This notice provides you with information about the risks associated with investment products, in which you may invest, through services provided to you by eToro Group entities. eToro provides a wide range of investment services in relation to a number of products through its regulated entities: eToro (Europe) Ltd., authorised and regulated by the Cyprus Securities and Exchange Commission (CySEC), eToro (UK) Ltd., authorised and regulated by the Financial Conduct Authority (FCA) ,eToro AUS Capital Limited, authorised by the Australian Securities and Investments Commission (ASIC), and eToro (Middle East) Ltd.
Investment products offered by eToro include stocks, Exchange-Traded Funds (ETFs) and cryptocurrencies, in which you gain ownership of the underlying asset. In addition, eToro offers contracts for differences (CFDs) that offer exposure to currencies, commodities and indices.
Any transactions relating to stocks, ETFs or cryptocurrencies in which eToro offers you leverage (which is not currently available for cryptocurrencies) or allows you to enter into short transactions, and/or some copy trading transactions (including Smart Portfolios), shall be considered CFD transactions.
eToro also offers investors the opportunity to buy the underlying cryptocurrencies, stock or ETFs (i.e., BUY transactions for said assets using leverage 1) hold such assets and subsequently sell such assets. All transactions relating to cryptocurrencies are subject to the Cryptocurrencies Trading Addendum (“Cryptocurrencies Trading Addendum”).
Since Cryptocurrency markets are decentralised and non-regulated, our Cryptocurrencies Trading Services as such term is defined in the Cryptocurrencies Trading Addendum, are unregulated services which are not governed by any specific European regulatory framework (including MIFID). Therefore, when eToro (Europe) Ltd. customers use our Cryptocurrencies Trading Service, they will not benefit from the protections available to clients receiving regulated investment services such as access to the Investor Compensation Fund for Customers of Cypriot Investment Firms and the UK Financial Ombudsman Service for dispute resolution. eToro (Europe) Ltd. customers will continue to benefit from the rules relating to best execution and client money and safekeeping of client assets. eToro (UK) Ltd. customers using the Cryptocurrencies Trading Service only will not benefit from the protections available to clients receiving regulated investment services such as access to the Financial Services Compensation Scheme (FSCS) and the Financial Ombudsman Service for dispute resolution. We will endeavour to enable you to benefit from rules relating to best execution and safekeeping of client assets.
All of these products carry a high degree of risk and are not suitable for many investors. This notice provides you with information about the risks associated with these products, but it cannot explain all of the risks nor how such risks relate to your personal circumstances. If you are in doubt, you should seek professional advice. It is important that you fully understand the risks involved before deciding to trade with eToro, that you have adequate financial resources to bear such risks and that you monitor your positions carefully. Trading involves risk to your capital. You should not invest money that you cannot afford to lose, however, you cannot lose more than the equity in your account.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE TERMS AND CONDITIONS AND/OR THIS GENERAL RISK DISCLOSURE, FRENCH RESIDENTS SHALL BE ELIGIBLE TO INTRINSIC PROTECTION. ACCORDINGLY AND INDEPENDENTLY OF MARKET VOLATILITY, THEIR MAXIMUM LOSS WITH RESPECT TO EACH TRANSACTION SHALL BE THE TOTAL AMOUNT INVESTED IN SUCH TRANSACTION, AS UPDATED BY SUCH USER FROM TIME TO TIME.
CFDs
CFD stands for “Contract For Difference,” meaning you are not buying the underlying asset, but, rather, purchasing a contract to settle the difference in the initial and ending price of the asset. When trading CFDs, you generally trade on margin, which means you only have to deposit a small percentage of the overall value of your position. This is known as “Leverage”, and even small market movements may have great impact, negative or positive, on your trading account.
If the market moves against you, you may sustain a total loss greater than the funds invested in a specific position. You are responsible for all losses in your account up to the equity in your account.
