Interactive Brokers Central Europe Zrt.

ANNOUNCEMENT
RISK WARNINGS AND INFORMATION ON FINANCIAL INSTRUMENTS

Valid from: 11 December 2020

We would like to emphasise that where you classify as a Retail Client, you should pay particular
attention to these Risk Warnings considering that your level of experience, knowledge and expertise is
lower than that of a Professional Client or Eligible Counterparty. You should therefore read attentively
and make sure you understand the below. There are risks involved in relation to any investment.

We have set an outline of some general risk warnings that are relevant to most asset classes and
investment strategies and of which you should be aware:

a) You should always remember that you may not get back the amount originally invested as the
value of the investments, and the income from them can go down as well as up. There are no
guaranteed returns. The price or value of an investment will depend on fluctuations in the
financial markets that are outside our control;

b) Past performance is not a guide to future performance;

c) The value of an individual investment may fall as a result of a fall in markets depending, for
example, on the level of supply and demand for a particular financial instrument, the investors
or market perception, the prices of any underlying or related investments or other political and
economic factors;

d) With regard to investments designated to be held for the medium to long-term or with limited
liquidity or with a fixed maturity date or with significant up-front costs, you should be aware that
early redemption may result in lower than expected returns, including the potential for loss to
the amount invested;

e) Trading in off exchange investments, that is investments which are not traded under the rules
of a regulated market or exchange or where there is no recognised market, and which are not
settled through a regulated clearing house, exposes the investor to the additional risk that there
is no certainty that the market makers will be prepared to deal in such investments and as a
consequence there might be no secondary market for such investments. There may also be
restrictions in relation to access and liquidity, for example, investments may only be made or
redeemed on certain dates or with prescribed period of notice. You should be aware that it may
be difficult to obtain reliable information about the current value of such investments or the
extent of the risks to which they exposed;

f) You will be exposed to concentration risk where there is an insufficient level of diversification
in your account and you are excessively exposed to one or a limited number of investments;

g) Correlation risk refers to the probability that the actual correlation between two assets or
variables will behave differently than what anticipated. The consequence is that your portfolio
could be riskier than originally envisaged. Correlation is a term used to compare how one asset
class might behave in comparison to another asset class. Assessing the correlation between
different assets in your portfolio is important in managing the riskiness of the account;

h) Volatility is a statistical measure of the tendency of an individual investment to feature

i) Regulatory/Legal risk is the risk from regulatory or legal actions and changes which may reduce
the profit potential of an investment or cause a loss on your investment. Legal changes could
even have the effect that a previously acceptable investment becomes illegal or if affects the
tax treatment of your investment may impact its profitability. Such risk is unpredictable and may
depend on various political, economic and other factors;
 j) Operational risk, such as breakdowns or malfunctioning of essential systems and controls,
including IT systems, can impact the ability of closing your investments or otherwise transact.

In addition to the above, there are three types of generic risks that you should review and understand
before dealing in financial instruments. The Risk Types are generically referred to below as Market
Risk, Liquidity Risk and Credit and Default Risk

1. Market Risks

a) Interest Rate Risk

Interest rate sensitivity means that prices change relative to current and future interests rate
expectations. For example, if interest rates are expected to rise the price of a fixed rate bond
may fall and consequently a sale of the bond at such time crystallise a loss. Conversely, a fall
in interest rates may result in the increase in value of a fixed rate bond. Interest rate changes
may also directly or indirectly impact the value of other financial instruments that do not provide
for a return on a fixed rate basis.

b) Inflation Risk

The risk that the rate of price increases in the economy deteriorates the returns associated with
an investment. The real value (the value adjusted for the impact of inflation) of an investment
will fall as a result of the rate of inflation exceeding the rate of return of the investment. This risk
has the greatest effect on fixed-rate inflation-linked bonds, which have a set interest rate from
inception. For example, if an investor purchases a 4% fixed bond and the inflation rises to 8%
a year, the bondholder will lose money on the investment because the purchasing power of the
proceeds has been greatly diminished.

c) Exchange Rates Risk

Exchange rate changes may cause the value of investments to rise or fall relative to the base
currency, any movement in currency exchange rates may have a favourable or an unfavourable
impact on the profit or loss of the investment.

d) Emerging Markets Risk

Emerging Markets generally have limited transparency, liquidity, efficiency and regulations
compared to developed markets, the reaction of the local financial markets to news and other
geo-political events may result in a more extreme variation in prices of emerging market
instruments compared to developed markets.

