Risk Disclosure

This Risk Disclosure document is prescribed by the Pakistan Stock Exchange Limited (PSX) under Clause 13(1) of the Securities Broker (Licensing and Operations) Regulations, 2016, and is issued by IEL (Integrated Equities Limited) to ensure full transparency regarding investment risks.

This document contains important information relating to various types of risks associated with trading and investment in financial products (equity securities, fixed income instruments, derivatives contracts etc.) being traded at PSX through IEL's brokerage services. The customer should carefully read this document before opening a trading account with IEL.

IMPORTANT DISCLAIMER

In case a customer suffers negative consequences or losses as a result of trading/investment through IEL's services, he/she shall be solely responsible for the same. IEL, PSX, and the Securities and Exchange Commission of Pakistan (SECP) shall not be held responsible/liable, in any manner whatsoever, for such negative consequences or losses.

KEY ACKNOWLEDGMENTS

The customers must acknowledge and accept that:

No Guaranteed Returns: There can be no guaranteed profit or guaranteed return on invested capital
No Fixed Return Promise: Under no circumstances can IEL provide customers any guarantee or fixed return on their investment
Market Volatility: Prices of securities and futures contracts can fall as well as rise depending on market conditions and company performance
Past Performance: Past performance is not a guide to future performance of securities, contracts, or the market as a whole
Independent Advice: If customers have any doubt or are unclear about the risks disclosed in this document, PSX and IEL strongly recommend seeking independent legal or financial advice in advance

LIMITATION OF LIABILITY

IEL, neither singly nor jointly, and neither expressly nor impliedly, guarantees or makes any representation concerning the completeness, accuracy, and adequacy of the information contained in this document. This document discloses risks and other significant aspects of trading/investment at the minimum level required by regulations.

IEL does not provide or purport to provide investment advice and shall not be liable to any person who enters into a business relationship based on any information contained in this document. Any information contained in this document must not be construed as business/investment advice in any manner whatsoever.

THE CUSTOMERS MUST BE AWARE OF AND ACQUAINTED WITH THE FOLLOWING:

1. BASIC RISKS INVOLVED IN TRADING IN SECURITIES MARKET:

1.1 VOLATILITY RISK

Volatility risk is the risk of changes in the value of financial products in any direction. High volatility generally means that the values of securities/contracts can undergo dramatic upswings and/or downswings during a short period.

Key Points:

Higher volatility is expected in illiquid or less frequently traded securities
Customer orders may not be executed or only partially executed due to rapid market price changes
Price uncertainty can cause execution prices to be substantially different from last available market prices
This can result in real or notional losses for customers

1.2 LIQUIDITY RISK

Liquidity refers to the ability of market participants to buy and/or sell securities expeditiously at a competitive price with minimal price difference.

Key Concerns:

Lower liquidity in thinly traded instruments compared to frequently traded ones
Customer orders may only be partially executed
Orders may be executed with relatively greater price differences
Orders may not be executed at all under certain conditions
Critical Risk: Under certain market conditions, it may be difficult or impossible to liquidate a position at a reasonable price when there are no outstanding orders or if trading is halted

1.3 SPECULATIVE TRADING RISK

Speculation involves trading securities/contracts with the expectation of short-term value increases to profit from market fluctuations rather than fundamental value.

Special Attention - Day Trading:

Day trading involves buying and selling the same security within the same trading day
All obligations are netted off with no settlement obligations
Day traders need to be more vigilant and informed than long-term investors
Markets may not move as anticipated, resulting in losses

1.4 RISK OF WIDER SPREAD

The Bid-Ask spread is the difference between offer price and bid price quoted by Market Makers or trading parties.

Factors Affecting Spread:

Liquidity levels
Volatility
Free float (shares readily available for trading)
Low liquidity, high volatility, and low free float result in wider Bid-Ask spreads
Higher spreads result in greater costs to customers

1.5 CORPORATE ANNOUNCEMENT RISK

Corporate announcements for corporate actions or material information may significantly affect security prices.

Customer Precautions:

Take corporate announcements into account when making investment decisions
Be cautious of fake rumors circulating in the market
Refrain from acting purely on rumors
Make well-informed decisions based on verified facts and circumstances

1.6 RISK REDUCING ORDERS

Customers can place various order types to limit losses:

Limit Orders
Stop Loss Orders
Market Orders

Important Limitation: These orders may not always be effective due to rapid price movements, and such orders may not be executed as intended.

1.7 SYSTEM RISK

High volume trading frequently occurs at market opening and before market close, and may occur at any point during the day.

Potential Issues:

Delays in order execution or confirmation
During volatile periods, continuous order modifications by market participants may cause delays

1.8 SYSTEMIC RISK

Systemic risk arises in exceptional circumstances when the inability of one or more market participants to perform as expected causes other participants to be unable to meet their obligations, thereby affecting the entire capital market.

1.9 SYSTEM AND NETWORKING RISK

Trading on PSX is conducted electronically using satellite/leased line communications, various technologies, and computer systems.

Vulnerabilities:

Temporary disruption or failure of systems
Glitches leading to access failures
Delays in processing buy/sell orders
Partial or non-processing of orders
Customer Risk: Losses may occur if orders cannot be executed normally due to system failures by the exchange or broker

1.10 RISK OF ONLINE SERVICES

Online trading through IEL's platforms carries specific risks that customers must fully understand.

Key Risks:

Online trading may not be completely secure and reliable
Potential delays in information transmission and instruction execution due to technological barriers
Customer Responsibility: Customers are solely responsible for consequences arising from disclosure of access codes/passwords to third parties or unauthorized use

1.11 REGULATORY/LEGAL RISK

Government policies, rules, regulations, and procedures governing exchange trading are updated from time to time.

Impact Areas:

Changes in tax/levies may alter investment profit potential
Some government policies may focus more on certain sectors, affecting risk/return profiles
Regulatory changes can impact the overall investment environment

2. RISKS IN DERIVATIVE AND LEVERAGE PRODUCTS

Derivative and leveraged trades enable customers to take larger exposure with smaller margin investments. These trades carry high risk levels and may not be suitable for all customers.

Available Products at PSX:

Derivatives: Deliverable Futures Contracts, Cash Settled Futures Contracts, Stock Index Futures Contracts, Index Options Contracts
Leveraged Products: Margin Trading System, Margin Financing, Securities Lending and Borrowing

Critical Considerations:

Higher leverage degree increases both profit and loss possibilities
Customers should trade based on their experience, objectives, financial resources, and relevant circumstances
Carefully review broker agreements and understand specifications, terms, conditions, markup rates, and risk disclosures

Additional Derivative and Leverage Risks:

a) Unlimited Loss Potential

Trading may result in potentially unlimited losses greater than the deposited amount
Do not risk funds you cannot afford to lose (retirement savings, medical funds, education funds, home ownership funds, student loans, mortgage proceeds, or living expense funds)

b) No Risk Elimination

No trading strategy can eliminate risk entirely
Combination strategies (spreads) may be as risky as outright long/short positions
Equity futures trading requires knowledge of both securities and futures markets

c) Profit Claims Caution

Be cautious of large profit claims from such trading
High leverage can result in large immediate gains OR losses

d) Immediate Loss Effects

Leverage nature means customers feel loss effects immediately
Initial margin is small relative to contract value ("leveraged" or "geared" transactions)
Small market movements have proportionately larger impacts on deposited funds
Margin Call Risk: If markets move against positions or margin levels increase, customers may be called to pay substantial additional funds on short notice
Liquidation Risk: Failure to comply with additional fund requests within specified time may result in position liquidation at a loss