Before deciding to trade on margin, you should carefully consider your investment objectives, level of experience, and risk appetite. Our CFDs are not listed on any exchange. CFDs involve greater risk than investing in on-exchange products, as market liquidity cannot be guaranteed and it may be more difficult to liquidate an existing position. The prices and other conditions are set by us in accordance with our obligation to provide best execution as set out in our order execution policy, to act reasonably and in accordance with the applicable Terms and Conditions. The characteristics of our CFDs can vary substantially from the actual underlying market or instrument. Full details of all of our CFDs are set out on our website. In respect of corporate events, with respect to the underlying assets, we do not aim to make a profit from our clients from the outcome of corporate events such as rights issues, takeovers, mergers, share distributions or consolidations and open offers. We aim to reflect the treatment we receive, or, would receive if we were hedging our exposure to you in the underlying market. Ultimately, however, you are not dealing in the underlying market and, therefore, in relation to our CFDs, the treatment you receive may be less advantageous than if you owned the underlying instrument.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
CFDs are not suited to the long-term investor. If you hold a CFD open over a long period of time, the associated costs increase (such as overnight fees), and it may be more beneficial for you to buy the underlying asset instead. Sudden market movements, known as “gapping” may occur, causing a dramatic shift in the price of an underlying asset. Gapping may occur when the underlying market is closed, meaning the price on the underlying market may open at a significantly different level, and at a less advantageous price for you.
At all times during which you have open positions, you must ensure that your account meets our margin requirements, which may change from time to time. Therefore, if our price moves against you, or if our margin requirements have changed, you may need to provide us with significant additional funds to meet your margin requirement at short notice, to maintain your open positions. If you do not do this, we will be entitled to close one or more or all of your positions and you alone will be responsible for any losses incurred as a result.
Appropriateness
Before we open an account for you, we are required to make an assessment of whether the product(s) and/or services you have chosen are appropriate for you, and to warn you if, on the basis of the information you provide us, any product or service is not appropriate. If you decide to continue and open an account with us, you are confirming that you are aware of and understand the risks.
Position Monitoring
You should further ensure that you are able to monitor positions on your account at all times, as you are solely responsible for this. We are not responsible for monitoring positions on your account.
Execution
Although the eToro trading platform is automated, and we give you the best execution available, it is possible that the market price could have changed between order placement and execution time, and, therefore, we cannot guarantee that the price requested will be the same as the price at which the order is executed, therefore, the price you receive can be in your favour or against you.
To limit losses, we require you to choose ‘stop loss’ limits. These set limits to automatically close your position when it reaches a price limit of your choice. There are, however, circumstances in which a ‘stop loss’ limit is not fully effective — for example, where there are rapid price movements, or market closure.
In addition, there are risks associated with the use of online deal execution and trading systems including, but not limited to, software and hardware failure and Internet disconnection.
Copy Trading
eToro offers Social Trading Features. In making a decision to copy a specific trader or traders and/or follow a particular strategy, you must consider your entire financial situation, including financial commitments. You must understand that using Social Trading Features is highly speculative and that you could sustain significant losses exceeding the amount used to copy a trader or traders. The risks associated with Social Trading Features include, but are not limited to, automated trading execution whereby the opening and closing of trades will happen in your account without your manual intervention.
You can read more about copy trading risks here.
Cryptocurrencies
Trading risks
Since Cryptocurrency markets are decentralised and non-regulated, our Cryptocurrencies Trading Services are unregulated services which are not governed by any specific European regulatory framework (including MIFID). This means that there is no central bank that can take corrective measures to protect the value of Cryptocurrencies in a crisis or issue more currency. Therefore, when eToro (Europe) Ltd. customers use our Cryptocurrencies Trading Services, they will not benefit from the protections available to clients receiving regulated investment services such as access to the Investor Compensation Fund for Customers of Cypriot Investment Firms and the Financial Ombudsman Service for dispute resolution. eToro (Europe) Ltd. customers will continue to benefit from the rules relating to best execution and client money and safekeeping of client assets.
eToro (UK) Ltd. customers using Cryptocurrencies Services will not benefit from the protections available to clients receiving regulated investment services such as access to the Financial Services Compensation Scheme (FSCS) and the Financial Ombudsman Service for dispute resolution. We will endeavour to enable you to benefit from rules relating to best execution and safekeeping of client assets.
CRYPTOCURRENCY MARKETS ARE DETERMINED BY DEMAND AND SUPPLY ONLY. The Cryptocurrency market is a dynamic arena and its respective prices are often highly unpredictable and volatile. The Cryptocurrency prices are usually not transparent, highly speculative and susceptible to market manipulation. In the worst-case scenario, the product could be rendered worthless.
It is important to make a distinction between indicative prices which are displayed on charts and dealable prices which are displayed on our trading platform. Indicative quotes only give an indication of where the market is. Because Cryptocurrency markets are decentralised, meaning they lack a single central exchange where all transactions are conducted, each market maker may quote slightly different prices. Therefore, any prices displayed on any chart made available by us or by a third party will only reflect “indicative” prices and not necessarily actual “dealing” prices where trades can be executed.
