Risk Disclosure Statement
Day Trading Disclosures
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 a day-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.
Market Volatility, Market Orders, and Limit Orders
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 Lightspeed Trading 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 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.
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. Lightspeed Trading in its sole discretion may require limit orders on certain bulletin board stock transactions. The Market Data supplied by Lightspeed Trading regarding bulletin board stocks is updated from time to time, but may not be current at any given point in time.
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 Lightspeed Trading 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 Lightspeed Trading.
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.
- 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.
- 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.
- 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
- For combination writing, where the investor writes both a put and a call on the same underlying instrument, the potential risk is unlimited.
- 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.
- 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.
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.
Privacy Statement Lightspeed Trading, LLC.
Your privacy is our priority
We are committed to protecting our customers’ personal and financial information. In the course of providing you with products and services, we need to collect and maintain certain nonpublic personal information about you. This Privacy Statement answers some questions about what nonpublic personal information we collect, what we do with it, and how we protect it.
What types of nonpublic personal information about me do you collect?
When you open and maintain an account with us we collect the following types of information:
- Information provided by you on applications or other forms, such as your name, mailing address, Social Security number, date of birth, employment information, investment experience, and risk tolerance.
- Information about your transactions with us, such as your account balance, trading activity and payment history.
- Information about you from consumer-reporting agencies and/or information services companies that include creditworthiness, credit history and identity verification.
What types of nonpublic personal information about me do you disclose?
We may disclose nonpublic personal information about you that we collect, primarily to make available to you the financial products and services that we and our business partners provide. We do not disclose nonpublic personal information about former customers to anyone, except as permitted by law.
To what types of entities (other than those companies used to process or service transactions) do you disclose my nonpublic personal information?
We may disclose certain information about you to our affiliated companies and to other financial services providers with which we have joint marketing agreements or that offer financial products and services with us or on our behalf. By sharing information about you and your accounts, transactions, and other customer relationships with our affiliated companies and other financial services providers, we can provide you with a broader range of financial products and services, improve your experience with us, and better serve your financial needs.
We may also disclose information that we collect from you such as your name, contact information, and customer relationships with us to nonaffiliated third parties that perform services for us other than processing or servicing transactions, such as marketing or market research. For example, we may provide your name, address, phone number, and/or e-mail address to vendors who send our e-mail or regular mail.
We require that all entities with which we share your nonpublic personal information, including companies that process or service transactions for us, agree to keep your information confidential. We also prohibit them from using or disclosing your information except for the limited purposes and to the persons for whom disclosure was intended, or as otherwise permitted by law.
We do not sell your personal information to third-party marketers or any other entity for any purpose.
In some limited circumstances, we may disclose nonpublic personal information about you to a non-financial services company, such as a retailer with which we have a marketing program, but only with your prior consent (or “opt in”). If you consent (or opt in) to such disclosure, the information shared will be limited to that stated in our request for your consent. Account balance, credit, Social Security number, and trading activity information are never disclosed.
To what other types of entities might you disclose my nonpublic personal information?
We also may disclose information about you to companies that service, maintain or process for us your transactions and accounts. For example, we provide information to companies that prepare and mail account statements and transaction confirmations.
Information may also be disclosed in connection with a proposed or actual sale, merger, or transfer of all or a portion of business; to protect or defend against fraud, unauthorized transactions (such as money laundering), law suits, claims or other liabilities; or to service providers of Lightspeed in connection with the administration and operations of Lightspeed’s products and services which may include brokers, attorneys, accountants, auditors, administrators or other professionals.
In addition, we disclose nonpublic personal information to nonaffiliated third parties as permitted or required by law. These parties include government/regulatory organizations such as the Federal Bureau of Investigation (FBI), Internal Revenue Service (IRS), and the Securities and Exchange Commission (SEC), and to parties under court order or subpoena that request this information. Disclosures for which you have provided your consent or you have directed us to make are also permitted.
What are my rights to opt out of disclosure and how can I exercise them?
