Benchmark 1: Client Qualification
ThinkForex operates a client qualification policy that is intended to ensure that new Australian resident clients are adequately qualified to trade in any product offered through ThinkForex.
In order to be deemed sufficiently qualified to trade with ThinkForex, potential clients must prove that they are able to satisfy one of the three following criteria:
- Have sufficient trading experience; or
- Pass a multiple choice quiz designed to test the extent of their knowledge in trading and financial markets; or
- Complete a training course that meets the minimum requirements.
1. Sufficient Trading Experience
In order to establish that an individual has had sufficient trading experience, potential clients must prove all of the following. That they:
- Have operated, within the past three (3) years, an OTC margin forex or CFD account, through an **ASIC regulated provider similar to ThinkForex*; and
- Have had at least two months of trading experience; and
- Operated as an active trader**.
If a potential client fails to completely satisfy all three of the above criteria, then they either attempt the quiz (part 2) or attend a training course (part 3)
2. Multiple-choice quiz:
n order to qualify as a potential client for ThinkForex, you must record a pass score (of 70% or greater). The quiz consists of 10 (ten) multiple choice questions, with at least one correct answer required from each of the following sections:
- Previous experience in investing in financial instruments, including securities and derivatives.
- Understanding of the concepts of leverage, margins and volatility.
- Understanding of the nature of CFD trading.
- Understanding of the processes and technologies used in trading.
- Preparedness to monitor and manage the risks of trading.
- ThinkForex has a large pool of suitable questions for each category from which the quiz questions are selected. These questions are altered each time the quiz is taken.
If a mark of 70% or greater is achieved, you will be deemed qualified to trade through ThinkForex. If a pass grade is not achieved, then you will be required to complete a training course, as per part 3.
3. Training Course:
To be deemed eligible to trade with ThinkForex, an individual must undertake and complete a training course that satisfies the following criteria:
- A duration of 8-16 hours
- If the course does not meet the minimum time required, then it will be deemed an insufficient qualification
- Regulated by **ASIC
- The provider must operate under an **AFSL that allows them to provide general financial product advice.
- Provides ongoing support and coaching for a minimum 6 (six) week period.
- You must provide ThinkForex with a copy of your certificate of completion.
If a training course fulfills all three of the above requirements, then an individual will be deemed qualified to trade with ThinkForex.
If you cannot fully satisfy one of the aforementioned elements, then you will not be considered qualified to be a client with ThinkForex.
* Call ThinkForex for clarification regarding the eligibility of your provider.
** To be considered ‘actively operating’ as a trader, you must have made at least 20 trades during the time that your account has been open, and you must be assessed for compliance by providing your trading statement to ThinkForex.
Benchmark 2: Opening Collateral
The minimum opening balance requirement for all ThinkForex accounts is $250 AUD.
ThinkForex provides credit card funding for the ease of providing secure electronic payment system to its clients. This is used for both instantaneously funding accounts and meeting margin calls.
ThinkForex does not encourage the use of leverage products with borrowed funds.
ThinkForex does not accept “cash equivalents” as opening collateral (e.g. no securities as deposits).
ThinkForex has chosen not to comply with **ASIC’s suggested benchmark on Opening Collateral requirements, which suggest limiting initial funding by credit card to a maximum of $1000.
Benchmark 3: Counterparty risk (hedging)
ThinkForex may not execute a trade directly with a third party (Straight Through Processing) and instead, we will set the price at which we are willing to deal with you. ThinkForex implements controls to ensure that the procedures it adopts when managing exposure to market risk are followed.
ThinkForex may decide to ‘hedge’ trades by passing exposure to one of our counterparties based on a number of criteria. ‘Hedging’ refers to the process where a financial service provider such as ThinkForex reduces or removes its exposure to market risk by entering into a corresponding transaction with another entity. The purpose of this hedging is to mitigate market and trade risk. A decision to hedge all or some exposure will largely be based on the following criteria:
- Volume: this can be the size of an individual trade, the overall trading volume of an account or if the overall exposure on a single instrument exceeds our risk tolerance.
- Trading performance: The overall performance of a trading account in terms of profit/loss and trading style.
- Account balance: The size of the account may indicate a need to hedge all or some trades regardless of account performance.
- Toxic trading: Accounts which trade using methods that are deemed to be problematic in nature such as arbitrage/latency trading.