2. Liquidity Risk

Liquidity risk is the inability to buy or sell an investment at the desired time, or to transact in an
instrument at all. When a delay occurs, such delay may affect the price at which such asset can actually
be bought or sold. Also, instruments that are illiquid or that trade in lower volumes may be more difficult
to value or to obtain reliable information about their value.

Liquidity risk is linked to a variety of factors such as:

• The particular terms and conditions of an instrument;

• The fact that the instrument is not publicly traded or listed on an exchange;

• Adversely perceived market developments;

• The fact that the ownership of an investment is highly concentrated in one or small number of
investors;
 • A reduced number of financial institutions operating as market maker in the relevant financial
instruments. For example, in the case of securitised derivatives (such as structured products),
the only market maker might be the issuer itself (or an affiliated entity), who might provide a
limited undertaking to act as market maker;

• The fact that market participants may attempt to sell holdings at the same time as the investor,
and there may be insufficient liquidity to accommodate these sales.

These factors may exist at the time of investment or may arise subsequently.

3. Credit and Default Risks

Counterparty or credit risk arises if a party connected to a transaction is unable to meet its obligations.
In certain circumstances these risks may mean that you will not get back the sum invested, or the return
anticipated from such transaction.

a) Insolvency Risk

Our insolvency or default, or that of other parties involved with your transaction, may result to positions
being liquidated without your consent. In certain circumstances, you may not get back the actual assets
which you posted as collateral and you may have to accept any available payments in cash.

b) Bail-in Risk

This is the risk that the financial instruments of certain issuers, including banking institutions, investment
firms and certain banking group companies, may be subject to action taken by governmental, banking
and/or other regulatory authorities, for example to address banking crises pre-emptively, whether or not
the express terms of a financial instrument anticipate such action. The relevant authorities may have
broad discretion on the action they may take, and their powers may be extended in response to
particular events.

Examples of the action they may be able to take could include the following:

• The reduction, including to zero, of the principal of the bonds/debentures of such issuers;

• The conversion of such bonds/debentures into equities or other instruments of ownership

• The variation of the terms, including with respect to maturity and/or the payment of interest, of
such bonds/debentures; and shareholders being divested of their shares.

c) Financial Instruments and investments

Set out below is an outline of the risks associated with certain types of financial instruments.

4. Shares and other equity-like instruments

a) Equities or shares

Equities or shares represent shareholder’s rights and interests in a company. One share represents
a fraction of a company’s share capital and a shareholder may benefit from an increase in the value
of the share, although this is not guaranteed. Shareholders may also qualify for dividend payments,
but these are paid only at the discretion of the company’s management. A shareholder has no right
to return of capital and the shares could become valueless in the event of insolvency of the
company.

A shareholder’s return from investing in the equity will depend to a large extent on the market price
of the equities at the time of the sale. The market price of an equity is determined by a number of
factors that affect the supply and demand for that equity, including, but not limited to:
 • fundamentals about the company: such as profitability of the company and strength of the
company’s management;

• domestic and international factors: such as the exposure of the company to international events
or market factors;

• sector specific factors: such as the economic cycle of a specific industry and changes in the
prices of commodities or in consumers’ demands.

Shares in smaller companies may carry an extra risk of losing money as there can be a big difference
between the buying price and the selling price of these securities. If shares in smaller companies have
to be sold immediately, you may get back much less than you paid for them. The price may change
quickly, and it may go down as well as up.

Shares are generally a fairly volatile asset class – their value tends to fluctuate more than other financial
instruments such as bonds. Holding shares is high risk – if you put your money into one company and
that company becomes insolvent then you will probably lose most, if not all, of your money.

b) Penny Shares

There is an extra risk of losing money when shares are bought in some smaller companies or in
companies of which the shares are traded at very low prices compared to their nominal value, such as
“penny shares”. There may be a (relatively) big difference between the buying price and the selling price
of these shares. If they have to be sold immediately, you may get back much less than you paid for
them.

