ANNEX A

 

Enigma Strategy Limited

 

COPY TRADING

 

RISK WARNING, DRAWDOWN LIMITS & PERFORMANCE FEE

CALCULATION (Including fee schedule)

 

AGREEMENT

BETWEEN

Enigma Strategy Ltd

AND

Enigma Strategy Limited is authorised and regulated by the Financial Conduct Authority (Reference number: 926961). Registered address: 35 Berkeley Square, Mayfair, London, W1J 5BF. Registered in England and Wales under registered number 12315940.

Enigma is providing client with trading services including copy trading services, and will provide other services related to trading services and copy trading services. This Annex sets out the specific terms that will apply to you when using the copy trading functionality on the Enigma Strategy Limited (“Enigma”) platform. The terms in this Annex apply to you in addition to the TRADING TERMS and CONDITIONS, Risk warnings and disclosures. or DISCRETIONARY MANAGED PORTFOLIO AGREEMENT, which apply to all of our services and not just to copy trading.

 

Interpretation
All copy trading services are provided to you by Enigma. References to "us", "we", "our" and "Enigma" in this Annex is a reference to Enigma only, and when using the copy trading services, you are agreeing to use the investment management services provided by Enigma. "Services" means our services as described above and in the Operative Agreements addressing trading services, copy trading services, custody services, and other related services.  Capitalised words in this Annex A will have the same meaning which are given to those words in the General & Trading Terms and Conditions or DISCRETIONARY MANAGED PORTFOLIO AGREEMENT. If a term of this Annex conflicts with or differs from a term in the General Terms and Conditions or DISCRETIONARY MANAGED PORTFOLIO AGREEMENT, this Annex will apply. 

1.      Copy Trading
Copy trading is a trading functionality which allows you to copy the account of other traders. You do this by either copying a specific Enigma trader account or copying a portfolio (we explain what this means below). By placing a copy order, you authorize us to automatically recreate this account for you in your Enigma account without any prior consultation, consent, or approval. This will be done on a pro rata basis with the same products and the same trading instructions.

1.1.    The Enigma platform provides you with the ability to interact, follow and copy other traders, strategies and/or portfolios by using the information, as well as providing you with "social trading features".

1.2. Social trading features include detailed account information, trading histories, risk profiles, and other information in relation to Enigma traders, strategies and/or portfolios that may be useful to you when deciding whether to copy such an Enigma trader, strategy provider and/or portfolio.

2.      Copy Trading Service
Enigma offers a copy service which allows you to copy trades on the Enigma platform via a Trader model or Portfolio model.

2.1.    Under the Copy Trading model the Client can choose to copy the orders in an account of a single strategy provider.

2.2.    Under the Portfolio model the Client can choose to copy an account which contains a portfolio of products and/or traders.

2.3.    Portfolios are designed by Enigma or designed by third parties.

2.4.    Each Strategy or Strategy portfolio will have certain profiles and parameters which are pre fixed and cannot be altered manually or otherwise by the follower..

2.5.    Enigma or its Strategy providers may update or amend the structure and/or composition of a strategy under the Portfolio model at our discretion, without notifying you. This is called "re-balancing".

2.6.    Limitations on Enigma’s copy trading service includes:

2.6.1.  Enigma will take reasonable steps to monitor the performance of any copied trader under the Trader model and the performance of the different trading strategies and portfolios under the Portfolio model;

2.6.2.  Information provided by the Enigma as part of a copy trade, or about the performance of the copy trade, is solely for informational purposes and is not advice;

2.6.3.  Client should undertake independent research and investment decision making, but Client should not make investment decisions based on information provided on the Enigma platform or website;

2.6.4.  Enigma does not provide personalised investment recommendations, advice, or tax related advice;

2.6.5.  Enigma, reserves the right to pause, stop, or block any Trader model or any Portfolio mode.

3.      Categorisation of Trades.
Trades opened on your behalf as part of the Copy or Portfolio models will usually be categorised under the same asset class as categorised in the copied account. This may result in trades in a number of financial instruments, and you are advised to also read the General Terms and Conditions and other Operative Agreements relating to CFDs and securities.

