Active – Day Trading Disclosure
Active trading, or day trading, can be extremely risky. Day trading on margin or short selling may result in losses beyond your initial investment. You should consider the following points before engaging in an active trading strategy. For purposes of this notice, a “day trading strategy” means an overall trading strategy characterized by the regular transmission by a customer of intra-day orders to effect both purchase and sale transactions in the same security or securities.
Day trading can be extremely risky
Day trading generally is not appropriate for someone of limited resources and limited investment or trading experience and low risk tolerance. You should be prepared to lose all of the funds that you use for day trading. In particular, you should not fund day-trading activities with retirement savings, student loans, second mortgages, emergency funds, funds set aside for purposes such as education or home ownership, or funds required to meet your living expenses. Further, certain evidence indicates that an investment of less than $50,000 will significantly impair the ability of a day trader to make a profit. Of course, an investment of $50,000 or more will in no way guarantee success.
Be cautious of claims of large profits from day trading
You should be wary of advertisements or other statements that emphasize the potential for large profits in day trading. Day trading can also lead to large and immediate financial losses.
Day trading requires knowledge of securities markets
Day trading requires in-depth knowledge of the securities markets and trading techniques and strategies. In attempting to profit through day trading, you must compete with professional, licensed traders employed by securities firms. You should have appropriate experience before engaging in day trading.
Day trading requires knowledge of a firm’s operations
You should be familiar with a securities firm’s business practices, including the operation of the firm’s order execution systems and procedures. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a stock suddenly drops, or if trading is halted due to recent news events or unusual trading activity. The more volatile a stock is, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to system failures.
Day trading will generate substantial commissions, even if the per trade cost is low
Day trading involves aggressive trading, and generally you will pay commissions on each trade. The total daily commissions that you pay on your trades will add to your losses or significantly reduce your earnings. For instance, assuming that a trade costs $16 and an average of 29 transactions are conducted per day, an investor would need to generate an annual profit of $111,360 just to cover commission expenses.
Day trading on margin or short selling may result in losses beyond your initial investment
When you day trade with funds borrowed from a firm or someone else, you can lose more than the funds you originally placed at risk. A decline in the value of the securities that are purchased may require you to provide additional funds to the firm to avoid the forced sale of those securities or other securities in your account. Short selling as part of your day-trading strategy also may lead to extraordinary losses, because you may have to purchase a stock at a very high price in order to cover a short position.
Potential Registration Requirements
Persons providing investment advice for others or managing securities accounts for others may need to register as either an “Investment Advisor” under the Investment Advisors Act of 1940 or as a “Broker” or “Dealer” under the Securities Exchange Act of 1934. Such activities may also trigger state registration requirements.
I understand that, whether I place a market or limit order, I will receive the price at which my order is executed in the marketplace. Particularly during periods of high volume, illiquidity, fast movement or volatility in the marketplace, the execution price received may differ from the quote provided on entry of an order, and I may receive partial executions of an order at different prices. I understand that Arive Capital Markets is not liable for any such price fluctuations. I also understand that price quotes generally are for only a small number of shares as specified by the marketplace, and larger orders are relatively more likely to receive executions at prices that vary from the quotes or in multiple lots at different prices. Securities may open for trading at prices substantially higher or lower than the previous closing price or the anticipated price. If I place a market order (whether during normal market hours or when the market is closed), I agree to pay or receive the prevailing market price at the time my market order is executed. I understand that the price I pay may be significantly higher or lower than anticipated at the time I placed the order. To avoid buying a security at a higher price and possibly exceeding my buying power, or selling it at a lower price than I desire, I understand my option is to enter a limit order. I also understand that limit orders may not be executed at any particular time, or at all if there is not sufficient trading at or better than the limit price I specify.
In a fast market (i.e., when there is a sudden increase in demand or supply of shares in a particular security), the bid and ask prices of securities may change rapidly. Although all securities have the potential to be exposed to fast market conditions, securities of companies that have recently made initial public offerings (IPOs) may be particularly prone to price volatility. For example, if I place market orders for securities issued as part of an IPO where securities have recently begun trading in the secondary market, I understand that there is substantial risk of receiving execution that is substantially away from the market price at the time I placed the order. As a result of these fast market or volatile market conditions, large order imbalances, system queues, high volume of orders or trading, Internet communications delay, system outages and capacity limitations, there may be delays in the entry and execution of my orders. Therefore, the price of the securities that I want to trade may change significantly between the time I obtain a price quote and placement of my order and the time of order execution.
I understand that options trading is highly speculative and contains a high degree of risk and that options trading is not suitable for all investors. I agree that prior to completing the “Options” section of the Account Application; I will carefully review and consider my financial situation, risk tolerance and investment objectives. I will only apply for an Options Account if, based on that review, I am fully prepared financially to undertake such risks, withstand any and all losses incurred, including total loss of premium, plus transaction costs. I understand that Arive Capital Markets reserves the right to terminate or restrict my options trading privileges if it determines that my trading activities or option positions present a risk to Arive Capital Markets.