5. Warrants

A warrant is a time-limited right to subscribe for shares, debentures, loan stock or government
securities, and is exercisable against the original issuer of the securities. A relatively small movement
in the price of the underlying security results in a disproportionately large movement, unfavourable or
favourable, in the price of the warrant. The prices of warrants can therefore be volatile. It is essential
for anyone who is considering purchasing warrants to understand that the right to subscribe which a
warrant confers is invariably limited in time with the consequence that if the investor fails to exercise his
right within the predetermined time-scale then the investment becomes worthless. You should not buy
a warrant unless you are prepared to sustain a total loss of the money you have invested plus any
commission or other transaction charges. Some other instruments are also called warrants but are
actually options (for example, a right to acquire securities which is exercisable against someone other
than the original issuer of the securities, often called a "covered warrant").

6. Money-market instruments

Money-market instruments are collective investment schemes which invest money in cash or cash
equivalents, such as short term loans to the government that pay a fixed rate of interest. The loan is for
a period, generally no longer than six months, but occasionally up to one year, in which the lender takes
a deposit from the money markets in order to lend (or advance) it to the borrower. Unlike in an overdraft,
the borrower must specify the exact amount and the period for which he wishes to borrow.

7. Fixed interest or bonds

Fixed interest, bonds or debt securities are payment obligation of a party, usually referred to as the
issuer. Bonds have a nominal value, which is the amount that, subject to Credit and Default Risk, will
be return to the bondholder when the securities mature at the end of the investment period. The nominal
value of a bond is distinct from its price or market value. Bonds can be bought or sold in the market (like
shares) and their price can vary from day to day. A rise or fall in the market price of a bond does not
affect, subject to Credit and Default Risk, what you would get back if you hold the bond until it matures.

While the price of a bond is subject to market’s fluctuations, when close to maturity the market price
tends to reflect the bond’s nominal value. The factors which are likely to have a major impact on the
value of a bond are the perceived financial position of the issuer and changes to market interest rate
expectations.

For some bonds there may be a restricted market and it may be more difficult to deal in them or obtain
reliable information about their value (and it might be more difficult to establish a proper market in them
for the purposes of making a subsequent sale).

The risk associated with investing in bonds include, but are not limited to:

• Interest Rate Risk;

• Inflation Risk;

• Credit and Default Risk.

If an issuer is in financial difficulty, there is an increased risk that they may default on their repayment
obligations. In this event, little or no capital may be recovered, and any amounts repaid may take a
significant amount of time to obtain.

8. Commodities

Commodity based investments, whether made by investing directly in physical commodities, for
example gold, or by investing in companies whose business is substantially concerned with
commodities or through commodity linked products, may be impacted by a variety of political, economic,
environmental and seasonal factors. These relate to real world issues that impact either on demand or
on the available supply of the commodity in question. Other factors that can materially affect the price
of commodities include regulatory changes, and movement in interest rates and exchange rates. Their
value can fall as well as rise, and in some cases an investment in commodity linked products might
result in the delivery of the underlying.

9. Mutual Funds

A mutual fund is a scheme under which assets are held on a pooled basis on behalf of a number of
investors. It may be structured in a number of ways, for example, in the form of a company, partnership
or trust. The level of risk of investing in a mutual fund depends on the underlying investments in which
the scheme is invested and how well diversified it is. Investments may typically include bonds and
exchange traded equities but depending on the type of scheme may include derivatives, real estates or
riskier assets. There are risks relating to the assets held by the scheme and investors should check and
understand the type of assets included in the pool and the scheme’s investment strategy.

10. Exchange Traded Funds (ETFs) and Exchange Traded Products (ETPs)

ETFs and ETPs are investment funds and other securities that are traded like shares and which invest
in a diversified pool of assets such as shares, bonds or commodities. In general, they track the
performance of a benchmark or financial index and the value of the investment will fluctuate accordingly.
Some ETFs and ETPs employ complex techniques or hold riskier assets to achieve their objectives, for
more details please review carefully the “Risk Disclosure For Trading Leveraged, Inverse And Volatility-
Based Exchange Traded Products”.