4.      Copy Trading Service Assessment and Regulation. 
Enigma’s copy trading services is a related service to our discretionary investment management, requiring Enigma to assess whether the Client is suitable for copy trading.

4.1.    Client agrees and acknowledges that the appropriateness and suitability assessments are undertaken on the basis of information and documents provided by Client

4.2.    Engma’s assessment of the client suitability is determined entirely by the information provided by the Client and as may be supplemented or updated by the Client;

4.3.    The Client's copy trading model will be determined based on and reflect the Client’s suitability for copy trading;

4.4.    The Client agrees to indemnify Enigma from, and Enigma is not liable for, any losses that Client suffers as a result of providing false, misleading, or inaccurate information as part of Enigma’s assessment of the Client for copy trading;

4.5.    If it is determined that the Client is not a suitable for copy trading, then the Client will not be able to use either a Trader or Portfolio model on the Enigma platform;

4.6.    Enigma may update Client’s suitability assessment from time to time or if there is a change to Client’s knowledge, experience, financial situation, investment objectives, or risk tolerance, Client should advise Enigma to reconsider assessment;

4.7.    Client should also refer to the General Terms and Conditions or DISCRETIONARY MANAGED PORTFOLIO AGREEMENT regarding assessment of suitability. 

5.      Copy Trading related Risks.
Client should understand that copy trading is highly speculative, should consider your financial situation, including your financial commitments, and Client could sustain significant losses exceeding the amount used to copy a trader or traders.

5.1.    Client acknowledges the risks related to copy trading;

5.2.    Client acknowledges that losses from copy trading could result from many reasons including: 

5.2.1.  That is involves automated trading execution within in your account but without your intervention;

5.2.2.  copying traders whose purpose, intention, or financial status may differ from yours; 

5.2.3.  manually modifying or closing an order generated by the Trader model may achieve a materially different result than the trader copied;

5.2.4.  if Client is copying trades which are currently open, Enigma will open your position at the best available price at the time of copying, not the price at the time which the trade being copied was originally opened;

5.2.5.  due to a number of factors including starting balance, account settings, spread, interest, minimum trade size, investment price, and fees, cash-out and withdrawals by the copied trader, strategy and/or portfolio when you are using the Trader or Portfolio models may result in significantly different result than the portfolio or trader copied, and may also may affect the copy trading proportions;

5.2.6.  trading decisions could be by inexperienced and/or unprofessional traders; 

5.2.7.  copied trades in amounts lower than the minimum trade will not be opened.

5.3.    Enigma’s past copy trading performance under our Trader and/or Portfolio models functionality, or portfolios and strategies under the Portfolio model, are not reliable indicators of future performance.

5.4.    Enigma is unable to guarantee the performance of any particular investment, account, portfolio or strategy Enigma does not represent or guarantee that you will achieve profits or losses similar to those shown on the Enigma trader or portfolio that you are copying. 

5.5. Client should also refer to the General Terms and Conditions or DISCRETIONARY MANAGED PORTFOLIO AGREEMENT regarding risk.

6.      Placing an order. 
Client will need to allocate the amount of money you would like to put towards a copy trade prior to entering into a copy trade or our copy trading service. Any amount put towards copy trades will be apportioned in trades proportionate to its apportionment in the copied account. Enigma will then automatically execute that order for Client.  Client will not obtain your confirmation before Enigma executes the order, nor will the opening of such trades shall require Enigma to obtain prior consultation, consent or approval from Client. Client acknowledges that trades below the minimum trade amount shall not be opened.

6.1.    There are numerous restrictions when copy trading. This includes, but is not limited to:

6.1.1.  the minimum amount on any single copy trade;

6.1.2.  the minimum amount that can be invested in an Enigma trader or portfolio that Client copies;

6.1.3.  the maximum number of individual traders that Client can copy;

6.1.4.  the maximum amount that can be invested in an Enigma trader or portfolio that Client copies.[1] 

6.2.    Only new trades which are opened after the Client begins to copy the strategy providers account. Thus, Enigma will not copy any trades from the strategy providers accounts which were entered into before this point.