Uncovered Options Disclosure
There are special risks associated with uncovered options writing which expose the investor to potentially significant loss. Therefore, this type of strategy may not be suitable for all customers approved for options transactions.
o The potential loss of uncovered call writing is unlimited. The writer of an uncovered call is in an extremely risky position and may incur large losses if the value of the underlying instrument increases above the exercise price.
o As with writing uncovered calls, the risk of writing uncovered put options is substantial. The writer of an uncovered put option bears a risk of loss if the value of the underlying instrument declines below the exercise price. Such loss could be substantial if there is a significant decline in the value of the underlying instrument.
o Uncovered options writing is thus suitable only for the knowledgeable investor who understands the risks, has the financial capacity and willingness to incur potentially substantial losses and has sufficient liquid assets to meet applicable margin requirements. In this regard, if the value of the underlying instrument moves against an uncovered writer’s options position, the investor’s broker may request significant additional margin payments. If an investor does not make such margin payments, the broker may liquidate stock or options positions in the investor’s account without notice to the investor in accordance with the investor’s margin agreement.
o For combination writing, where the investor writes both a put and a call on the same underlying instrument, the potential risk is unlimited.
o If a secondary market in options were to become unavailable, investors could not engage in closing transactions and an options writer would remain obligated until expiration or assignment.
o The writer of an American-style option is subject to being assigned an exercise anytime after he has written the option until the option expires. By contrast, the writer of a European-style option is subject to exercise assignment only during the exercise period.
o More information about uncovered options sales is available in the chapter entitled “Risks of Buying and Writing Options” contained in the “Characteristics and Risks of Standardized Options” document. This statement is not intended to enumerate all of the risks entailed in writing uncovered options.
Bulletin Board/Pink Sheet Stocks
Bulletin board, pink sheet and other thinly-traded securities (”bulletin board stocks”) present particular trading risks, in part because they are relatively less liquid and more volatile than actively traded securities listed on a major exchange or NASDAQ. I understand that bulletin board stocks may be subject to different trading rules and systems than other securities and that I may encounter significant delays in executions, reports of executions and updating of quotations in trading bulletin board stocks. Arive Capital Markets in its sole discretion may require limit orders on certain bulletin board stock transactions. The Market Data supplied by Arive Capital Markets regarding bulletin board stocks is updated from time to time, but may not be current at any given point in time.
Arive Capital Markets is furnishing this document to you to provide some basic facts about purchasing securities on margin, and alert you to the risks involved with trading securities in a margin account. Before trading stocks in a margin account you should carefully review the margin agreement provided by Arive Capital Markets. Please consult an Arive Capital Markets representative regarding any questions or concerns you may have with your margin account.
IT IS IMPORTANT THAT YOU FULLY UNDERSTAND THE RISKS INVOLVED IN TRADING SECURITIES ON MARGIN, INCLUDING:
You can lose more funds than you deposit in the margin account
A decline in the value of securities that are purchased on margin may require you to provide additional funds to the firm that has made the loan to avoid the forced sale of those securities or other securities in your account.
The firm can force the sale of securities in your account
If the equity in your account falls below the maintenance margin requirements under the law or the firm’s higher “house” requirements, the firm can sell the securities in your account to cover the margin deficiency. You also will be responsible for any shortfall in the account after such a sale.
The firm can sell your securities without contacting you
Some investors mistakenly believe that a firm must contact them for a margin call to be valid, and that the firm cannot liquidate securities in their accounts to meet the call unless the firm has contacted them first. This is not the case. Most firms will attempt to notify their customers of margin calls but they are not required to do so. However, even if a firm has contacted a customer and provided a specific date by which the customer can meet a margin call the firm can still take necessary steps to protect its financial interests, including immediately selling the securities without notice to the customer. You are not entitled to choose which security in your account should be liquidated to meet a margin call. Because the securities are collateral for the margin loan, the firm has the right to decide which security to sell in order to protect its interests.
The firm can increase its “house” maintenance margin requirements at any time
The firm is not required to provide you with advance written notice. These changes in firm policy often take effect immediately and may result in the issuance of a maintenance margin call. Your failure to satisfy the call may cause the member to liquidate or sell the securities in your account.
You are not entitled to an extension of time on a margin call
While an extension of time to meet margin requirements may be available to customers under certain conditions a customer does not have a right to the extension.
Arive Capital Markets(“ACM”) believes you should understand how we treat our customers’ nonpublic personal information, and how we use this information to provide products and services to you at your request. This notice, which you should read carefully, addresses our privacy policies and practices at Arive Capital Markets.
What information do we collect?
We collect nonpublic personal information about you from the following sources:
o Information we receive from you on applications or other forms (i.e., name, address, Social Security number)
o Information about your transactions with us, our affiliates, or others (i.e., to verify account balance and to check on deposits sent to our clearing firm); and
o Information we receive from you through correspondence (i.e., mail, faxes, electronic correspondence, etc.).
What information do we disclose?
WE DO NOT DISCLOSE ANY NONPUBLIC PERSONAL INFORMATION ABOUT YOU TO ANYONE, EXCEPT AS PERMITTED BY LAW. In addition, ACM does not sell or lease any nonpublic personal information about you to anyone. We may disclose any nonpublic personal information, as permitted by law, to effect, service, administer or process a transaction, product or service you have authorized or requested; to protect against fraud, liability or damages to property; to respond to judicial process; or in connection with settling a transaction.