The law allows you to “opt out” of our sharing nonpublic personal information about you in certain circumstances with affiliated and nonaffiliated companies; that is, you may direct us to not make such disclosures. We do not currently share information about you with any affiliate or third party that triggers this opt-out right. Therefore, there is no need for you to opt out. If in the future we desire to disclose your information in a way that is inconsistent with this policy, we will notify you in advance and provide you with the opportunity to opt out of such disclosure.
How do you protect the confidentiality and security of my nonpublic personal information?
We maintain physical, electronic, and procedural safeguards that meet or exceed industry standards to guard your nonpublic personal information. Any Customer and / or trading related data sent across public network space such as the Internet while utilizing one of our products is protected by industry leading encryption mechanisms. We make sure that the technology we use is always up to date to achieve the best possible protection at any given time.
Our employees (for example, customer service and compliance personnel) and third party service providers have access to your nonpublic personal information only on a “need to know” basis. We conduct regular internal audits of our business practices and procedures, examining confidentiality standards and information access in order to protect your personal information.
How can I access and update the nonpublic personal information that Lightspeed Trading, LLC collects about me?
We take measures to ensure that your nonpublic personal information is accurate and up-to-date. You can also update certain nonpublic personal information that we collect about you. To update your mailing address or your home or work phone numbers, please contact your Account Services Representative or write to us at:
Lightspeed Trading, LLC
1001 Avenue of the Americas, 16th Floor
New York, NY 10018
In your communication, please include your account number(s), your old information, and the new information that you want updated. For answers to other questions regarding our Privacy Statement, please e-mail [email protected].
Anti-Money Laundering Disclosure
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT OR ESTABLISHING A NEW CUSTOMER RELATIONSHIP
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 with Lightspeed Trading, LLC.
What this means: If you enter into a new customer relationship with Lightspeed Trading, LLC, the Firm will ask for your name, address, and other identification information which will be used to verify your identity. As appropriate, the Firm may, in its discretion, ask for additional documentation or information. In order to open an account or establish a relationship with you, all required documentation or information requested by Lightspeed Trading, LLC must be provided.
Business Continuity Summary
As part of our ongoing commitment to our clients, this will serve to provide you with an overview regarding the Lightspeed Trading, LLC (“Lightspeed”) Business Continuity Plan (“BCP”).
On April 7, 2004, the Securities and Exchange Commission approved NASD Rules 3510 and 3520 which require member firms to create and maintain a business continuity plan. A business continuity plan is a plan that will enable the firm to continue its business operations in the event of a significant business interruption.
Business Continuity Components
Lightspeed has evaluated the impact of business interruptions resulting from various events including but not limited to loss of facilities and resources. The BCP was developed by identifying methods to protect and restore critical business processes, records, data and systems to allow customers to transact business. Lightspeed relies on a third party provider for customer records, transactions, custody of funds and securities and operating systems. The third party provider has a business continuity plan with system redundancy and back-up facilities.
The Lightspeed Trading, LLC BCP addresses the following key elements:
- Data Back-Up and Recovery
- Identification of Mission Critical Systems
- Financial and Operational Assessments
- Alternate Communications with Customers
- Alternate communications with Employees
- Alternate Physical Location of Employees
- Impact of Critical Business Counter-Parties
- Regulatory Reporting
- Communications with Regulators
- Customers Access to Funds and Securities
In the event of a business interruption, Lightspeed has plans and teams in place to address the immediate response to the incident, the management of the situation from the time of the incident until the matter is resolved, and a business unit and information technology recovery plan.
The data recovery plan includes maintenance of redundant real-time system facilities. The staff and workspace recovery plan includes the relocation of critical personnel to alternate sites.
Whatever the event, our BCP is designed to enable the firm to be operational within 24 hours or less assuming that third party providers and industry critical systems are operational.
Updates and Information Requests
The Lightspeed BCP is reviewed and tested at a minimum annually. Modifications and updates are made to incorporate any material business change or regulatory requirement. To obtain a copy of the Lightspeed BCP summary plan, please submit a written request to:
Lightspeed Trading, LLC
Attn: Compliance Department
1001 Avenue of the Americas
New York, NY 10018
Margin Disclosure Statement
Lightspeed Trading, LLC is furnishing this document to provide some basic facts about purchasing securities on margin and to alert you to the risks involved with trading securities in a margin account. Before trading stocks in a margin account, you should carefully review this document and the margin agreement that we provided to you. In the event of a conflict between this document and any other agreements you may have with Lightspeed Trading, LLC the other agreements will govern.
