PRIIPs Overview

BACKGROUND
In 2018, an EU regulation, intended to protect “Retail” clients by ensuring that they are provided with adequate disclosure when purchasing certain products took effect. This regulation is known as the Packaged Retail and Insurance-based Investment Product Regulation (MiFID II, Directive 2014/65/EU), or PRIIPs, and it covers any investment where the amount payable to the client fluctuates because of exposure to reference values or to the performance of one or more assets not directly purchased by such retail investor. Common examples of such products include options, futures, CFDs, ETFs, ETNs and other structured products.

It’s important to note that a broker cannot allow a Retail client to purchase a product covered by PRIIPs unless the issuer of that product has prepared the required disclosure document for the broker to provide to the client. This disclosure document is referred to as a Key Information Document, or KID, and it contains information such as product description, cost, risk-reward profile and possible performance scenarios. U.S. clients are not impacted by PRIIPs, so the issuers of some of the more popular U.S. listed ETFs often elect not to create a KID. This means that EEA Retail client may not purchase the product.

CLIENT CATEGORISATION
IBKR categorises all individual clients as “Retail” by default as this affords clients the broadest level of protection afforded by MiFID. Client who are categorised as “Professional” do not receive the same level of protection as “Retail” but are not subject to the KIDs requirement. As defined under MiFID II rules, “Professional” clients include regulated entities, large clients and individuals who have asked to be re-categorised as “elective professional clients” and meet the MiFID II requirements based on their knowledge, experience and financial capability.

IB provides an online step-by-step process that allows “Retail” to request that their categorisation be changed to “Professional". The qualifications for re-categorisation along with the steps for requesting that one’s categorisation be considered are outlined in KB3298 or, to directly apply for a change in categorisation, the questionnaire, is available in the Client Portal/Account Management.
 

Interactive Brokers (U.K.) Limited – MiFID Categorisation

Introduction

The European Union legislative act known as the Markets in Financial Instruments Directive, or MiFID, as amended by MiFID II, requires Interactive Brokers (U.K.) Limited (IBUK) to classify each Client according to their knowledge, experience and expertise: "Retail", "Professional" or "Eligible Counterparty". 

In accordance with the Financial Conduct Authority rules, IBUK categorises most clients as Retail clients, providing them with a higher degree of protection.
 
Only those clients that are either regulated entities or funds managed by regulated fund managers, are categorised as Per Se Professional Clients.

The main differences in regulatory protections afforded to Professional Clients as compared with Retails Clients are:

1. Description of the nature and risks of packaged investments: A firm that offers an investment service with another service or product or as a condition of the same agreement with a retail client must: (i) inform retail clients if the risks resulting from the agreement are likely to be different from the risks associated with the components when taken separately; and (ii) provide retail clients with an adequate description of the different components of the agreement and the way in which its interaction modifies the risks. The above requirements do not apply in respect of professional clients. However, IBUK will not make such differentiation apart from the case specified under point 3 below.

2. Investor protection measures on the provision of Contracts for Differences (“CFDs”): The European Securities and Markets Authority (“ESMA”) introduced product intervention measures on the provision of CFDs to retail investors. The measures include: (i) New leverage limits on the opening of a position, which vary according to the volatility of the underlying; (ii) A margin close out rule on a per account basis that standardises the percentage of margin at which providers are required to close out one or more open CFDs; (iii) Negative balance protection on a per account basis;
(iv) A restriction on the incentives offered to trade CFDs; and (v) A standardised risk warning, including the percentage of losses on a CFD provider’s retail investor accounts.The above requirements do not apply in respect of professional clients.

3. Communication with clients: A firm must ensure that its communications with all clients are fair, clear and not misleading. However, the way in which a firm may communicate with professional clients (about itself, its services and products, and its remuneration) may be different from the way in which the firm communicates with retail clients. A firm’s obligations in respect of the level of details, medium and timing of the provision of information are different depending on whether the client is a retail or professional client. The requirements to deliver certain product-specific documents, such as Key Information Documents (“KID”) for Packaged Retail and Insurance-based Investment Products (“PRIIPs”), are not applied to professional clients.

4. Depreciation in value reporting: A firm that holds a retail client account that includes positions in leveraged financial instruments or contingent liability transactions must inform the retail client, where the initial value of each instrument depreciates by 10 per cent and thereafter at multiples of 10 per cent. The above requirements do not apply in respect of professional clients.