Who may we disclose your information to?
We disclose nonpublic personal information under circumstances described above in paragraph 2 to the following parties:
o Clearing Firm: Axos Clearing LLC.; and
o Nonaffiliated third parties as permitted by law.
How do we treat inactive or closed accounts?
If you decide to close your account(s) or become an inactive customer, we will adhere to the privacy policies and practices as described in this notice.
Will you be able to opt-out of information that we provide to our affiliate and nonaffiliated third parties
We disclose nonpublic personal information only when it is both permitted by law and required for the ordinary course of business. Therefore, you will not be able to opt-out of the disclosure of nonpublic personal information that we provide to our affiliate and nonaffiliated third parties.
Revised Policy Notices
If we decide to change our privacy policy, we will notify you immediately by providing you with a copy of our revised privacy policy.
Confidentiality and Security
We restrict access to nonpublic personal information about you to those employees who need to know that information to provide products or services to you. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
Anti-Money Laundering Disclosure
Important Information You Need to Know About Opening a New Account
To help the U.S. government fight the funding of terrorism and money laundering activities, Federal law requires all U.S. financial institutions to obtain, verify, and record information that identifies each individual or institution that opens an account or establishes a customer relationship.
THIS NOTICE PROVIDES INFORMATION ABOUT CUSTOMER IDENTIFICATION
What types of information will I need to provide?
When you open an account, your firm is required to collect the following information:
o Name
o Date of birth
o Address
o Identification number
• U.S. citizen: taxpayer identification number (Social Security number or employer identification number); You may also need to show your driver’s license or other identifying documents.
• Non‐U.S. citizen: taxpayer identification number; passport number and country of issuance; alien identification card number; or government‐issued identification showing nationality, residence and a photograph of you.
A corporation, partnership, trust or other legal entity may need to provide other information, such as its principal place of business, local office, employer identification number, certified articles of incorporation, government‐issued business license, a partnership agreement or a trust agreement. U.S Department of the Treasury, Securities and Exchange Commission, FINRA and New York Stock Exchange rules already require you to provide most of this information. These rules also may require you to provide additional information, such as your net worth, annual income, occupation, employment information, investment experience and objectives and risk tolerance.
What happens if I don’t provide the information requested or my identity can’t be verified?
Your firm may not be able to open an account or carry out transactions for you. If your firm has already
opened an account for you, they may have to close it.
Business Continuity Plan Disclosure
Arive Capital Markets has developed a Business Continuity Plan on how we will respond to events that significantly disrupt our business. Since the timing and impact of disasters and disruptions is unpredictable, we will have to be flexible in responding to actual events as they occur. With that in mind, we are providing you with this information on our business continuity plan.
Contacting Us
If after a significant business disruption you cannot contact us as you usually do at 718.887.9911 or support@arivecapital.com, you should go to our website at www.arivecapital.com for an alternative telephone number and/or email address. If you cannot access us through either of those means, you should contact our clearing firm, Axos Clearing, LLC, at www.axosclearing.com for instructions on how the disruption will affect your prompt access to your funds and securities.
Our Business Continuity Plan
We plan to quickly recover and resume business operations after a significant business disruption and respond by safeguarding our employees and property, making a financial and operational assessment, protecting the firm’s books and records, and allowing our customers to transact business. In short, our business continuity plan is designed to permit our firm to resume operations as quickly as possible, given the scope and severity of the significant business disruption.
Our business continuity plan addresses: data back up and recovery; all mission critical systems; financial and operational assessments; alternative communications with customers, employees, and regulators; alternate physical location of employees; critical supplier, contractor, bank and counter-party impact; regulatory reporting; and assuring our customers prompt access to their funds and securities if we are unable to continue our business.
Our clearing firm, Axos Clearing LLC., backs up our important records in a geographically separate area. While every emergency situation poses unique problems based on external factors, such as time of day and the severity of the disruption, we have been advised by our clearing firm that its objective is to restore its own operations and be able to complete existing transactions and accept new transactions and payments within 4 hours. Your orders and requests for funds and securities could be delayed during this period.
Varying Disruptions
Significant business disruptions can vary in their scope, such as only our firm, a single building housing our firm, the business district where our firm is located, the city where we are located, or the whole region. Within each of these areas, the severity of the disruption can also vary from minimal to sever. In a disruption to only our firm or a building housing our firm, we will transfer our operations to a local site when needed and expect to recover and resume business within 15 minutes. In a disruption affecting our business district, city, or region, we will transfer our operations to a site outside of the affected area, and recover and resume business within 4 hours. In either situation, we plan to continue in business, transfer operations to our clearing firm if necessary, and notify you through our website www.arivecapital.com, by telephone, or by email. If the significant business disruption is so severe that it prevents us from remaining in business, we will assure our customer’s prompt access to their funds and securities.
For More Information
If you have questions about our business continuity planning, you can contact us at:
Telephone: 718.887.9911
Email: support@arivecapital.com