11. Structured products

Structured products are the generic name for products which provide economic exposure to a wide
range of underlying asset classes. The level of income and/or capital growth derived from a structured
product is usually linked to the performance of the relevant underlying assets. Structured products are
generally issued by financial instructions and therefore the products are subject to the credit risk of the
issuer. If the issuer is unable to repay sums due under the terms of the product, this may affect the
returns under the structured product and result in a total loss of the initial investment. Before you make
a decision to invest in a structured product you should review the “Risk Disclosure Statement for Trading
Structured Products (including warrants) with Interactive Brokers”.
12. Derivatives, including futures, options and contracts for differences

a) Derivatives generally

Derivatives are financial instruments whose prices are derived from an underlying asset. Examples
of derivatives include futures, options and Contracts for Differences. Transactions in derivative
instruments involve a higher risk than a direct investment in the underlying asset. As the derivatives’
value is dependent on the future value of underlying assets, a movement in the value of the
underlying assets may result in an amplified change in the value of the derivative.

b) Futures

Transactions in futures involve the obligation to make, or to take, delivery of the underlying asset of
the contract at a future date, or in some cases to settle the position with cash. They carry a high
degree of risk. The "gearing" or "leverage" often obtainable in futures trading means that a small
deposit or down payment can lead to large losses as well as gains. It also means that a relatively
small movement can lead to a proportionately much larger movement in the value of your
investment, and this can work against you as well as for you. Futures transactions have a contingent
liability, and you should be aware of the implications of this, in particular the margining requirements.

c) Options

There are many different types of options with different characteristics subject to the following
condition. Buying options: Buying options involves less risk than selling options because, if the price
of the underlying asset moves against you, you can simply allow the option to lapse. The maximum
loss is limited to the premium, plus any commission or other transaction charges. However, if you
buy a call option on a futures contract and you later exercise the option, you will acquire the futures.
This will expose you to the risks described under "futures" and "contingent liability investment
transactions."

Writing options: If you write an option, the risk involved is considerably greater than buying options.
You may be liable for margin to maintain your position and a loss may be sustained well in excess
of the premium received. By writing an option, you accept a legal obligation to purchase or sell the
underlying asset if the option is exercised against you, however far the market price has moved
away from the exercise price. If you already own the underlying asset which you have contracted
to sell (when the options will be known as "covered call options") the risk is reduced. If you do not
own the underlying asset ("uncovered call options") the risk can be unlimited. Only experienced
persons should contemplate writing uncovered options, and then only after securing full details of
the applicable conditions and potential risk exposure.

Traditional options: Certain London Stock Exchange member firms under special exchange rules
write a particular type of option called a "traditional option." These may involve greater risk than
other options. Two-way prices are not usually quoted and there is no exchange market on which to
close out an open position or to effect an equal and opposite transaction to reverse an open position.
It may be difficult to assess its value or for the seller of such an option to manage his exposure to
risk.

Certain options markets operate on a margined basis, under which buyers do not pay the full
premium on their option at the time they purchase it. In this situation you may subsequently be
called upon to pay margin on the option up to the level of your premium. If you fail to do so as
required, your position may be closed or liquidated in the same way as a futures position.

d) Contracts for Differences

Futures and options contracts can also be referred to as contracts for differences. These can be
options and futures on an index, as well as currency and interest rate swaps. However, unlike other
futures and options, these contracts can only be settled in cash. Investing in a contract for
differences carries the same risks as investing in a future or an option. Transactions in contracts for
differences may also have a contingent liability.
13. Risks of money market funds

The Company is entitled to invest funds received from a Client under the agreement concluded with
the Client within the framework of its investment services or ancillary services or after the execution
of the client's order in a qualified money market fund pursuant to Regulation 2017/1131 of the
European Parliament and of the Council.

The Company selects with a due diligence expected of it and regularly, but at least annually, reviews
the compliance of the institution entrusted with the management of such funds with the regulations
on the management of funds.

Investing in a money market fund differs from investing in a deposit, especially in terms of the risk
that the capital invested in the money market fund may fluctuate. The money market fund is not a
guaranteed investment, thus there is a risk of losing capital when investing in it and client asset
protection rules as set in Act CXXXVIII of 2007 on Investment Firms and Commodity Exchange
Service Providers and the Rules of the Activities (Bszt.) are not applicable.

14. Risks relevant to certain types of transactions and arrangements

a) Off-Exchange transactions

Transactions that are conducted off-exchange (“OTC Transactions”) may involve greater risk than
dealing in exchange traded instruments because there is no exchange market through which to
liquidate your position, or to assess the value of the instruments or the exposure to the risk.

OTC Transactions carry a higher settlement risk.

Settlement risk is the risk that the counterparty does not deliver the security (or equivalent assets)
as required under the agreed terms. This results in one party to the transaction not receiving the
securities or assets they are entitled to. This risk increases where it is not possible to exercise
netting where the amounts delivered by each party will partially or completely cancel each other
out.

