationships in over The PDS is an important document and we 40 countries and cultivated a diverse client recommend that you read it carefully before base representing every industry. acquiring the financial product, and then keep it in a safe place. AFEX is the issuer of the products described in this PDS. You should consider this PDS before making a decision to acquire or continue to Warning: hold any of the products described in it. Trading in foreign exchange and foreign exchange derivative products involves the If you become a client, you will be assigned a potential for gain as well as the risk of loss. In dedicated Relationship Manager. That person some cases, that loss may exceed the amount will be your primary contact point and will help of money you commit to a transaction. you use our products and services. Movements in the price of foreign exchange rates are influenced by a variety of factors many of which are unpredictable. AFEX is unable to guarantee a maximum loss that you may suffer from trading. You must not use any products described in this PDS unless you have a comprehensive understanding how they work, including the risks and the costs involved.

Changes to this PDS

Information in this PDS that is not materially adverse to users of our products is subject to change and may be updated via our company website. You can access that information by

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Product Disclosure Statement June 2021

Your Contract with AFEX Foreign Exchange Option Contracts:

When you acquire a product from us you are • Vanilla Option(page 6) entering into a contract with AFEX in relation to • Window Forward Extra (page 6) the product. That contract is made up of: • Participating Forward (page 7) • Participating Forward Extra (page 7) • the relevant application form; • Collar Option (page 7) • the description of the products in this PDS; • Knock-Out Forward (page 8) • the terms and conditions provided to you (this • Knock-Out Ratio Forward (page 8) is usually part of the account application form, • Ratio Forward (page 8) but may include extra documents); and • Ratio Forward Extra (page 8) • any additional documents or • Target Accrual Redemption Forward (page 9) correspondence relating to one or more • Additional Products Offered (page 9) contracts with us. Each of the above products is explained in this The application forms, our standard terms and PDS. You should refer to the glossary at the end of conditions and any additional documents or this PDS for an explanation of specific terms. The correspondence relating to one or more contracts examples in this PDS are for illustrative purposes with us are separate documents to this PDS. The only and do not reflect actual market conditions. relevant application form for you will depend on whether you are using our services in your own Additional products follow this section. capacity (a personal account application form) or Spot Value Contracts on behalf of a business (a business account application form). The terms and conditions and Spot Value Contracts exchange one currency for description of fees and products within those another at a specified and agreed Foreign documents forms part of this PDS. A copy of those Exchange Rate (the Spot Exchange Rate) two forms is available upon your request, at no charge, business days after the Trade Date (Spot Value by contacting us using the details on the cover Date). page of this PDS. To the extent of any Spot Value Contract Example inconsistency, the terms of this PDS prevail over any other terms and conditions. You are an Australian-based importer and need to pay for goods valued USD 100,000 in two days None of our products has a cooling off period. using AUD. AFEX quotes you a spot exchange rate (the contract rate) of 0.8500. Acceptance What Financial Products do of this quote will create the Spot Value Contract between you and AFEX.

we offer? The AUD equivalent is USD 100,000 ÷ AUD/USD 0.8500 = AUD 117,647.06. AFEX offers the following products that help you transfer currency, exchange currency, and manage Before 3pm AEST/AEDT of the Spot Value Date, currency risks: you will send AFEX the AUD to settle your contract so that AFEX can deliver the USD on the Foreign Exchange Products: Spot Value Date. • Spot Value Contracts (page 4) By entering into a Spot Value Contract, you have • Exotic Currency Spot Value Contracts / removed the uncertainty of exchange rate Forward Contracts (page 5) movements over the next two business days. In Foreign Exchange Derivative Products: exchange for this exchange rate certainty you have • Value Today Contracts (page 5) lost the opportunity to take advantage of any • Value Tomorrow Contracts (page 5) favourable exchange rate movements between the Trade Date and the Spot Value Date as you have • Window Forward Contracts (page 5) locked in the exchange rate at the time of booking. • Outright Forward Contracts (page 5)

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Product Disclosure Statement June 2021

The exchange rates quoted for Value Dates are determined by adjusting the Spot Exchange Rate Exotic Currency by Forward Points. You will be informed at the time of booking by By entering into a Value Today Contract you have your dedicated Relationship Manager whether the removed the uncertainty of exchange rate currency you are buying is an Exotic Currency. movements for the day. In exchange for this exchange rate certainty you have lost the Spot Value Contracts opportunity to take advantage of any favourable If you intend to purchase an Exotic Currency Spot exchange rate movements from the time the Value Contract, you are only allowed to book for contract is executed. delivery on the Spot Value Date and need to make Value Tomorrow Contracts payment for this purchase on or before 3pm AEST/AEDT of the Trade Date. Failure to do so may Value Tomorrow Contracts exchange one currency result in the Exotic Currency you had purchased for another at a specified and agreed Foreign being sold back and the resulting loss (if any) being Exchange Rate for a Value Date one business day charged to you. after the Trade Date. They are not available for Exotic Currencies. Forward Contracts The exchange rates quoted for Value Dates are If you intend to purchase an Exotic Currency for a determined by adjusting the Spot Exchange Rate value date later than the Spot Value Date, you will by Forward Points. be entering into an Exotic Currency Forward Contract. By entering into a Value Tomorrow Contract you have removed the uncertainty of exchange rate It is your responsibility to provide correct and movements over the next business day. In complete bank instructions prior to the trade. The exchange for this exchange rate certainty you have trade may take place only upon approval of the lost the opportunity to take advantage of any bank instructions by AFEX. favourable exchange rate movements between the By entering into an Exotic Currency Spot or Trade Date and the Value Date. Forward Contract, you have removed the Window Forward Contracts uncertainty of exchange rate movements. In exchange for this exchange rate certainty you have Window Forward Contracts exchange one currency lost the opportunity to take advantage of any for another at a specified and agreed Foreign favourable exchange rate movements between the Exchange Rate for a Value Date between three Trade Date and the Value Date. business days and an agreed point in time after the Trade Date and allow you to access your foreign In addition, the differences between the bid and currency at any time within the Window Period. ask prices for exotic currencies tend to be significantly wider compared to the major The exchange rates quoted for Value Dates are currencies. Due to its illiquid nature and lack of determined by adjusting the Spot Exchange Rate inherent price stability, there is heightened by Forward Points. volatility associated with exotic currencies , which By entering into a Window Forward Contract, you may pose a significant risk to any trading entity. have removed the uncertainty of exchange rate Market volatility can be higher by a margin of movements until the settlement of the contract. In several hundred percent, depending on exchange for this exchange rate certainty you have socioeconomic and political conditions or the lost the opportunity to take advantage of any prevalent investment climate in the respective favourable exchange rate movements between the jurisdiction. If a transaction is sold back to the Trade Date and the Value Date. In addition, with a currency market, the probability for substantial Window Forward Contract, you may utilize any losses is significantly increased. portion of the currency purchased at any time up Value Today Contracts to the Value Date of the contract, once that currency has been paid for. Value Today Contracts exchange one currency for another at a specified and agreed Foreign Outright Forward Contracts Exchange Rate for a Value Date the same day as Outright Forward Contracts exchange one the Trade Date. They are not available for Exotic currency for another at a specified and agreed Currencies.

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Product Disclosure Statement June 2021