5. Appropriateness: When assessing appropriateness for non-advised services, a firm may be required to determine whether the client has the necessary experience and knowledge in order to understand the risks involved in relation to the product or service offered or demanded. Where such an appropriateness assessment requirement applies in respect of a client, the firm may assume that a professional client has the necessary experience and knowledge in order to understand the risks involved in relation to those particular investment services or transactions, or types of transaction or product, for which the client is classified as a professional client. A firm may not make such an assumption for a retail client and must determine that a retail client does have the necessary level of experience and knowledge.
 

IBUK provides non-advised services and is not required to request information or adhere to the assessment procedures for a professional client when assessing the appropriateness of a given service or product as with a retail client, and IBUK may not be required to give warnings to the professional client if it cannot determine appropriateness with respect to a given service or product. 

6. Exclusion of liability: Firms’ ability to exclude or restrict any duty or liability owed to clients is narrower under the FCA rules in the case of retail clients than in respect of professional clients.

7. The Financial Services Ombudsman: The services of the Financial Ombudsman Service in the UK may not be available to professional clients, unless they are, for example, consumers, small businesses or individuals acting outside of their trade, business, craft or profession.

8. Compensation: IBUK is a member of the UK Financial Services Compensation Scheme. You may be entitled to claim compensation from that scheme if IBUK cannot meet its obligations to you. This will depend on the type of business and the circumstances of the claim; compensation is only available for certain types of claimants and claims in respect of certain types of business. Eligibility for compensation from the scheme is determined under the rules applicable to the scheme.
 

Re-categorisation as Professional Client

IBUK allows its Retail Clients to request to be re-categorised as Professional Clients. Clients are notified of their Client Category and can check it at any time from Account Management, under Settings> Account Settings> MiFID Client Category. From this same screen, Clients can also request to change their MiFID Category.

IBUK will consider re-categorising Retail Clients to Professional Clients in two instances:

1. Per Se Professional Clients can notify IBUK that they consider that they should have been categorised as Per Se Professionals under the FCA rules, because at least one of the following conditions applies:

(i) authorised or regulated to operate in the financial markets; or

(ii) a large undertaking meeting two of the following size requirements on a company basis:

(a) balance sheet total of EUR 20,000,000;
(b) net turnover of EUR 40,000,000;
(c) own funds of EUR 2,000,000;

(iii) an institutional investor whose main activity is to invest in financial instruments. This includes entities dedicated to the securitisation of assets or other financing transactions.

2. IBUK may treat Clients as Elective Professional Clients if, based on an assessment of the Client’s expertise, experience, and knowledge, IBUK is reasonably assured that, in light of the nature of the transactions or services envisaged, the Client is capable of making its own investment decisions and understand the risks involved. Clients who do not meet the requirements to be categorised as Per Se Professional Clients can still request to be categorised as Elective Professional Clients.

To obtain such re-categorisation, Retail Clients must provide evidence that they satisfy at least two (2) of the following criteria:

1. Over the last four (4) quarters, the Client conducted trades in financial instruments in significant size at an average frequency of ten (10) per quarter.

To determine the significant size IBUK considers the following:

a. During the last four quarters, there were at least forty (40) trades; and
b. During each of the last four (4) quarters, there was at least one (1) trade; and
c. The total notional value of the top forty (40) trades of the last four (4) quarters is greater than EUR 200,000; and
d. The account has a net asset value greater than EUR 50,000.

Trades in Spot FX and Unallocated OTC Metals are not considered for the purpose of this calculation.

2. The Client holds a portfolio of financial instruments (including cash) that exceeds EUR 500,000 (or equivalent);

3. The Client is an individual accountholder or a trader of an organisation account who works or has worked in the financial sector for at least one year in a professional position which requires knowledge of products it trades in.

Upon review and verification of the information and supporting evidence provided, IBUK will re-categorise clients if all relevant conditions are met to satisfaction.

Retail Clients requesting to be re-categorised as Professional Accounts must read and understand the warning provided by IBUK before the relevant request is submitted.

Re-categorisation as Retail Client Professional Clients can request IBUK to be re-categorised as Retail Clients, from the same Account Management page described above (under Settings> Account Settings> MiFID Client Category).