It is important that you understand fully the risks involved in trading securities on margin, which include but are not limited to the following:
- You can lose more funds than you deposit in the margin account.
A decline in the value of securities purchased on margin may require you to provide additional funds to the Firm to avoid the forced sale of those or other securities or assets in your Account.
- The Firm can force the sale of securities or other assets in your Accounts.
If the equity in your account falls below the NYSE margin maintenance requirements or the Firm’s higher “house” requirements, the Firm can sell the securities or other assets in any of your Accounts held at the Firm 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 or other assets without contacting you.
Some investors mistakenly believe that their brokerage firm must contact them for a margin call to be valid and that their firm cannot liquidate securities or other assets in their accounts to meet the call unless the firm has contacted them first. This is not the case. While Lightspeed Trading, LLC may attempt to notify you of margin calls, we are not required to do so. Furthermore, even if we contacted you and provided a specific date by which to meet a margin call, we can still take the steps necessary to protect our financial interests, including selling the securities immediately without notice to you.
- You are not entitled to choose which securities or other assets in your Account are to be liquidated or sold 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” margin maintenance requirements at any time and is not required to provide you advance written notice.
These changes in Firm policy often take effect immediately and may result in the issuance of a margin maintenance call. Your failure to satisfy the call may require us to liquidate or sell securities in your Accounts.
- 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 you under certain conditions, you do not have a right to the extension
EXTENDED HOURS RISK DISCLOSURE STATEMENT
You should consider the following points before engaging in trading outside of regular market hours.
Risk of Lower Liquidity. Liquidity refers to the ability of market participants to buy and sell securities. Generally, the more orders that are available in a market, the greater the liquidity. Liquidity is important because with greater liquidity it is easier for investors to buy or sell securities, and as a result investors are more likely to pay or receive a competitive price for securities purchased or sold. There may be lower liquidity in extended hours trading as compared to regular market hours. As a result, your order may only be partially executed, or not at all.
Risk of Higher Volatility. Volatility refers to the changes in price that securities undergo when trading. Generally, the higher the volatility of a security the greater its price swings. There may be greater volatility in extended hours trading in extended hours trading than in regular market hours. As a result, your order may only be partially executed, or not at all, or you may receive an inferior price in extended hours trading than you would during regular market hours.
Risk of Changing Prices. The prices of securities traded in extended hours trading may not reflect the prices either at the end of regular market hours or upon the opening the next morning. As a result, you may receive an inferior price in extended hours trading than you would during regular market hours.
Risk of Unlinked Markets. Depending on the extended hours trading system or the time of day, the prices displayed on a particular extended hours trading system may not reflect the prices in other concurrently operating extended hours trading systems dealing in the same securities. Accordingly, you may receive an inferior price in one extended hours trading system than you would in another extended hours trading system.
Risk of News Announcements. Normally, issuers make news announcements that may affect the price of their securities after regular market hours. Similarly, important financial information is frequently announced outside of regular market hours. In extended hours trading, these announcements may occur during trading, and if combined with lower liquidity and higher volatility, may cause an exaggerated and unsustainable effect on the price of a security.
Risk of Wider Spreads. The spread refers to the difference in price between what you can buy a security for and what you can sell it for. Lower liquidity and higher volatility in extended hours trading may result in wider than normal spreads for a particular security.
Risk of Lack of Calculation or Dissemination of Underlying Index Value or Intraday Indicative Value (“IIV”). For certain derivative securities products, an updated underlying index value or IIV may not be calculated or publicly disseminated in extended trading hours. Since the underlying index value and IIV are not calculated or widely disseminated during extended hours trading sessions, an investor who is unable to calculate implied values for certain derivative securities products in those sessions may be at a disadvantage to market professionals.