Foreign Exchange Rate for a Value Date adverse movement in a Spot Rate, and allow you between three business days and an agreed to achieve a better rate if the Spot Market point-in-time Trade Date and have a fixed future subsequently moves in your favour. This is a date as the Value Date. premium option structure, meaning there is a non- refundable upfront cost. This Vanilla Option The exchange rates quoted for settlement dates ensures that you won’t receive a rate below the different from the spot value contract are Budget/Strike Rate. If the AUDUSD Spot Rate is determined by adjusting the Spot Exchange Rate above the Strike Rate at expiry, you have the right by Forward Points. to trade at the prevailing Spot Rate. By entering into an Outright Forward Contract, you Risks have removed the uncertainty of exchange rate movements over the next business day. In • An upfront premium is payable when exchange for this exchange rate certainty you have you purchase a Vanilla Option which is lost the opportunity to take advantage of any non-refundable regardless of whether favourable exchange rate movements between the the option lapses or is terminated Trade Date and the Value Date. before the Expiry Date. Outright and Window Forward Contract • You may be obligated to trade at the Example Strike Rate which is worse than the current Spot Rate. You are an Australian based importer and need to pay for goods valued USD 100,000 in 3 months Benefits using AUD. • A Vanilla Option provides protection AFEX quotes you a forward exchange rate (the against adverse movements in the contract rate) of 0.8200, which in this case is exchange rate during the term of the made up of a spot exchange rate less forward option. points. Acceptance of this quote will create the Forward Contract between you and AFEX. • Allows unrestricted participation in all favourable exchange rate movements. The AUD equivalent is USD 100,000 ÷ AUD/USD 0.8200 = AUD 121,951.22. • You receive a Generated Premium 2 business days after trade is locked in. Before the value date of the contract, you will send AFEX the AUD to settle your contract so that • Vanilla Options are flexible; the Strike AFEX can deliver the USD on the final date of the Rate, Expiry Date and amount can be contract. tailored to your needs. By entering into a forward contract, you have Window Forward Extra removed the uncertainty of exchange rate movements over the term of the forward contract. A Window Forward Extra is a low risk hedging In exchange for this exchange rate certainty you strategy that can lock in a Budget Rate, while have lost the opportunity to take advantage of any allowing the holder to profit against the Budget favourable exchange rate movements. Rate if the Spot Rate is more favourable and has not touched the Barrier Level during the Barrier In an Outright Forward Contract you can only Level Period. If the Barrier Level is touched during make use of the foreign currency on the Value the Barrier Level Period, the Strike Rate is locked Date. In a Window Forward Contract, you can in. make use of the foreign currency throughout the Window Period and must be fully paid for by the Risks Value Date. • The Strike Rate/Budget Rate for a Vanilla Option Window Forward Extra is worse than the current Forward Contract rate. The Vanilla Option is a currency protection • Any profits from a favourable move in contract which gives the holder the right, but not the obligation, to buy a predetermined amount of AUDUSD is limited by the Barrier Level. currency at a strike rate on a specific date. This is a • The Strike Rate for a Window Forward low risk hedging strategy which, for the payment Extra is worse than the current Forward of an upfront premium, will protect you from an Contract rate.

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Product Disclosure Statement June 2021

• Your participation in profit from a Risks favourable move in AUDUSD is limited • The Budget Rate for a zero-cost by the Barrier Level. Participating Forward Extra is lower Benefits than the current Forward Contract rate. • Can be used to establish a Strike • Participation in profit from a favourable Rate/Budget Rate to buy USD and sell move in AUDUSD is limited by the AUD. potential to get knocked-in by the Barrier Level. • Allows a profit vs. the Budget Rate if the Spot Rate ends up in between the • If the AUDUSD Spot Rate breaches the Barrier Level at expiry but hasn't Barrier Level at any time during the touched the Barrier Level during the Barrier Level Period, you will be Barrier Level Period. obligated to trade the entire Notional • Can be used to establish a Strike Amount. Rate/Budget Rate to sell USD and buy Benefits AUD. • The Strike Rate is more favourable than • Allows a profit vs. the Budget Rate if the rate applicable to a comparable the Spot Rate ends up in between the Participating Forward. Barrier Level at expiry but hasn't • Allows participation in a favourable touched the Barrier Level during the move of AUDUSD. Barrier Level Period. Collar Option Participating Forward The Collar Option is a structured option which A Participating Forward is equivalent to the allows you to protect against the risk that the Spot combination of a Forward Contract and a Vanilla Rate will be less favourable than a nominated Option. This is a low risk hedging strategy which forward exchange contract rate (the Protection can protect you from an adverse movement in the Rate). It also gives you the ability to participate in Spot Rate yet still allow you to benefit if the favourable movements in the Spot Rate between market subsequently moves in your favour. the Protection Rate and the Collar Rate. Risks Risks • The Strike Rate for a zero-cost • The Protection Rate for a zero-cost Participating Forward is worse than the Collar is worse than the current current Forward Contract rate. Forward Contract rate. • Any profits from a favourable move of • Your participation from a favourable AUDUSD is limited by the potential move of AUDUSD is limited by the obligation to buy the Obligated Amount potential obligation to buy the Notional at the Strike Rate. Amount at the Collar Rate. Benefits • If the Spot Rate at expiry is above the • Allows participation in a favourable Collar Rate, you will be obligated to move of AUDUSD if it moves higher. trade at the Collar Rate which is below the prevailing Spot Rate. • Can be used to establish a Budget Rate. Benefits Participating Forward Extra • Allows limited participation in a A Participating Forward Extra is equivalent to the favourable move of AUDUSD moving combination of a Forward Contract and a Knock-in between the Collar Rate. Option. This is a low risk hedging strategy which • Can be used to establish a Budget Rate. can protect you from an adverse movement in the Spot Rate, yet still allow you to benefit if the market subsequently moves in your favour towards a Barrier Level.

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Product Disclosure Statement June 2021

Knock-out Forward Benefits A Knock-Out Forward provides the Strike Rate for • Gives a significantly more favourable future exchange requirements which is better than Strike Rate than a standard Forward the prevailing Forward Contract rate. However, if Contract. the market level breaches the pre-determined Knock-Out Level at any time during the Knock-Out Ratio Forward Level Period, the trade ceases to exist and there A Ratio Forward provides a known Strike Rate for are no obligations on either party. If the Knock-Out future exchange requirements which is better than Level does not trade during the Knock-Out Level the prevailing Forward Contract rate. The amount Period, then you will have the right or the you may be required to exchange is dependent obligation, depending on where the Spot Rate fixes upon where the Spot Rate is on expiry. at the expiry date, to exchange the full Notional Amount at the pre-agreed Strike Rate. Risks Risks • You may be obligated to trade the Ratio Amount at the Strike Rate which • The Knock-Out Forward does not offer is worse than the Spot Rate at expiry. a guaranteed outcome. • If the trade does Knock-Out then you Benefits will be left completely un-hedged. • Gives a more favourable Strike Rate • If the trade does not Knock-Out and at compared to the equivalent Forward expiry fixes above the Strike Rate, you Contract. will be obliged to trade at a less • Provides a guaranteed strike rate for a favourable rate than is available in the notional amount. Spot Market at that time. Ratio Forward Extra Benefits A Ratio Forward Extra provides a known Strike • Gives a more favourable Strike Rate Rate for future exchange requirements with the than a standard Forward Contract. opportunity to participate in favourable exchange rate movements, provided the currency pair has Knock-out Ratio Forward not breached a pre-specified Barrier Level. If the A Knock-Out Ratio Forward provides a known Barrier Level is breached at any time during the Strike Rate for future exchange requirements Barrier Level Period, then you will be locked into which is significantly better than the prevailing dealing at the Strike Rate. The amount you will Forward Contract Rate. The amount you may be have the right to deal or may be obligated to deal required to exchange is dependent upon where will not be known until expiry. the Spot Rate is on expiry. Furthermore, if the Risks currency pair breaches the pre-determined Knock- • Your participation from a favourable Out Barrier Level at any time during the Knock-Out Barrier Level Period, the trade ceases to exist and move of the AUDUSD is limited by the there are no obligations on either party. Barrier Level. Risks • If the Barrier Level is breached, you may be obliged to deal the Ratio • The Knock-Out Ratio Forward does not Amount at the Strike Rate. offer a guaranteed Budget Rate. • If the trade does Knock-Out then you Benefits will be left completely un-hedged. • Allows a profit vs. the Strike Rate if the • If the trade does not Knock-Out then Spot Rate ends up in between the you will either be left un-hedged on the Strike Rate and the Barrier Level as difference between the Ratio Amount specified and hasn't touched the and Notional Amount, or you will be Barrier Level during the Barrier Level obliged to trade the difference at a less Period. favourable rate than is available in the

Spot Market at that time.