With the sole exception of regulated entities or funds managed by regulated fund managers, which are categorised as Per Se Professional Clients, IBUK accepts all such requests.

THIS INFORMATION IS GUIDANCE FOR INTERACTIVE BROKERS FULLY DISCLOSED CLEARED CUSTOMERS ONLY.
NOTE: THE INFORMATION ABOVE IS NOT INTENDED TO BE A COMPREHENSIVE, EXHAUSTIVE NOR A DEFINITIVE INTERPRETATION OF THE REGULATION, BUT A SUMMARY OF IBUK’S APPROACH TO CLIENT CATEGORISATION AND RE-CATEGORISATION POLICY.

 

 

Information Regarding Australian Regulatory Status Under IB Australia

Introduction
Australian resident customers maintaining an account with Interactive Brokers Australia Pty Ltd (IB
Australia), which holds an Australian Financial Services License, number 453554, are initially
classified as a retail investor, unless they satisfy one or more of the requirements to be classified as a
wholesale or professional investor according to the relevant provisions of the Corporations Act 2001.
This article outlines how this process is handled by IB Australia.

Australian Regulatory Status
All new customers of IB Australia default to being classified as a retail investor unless they produce to
IB Australia the required documentary evidence to allow IB Australia to treat them as a wholesale or
professional investor. Investors of IB Australia will only have their regulatory status change from
retail investor to either wholesale or professional investor subsequent to the required
documentation being received and approved by IB Australia.

What is a Wholesale Investor?
The most common way to be classified as a wholesale investor is to obtain a qualified accountant’s
certificate stating that you have net assets or net worth of at least $2.5 million AUD OR have a gross
annual income of at least $250,000 AUD in each of the last two financial years. The qualified
accountant’s certificate is only valid for two years before it needs to be renewed. We have prepared a
wholesale investor booklet, including a pro forma certificate for your accountant to complete, that
can be downloaded [here].

What is a Professional Investor?
In order to qualify as a professional investor, you must have an AFSL, be a body regulated by APRA,
be a superannuation fund (but not a SMSF) and/or have net worth or liquid net worth of at least $10
million AUD. If you meet one of these criteria, you will need to complete and submit to IB Australia
the professional investor declaration contained within the professional investor booklet that we have
prepared, which can be downloaded [here].

What about Self-Managed Super Funds (SMSF’s)?
The law governing the regulatory status of SMSF’s is somewhat of a grey area. As such, IB Australia
have decided to treat all SMSF’s as retail investors, notwithstanding that they may meet the
requirements to otherwise be classified as a wholesale or professional investor.

What about trusts?
For a trust to be considered as a wholesale investor, all trustees must be considered a wholesale
investor based on the tests described above.

Similarly, for a trust to be considered as a professional investor, all trustees must be considered a
professional investor based on the tests described above.

As a result, if at least one trustee is considered retail, the trust is considered a retail trust, regardless
of the status of any other trustees (if applicable).

Other

  • For a full list of the disclosure documents and legal terms which govern the services IB Australia will make available please refer to the IB website.
  • For further information on IB Australia, click on our Financial Services Guide.
  • For more information or assistance, please contact IB Investor Services.

 

Clearinghouse Restrictions on Cannabis Securities

Boerse Stuttgart and Clearstream Banking have announced that they will no longer provide services for issues whose main business is connected directly or indirectly to cannabis and other narcotics products.  Consequently, those securities will no longer trade on the Stuttgart (SWB) or Frankfurt (FWB) stock exchanges. Effective as of the 19 September 2018 close, IBKR will take the following actions:

  1. Force close any impacted positions which clients have not acted to close and that are not eligible for transfer to a U.S. listing; and
  2. Force transfer to a U.S. listing any impacted positions which clients have not acted to close and that are eligible for such transfer.

Outlined in the table below are impacted issues as announced by the Boerse Stuttgart and Clearstream Banking  as of 7 August 2018. This table includes a notation as to whether the impacted issue is eligible for transfer to a U.S. listing. Note that the clearinghouses have indicated that this list may not yet be complete and clients are advised to review their respective websites for the most current information.