Cryptocurrency trading is prone to being misused for illegal activities due to the anonymity of transactions and investors would be adversely affected if law enforcement agencies were to investigate any alleged illicit activities.
ACCORDINGLY, CRYPTOCURRENCIES SHOULD BE SEEN AS AN EXTREMELY HIGH-RISK ASSET AND YOU SHOULD NEVER INVEST FUNDS THAT YOU CANNOT AFFORD TO LOSE.
Given the foregoing, Cryptocurrencies are not appropriate for all investors. You should not deal in these products unless you have the necessary knowledge and expertise, understand these products’ characteristics and your exposure to risk. You should also be satisfied that the product is suitable for you in light of your circumstances and financial position. In addition, use of our Services can never be considered a safe investment, rather, only an investment with a high risk of loss inherently associated with them.
Furthermore, our own spread is added to online quotes which makes a trade on our websites even more volatile.
The risk of loss in trading Cryptocurrencies can be substantial. You should, therefore, carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should be aware that you may sustain a total loss of the funds in your account. If the market moves against your position, we may ask you to provide a substantial amount of additional margin funds on short notice, in order to maintain your position. If you do not provide the required funds within the time frame required by us, your position may be liquidated at a loss, and you will be liable for any resulting deficit in your account.
eToro currently allows trading in cryptocurrencies over the weekend and it reserves the right not to do so. Should eToro so elect, trading in cryptocurrencies shall be allowed only from Monday through Friday. Given that the Cryptocurrency exchanges may operate over weekends, there may be a significant difference between Friday’s close and Sunday’s open. All such factors may result in you either not completing an order on a specific trading day or completing an order on a substantially less favourable price.
Under certain market conditions, you may find it difficult or impossible to liquidate a position. This can occur, for example, when the market reaches a daily price fluctuation limit (“limit move”), if there is insufficient liquidity in the market.
Certain crypto assets may carry additional or specific risks.
Newly issued cryptocurrencies might carry additional risks you need to consider. Limited liquidity or difficulties to trade the asset after you’ve bought it. This means prices could be volatile, going up and down quickly, and liquidity may be limited, all depending on supply and demand. eToro cannot control these external factors.
Blockchain Risks
Since blockchain is an independent public peer-to peer network and is not controlled in any way or manner by eToro, eToro shall not be responsible for any failure and/or mistake and/or error and/or breach which shall occur in blockchain or in any other networks in which the Cryptocurrencies are being issued and/or traded. You will be bound and subject to any change and/or amendments in the blockchain system and subject to any applicable law which may apply to the blockchain. We make no representation or warranty of any kind, express or implied, statutory or otherwise, regarding the blockchain functionality nor for any breach of security in the blockchain.
Operation of Cryptocurrency Protocols
eToro does not own or control the underlying software protocols which govern the operation of Cryptocurrencies available for trading on our platform. In general, the underlying protocols are open source and anyone can use, copy, modify, and distribute them. eToro is not responsible for the operation of the underlying protocols and eToro makes no guarantee of their functionality, security, or availability. The underlying protocols are subject to sudden changes in operating rules (“Forks”), and such Forks may materially affect the value, function, and/or even the name of the Cryptocurrency eToro holds for your benefit. In the event of a Fork, eToro may temporarily suspend eToro operations (with or without advance notice) and eToro may (a) configure or reconfigure its systems or (b) decide not to support (or cease supporting) the Forked protocol entirely. eToro may, but is not obligated to do so, adjust your account in respect of a Fork, depending on the circumstances of each event attributable to any specific Cryptocurrency which you hold.
Third-party Risks.
We may elect to execute any order and/or hold any fiat money and cryptocurrencies via a Third Party. Such Third Parties are not banks that hold their fiat money/virtual currency as a deposit. If any such Third Party loses any money, fails or goes out of business, there is no specific legal protection that covers you for losses arising from any funds you may have held with such a Third Party, even when such party is registered with a national authority. Depending on the structure and security of the eToro Money crypto wallet, some individuals may be vulnerable to hacks, resulting in the theft of virtual currency or loss of customer assets. eToro will not be responsible in the event of losses caused by those Third Parties.