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Product Disclosure Statement June 2021

Target Accrual Redemption Forward • Your participation in benefit from a A Target Accrual Redemption Forward (TARF) favourable move in AUDUSD is limited provides a known Strike Rate for a series of future by the Barrier Level. expiry dates. The amount that you will be obliged Benefits to exchange or have the right to exchange will be determined by where the currency pair fixes on • Can be used to establish a Strike the expiry dates. The known Strike Rate can be Rate/Budget Rate to buy USD and sell nullified if a termination condition is satisfied. AUD. Risks • Allows a potential enhancement • Known and limited gains. Unknown and against the Strike Rate if the Spot Rate unlimited losses. at expiry is below the Strike Rate and the Barrier Level has not touched the • You may be required to deal the Barrier Level during the Barrier Level Notional Amount at the Strike Rate. Period. • A long-term move higher in the currency pair could result in significant losses. Participating Forward with Cap • If the termination condition is satisfied A Participating Forward with Cap is equivalent You will be left un-hedged on the to the combination of a Forward Contract and remainder of your currency exposure. a Vanilla Option, plus the addition of a Vanilla Benefits Option at the higher Cap Rate level. This is a • Gives a significantly more favourable low risk hedging strategy which can protect Strike Rate than a standard Forward you from an adverse movement in the Spot Contract. Rate yet still allow you to benefit if the market subsequently moves in your favour. • Allows profit for the term of the contract if the currency pair fixes below Risks the Strike Rate and the cumulative • The Protection Rate for a zero-cost gains do not reach or exceed the Participating Forward is worse than the Accrual Cap. current Forward Contract rate. • Benefit from a favourable move in Additional Products AUDUSD is limited by the potential Offered obligation to trade at the Cap Rate. • If the Spot Rate at expiry is above the Participating Improving Forward Cap Rate, you will be obligated to trade a proportion of the USD exposure at This Participating Improving Forward gives you a known protection level at the Strike Rate similar to the Cap Rate which is below the a Forward Contract. The potential enhancement is prevailing Spot Rate. contingent upon whether the Spot Rate expires Benefits between the Strike Rate and the nominated lower Knock Out Barrier Level. You will receive an • The Protection Rate is more favourable additional benefit should the market expire that the rate applicable to a between the Strike Rate and Knock Out Barrier comparable Participating Forward Level without breaching the Knock Out Barrier without a Cap. Level at any stage. In addition, you will benefit if • Allows limited participation in a the market subsequently moves in your favour above the Strike Rate. favourable move of AUDUSD moving between the Cap Rate. Risks • The Strike Rate for a Participating Participating Forward with Floor Improving Forward is worse than the A Participating Forward with Floor is current Forward Contract rate. equivalent to the combination of a Forward

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Product Disclosure Statement June 2021

Contract and a Vanilla Option, plus the Spot Rate. addition of a Vanilla Option at the lower Floor Benefits Rate level. This is a low risk hedging strategy • The Protection Rate is more favourable which can protect you from an adverse that the rate applicable to a movement in the Spot Rate yet still allow you comparable Participating Forward to benefit if the market subsequently moves in without a Cap your favour. • Allows limited participation in a Risks favourable move of AUDUSD moving • The Protection Rate for a zero-cost between the Cap Rate. Participating Forward with Floor is worse than the current Forward Participating Forward with Ratio Floor Contract rate A Participating Forward with Ratio Floor is • Your participation in favourable moves equivalent to the combination of a Forward of AUDUSD is limited by the potential Contract and a Vanilla Option, plus the obligation to sell the balance of USDs at addition of a Vanilla Option at the lower floor the Floor Rate. Rate level. This is a low risk hedging strategy • If the Spot Rate at expiry is below the which can protect you from an adverse Floor Rate, you will be obligated to movement in the Spot Rate, yet still allow you trade a proportion of your USD to benefit if the market subsequently moves in exposure at the Floor Rate which is your favour. above the prevailing Spot Rate. Risks Benefits • The Protection Rate for a zero-cost • Can be used to establish a Budget Rate. Participating Forward is worse than the • Allows limited participation in a current Forward Contract rate. favourable move of AUDUSD. • Participation in a favourable move in AUDUSD is limited by the potential Participating Forward with Ratio Cap obligation to trade at the Floor Rate. A Participating Forward with Ratio Cap is • If the Spot Rate at expiry is below the equivalent to the combination of a Forward Floor Rate, you will be obligated to Contract and a Vanilla Option, plus the trade an additional Ratio floor Amount addition of a Vanilla Option at the higher Cap at the Floor Rate which is above the Rate level. This is a low risk hedging strategy prevailing Spot Rate. which can protect you from an adverse Benefits movement in the Spot Rate, yet still allow you • The Protection rate is more favourable to benefit if the market subsequently moves in than the rate applicable to a your favour. comparable Participating Forward Risks without a floor. • The Protection Rate for a zero-cost • Allows limited participation in a Participating Forward is worse than the favourable move of AUDUSD moving current Forward Contract rate. between the Floor Rate. • Participation in a favourable move in AUDUSD is limited by the potential Convertible Forward Extra obligation to trade at the Cap Rate. A Convertible Forward Extra provides a known • If the Spot Rate at expiry is above the Strike Rate for future exchange requirements Cap Rate, you will be obligated to trade with the opportunity to participate in an addition Ratio Cap Amount at the favourable exchange rate movements, Cap Rate which is below the prevailing provided the currency pair has not breached a

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Product Disclosure Statement June 2021

pre-specified Upper Barrier Level. If the Upper at the Cap Rate which is below the Barrier Level is breached at any time during prevailing Spot Rate. the Barrier Level Period, then you will be Benefits locked into dealing at the Strike Rate. If • The Protection Rate specifies a known however, the Lower Barrier Level is breached worst-case rate for a known amount. at any time during the Barrier Level Period, then this subsequent obligation, or any • You will trade at a rate no worse than potential obligation is removed. Your this for your AUDUSD exposure. protection at the Strike Rate will always Knock-Out Collar remain. The Knock-Out Collar Option is a structured Risks option which allows you limited protection • Your participation from a favourable against the risk that the Spot Rate will be less move of AUDUSD is limited by the favourable than the Strike Rate. It also gives Upper Barrier Level. If the Upper you the ability to participate in favourable Barrier Level is breached, you may be movements in the Spot Rate between the obliged to deal at the Strike Rate. Strike Rate and the Cap Rate. The protection and participation that this structure provides is Benefits contingent upon a specified exchange rate, the • Allows for participation vs. the Strike Knock-Out Barrier level, not trading in the spot Rate if the Spot Rate ends up in market during the Barrier Level Period. Should between the Strike Rate and the Upper the Knock-Out Barrier level trade during the Barrier Level as specified and hasn't specified Barrier Level Period, the trade will touched the Upper Barrier Level during cease to exist. A Knock-Out Collar give you a the Barrier Level Period. more favourable Strike Rate relative to a • If the Lower Barrier Level is breached at comparative Collar Option. any time, the Upper Barrier Level or Risks any subsequent obligation is removed. • The Knock-Out Collar does not offer a guaranteed protection. Ratio Collar Option • If the trade does Knock-Out then you The Ratio Collar Option is a structured option will be left completely un-hedged. which allows you to protect against the risk • If the trade does not Knock-Out and at that the Spot Rate will be less favourable than expiry fixes above the Cap Rate, you a nominated foreign exchange rate (the will be obligated to trade at a less Protection Rate). It also gives you the ability to favourable rate than is available in the participate in favourable movements in the Spot Market at that time. Spot Rate between the Protection Rate and the Cap Rate. Benefits • Risks The Strike Rate of a Knock-Out Collar is higher than the comparable rate of a • The Protection Rate for a zero-cost Collar. Ratio Collar is worse than the comparable Forward Contract rate Knock Out Ratio Collar Option • Your participation from a favourable The Knock-Out Ratio Collar Option is a move of AUDUSD is limited by the structured option which allows you limited potential obligation to buy the Cap protection against the risk that the Spot Rate Amount at the Cap Rate. will be less favourable than a nominated • If the Spot Rate at expiry is above the foreign exchange rate, the Strike Rate. It also Cap Rate, you will be obligated to trade gives you the ability to participate in

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Product Disclosure Statement June 2021