ISIN NAME EXCHANGE U.S. TRANSFER ELIGIBLE? U.S. SYMBOL
CA00258G1037

ABATTIS BIOCEUTICALS CORP

FWB2 YES

ATTBF

CA05156X1087

AURORA CANNABIS INC

FWB2, SWB2 YES

ACBFF

CA37956B1013

GLOBAL CANNABIS APPLICATIONS

FWB2 YES

FUAPF

US3988451072

GROOVE BOTANICALS INC

FWB YES

GRVE

US45408X3089

INDIA GLOBALIZATION CAPITAL

FWB2, SWB2 YES

ICG

CA4576371062

INMED PHARMACEUTICALS INC

FWB2 YES

IMLFF

CA53224Y1043

LIFESTYLE DELIVERY SYSTEMS I

FWB2, SWB2 YES

LDSYF

CA56575M1086

MARAPHARM VENTURES INC

FWB2, SWB2 YES

MRPHF

CA5768081096

MATICA ENTERPRISES INC

FWB2, SWB2 YES

MQPXF

CA62987D1087

NAMASTE TECHNOLOGIES INC

FWB2, SWB2 YES

NXTTF

CA63902L1004

NATURALLY SPLENDID ENT LTD

FWB2, SWB2 YES

NSPDF

CA88166Y1007

TETRA BIO-PHARMA INC

FWB2 YES

TBPMF

CA92347A1066

VERITAS PHARMA INC

FWB2 YES

VRTHF

CA1377991023

CANNTAB THERAPEUTICS LTD

FWB2 NO  
CA74737N1042

QUADRON CANNATECH CORP

FWB2 NO  
CA84730M1023

SPEAKEASY CANNABIS CLUB LTD

FWB2, SWB2 NO  
CA86860J1066

SUPREME CANNABIS CO INC/THE

FWB2 NO  
CA92858L2021

VODIS PHARMACEUTICALS INC

FWB2 NO  

 IMPORTANT NOTES:

  • Note that the U.S. listings generally trade over-the-counter (PINK) and are denominated in USD not EUR thereby exposing you to exchange rate risk in addition to market risk.
  • Account holders maintaining PINK Sheet securities require United States (Penny Stocks) trading permissions in order to enter opening orders.
  • All users on accounts maintaining United States (Penny Stocks) trading permissions are required use 2 Factor login protection when logging into the account.

Legal Entity Identifier Overview

BACKGROUND

The Legal Entity Identifier (LEI) is a 20-digit reference code that uniquely identifies legally distinct entities engaging in financial transactions globally, and across markets and jurisdictions. The LEI system was developed by the G-20 in accordance with ISO standards and the issuers of LEIs, referred to as Local Operating Units (LOU), supply registration and renewal services. Providing a unique identifier for each legal entity (along with key reference information associated with the entity) participating in financial transactions is intended to promote transparency.

DTC, in collaboration with SWIFT, operate as the local (U.S.) source provider of LEIs and maintains a website for the assignment of new and search of existing LEIs.  See: http://www.gmeiutility.org/

 

SITUATIONS REQUIRING A LEI

In certain instances, brokers are required by regulation to report information regarding a client and include in that information a client identifier. For entities such as trusts and organizations, that identifier is referred to an a LEI. Examples of these reporting instances include the following:

CFTC Ownership and Control Reporting
MiFIR Transaction Reporting
China Stock Connect
EMIR reporting to trade repository

 

OBTAINING THE LEI

A LEI can be obtained by contacting an authorized LEI issuer, also referred to as a Local Operating Unit (LOU). The DTC, in collaboration with SWIFT, operates as a U.S. LOU and maintains a website for purposes of LEI registration and renewal. Note that LEI applicants can use the services of any accredited LOU and are not limited to using an LEI issuer in their own country.

In addition, as a service to its clients, IBKR will send an invite via Account Management to those who are required to obtain a LEI for trading or other regulatory reporting functions.  Through this invite, the client can authorize IBKR to request an LEI through DTC on an accelerated basis (3 business days) and debit the client's account for the application fee and the annual renewal fee thereafter.

PRIIP Order Reject Translations

Clients entering opening orders for products covered by the PRIIPs Regulation where the issuer has not provided the required disclosure documents or Key Information Documents (KIDS) will have their order rejected and will receive the following reject message1:

 

English

This product is currently unavailable to clients classified as 'retail clients'.

Note:  Individual clients and entities that are not large institutions generally are classified as 'retail' clients.