6.3.    Regarding the opening of trades and pricing:

6.3.1.  if you are copying all trades which are currently open, Enigma will open Client’s position at the best available price at the time of copying and not the price at the time which the trade being copied was originally opened;

6.3.2.  if Client is copying only new trades, Enigma will open Client’s positions at the same time as the trades being copied and all instructions and actions related to the copied trade will automatically be duplicated in your Enigma account, subject to the other provisions of the Annex and other Operative Agreements.

6.3.3.  If the relevant markets are closed at the time of copying, Enigma will open a market order for Client and once the market reopens, Client’s order will be executed at the first available price.

6.3.4.  Proportional by equity. If a strategy provider account trades with 0.11, and this account is 10 times greater than the equity within the client account, you may not be able to accept the trade signals, since the lot sizing (0.011) decimal may not be available. Therefore our system proposal is to "round up" to the broker's minimum lot size which in this example would be 0.02.

- Working by this method would mean client accounts would pick up every trade in this example, however, there might be some slight differences in the client PnL & drawdowns when compared to the strategy provider account.

6.4.    Enigma’s copy trading service has a number of other functionalities that Enigma may make available to Client and Enigma reserves the ability and authority to alter the availability and features of these functionalities, in Enigma’s sole discretion.

6.5.    Please also review Enigma’s general Order Execution Policy available at: https://www.enigmastrategy.com/order-execution-policy

6.6.    Trades which are executed via copy trading are subject to deposit size, margin requirement, and drawdown. Due to the risky nature of copy trading, strategies will not trade if the trading account hits certain threshold levels. i.e. you have no available margin to trade, you will not be able to place an order. This may result in differing performance from the strategy providers' fact sheet.

6.7.    A broker (counterparty) server may also affect the following and unfollowing of trades from a strategy provider. i.e. if a strategy provider is trading with one broker and you are trading with another broker, and your broker's server is unavailable to receive the strategy provider's trading signal. The strategy provider may continue to trade (execute and close) with their broker, whilst the trading signal which is being sent from the strategy provider to your broker cannot be executed into your trading account because your broker's server is down. This therefore may affect trading performance.

[1] Please contact Enigma for a fuller list of restrictions, if required.

7.      Fees and costs
Please refer to the Fees Schedule found in the General Terms and Conditions or DISCRETIONARY MANAGED PORTFOLIO AGREEMENT  or brokers LIMITED POWER OF ATTORNEY regarding fees.

8.      Risk Warning
Trading in Foreign Exchange (FX), Contracts for Difference (CFD's), and margin products carries a high level of risk to your capital, and is not suitable for all investors. Enigma Strategy Limited does not provide investment advice to clients unless otherwise agreed in writing. Only speculate with money you can afford to lose. Investments may fall as well as rise and you may lose some, part or all of your original capital invested and be liable for a balance where leverage is employed. Please ensure you fully understand the risks, and seek financial advice if necessary. The Client understands that there are many strategies that can be used in trading FX, some of which have unlimited risk of loss and could result in the Client sustaining a total loss of all funds in the Account and, further, that the Client is liable for any deficit in the Account resulting therefrom.

9.      Independent Advice
It is recommended that independent financial advice is sought prior to any application and that the Client acknowledges that he/she/it has had the opportunity to discuss with his/her /its own independent financial advisers and understands the nature and risks of the strategy to be used in connection with transactions affected for the Client’s Account.

10.   Risk And Drawdown Limit
The Client accepts that the drawdown limit on the account will be subject to a maximum of 50% of the initial account deposit (less any fees); if this level is reached, no further trading will be undertaken on the account. [1] The Client acknowledges and understands this risk and agrees not to hold Enigma Strategy Limited (acting as the Attorney/Money Manager, as per the duly signed Limited Power of Attorney [2] - (the “Investment Manager”)), liable for any losses on the account. The maximum drawdown figure is not a guarantee, but an indication of your risk appetite.