favourable movements in the Spot Rate benefit from moves lower in the Spot between the Strike Rate and the Cap Rate. The Rate beneath the Strike Rate and protection and participation that this structure moves higher in the Spot Rate above provides is contingent upon a specified the Strike Rate. exchange rate, the Knock-Out Barrier, not trading in the spot market during the Barrier Dynamic Ratio Forward Extra Level Period. Should the Knock-Out Barrier A Dynamic Ratio Forward Extra provides a trade during the specified Barrier Level Period, Dynamic Strike Rate for future exchange the trade will cease to exist. A Knock-Out Ratio requirements with the opportunity to Collar gives you a more favourable Strike Rate participate in favourable exchange rate relative to a comparative Collar Option. movements, provided the currency pair has not breached either of the pre-specified Risks Barrier Levels. If either of the two Barrier • The Knock-Out Ratio Collar does not Levels are breached at any time during the offer guaranteed protection. Barrier Level Period, you will be locked into a • If the trade does Knock-Out then you contract in which you will either deal the will be left completely un-hedged. Notional Amount or the Ratio Amount at the • If the trade does not Knock-Out and at Strike Rate. expiry fixes above the Cap Rate, you Risks will be obliged to trade at a less favourable rate than is available in the • Your participation from favourable Spot Market at that time. moves is limited by the Barrier Levels. • If either Barrier Level is breached Benefits during the Barrier Level Period then • Gives a more favourable Strike Rate you will deal at the Strike Rate. than a standard Collar. Benefits Dynamic Forward Extra • Providing the Spot Rate hasn’t traded at or A Dynamic Forward Extra provides a Dynamic beyond either Barrier Level, you benefit Strike Rate for future exchange requirements from moves lower in the Spot Rate beneath with the opportunity to participate in the Strike Rate and moves higher in the Spot favourable exchange rate movements, Rate above the Strike Rate. provided the currency pair has not breached Dynamic Knock-Out Ratio Forward Extra either of the pre-specified Barrier Levels. If either of the two Barrier Levels are breached A Dynamic Knock-Out Ratio Forward Extra at any time during the Barrier Level Period, (DKORFE) gives the client the opportunity to then you will be locked into a contract in deal at the Dynamic Strike Rate for future which you will deal the Notional Amount at exchange requirements provided the market the Strike Rate. does not trade at or beyond the pre-specified Barrier Level or Knock-Out Level within the Risks Barrier Level / Knock-Out Level Period. As the • Your participation in favourable moves market deviates from the Strike Rate at the of AUDUSD is limited by the Barrier expiry date, the client benefits by significantly Levels. outperforming the prevailing Spot Rate • If either Barrier Level is breached regardless of the direction of the move. If the during the Barrier Level Period then market does trade at or beyond either the you will deal at the Strike Rate. Barrier Level or Knock-Out Level within the Benefits Barrier Level / Knock-Out Level Period, the trade will either Knock-Out and you will be left • Providing the Spot Rate hasn’t traded unhedged, or Knocked-In to a Strike Rate at at or beyond either Barrier Level, you

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Product Disclosure Statement June 2021

which the amount you may be obliged to deal Period, you will deal at the Strike Rate. The or will have the right to deal is dependent on amount dealt and whether you have right to where the Spot Rate fixes at expiry. or will be obliged to deal at the Strike Rate which is dependent on where AUDUSD fixes at Risks expiry. • If the AUDUSD Spot Rate trades at or beyond the Knock-Out Level during the Risks Knock-Out Level Period, the trade will • Your participation from a favourable be Knocked-Out and you will be left move of AUDUSD is limited by the unhedged. Barrier Level. • If the AUDUSD Spot Rate trades at or • If the Barrier Level is breached, you beyond the Barrier Level during the may be obligated to deal the Ratio Barrier Level Period, you will be locked Amount at the Strike Rate. into the Strike Rate. The amount you Benefits may be obligated to deal or will have • Allows a benefit vs. the Spot Rate if the the right to deal will not be known until Spot Rate ends up in between the expiry. Strike Rate and the Barrier Level as • Your ability to benefit in moves away specified and hasn't touched the from the Strike Rate is limited by the Barrier Level during the Barrier Level Barrier Level and Knock-Out Level. Period. Benefits Convertible Forward • May offer the opportunity to outperform the prevailing Spot Rate. A Convertible Forward provides a known Strike • Providing neither the Barrier Level nor Rate for future exchange requirements with Knock-Out Level has been breached the opportunity to participate in favourable during the Barrier Level / Knock-Out exchange rate movements, provided the Level Period, you will be able to deal at currency pair has breached a pre-specified a rate which is better than prevailing Barrier Level - often the same level as the Spot Rate at time of expiry. Strike Rate. If the Barrier Level is breached at any time during the Barrier Level Period, then Bonus Ratio Forward Extra you will be removed from any obligation of A Bonus Ratio Forward Extra provides a known dealing at the Strike Rate. If however, the spot Strike Rate for future exchange requirements rate is lower than the Strike Rate at expiry, you with the opportunity to outperform the Spot are still Notional at this pre-determined level. Market, provided the currency pair has not Risks breached a pre-specified Barrier Level. If the • Your participation in a favourable move Barrier Level is breached at any time during of AUDUSD is not possible until the the Barrier Level Period, then you will be Barrier Level is breached during the locked into dealing at the Strike Rate. The Barrier Level Period. amount you will have the right to deal, or may Benefits be obligated to deal will not be known until expiry. This strategy may give you the right to • The Convertible Forward offers a buy the Notional Amount and sell AUD at the guaranteed protection rate. Bonus Rate; calculated as follows: • If the Barrier Level is breached at any time, this removes your obligation to Bonus Rate = Strike Rate + ( (Spot Rate - Strike trade the Notional Amount at the Strike Rate) * 2 ) Rate. If the AUDUSD Spot Rate trades at or above • Allows for participation vs. the Strike the Barrier Level during the Barrier Level Rate if the Spot Rate moves below the

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Product Disclosure Statement June 2021

Barrier Level during the Barrier Level in AUDUSD is limited by the Barrier Period. Level.

Range Reset Forward Benefits • Can be used to establish a Protection A Range Reset Forward (RRF) is a Structured Rate to buy USD and sell AUD. Option that allows the holder to receive an Enhanced Rate compared to the equivalent • Allows a benefit vs. the Protection Rate Forward Exchange Rate provided that the if the Spot Rate fixes above the Spot Rate remains within a specified range Protection rate at expiry. for the entire life of the structure. It Ratio Forward Extra Reset provides the holder with a guaranteed worst-case rate (100% protection), and a A Ratio Forward Extra Reset is a low risk hedging potential enhanced level without strategy that can lock in a Protection Rate, while leveraging. allowing the holder to profit vs. the Protection Rate if the Spot Rate is more favourable at Risks expiry. If the Barrier Level is breached during the • If either the Lower Barrier Rate or the Barrier Level Period, the Reset Rate is locked in Upper Barrier Rate is breached, you will which is more favourable than the Protection be trading at a rate which may be at a Rate. level lower than the comparative Risks Forward Exchange Rate. • The Strike Rate for a Ratio Forward • There is potential to be transacting Extra Reset is worse than the current lower than the prevailing AUDUSD Spot Forward Contract rate. Rate at expiry. • Your participation favourable move in Benefits AUDUSD is limited by the Barrier Level. • Protection at all times, with a known Benefits worst-case AUDUSD rate. • Can be used to establish a Protection • Ability to achieve an Enhanced Rate Rate to buy USD and sell AUD. which is superior to the comparative • Allows a benefit vs. the Protection Rate Forward Exchange Rate provided if the Spot Rate fixes above the neither barrier is breached. Protection rate at expiry. • A Range Reset Forward can be pre- delivered at the Protection Rate. Knock-In Target Accrual Redemption Forward (KITARF) Forward Extra Reset A KITARF provides a known Strike Rate for a A Forward Extra Reset is a low risk hedging series of future expiry dates. The amount that strategy that can lock in a Protection Rate, while you will be obligated to exchange or have the allowing the holder to benefit vs. the Protection right to exchange will be determined by where Rate if the Spot Rate is more favourable at the currency pair fixes on the expiry dates. The expiry. If the Barrier Level is breached during the known Strike Rate can be nullified if a Barrier Level Period, the Reset Rate is locked in termination condition is satisfied. which is more favourable than the Protection Rate. Risks • Unknown and unlimited losses. Risks • You may be required to deal the Ratio • The Strike Rate for a Forward Extra Amount at the Strike Rate. Reset is worse than the current Forward • Contract rate. A long-term move higher in the currency pair could result in significant • Your participation in a favourable move