There may be other products with similar economic characteristics that are available for you to trade.

 

French

Ce produit n’est pas actuellement disponible pour les clients considérés comme des clients “Particuliers/de détail”. Remarque : les clients particuliers et entreprises de détail qui ne sont pas de larges établissements sont classifiés comme des clients “de détail”. 

D’autres produits aux caractéristiques similaires peuvent exister mais ne vous sont pas proposés au trading.

 

German

Dieses Produkt ist derzeit für Kunden, die als „Retail-Kunden” eingestuft werden, nicht verfügbar. Hinweis: Einzelkunden und Körperschaften, bei denen es sich nicht um große Institutionen handelt, werden grundsätzlich als „Retail”-Kunden bezeichnet. 

Es ist möglich, dass Ihnen andere Produkte mit ähnlichen wirtschaftlichen Merkmalen zum Handel zur Verfügung stehen.

 

Italian

Questo prodotto al momento non è disponibile per i clienti “retail”. Nota: i clienti privati e le organizzazioni di non grandi dimensioni sono in genere classificati come clienti “retail”.

Potrebbero esserci altri prodotti con simili caratteristiche disponibili per le negoziazioni.

 

Spanish

Este producto no está actualmente disponible para clientes clasificados como “clientes minoristas”. Nota: los clientes individuales y las entidades que no sean grandes instituciones son clasificados, generalmente, como clientes “minoristas”.

Podría haber otros productos con características económicas similares que estén disponibles para que usted opere en ellos.

 

Russian

На данный момент этот продукт недоступен для розничных клиентов.    Примечание: Частные лица и юридические структуры, не являющиеся крупными предприятиями, как правило, относятся к числу розничных клиентов.

Вам могут быть доступны другие продукты с похожими экономическими характеристиками.

 

Japanese

こちらの商品は現在「リテール・クライアント」として分類されるお客様にはご利用いただけません。注意:大きな機関ではない個人のお客様および事業体のお客様は、通常「リテール」クライアントとして分類されます。

似た経済特性を持つその他の商品で、お客様にお取引いただくことのできる商品がある可能性があります。

 

Chinese Simplified

该产品目前不适用于"零售客户"。 请注意:个人用户和非大型机构实体通常均被划分为"零售"客户。

可能有其他具有类似经济特征的产品适用于您的交易。

 

Chinese Traditional

該產品目前不適用於"零售客戶"。請注意: 個人用戶和非大型機構實體通常均被劃分為"零售"客戶。

可能有其他具有類似經濟特徵的產品適用於您的交易。

 

1 Please note that in the near future, Interactive Brokers will allow eligible Retail clients to elect to be treated as Professional clients, which will allow them to trade certain products that are not available to Retail clients. 

Generally, the ability to elect to be treated as a Professional client will be limited to clients with over 500,000 EUR account value.

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China Connect Northbound Investor ID Model

Background
In November 2017, the Securities and Futures Commission (SFC) and China Securities Regulatory Commission (CSRC) announced an agreement to introduce an investor identification regime for Northbound trading under Mainland-Hong Kong Stock Connect. This regime is intended to enhance regulatory surveillance of mainland-listed stock trading from Hong Kong and requires brokers to report the identity of clients submitting orders to either the Shanghai or Shenzhen Stock Exchange.  This regulation will be effective as of September 26, 2018.  Additional information is provided in the series of FAQs below.
 
What is the Stock Connect?
The Stock Connect is a collaboration between the Hong Kong, Shanghai and Shenzhen Stock Exchanges which allows international and Mainland Chinese investors to trade securities in each other's markets through the trading and clearing facilities of their home exchange.
 
What is Northbound trading?
Northbound trading refers to the trading of mainland-listed stocks (e.g., Shanghai and Shenzhen Stock Exchanges) from the Hong Kong Stock Exchange.
 
What information is being collected and reported?
The information collected and reported depends upon the client classification. In the case of individuals, the information is as follows:
  • Name in English and Chinese
  • ID issuing country/jurisdiction
  • ID type (Hong Kong ID card, ID card issued by the government authority of relevant country/region, passport, or any other official identity document e.g. driver's license)
  • ID number (number of ID document)
For Institutional investors, the information is as follows:
  • Entity name
  • Other official incorporation documents (IBKR will attempt to us the documents clients provided at the point of account opening, whenever possible).
  • Legal Entity Identifier (if you do not already have an LEI, you can order one through IBKR when requesting trading permissions for China Connect. Note that obtaining a LEI can take up to three days, is associated with an application fee imposed by the LEI issuing organization, and an annual renewal fee thereafter).
Each Northbound trading client will be assigned a Broker-to-Client Assigned Number (BCAN) which will be associated with the identification information collected and will be tagged to every Northbound order on a real-time basis.
 