10.1. Market Volatility. Under normal circumstances, copied trades need to be within 10 pips of the strategy/signal open price to be executed. If there is intense market volatility and/or slippage it is possible the market will move greater than 10 pips, therefore clients will not be executed into the trading position(s). If this occurs there will be some performance deviation when compared to the strategy/signal since the trades coming into the strategy/signal will not be received. This may result in differing performance from the strategy providers' fact sheet.

[1] Subject to normal market conditions and conditions such as Force Majeure events as detailed.
[2] The Limited Power of Attorney to be provided upon execution of the Discretionary Managed Portfolio Agreement by the chosen broker counterparty and available upon request.   

11.      Performance Fee Calculation and Watermark
The performance fee is deducted monthly in arrears on the basis of the extent to which total aggregate profit that month has been achieved, subject to a higher watermark. The watermark is based on the highest end of month value that a client account has achieved. The watermark is reset at the start of each calendar month.

11.1.    If profit has been achieved in the previous month, then the gain minus the performance fee will become the new watermark.

11.2.    If a loss has been achieved in the previous month, then the watermark will be reset at the previous watermark level. This will apply until such time as the losses have been recouped. The watermark is adjusted to ensure that any losses from a previous month(s) are taken into account before any fee is deducted.

11.3.    Below we show two examples: (the figures quoted are purely an example to show the calculation method used and are not indicative of performance achievable). Calculation Example based on 30% monthly performance fee and is for illustration purposes only.

11.4. This illustration is indicative only and does not represent live or past strategy performance*:

*In month 7 a profit is made of £3200 creating a new balance of £107,440. No performance fee is taken since the a/c balance is below the £109,440 high watermark. In month 8 a £2600 profit is made, bringing the total balance to £110,040 and exceeding the previous high water mark by £600. Therefore a 20% (£120) charge is taken from the £600 profit above the high watermark and the new high watermark is £109,290.

12.   Opening and Closing Your Account
The Investment Manager will commence trading your account, as soon as conditions are right, after you open and fund your account at the broker; any profit made by the end of the first month will incur a performance fee and any losses will be recorded as per the calculation above. If you close your account, the Investment Manager will first calculate any performance fees owed up until the point of closure and then the broker will send you the balance. If your account incurred an overall loss up until the point of closure, the broker will send you only the balance on the account.

13.   Fee Schedule
The client agrees to have the following charges and payments deducted directly from their Broker account and for the Broker to pay the Investment Manager as instructed.

13.1. Performance Fee (PF) 30%: Performance fees are deducted monthly in arrears on the basis of the extent to which total aggregate profit (after all fees and costs other than performance fee) has been achieved. 

13.2. Annual management charge (AMC) 2%: The Management Fee is calculated on your total portfolio balance on a daily basis and charged quarterly. Calculation of this fee will commence from the date we receive your initial contribution.

14.   Conflicts of interest
Although Enigma is required to act in Client’s best interest when providing our copy trading services, there may be instances where the Client's interest conflicts with Enigma’s or another client. Client acknowledges this possibility can arise and should also refer to the General Terms and Conditions or DISCRETIONARY MANAGED PORTFOLIO AGREEMENT regarding conflict of interest.

15.   Liability for Losses
Neither Enigma nor any affiliates or associate third parties will be liable for any losses arising from: decisions or actions taken by Enigma or one of its traders that you have chosen to copy, including in connection with portfolios; for specific investment decisions or actions taken or not taken in good faith relating to our copy trading services for you and/or on your Trader or Portfolio models; trade CFDs or investment in securities by copying the trades of other Enigma customers, or by copying trades in a portfolio which Enigma has compiled, as part of Enigma’s copy trading services;  actions taken by us in order to carry out your written or spoken instructions. Client and Enigma acknowledge that the above limits on liability for losses are subject to Applicable Laws.