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Product Disclosure Statement June 2021

losses. provides a known Strike Rate for future • If a termination condition is satisfied, exchange requirements with the opportunity you will be left un-hedged on the to participate in favourable exchange rate remainder of your currency exposure. movements, provided the currency pair has breached a pre-specified Barrier Level. If the Benefits Barrier Level is breached at any time during • Gives a significantly more favourable the Barrier Level Period, then you will be Strike Rate than a standard Forward removed from any obligation of dealing at the Contract. Strike Rate. If however, the Spot Rate is lower • Allows for a benefit of the term of the than the Strike Rate at expiry, you are still contract if the currency pair fixes below Notional at this pre-determined level. If the the Strike Rate and the cumulative Barrier Level is not breached, and the gains do not reach the accrual cap. exchange rate fixes above the Strike Rate at expiry, you will be obliged to deal the Ratio Ratio Convertible Forward Extra Amount at the Strike Rate. A Ratio Convertible Forward Extra provides a Risks known Strike Rate for future exchange • requirements with the opportunity to Your participation in a favourable move participate in favourable exchange rate of AUDUSD is not possible until the movements, provided the currency pair has Barrier Level is breached during the

not breached a pre-specified Upper Barrier Barrier Level Period. Level. If the Upper Barrier Level is breached at Benefits any time during the Barrier Level Period, then • The Convertible Forward offers a you will be locked into dealing at the Strike guaranteed Budget Rate. Rate. If however, the Lower Barrier Level is • If the Barrier Level is breached at any breached at any time during the Barrier Level time, this removes your obligation to Period, then this subsequent obligation, or any trade at the Collar Rate. potential obligation is removed. Your • Allows for participation vs. the Strike protection at the Strike Rate will always Rate if the Spot Rate trades through remain. the Barrier Level during the Barrier Risks Level Period. • Your participation in favourable move of AUDUSD is limited by the Upper Ratio Improving Forward Barrier Level. If the Upper Barrier Level A Ratio Improving Forward gives you a known is breached, you may be obliged to deal protection level at the Strike Rate similar to a at the Strike Rate. Forward Contract. The potential enhancement is contingent upon whether the Spot Rate Benefits expires between the Strike Rate and the • Allows for participation vs. the Strike nominated lower Knock Out Barrier. You will Rate if the Spot Rate ends between the receive an additional benefit should the Strike Rate and the Upper Barrier Level market expire between the Strike Rate and and has not touched the Upper Barrier Knock Out Barrier Level without breaching the Level during the Barrier Level Period. Knock-Out Barrier Level at any stage. • If the Lower Barrier Level is breached at any time, the Upper Barrier Level or Risks any subsequent obligation is removed. • The Strike Rate for a Ratio Improving Forward is worse than the current Ratio Convertible Forward with Collar Forward Contract rate. A Ratio Convertible Forward with Collar • Your participation in favourable move

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Product Disclosure Statement June 2021

in AUDUSD is limited by the Barrier market expire between the Strike Rate and Level. Knock Out Barrier Level without breaching the • You cannot benefit if the Spot Rate Knock-Out Barrier Level at any stage. expires above the Strike Rate. Risks Benefits • The Strike Rate for an Improving • Can be used to establish a Strike Forward is worse than the current Rate/Budget Rate to buy USD and sell Forward Contract rate. AUD. • Your participation in a favourable move • Allows a potential enhancement against in AUDUSD is limited by the Barrier the Strike Rate if the Spot Rate at expiry Level. is below the Strike Rate and the Barrier • You cannot benefit if the Spot Rate Level has not touched the Barrier Level expires above the Strike Rate. during the Barrier Level Period. Benefits Improving Forward • Can be used to establish a Strike Rate/Budget Rate. An Improving Forward gives you a known protection level at the Strike Rate similar to a • Allows a potential enhancement Forward Contract. The potential enhancement against the Strike Rate if the Spot Rate is contingent upon whether the Spot Rate at expiry is below the Strike Rate and expires between the Strike Rate and the has not touched the Barrier Level nominated lower Knock Out Barrier Level. You during the Barrier Level Period. will receive an additional payout should the

Page 16 of 27

Product Disclosure Statement June 2021

You may request that a Foreign Exchange Terms and Conditions Transaction be cancelled at any time before the Each Foreign Exchange Transaction and Foreign Value Date. If you use a Foreign Exchange Exchange Derivative Transaction is subject to the Transaction to cover an obligation that ceases to terms and conditions outlined in the Account exist, or that changes, or if for any other reason Application you completed and signed when you you need to close out the contract prior to the opened your account with AFEX. We are not liable final date of the contract, then the contract may for any loss that arises from incorrect information need to be cancelled. If the contract is cancelled, that you have provided. you will be liable for any loss due to the closure of this contract. Where possible, we will provide you You will be required to indemnify us for any loss with a quote for the cost of the cancellation. that occurs as a result of AFEX: • Acting in good faith on your verbal or written • Cancelling Spot Value, Value Today, Value instructions; or Tomorrow, Outright Forward and • Having to cancel a transaction. Window Forward Contracts requires us to conduct an opposite transaction to Unless you have disclosed to us that you are acting offset the transaction. We will pass all in a trustee capacity or on behalf of another party, these costs on to you, which will usually you warrant that you are acting on your own be calculated by considering your original behalf when purchasing a product from us. agreed locked in rate, and the cost that When you use our services, you are promising that AFEX must pay in purchasing an opposite you will not breach any law in Australia or any contract at the prevailing rate. This is other country. required before AFEX can cancel out the original Forward Contract. Payment is When providing instructions by telephone, you due within 24 hours of the cancellation. will need to provide us with adequate identification information. • Cancelling Vanilla Options and Structured Options is a complex matter requiring Foreign Exchange Option Partial or Full Pre- the buy-back of the option(s) by us. The Delivery cancellation pricing will be determined Partial or Full Pre-delivery is allowed on some of by the same factors (including the the Structured Option products that do not have a contract exchange rate, interest rate Knock-Out parameter and must be for a minimum differential, currency type, amount and amount of AUD 50,000. The pre-delivery of the expiry date) used when pricing the contract will be processed at the worst-case rate. original contract. These will be adjusted Should an option be Knocked In then there is no taking into consideration the prevailing minimum amount of pre-delivery. market Foreign Exchange Rates, the remaining term of the contract, the Cancellation Forward Rate, Interest Rates We reserve the right to cancel any contract Differentials, and volatility associated immediately in circumstances set out in our terms with the currencies. These factors and conditions. Those circumstances include (but combine to determine the cancellation are not limited to) your insolvency, non-payment price. If you accept the cancellation or late payment, or for a breach by you of our price, then the contract will be cancelled terms and conditions. and the cancellation price will become payable within 24 hours of cancellation. If at any time you choose to cancel or alter a You may lose money as a result of this Foreign Exchange Transaction with us, you will action, but where possible, you will be have to pay any costs and/or exchange rate losses provided with a quote for cancellation, that we incur. based on the factors described above.

Page 17 of 27

Product Disclosure Statement June 2021

When cancelling a Foreign Exchange • Zero-Premium Structure Transaction, third parties (such as banks) may AFEX products feature zero-premium structures impose fees which we will pass on to you. with the exclusion of the Vanilla Option which does charge a premium. Client Money • Tailored and Flexible The following Client funds shall be held by AFEX in We can tailor the transaction to meet your accordance with the Client Money Rules: specific circumstances. Unlike exchange traded • Funds held by AFEX pending receipt of products, our over-the-counter contracts are an instruction from the Client; not standardised and can be personally tailored to suit your requirements. For example, AFEX • Any amount required by AFEX, either in allows you to enter into transactions in small the form of funds held by AFEX for a amounts and the Value Date is negotiable, Client, or in the form of a payment by whereas exchange traded products are a the Client, to be applied in partial standard size and cannot be varied in duration. payment of a Foreign Exchange Transaction (i.e., initial margin); and • Virtual 24-Hour Trading We offer an online platform that helps you trade • Funds required when the net mark to simply and easily, 24 hours a day. market value of all open transactions exceeds 7.5% or an alternative • High Level of Liquidity The foreign exchange market is very liquid percentage or fixed amount as AFEX enabling AFEX to efficiently manage its risks by may advise, of the notional value of all entering into transactions with its hedging open Foreign Exchange Transactions counterparties. The liquidity comes mainly from (i.e., variation margin). large and smaller banks that provide liquidity to AFEX will pool Client’s funds with similar funds investors, companies, institutions and other held on behalf of other clients of AFEX and may currency market players. convert the funds into either AUD or USD in • Real time quotes accordance with the Client Money Rules. Interest AFEX uses sophisticated technology and/or accruing to funds held in accordance with the liquidity providers (counterparties) in order to Client Money Rules shall be transferred and offer you up-to-the-minute quotes. assigned to AFEX in consideration for Client’s use of the AFEX’s services. Significant Risks of Our Products Significant Benefits of Our Products The following is a description of significant risks associated with trading products offered by In addition to the benefits already outlined in AFEX. this PDS, other significant benefits of using our products include: • Product Risks It is important to note that when a product in • Manage Volatility this PDS is described as “zero cost”, that means We can offer products that manage the risk that that there is no up- front cost. Depending on the the Foreign Exchange Rate will move in an movement of the Spot Rate, you may be adverse direction. required to trade at a price that is far less • Provide Cash Flow Certainty favourable than if you had not entered into the Depending on the products chosen, Foreign agreement at all. Zero cost means you are Exchange Transactions generally allow you to limiting your advantage or selling some of your agree to a rate of exchange now, for a time in opportunity to gain. By selling this advantage the future. This will help you to determine the you are able to have a counterparty cover the exact cost of that currency, giving certainty over cost of this product, making it zero cost. If a the flow of funds. product in this PDS has a Strike Rate that is more advantageous than the current Forward Rate, •