Who is IBKR authorized to share this information with?
Clients who wish to access the Stock Connect must provide IBKR with consent to provide their information to the Hong Kong Exchanges and Clearing Ltd and the Chinese regulatory bodies such as:
  • Shanghai and Shenzhen Stock Exchanges
  • China Securities Depository and Clearing (Hong Kong) Company Limited
  • Mainland regulatory authorities and law enforcement agencies
 
How will IBKR collect this information?
Clients with existing Northbound trading permissions will be presented with the online form upon log in to Account Management. This form will allow IBKR to collect the required information and consent to submit this information upon order submission.
 
When will the identification take place?
The Northbound Investor ID model will be effective as of October 22, 2018. 
 
Will there be a Southbound Investor ID model?
The SFC and the CSRC also agreed to introduce a similar investor identification regime for Southbound trading as soon as possible after the regime for Northbound trading is implemented.
 
What happens if I do not provide the required information?
Once the Northbound Investor ID model is in effect, clients who either fail to provide the required information or elect not to provide consent to report the required information will not be allowed to submit opening Northbound orders but will be allowed to close existing positions.
 
How can I trade China Connect Stocks?
In order to trade China Connect stocks clients are required to login to Account Management and request the necessary trading permissions in Settings -> Account Settings -> Trading Permissions -> Hong Kong/China Stock Connect.
 
After the trading permission has been requested clients will be prompted with the Northbound Trader Disclosure. Once consent has been given, IBKR will assign a BCAN and send the client file to the HKEX before the deadline at 2:45pm HKT. If the request has been approved, clients will be able to trade on the next day.

China Connect - Disclosure Obligation and Foreign Shareholding Restriction

Overview: 

The following is a high-level summary of the disclosure obligations and foreign investors’ shareholding restriction applicable to the trading of Shanghai Stock Exchange (SSE) Securities or Shenzhen Stock Exchange (SZSE) Securities under Stock Connect.

Both Interactive Brokers, in its role as a China Connect Exchange Participant, and investors trading SSE/SZSE Securities through Interactive Brokers are required to comply with these requirements. 

 

I. Disclosure Obligation

-      When an investor holds or controls up to 5% of the issued shares of a Mainland listed company, the investor is required to report in writing to the China Securities Regulatory Commission (“CSRC”) and the relevant exchange, and inform the Mainland listed company within three working days of reaching 5%.

-      The investor is not allowed to continue purchasing or selling shares in that Mainland listed company during the three day notification period.

-      For such investor, whenever there is an increase or decrease in his shareholding that equals or exceeds 5% of the existing holdings, he is required to make disclosure within three working days of the change. From the day the disclosure obligation arises to two working days after the disclosure is made, the investor may not buy or sell the shares in the relevant Mainland listed company.

-      If a change in shareholding of the investor is less than 5% but results in the shares held or controlled by him/her falling below 5% of the relevant Mainland listed company, the investor is required to disclose the information within three working days of the event.

 

II. Shareholding Restriction

-      A single foreign investor’s shareholding in a Mainland listed company is not allowed to exceed 10% of the company’s total issued shares, while all foreign investors’ shareholding in the A shares of the listed company is not allowed to exceed 30% of its total issued shares.

-      When the aggregate foreign shareholding of an individual A share reaches 26%, SSE or SZSE  will publish a notice on its website.

-      Once SSE or SZSE informs the Stock Exchange of Hong Kong Limited (SEHK) that the aggregate foreign shareholding of an SSE or SZSE Security reaches 28%, further Northbound buy orders in that SSE or SZSE Security will not be allowed, until the aggregate foreign shareholding of that SSE or SZSE Security is sold down to 26%.

-      If the 30% threshold is exceeded due to Shanghai Connect or Shenzhen Connect, HKEX will identify the relevant China Connect Exchange Participant and require it to follow the forced-sale requirements, whereupon the foreign investors concerned will be requested to sell the shares on a last-in-first-out basis within five trading days of notifying the relevant China Connect Exchange Participant.