Delisting and/or unsupported Cryptocurrencies: if at any time any of the Cryptocurrencies from the subject of your order are delisted and/or we no longer support the trading in such Cryptocurrencies for any reason, then the applicable order will be immediately closed. If eToro is notified that a Cryptocurrency you hold in your account is likely to be delisted and/or removed and/or cancelled from any of the exchanges (some of them or all) and eToro believes that it shall not be able to trade in such Cryptocurrencies, eToro shall make an effort to sell the Cryptocurrencies on your behalf at such time and price, and in such manner, as it determines.
Automated Trading & Internet Risks
While trading on our website and/or applications, system errors may occur. You should be aware of the risks that may result from any system failure which could mean that your order may be delayed or fail.
You acknowledge that there are risks associated with utilising an Internet-based trading system including, but not limited to, the failure of hardware, software, and Internet connections, the risk of malicious software introduction, the risk that third parties may obtain unauthorized access to information and/or assets (including your Cryptocurrencies) stored on your behalf, cyber attack, Cryptocurrency network failure (such as blockchain), computer viruses, communication failures, disruptions, errors, distortions or delays you may experience when trading via the Services, howsoever caused, spyware, scareware, Trojan horses, worms or other malware that may affect your computer or other equipment, or any phishing, spoofing or other attack. You should also be aware that SMS and email services are vulnerable to spoofing and phishing attacks and should use care in reviewing messages purporting to originate from eToro.
Fees and Costs
Our fees and charges are set out on our website etoro.com under the ‘Fees’ section. Please be aware of all costs and charges that apply to you, because such costs and charges will affect your profitability.
Information
Any opinions, news, research, analyses, prices, or other information contained on this website are provided as general market commentary, and do not constitute investment advice. eToro shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information provided.
We, or the relevant exchanges, or the relevant third parties, which provide Market Data, do not guarantee that the Market Data we provide is always accurate, correct, or up to date although we will take reasonable steps to ensure that it is. Importantly, Market Data is not financial advice and we are not responsible or liable for any action which you take or do not take based on such Market Data. We and the relevant third parties, including exchanges or other providers of Market Data, do not accept any liability (whether in tort or contract or otherwise) for any loss or damage arising from any inaccuracies or omissions within the Market Data or your use of it. If you want to use the information to help you with your own investment decisions, you do this at your own risk.
Past Performance
Past performance is not an indication of future performance. The value of investments can go down as well as up.
Currency Risk
Your account with eToro will be held in USD which may be different from the currency you used to deposit. Accordingly, you should be aware of currency fluctuations. Please also refer to eToro’s blog article concerning the impact of currency fluctuation on profit and loss.
Stock Investment Risk
When you invest in stocks on eToro, including SPAC stocks, you gain ownership of the underlying asset. This also entails exposure to the risks involved in stock investment. For more information on SPAC investment on eToro, click here.
SPAC Risks
Investing in SPACs carries different risks to investing in other stocks on eToro. Unlike other listed companies, SPACs are shell companies when they become public and, therefore, they do not have an underlying operating business. This means that you are relying on the managers of the SPACs to realise your investment. There is no guarantee that SPACs will be managed by individuals and firms that may not be competent or qualified to do so. You should read the SPAC’s IPO prospectus and any reports or other key information documents filed or published to understand the terms of your investments and the economic interests and motivations of the SPAC you are investing in. Moreover, SPACs that do not carry out an acquisition within a certain time period will be liquidated. As a result, there is a risk that you may not recover some or all of the money directly invested by you into the SPAC. The liquidation of the SPAC is also likely to render any stocks held in the SPAC worthless. For more information on the specific risks of investing in SPACs, please click here.
Extended-Hours Trading Risks
There is generally less trading volume during the extended hours market. Consequently, price moves can be more volatile and less representative of the broader market sentiment. Traders may experience:
- Lower liquidity: There are typically fewer buyers and sellers during extended hours, which can result in less trading volume and wider bid-ask spreads. This might make it harder to execute trades at desirable prices.
- Higher volatility: Lower liquidity can also lead to greater price volatility, with potentially rapid and significant price moves.
- Increased competition: Extended hours traders may also be competing against professional traders and institutional investors who have access to more resources.
- Risk of changing prices: The prices of securities traded in extended hours may not reflect the prices either at the end of regular trading hours or at the opening the next morning. As a result, you may receive an inferior price when engaging in extended-hours trading than you would during regular trading hours.
- Risk of news announcements: Normally, issuers make news announcements that may affect the price of their securities after regular trading hours. Similarly, important financial information is frequently announced outside of regular trading 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 between the price you can buy a security and the price you can sell it. Lower liquidity and higher volatility in extended-hours trading may result in wider than normal spreads for a particular security.