Page 18 of 27

Product Disclosure Statement June 2021

then it is likely that it is a riskier product. You If the unrealised loss of all open Orders with will be “selling” some sort of protection (even if AFEX falls below the Variation Margin it is just the opportunity to increase a gain) in requirements, then you may request that order to bring your up-front price down. AFEX return the difference between the unrealised loss of all open Orders and the • Extension of Contracts If you do not pay for your contract within the Variation Margin held by AFEX on that stipulated time, AFEX may, at your request, Business Day. Any requests must be made in extend or “roll” your contract to another date by writing before 12pm AFEX Local Time, on the when you are expected to make full settlement same Business Day, and AFEX will process the for that contract. This will cause a delay in the request on the Business Day on which it was outgoing payment of your contract and you will made and the surplus Variation Margin will also be charged for the extension of the be returned in a timely manner. Any request contract. When a contract is extended on your made after 12pm AFEX Local Time will be behalf, AFEX is entitled to request for a deposit processed on the following Business Day. to be paid on that contract to cover the current E.g. You have an Outright Forward Contract or potential mark to market loss on that for AUD/USD that is at a rate of 1.00 for contract. buying USD 100,000, with a 10% Partial Extensions are not available for Vanilla Prepayment agreement. If the AUDUSD rate Options or Structured Options. unexpectedly moves 10% out of the money (or higher) than the Foreign Exchange Rate on • Initial Margin your contract we then reserve the right to ask We may require you to pay an initial margin for 10% (or higher) of the notional value as towards the Option Contract or Forward the Variation Margin to be paid within 24 Contract within 24 hours of your instructions to hours of the request being made so that AFEX enter into the Option Contract or Forward can manage this position and protect against Contract with us. further adverse currency movements. This • Variation Margin needs to be paid within the agreed time limit. As part of our risk management process AFEX Should the rate subsequently move further carries out a mark to market revaluation of all out of the money we reserve the right to ask outstanding Foreign Exchange Transaction for an Additional Variation Margin. If the contracts on a daily basis. exposure goes below 10% we can return any If during this process your Foreign Exchange excess Variation Margin to you. Transaction contract(s) move out of the • Market Volatility money beyond a predetermined amount or The Foreign Currency Market is subject to many percentage of the contract amount, we may influences which may result in rapid fluctuations seek from you a variation margin as stated in and reflect unforeseen events or changes in the Margin Call issued by AFEX. Each time the conditions with the inevitable consequence net market value of all of your open Orders being market volatility. There is a risk that the declines and the unrealised loss when value of the currencies in a Forward Contract marked to market further increases, AFEX may change between the date of the order and may issue a Margin Call whereby you are the Balance Due Date. For the Options Contract, required to post additional Variation Margin a Premium is not refundable, and a loss will be in the amount stated in the Margin Call incurred if the option is not exercised or if the within one (1) clear Business Day. It may be gain on exercise of the option is less than the necessary for you to make an Additional Premium. Variation Margin should the revaluation Given the potential levels of volatility in the continue to move further out of the money financial markets, it is therefore during the term of the contract. recommended that you closely monitor your

Page 19 of 27

Product Disclosure Statement June 2021

positions with AFEX at all times, as we reserve favourable exchange rate movements by the right to require a Variation Margin if you entering into further transactions, provided you have Foreign Exchange Transactions open. are able to continue to meet your obligations to us. In certain market conditions such as during extreme price volatility in markets, quotes If you buy a Vanilla Option or a Structured provided by AFEX may ‘gap’. A gap means Option, the underlying movement in currency that a price may unexpectedly jump from one rates may not be enough to cover the cost of price level to another without trading at rates your option (i.e. the Premium). in between those two price levels or quotes. • Leverage It is not possible for us to predict when a When you enter into a Foreign Exchange price ‘gap’ will occur or by how much. Price Transaction without paying the full cost of gaps are generally a result of unexpected entering into that contract, you are entering into news or previously unknown data being a leveraged contract. A leveraged contract is released (e.g. news of terrorist attacks, susceptible to movements in the market that revaluation of a currency, geopolitical could lead to losses or gains exceeding any upheaval or natural disasters). In such an amounts paid towards that contract. event, AFEX reserves the right to make cash adjustments where there have been losses • System Risks AFEX relies on technology providers and systems incurred by us as a result of an active order to provide you with its online system. AFEX you have on the trading platform. ensures the systems are regularly updated and • Counterparty Risk maintained. A disruption to the AFEX trading Given you are dealing with us as a counterparty platforms may mean you are unable to trade to every transaction, you will have an exposure online when you wish. to us in relation to each transaction. You are reliant on our ability to meet our obligations to With respect to settlement, electronic funds you under the terms of each transaction. This transfers, drafts and wires, AFEX relies on risk is known as counterparty risk. third party providers (such as banks) to assist in currency transfers between accounts. AFEX In order to reduce this exposure, we have the will not be able to control disruptions to ability to enter into opposite transactions as these systems. principal in the wholesale market. Also, the financial requirements imposed under our Sometimes, during a disruption, you can Australian Financial Services Licence require continue to use our financial products by us to maintain certain levels of capital and contacting us over the phone using the liquidity. details on the cover page of this PDS. • Electronic Trading You are also subject to our credit risk. If our There are a number of risks associated with business becomes insolvent, we may be unable using and relying on an online system. These to meet our obligations to you. If AFEX was to include, but are not limited to, risks related to go into liquidation you would be an unsecured the use of software and/or telecommunications creditor except to the extent that funds are systems such as software errors and bugs, held upon trust for you in a segregated funds delays in telecommunications systems, account (see page 18 which deals with Client interrupted service, data supply errors, faults or Money). inaccuracies and security breaches. • Opportunity Cost These risks and the occurrence of disruptive Once you have entered into a Foreign Exchange events can occur with all types of services Transaction you will have locked in the rate for provided through online transactions and are your chosen currency pair and you will only be outside of AFEX’s control. able to take advantage of subsequent

Page 20 of 27

Product Disclosure Statement June 2021

• Abnormal Market Conditions or Force When Payment is Made Majeure You need to make payments according to the AFEX reserves the right to close out some or all details provided to you by AFEX (this may be of the open transactions between you and AFEX if an event occurs that is beyond your or our contained in a document called a trade control, where such event either wholly or confirmation) by 3.00pm AEST/ADST, in order to partially prevents, hinders, obstructs, delays or ensure that payments are sighted on the day the interferes with your or our ability to meet your payment is made and value dates can therefore be obligations under the relevant contract. honoured. Failure to do so will mean that value dates will be postponed accordingly, and clients • Operational Risks may be charged for the extension of the contract. We are obligated to screen our clients and transactions for risks of money laundering, When purchasing a Vanilla Option or a Structured terrorist financing and fraud. There is a risk that Option contract that has a payable Premium , you your transaction may be delayed or cancelled must deposit funds into AFEX’s account according due to internal AFEX processes, people, or to the details provided to you by AFEX. You must systems that have been put in place for these make payment within 24 hours of receiving the screening purposes. Our banking partners also relevant details or trade confirmation from us. adhere to similar processes which may also Funds will either be released to your nominated delay or cancel your transaction without notice. beneficiary’s bank account or issued as a Draft on If your transaction is delayed or cancelled, we the Value Date of the contract (or for Window will do our best to inform you (where legally Forward Contracts – on a Value Date nominated by possible) and advise you accordingly. you), provided funds paid by you towards these How to Open an Account with AFEX contracts have cleared prior to the value date. Cleared funds can appear in the nominated Before you open an account with AFEX, you are account from the day they were sent, through to required to submit a: up to 4 Business Days later. Delivery times are • Completed Account Application form; dependent on the currency that we are sending • Direct debit form (if applicable); and and any processing time on the part of the • Supporting documentation (as indicated on beneficiary’s bank. Exotic Currencies, and more the application). remote beneficiary locations often result in longer These forms and the supporting documentation periods (typically up to 4 Business Days) before the must be completed, signed, and returned to us via funds appear in the nominated account. email, facsimile, mail, or in person. Upon receipt Upon termination of a contract, payment of the of these documents, AFEX will conduct an analysis outstanding amounts is required within 24 hours process to approve you as a customer. This of us providing you with information about the process is in line with our Know Your Customer amount outstanding. (KYC) policies and procedures.