- Market conditions: Overall market conditions and volatility can influence a decision to hedge more or less, similarly economic conditions in a single country/region can impact on the risk appetite related to a group of instruments.
ThinkForex ensures that the counterparties, with which it transacts to hedge client trades, are of appropriate financial standing. ThinkForex only hedges its positions through prime brokers that hold a minimum capital of 10 million USD (equivalent) and are regulated under either ASIC , FCA or a Central Bank in their country of origin.
ThinkForex’s Prime Brokerage accounts are with Forex Capital Markets Ltd (regulated by the Financial Conduct Authority in the United Kingdom), Saxo Capital Markets (Australia) Pty Ltd (regulated by the Australian Securities and Investments Commission in Australia), Capital Market Services UK Ltd (regulated by the Financial Conduct Authority in the United Kingdom), ADS Securities LLC (licenced by the Central Bank of the United Arab Emirates) and LMAX Limited (regulated by the Financial Conduct Authority in the United Kingdom). We may change our counterparties regularly and without notice.
Benchmark 4: Counterparty risk (Financial resources)
Monthly financial reports are prepared to ensure compliance with ThinkForex’s **AFSL Conditions and the financial requirements which are contained in **ASIC Regulatory Guide 166.
An annual financial audit is also conducted by an **ASIC approved auditor.
Stress testing of capital adequacy
The capital requirements and surplus position of ThinkForex is monitored on a daily basis. ThinkForex’s risk exposure that our clients face is calculated by our position keeper and reconciliation software in real time. This software is monitored by risk management staff, 24 hours a day, 5 days a week at all times whilst the foreign exchange markets are operating. Our free margin levels with our hedging counterparties are displayed at all times, showing how much market movement or increase in client position size can be sustained with the current level of funds.
Daily stress testing is conducted and alerts have been established at pre-defined levels to ensure that appropriate remedial action is taken in the event of market movements that are adverse to ThinkForex’s financial position.
Benchmark 5: Client Money
This document has been produced by ThinkForex to explain how client money is handled. The purpose is to provide clients with an insight into how client money is reconciled and segregated so that they are better informed to assess the safety of their funds in relation to other financial product providers. All client free margin* is held with National Australian Bank (NAB) and Commonwealth Bank of Australia (CBA), all of which are Australian Authorised Deposit-taking Institutions (ADIs).
When a client’s free equity falls below 50% of margin requirement, the client’s open positions will be instantly closed out. This helps ensure that the one client’s funds are not used to fund the positions of other clients.
ThinkForex creates an individual trading account for each client, which allows a complete record of transactions to be maintained, so that every client account is monitored and followed. Any default or outstanding payment is immediately followed up, to ensure that the client account stays in balance.
The Compliance Officer will ensure that all unencumbered client funds are placed in segregated trust accounts and invested in accordance with the Australian Client Money Rules, **ASIC Regulatory Guide 212 (titled ‘Client money relating to dealing in OTC derivatives’) and **ASIC Regulatory Guide 227, where appropriate. We ensure that reconciliations of client monies are conducted and reviewed on a daily basis.
*Free Margin is the amount of funds not in use as margin requirements for holding open positions. For example, If you have equity of $1,000 on your account and the total margin requirements are $250, the free margin amount is $750.
Benchmark 6: Suspended or halted underlying assets
Foreign exchange markets trade continuously. They open at 05:00pm American EST* Sunday evening (Monday morning 11 am AEST) and close at 05:00pm, American EST** on Friday (Saturday morning 11 am AEST). They are open 24 hours during this period.
Prices are continuously streamed during this period. Because foreign exchange is not an exchange-traded product, it is not possible to suspend or halt the streaming of these prices.
For our futures, commodities and index products, ThinkForex will halt client trading and the use of client money in an asset or derivative when a trading halt exists for the underlying asset, or trading in the underlying asset has been suspended through an exchange or otherwise.
* Eastern Standard Time (America)
Benchmark 7: Margin Calls
ThinkForex provides all clients with the option of applying a ‘stop loss’ on any order they place, in order to prevent losses exceeding their desired maximum loss on a position. This does not guarantee that a ‘stop loss’ order will be executed at the desired ‘stop loss’ price.
Furthermore, when a client’s free equity falls below 50% of free initial margin requirement, the client’s open positions will be instantly closed out, reducing the likelihood that clients enter negative equity.