16.   Force Majeure
16.1. Force Majeure Event. The Investment Manager may in its reasonable opinion determine that an emergency or exceptional market condition exists (“a Force Majeure Event”), including but not limited to: 

16.1.1.     where the Investment Manager, in its opinion, is unable to maintain an orderly trading strategy in respect of any one or more of the Underlying Instruments as a result of the occurrence of any act, omission or event (including but not limited to any circumstance beyond our control such as strike, riot, civil unrest or failure of power supply, communications or other infrastructure);

16.1.2.     the suspension, closure, liquidation or abandonment of any relevant market or Underlying Instruments;

16.1.3.     the imposition of limits or special or unusual terms in the relevant markets or Underlying Instruments;

16.1.4.     the excessive movement, volatility or loss of liquidity in the relevant markets or Underlying Instruments; or

16.1.5.     where the Investment Manager reasonably anticipates that any of the circumstances set out in paragraphs 3.1.1 to 3.1.4 are about to occur.

16.2. Actions The Investment Manager May Take. If the Investment Manager determines that a Force Majeure Event exists, then the Investment Manager may (without prejudice to any other rights to the Client and at the Investment Manager’s sole discretion) take any one or more of the following steps:

16.2.1.     alter normal trading times;

16.2.2.     alter the Margin Percentage; 

16.2.3.     amend or vary the trading strategy and any transaction contemplated by the trading strategy, including any Contract, insofar as it is impractical or impossible for the Investment Manager to comply with the Investment Manager’s obligations to the Client;

16.2.4.     close any or all open Margin Contracts, cancel instructions and orders as the Investment Manager deemed to be appropriate in the circumstances; or

16.2.5.     take or omit to take all such other actions as the Investment Manager deems to be reasonably appropriate in the circumstances having regard to the Positions of the Client, the Investment Manager and all other clients.

16.3. Notification of Force Majeure Event. The Investment Manager will not be under any obligation to inform the Client of any action that the Investment Manager proposes to take under 3.2 before the Investment Manager takes such action. If it is not practicable for the Investment Manager to give the Client prior notice, the Investment Manager will notify the Client at the appropriate time after taking any such action.

16.4. Liability. If the Investment Manager determines that a Force Majeure Event, and or a, situation that is outside normal market conditions exists, the Investment Manager will not be liable to the Client for any failure, hindrance or delay in performing the Investment Manager’s obligations or for taking or omitting to take any action in accordance with points 3.2 or 3.3. The Investment Manager will also not be liable for general trading / investment activities where Clients suffer losses that are part of the day to day decisions made by the Investment Manager.

16.5. Close Open Positions. In some circumstances, the Investment Manager may be unable, after using all reasonable efforts, to acquire, substitute, maintain, unwind or dispose of any Underlying Instrument the Investment Manager may consider necessary to hedge or protect the Client’s exposure to the market and other risks arising from an open Position. In such circumstances, the Investment Manager may close that open Position at the Contract Price, which may mean a loss to the Client.

17.   How your money is protected.
Please note that the UK Financial Services Compensation Scheme ("FSCS") protection and the Fund protection are only applicable to regulated products. This means that security trades, security copy trades, CFD trades and CFD copy trades, are protected. Enigma is covered by the FSCS. For more information about the FSCS, visit fscs.org.uk or call the FSCS at 020 7741 4100 or 0800 678 1100.

18.   How you can make a complaint
For more information on our complaints handling procedure, please visit our website at https://www.enigmastrategy.com/mifid-complaints-procedure.  If you're still not happy with how Enigma has dealt with your complaint, you can refer it to the Financial Ombudsman Service ("FOS") within six months of receiving Enigma’s final response to your complaint. The FOS is an independent organisation in the UK that helps resolve complaints. You can contact them by phone on 0800 023 4567, online at financialombudsman.org.uk or by post at Financial Ombudsman Service, Exchange Tower, London, E14 9R.

CONFIRMATION

1. I / we confirm that we have read the COPY TRADING - RISK WARNING, DRAWDOWN LIMITS and PERFORMANCE FEE CALCULATION (Including fee schedule)  annex detailed above and accept the risks associated and methodology with the managed copy trading services account.

2. I / we have had an opportunity to discuss this with an independent financial adviser and any other adviser that we feel is appropriate.

3. I/ we confirm that we have read the General Trading Terms and Conditions, Risk Warnings and disclosures, and Discretionary Managed Portfolio Agreement and agree.
 

The Parties have executed this Annex A of the Agreement on the respective dates specified below with effect from the Effective Date.