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Product Disclosure Statement June 2021

Cost of Foreign Exchange Transactions The table below shows the fees and other costs that may be charged in relation to Foreign Exchange Transactions. You may be charged equivalent amounts in other currencies. We reserve the right to reduce or waive these fees or costs at our sole discretion. Electronic Funds Transfer (EFT)

Type of Service Fee Brief Description Max Amount How & When

To Foreign Country This fee is charged when you send an EFT in the AUD $25.00 Per drawdown or per transfer foreign country's currency. For example: Euros to France.

Third Party Country This fee is charged when you send an EFT in the foreign AUD $25.00 Per drawdown or per transfer country in a currency other than their currency. For example: USD to China.

AUD to Foreign Country This fee is charged when you send an EFT in AUD to AUD $50.00 Per drawdown or per transfer another country or to Australia.

Foreign Bank Draft This fee is charged when you request a draft in a AUD $10.00 Per drawdown or per transfer foreign currency.

Miscellaneous Fees

Type of Service Fee Brief Description Max Amount How & When

Stop Payment on Foreign This fee is charged when you request a stop- AUD $25.00 Per request Draft payment on a foreign draft purchased from AFEX.

Wire Tracer (Standard) This fee is charged when you ask us to trace a wire. AUD $25.00 Per request Amendment to EFT This fee is charged when you change the payment AUD $25.00 Per request Payment Instructions instructions on your EFT. Invalid Wire Instructions This fee is charged when you give us invalid AUD $25.00 Per request (Re-issue) information and we have to re-issue the wire. Copy of Cleared Foreign This fee is charged when you request a copy of a AUD $25.00 Per request Bank Draft Cleared Foreign Bank Draft. Recall This fee is charged when you ask us to recall a AUD $25.00 Per request payment.

Returned ACH/Check This fee is charged when a debit is returned due to AUD $25.00 Per returned ACH/Check insufficient funds.

Costs of Contract This fee is charged when you do not pay for your Foreign Exchange Reflected in the Foreign Exchange Extension (Rollover contract within the stipulated time and your contract Rate adjusted Rate of the contract that replaces Costs) is extended to the expected date of payment. adversely by the contract that was not paid for 0.05% of the within the stipulated time. original Foreign Exchange Rate per calendar day

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Product Disclosure Statement June 2021

commission is payable, it will be calculated Other Ways We Are Remunerated according to the volume or mark up on the We do not charge commission; however a fee transaction(s). may be associated with some of the services we offer. Confirmation of Foreign Exchange Transactions We generate revenue by way of spread. The Your dedicated Relationship Manager will send spread is the difference between the Interbank you a receipt for each Foreign Exchange Market Exchange Rate that we can obtain at Transaction you place with us. Please ensure the wholesale level and the exchange rate we that you verify the information contained on offer to you. The spread that is charged is the receipt. If there is a discrepancy, please determined by the frequency of trading, contact your Relationship Manager on the day availability of the currency you are buying or of transaction. If we do not hear from you selling, market volatility, the value of the before 3.00pm of the following business day, transaction, and volatility of Interest Rates we will proceed as instructed and you will be Differentials. The spread is likely to be higher in bound by the information we have provided to times of higher volatility, smaller transactions, you. longer periods between purchase and Value Date, more rare currency pairs, and more Taxation volatile Interest Rate Differentials. The wholesale exchange rates and therefore the Using our products can create tax implications. rates we are able to offer you are constantly in Generally, if you make a gain attributable to a a state of fluctuation. Currencies are traded on foreign currency exchange rate fluctuation, the open market all over the world at any given then that part of the gain is included in your time of day or night. Hence, they are subject to assessable income. Conversely, if you make a a variety of global economic factors including loss attributable to a foreign currency the economic law of supply and demand. exchange rate fluctuation, then that part of the loss is deducted from your assessable income. Our representatives are paid a salary plus a commission based on the overall financial However, taxation laws are complex and may performance of AFEX, the Business Unit in vary depending on your personal circumstances which they operate , the individual and/or and the purpose of your transactions. team performance. The incentives may extend Accordingly, you should discuss any taxation to the sale of financial products and services. questions you may have with your tax adviser before using our products or services. We may pay a referral commission to companies that refer business to us. If a

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Product Disclosure Statement June 2021

Consumer Complaints & Disputes

AFEX is required to provide you with information relating to any complaints you may have arising from your business relationship with the company.

You should address any dispute relating to our products to your Relationship Manager. If we are unable to resolve the dispute, we will automatically forward it to our complaints handling officer. If you are not satisfied with the resolution, you may refer your dispute to the Australian Financial Complaints Authority (AFCA):

Online: www.afca.org.au

Email: [email protected]

Phone: 1800 931 678 (free call)

Mail: Australian Financial Complaints Authority GPO Box 3 Melbourne VIC 3001

As time limits may apply to AFCA complaints, you should act promptly or otherwise consult the AFCA website to find out if or when the time limit relevant to your circumstances expires. Privacy Statement

AFEX collects personal information about you so that it can provide the products described in this PDS to you and operate its business. Also, some laws require us to collect and hold personal information. These requirements include (but are not limited to) requirements set out in the Corporations Act 2001 and associated regulations and the Anti-Money Laundering & Counter Terrorism Financing Act 2006 and associated rules. AFEX does not disclose any non-public personal or financial information about its customers to third parties, except as permitted by law and as necessary in processing and conducting the transaction you have requested and authorised. Third parties that we may need to disclose your information to in order to meet these purposes include banks, compliance consultants and government bodies. You can access any personal information that we have about you, upon request. If you don’t provide information to us that we request, we may be unable to provide or continue providing services to you.

Please contact us to request a free copy of our full Privacy Policy.

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Product Disclosure Statement June 2021

Glossary Delivery Date - The date (being 2 Business Days after the Expiry Date) that the money physically settles in AFEX - Associated Foreign Exchange Australia Pty Ltd. your account, our account and/or the beneficiaries AFSL - Australian Financial Service Licence. account for a Vanilla Option or Structured Option. AUD - Australian Dollar. Dynamic Strike Rate Calculation - If, at Expiry, the Spot Rate fixes below the Strike Rate; Dynamic Strike Rate = Barrier Level - A pre-determined Foreign Exchange Strike Rate + (Strike Rate – Spot Rate). If, at Expiry, the Rate which, if triggered, will result in another event Spot Rate fixes at or above the Strike Rate; Dynamic occurring (such as, in the case of a Forward Extra Strike Rate = Strike Rate + (Spot Rate – Strike Rate). Option, requiring you to trade at the Worst Case Rate). Exotic Currency - Exotic currencies are typically issued by developing countries or small, emerging economies Barrier Period - The period commencing at 03:00 pm Tokyo time on the relevant contract’s agreed barrier in the Asia Pacific regions, the Middle East, South start date and ending at the Expiry Time on the America or Africa. Common characteristics are contract’s agreed barrier end date, which can be: illiquidity, wide trading bands and high volatility. You i) The entire life of the relevant Structured Option will be notified by your Relationship Manager if a contract currency you are purchasing is an Exotic Currency. ii) A portion of the life of the relevant Structured Expiry Date – The date that a Foreign Exchange Option contract Transaction expires. iii) At 3.00pm Tokyo time on the Expiry Date of the relevant Structured Option contract Expiry Time – Also referred to as “cut-off time”, this is the time on the Expiry Date at which the Foreign Best Case Rate - This is the pre-determined Foreign Exchange Transaction expires. We use the cut-off time Exchange Rate that is agreed to in certain Foreign of 3 P.M. in Tokyo (UTC/GMT +9), unless we state Exchange Options that you will be obliged to use in otherwise. conducting a Foreign Exchange Transaction if certain conditions are met. Foreign Exchange - The conversion of one currency to another at an agreed upon Foreign Exchange Rate. Budget Rate - This is the pre-determined Foreign Exchange Rate that is agreed to in certain Structured Foreign Exchange Rate - The price of one currency Options that you will be obliged to use in conducting a (base currency) in terms of another currency (foreign Foreign Exchange Transaction if certain conditions are currency). For example, the Foreign Exchange Rate met. AUD/USD .6285 means one Australian dollar (base currency) is equal to 62.85 US cents (foreign currency) Business Day - a day on which banks are open for after taking into account AFEX’s own profit mark-up. general banking business in all jurisdictions involved in a Foreign Exchange Transaction, including the Foreign Exchange Transaction – An agreement jurisdiction of each of the currencies involved in the between you and us to exchange different currencies at Foreign Exchange Transaction. an agreed Foreign Exchange Rate, and includes Spot Value Contracts, Value Today Contracts, Value Call Option - A Vanilla Option to buy one currency at a Tomorrow Contracts, Outright Forward Contracts, pre- determined price within a pre-determined time Window Forward Contracts, Vanilla Options and frame. Structured Options. Collar Option - A Structured Option which allows you to Forward Extra Option – A Structured Option which protect against the risk that the Spot Rate will be less provides guaranteed Worst Case Rate and also allows favourable than a nominated Worst Case Rate. It also you to fully participate in favourable exchange rate gives you the ability to participate in favourable movements, provided the currency pair has not traded movements in the spot market between your Worst at or above a pre-specified Barrier Level. Case Rate and a pre-determined Best Case Rate. Forward Points – The difference between the Foreign Client Money Rules – All laws and regulations Exchange Rates of a Spot Value Contract and foreign applicable to client money including but not limited to exchange contracts of other Value Dates - calculated Part 7.8 of the Corporations Act 2001 (Cth) and the using the interbank interest rates of the currencies Corporations Regulations 2001 (Cth) as amended from involved in the Foreign Exchange Transaction. Forward time to time. points can be negative or positive depending on those Deal Rate - An option specific term referring to the prevailing interbank interest rates. Foreign Exchange Rate that you would be trading at if GBP – British Pound Sterling. the Option or Structured Option contract you had entered into expired on that day. Interbank Market Exchange Rate - The rate at which