Liquidity Risk as described above is higher in OTC Transactions. There is no exchange market
through which to liquidate your position, or to assess the value of the OTC Transaction or the
exposure to risk. Bid and offer prices need not be quoted, and even where they are, they will be
established by dealers in these instruments and consequently it may be difficult to establish what is
a fair price.

b) Off-exchange transactions in derivatives

It may not always be apparent whether or not a particular derivative is arranged on exchange or in
an off-exchange derivative transaction. While some off-exchange markets are highly liquid,
transactions in off-exchange or "non-transferable" derivatives may involve greater risk than
investing in on-exchange derivatives because there is no exchange market on which to close out
an open position. It may be impossible to liquidate an existing position, to assess the value of the
position arising from an off-exchange transaction or to assess the exposure to risk. Bid prices and
offer prices need not be quoted, and, even where they are, they will be established by dealers in
these instruments and consequently it may be difficult to establish what is a fair price.

c) Foreign markets

Foreign markets will involve different risks from the EU markets. In some cases, the risks will be
greater. The potential for profit or loss from transactions on foreign markets or in foreign
denominated contracts will be affected by fluctuations in foreign exchange rates.

d) Commissions
 Before you begin to trade, you should obtain details of all commissions and other charges for which
you will be liable. If any charges are not expressed in money terms (but, for example, as a
percentage of contract value), you should obtain a clear and written explanation, including
appropriate examples, to establish what such charges are likely to mean in specific money terms.
In the case of futures, when commission is charged as a percentage, it will normally be as a
percentage of the total contract value, and not simply as a percentage of your initial payment.

e) Collateral

If you deposit collateral as security with us, the way in which it will be treated will vary according to
the type of transaction and where it is traded. There could be significant differences in the treatment
of your collateral, depending on whether you are trading on a recognised or designated investment
exchange, with the rules of that exchange (and the associated clearing house) applying or trading
off-exchange. Deposited collateral may lose its identity as your property once dealings on your
behalf are undertaken. Even if your dealings should ultimately prove profitable, you may not get
back the same assets which you deposited and may have to accept payment in cash.

f) Contingent liability investment transactions.

Contingent liability investment transactions, which are margined, require you to make a series of
payments against the purchase price, instead of paying the whole purchase price immediately. If
you trade in futures contracts for differences or sell options, you may sustain a total loss of the
margin you deposit with us to establish or maintain a position. If the market moves against you, you
may be called upon to pay substantial additional margin at short notice to maintain the position. If
you fail to do so within the time required, your position may be liquidated at a loss and you will be
responsible for the resulting deficit. Even if a transaction is not margined, it may still carry an
obligation to make further payments in certain circumstances over and above any amount paid
when you entered the contract.

g) Gearing or leverage

Gearing or leverage is a strategy, with a view to enhancing the return from, or the value of, an
investment involving the following:

(i) borrowing money;

(ii) investing in one or more instruments, such as warrants or derivatives, for which a relatively
small movement in the value or price of the underlying rights or assets results in a larger
movement in the value or price of the instrument;

(iii) structuring the rights of holders of an investment so that a relatively small movement in the
price or value of the underlying rights or assets, results in a larger movement in the price or
value of the investment; and

(iv) you may lose more than you had initially invested.

You should be aware that the strategy used or proposed for the gearing may result in:

• movements in the price of the investment being more volatile than the movements in the price
of underlying rights or assets;

• the investment being subject to sudden and large falls in value; and

• you are getting back nothing at all if there is a sufficiently large fall in value in the investment.

h) Suspensions of trading

Under certain trading conditions it may be difficult or impossible to liquidate a position. This may
occur, for example, at times of rapid price movement if the price rises or falls in one trading session
 to such an extent that under the rule of the relevant exchange trading is suspended or restricted.
Placing a stop-loss order will not necessarily limit your losses to the intended amounts, because
market conditions may make it impossible to execute such an order at the stipulated price.

i) Clearing house protections

On many exchanges, the performance of a transaction by us (or third party with whom we are dealing
on your behalf) is "guaranteed" by the exchange or clearing house. However, this guarantee is unlikely
in most circumstances to cover you, the customer, and may not protect you if us or another party
defaults on its obligations to you. On request, we will explain any protection provided to you under the
clearing guarantee applicable to any on-exchange derivatives in which you are dealing. There is no
clearing house for traditional options, nor normally for off-exchange instruments which are not traded
under the rules of a recognized or designated investment exchange.