 

III. Additional Information

For additional information, including details of position disclosure and restriction, please refer to the following website links:

Stock Connect FAQ (10 April 2017): http://www.hkex.com.hk/-/media/hkexmarket/mutual-market/stock-connect/getting-started/information-bookletand-faq/faq/faq_en

Chapter 14A China Connect Service - Shanghai:

http://www.hkex.com.hk/-/media/hkex-market/services/rules-and-forms-andfees/rules/sehk/securities/rules/chap-14a_eng

Chapter 14B China Connect Service - Shenzhen:

http://www.hkex.com.hk/-/media/hkex-market/services/rules-and-forms-andfees/rules/sehk/securities/rules/chap-14b_eng 

 

 

 

 

How to Complete CFTC Form 40

Clients maintaining a U.S. futures or futures option position at a quantity exceeding the CFTC's reportable thresholds may be contacted directly by the CFTC file with a request that they complete a Form 40.  Contact will generally be made via email and clients are encouraged to respond to such requests in a timely manner to avoid trading restrictions and/or fines imposed by CFTC upon their account at the FCM. 

Completion of the Form requires the following steps:

  1. Register for a CFTC Portal Account - performed online at: https://portal.cftc.gov/Account/Register.aspx  Registration will require entry of the 9-digit code that the CFTC provided to you within the email requesting that you register. If you cannot locate your code or receive an invalid entry message, contact TechSupport@cftc.gov.  When entering "Organization Type" from the drop-down selector, choose "LTR (Large Traders)".

 

 

2. Complete Form 40 - You will receive an email notification from the CFTC once your Portal Account has been approved. Note that this approval may take up to 2 business days from the date you complete the New User Request Form. The email will contain a link to the Portal where you will be prompted to log in: https://portal.cftc.gov/

Instructions for completing the form are available at: https://www.ecfr.gov/cgi-bin/text-idx?node=ap17.1.18_106.a

Note that Portal provides the opportunity to save a copy of your submission in XML format, a recommended step, as this allows for uploading the file to the Portal should you need to make modifications at a later date. This will eliminate the need to renter the form in its entirety.

The CFTC will send a confirmation email upon successful completion of your Form 40.

 

3. Confirm with IBKR -  forward your confirmation email, or other evidence that you have submitted the Form 40 to cftc_form40_filing@interactivebrokers.com. This will assist to ensure that your account is not subject to CFTC directed restrictions or fines.

 

 

Overview of CFTC Form 40

The CFTC, the primary regulator of U.S. commodity futures markets and Futures Commission Merchants (FCMs), operates a comprehensive system of collecting information on market participants as part of its market surveillance and large trader reporting program.

IBKR, as a registered FCM providing clients with access to those markets, is obligated to report to the CFTC information on clients who hold a position in a quantity that exceeds defined thresholds (i.e., a "reportable position").  In order to report this information, IBKR requires clients trading U.S. futures or futures options to complete an online CFTC Ownership and Control Reporting form at the point the client requests futures trading permissions.

Once a client holds a "reportable position", the CFTC may then contact that client directly and require them to file  more detailed information via CFTC Form 40. The information required of this report includes the following:

  • Trader's name and address
  • Principal business
  • Form of ownership (e.g., individual, joint, partnership, corporation, trust, etc.)
  • Whether the reporting trader is registered under the Commodity Exchange Act
  • Whether the reporting trader controls trading for others
  • Whether any other person controls the trading of the reportable trader
  • Name and location of all firms through which the reportable trader carries accounts
  • Name and location of other persons providing a trading guarantee or having a financial interest in account of 10% or greater
  • Name of accounts not in the reporting trader's name in which the trader provides a guarantee or has a financial interest of 10% or more.

Clients who fail to complete this Form in a timely manner may be subject to trading restrictions and/or fines imposed by CFTC upon their account at the FCM.  It is therefore imperative that clients immediately respond to these CFTC requests.

To complete the CFTC Form 40, clients must first register for a CFTC Portal Account, an online process which is subject to a review period of 2 business days from the point of initial registration to acknowledgement of approval by the CFTC.  For information regarding this registration process and completing the Form 40, see KB3149.

 

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