Page 25 of 27

Product Disclosure Statement June 2021

top-level banks exchange currencies between each a margin call, that we may require from you if you other. have an open Foreign Exchange Transaction and we consider that your position is exposing us to risk. For Interest Rate Differentials – A factor used in calculating example, if the Foreign Exchange Rate of one or more a Foreign Exchange Rate for a Forward Contract, which of your contracts is 10 per cent less favourable than the involves looking at the difference in interest rates prevailing Spot Exchange Rate or Foreign Exchange Rate, between the base currency and the foreign currency. we may ask you to pay a Margin Amount an Additional Issuer – AFEX. Partial Prepayment.

Knock-Out Forward - A Structured Option that provides Notional Amount – A pre-agreed amount in a Foreign a potential enhanced Strike Rate for future exchange Exchange Transaction that you may be obliged to requirements. However, if the Spot Rate breaches the transact at, if certain conditions are met. pre-determined Knock-Out Level at any time during the Outright Forward Contracts --A Foreign Exchange Knock-Out Period, the trade ceases to exist and there Transaction by which you exchange one currency for are no obligations on either party. another at a specified and agreed Foreign Exchange Knock-Out Forward Extra - A Structured Option that Rate for a Value Date between three Business Days and provides a potential enhanced Strike Rate for future one year after the Trade Date and having a fixed future exchange requirements with the opportunity to date as the Value Date. participate in favourable exchange rate movements, Participating Forward Option – A Structured Option provided the currency pair has not breached a pre- that allows you to set a Worst case Rate but also gives specified Barrier Level during the Barrier Period. If the you an opportunity to profit if the Foreign Exchange Barrier Level has been breached at any time during the Rate moves higher than the Worst case Rate, by giving Barrier Period, you will be obliged to trade the full you the option to trade some of your contract value Notional Amount at the known Strike Rate. at the higher and more favourable Spot Rate. Furthermore, if the Spot Rate breaches the pre- determined Knock-Out Level at any time during the PDS – Product Disclosure Statement. Knock-Out Period, the trade ceases to exist and there Premium – A non-refundable fee that you pay if you are no obligations on either party. purchase a Vanilla Option or a Structured Option Knock-Out Level – A pre-determined Foreign Exchange (unless it is described as “zero cost’) from us. The Rate which, if triggered, will result in the trade ceasing Premium is payable regardless of whether you exercise to exist and neither party having obligations. the option. Knock-Out Period - The period commencing at the Protection Rate - The pre-determined Foreign execution of the relevant contract and ending at the Exchange Rate that is agreed to in certain Foreign Expiry Time on the contract’s agreed end date. Exchange Transactions that you will be obliged to use in conducting a Foreign Exchange Transaction if certain Knock-Out Ratio Forward - A Structured Option that conditions are met. provides a potential enhanced Strike Rate for future exchange requirements. The amount you may be Put Option – A Vanilla Option allowing the buyer to sell required to exchange is dependent upon where the one currency at a pre-determined price within a pre- Spot Rate is on expiry. Furthermore, if the market level determined time frame. breaches the pre-determined Knock-Out Level at any Ratio Amount – A pre-agreed amount in a Structured time during the Knock- Out Period, the trade ceases to Option that you may be obliged to transact at, if certain exist and there are no obligations on either party. conditions are met. Knock-Out Ratio Forward Extra - A Structured Option Ratio Forward – A Structured Option that provides a that provides a potential enhanced Strike Rate for potential enhanced Strike Rate for future exchange future exchange requirements with the opportunity to requirements which is better than the prevailing participate in favourable exchange rate movements, Forward Rate. The amount you may be required to provided the currency pair has not breached a pre- exchange is dependent upon where the Spot Rate is on specified Barrier Level. If the Barrier Level is breached expiry. at any time during the Barrier Period, then you will be required to exchange the Ratio Amount at the Strike Ratio Forward Extra - A Structured Option that Rate. However, if the Knock-Out Level is breached the provides a potential enhanced Strike Rate for future trade ceases to exist: there are no obligations on either exchange requirements with the opportunity to party and you are unhedged. participate in favourable exchange rate movements, provided the currency pair has not breached a pre- Margin Amount Additional Partial Prepayment – An specified Barrier Level. If the Barrier Level is breached amount of money, also known as a margin deposit or at any time during the Barrier Period, then you will be

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Product Disclosure Statement June 2021

required to exchange the Ratio Amount at the Strike Trade Date. Rate. Value Tomorrow Contracts - A Foreign Exchange Relationship Manager - The primary point of contact Transaction to exchange different currencies at a assigned to you or your business, if you are a client of specified and agreed foreign exchange rate 1 Business AFEX. Relationship Managers are our employees, and Day after the Trade Date. will act on our behalf as the issuer of the products Vanilla Option - A Foreign Exchange Transaction that described in this PDS. gives the buyer the right but not the obligation to Spread – The difference between the price at which a exchange one currency for another at a pre-determined foreign exchange dealer will buy and sell a currency (the rate for a pre- determined price. ‘bid’ versus the ‘ask’). Window Forward Contracts - A Foreign Exchange Spot Exchange Rate – The exchange rate taken from the Transaction by which you exchange one currency for Interbank Market Exchange Rate which includes AFEX’s another at a specified and agreed Foreign Exchange own profit mark-up for settlement on a Value Date up Rate for a Value Date between three Business Days and to two Business Days from the date the transaction was one year after the Trade Date and which allows you to entered. access your foreign currency at any time within the Window Period. Spot Value Contract – A Foreign Exchange Transaction which is an agreement between you and us to exchange Window Period - The period during which you may elect one currency for another at an agreed Foreign Exchange an earlier settlement date for all or parts of the contract Rate and the currency is delivered to you or your for a Window Forward Contract. nominated beneficiary typically within two Business Worst Case Rate – The pre-determined Foreign Days (this is known as T+2) after the Trade Date. Exchange Rate that is agreed to in certain Structured Spot Value Date - A day that is two Business Days after Options that you will be obliged to use in conducting a the Trade Date for a Spot Value Contract. Foreign Exchange Transaction if certain conditions occur. Strike Rate – The fixed price at which the buyer of a Vanilla Option has the right to purchase or sell a currency and the seller of a Vanilla Option has the obligation to sell or purchase the currency. It is applicable to Structured Options to the extent that a Vanilla Option has been included in the combination of foreign exchange products. Structured Option – A combination of foreign exchange products that are bundled together and could include options that are bought, sold, or both. Generally, if you sell an option contract, you are entitled to an amount of money for that sale. If you buy an option contract, you are obliged to pay an amount of money for that purchase. Accordingly, some Structured Options are “zero cost” because you are buying and selling option contracts and the costs and benefits cancel each other out. Trade Date - The date on which you order a Foreign Exchange Transaction. USD – United States Dollar.

Value Date – The date that the currency you have purchased physically settles in your account, or your beneficiaries account for Spot Contracts, Value Today Contracts, Value Tomorrow Contracts, Outright Forward Contracts or a date you have specified for individual draw downs on Window Forward Contracts. Value Today Contracts - A Foreign Exchange Transaction to exchange different currencies at a specified and agreed foreign exchange rate on the same day as the

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