Product Disclosure Statement - XE

Powering you.Forward rate(AUD 1,000,000.00 AUD 3,780.82) /(NZD 1,093,613.30 NZD 4,823.88) 0.9138In this example the company would receive a FXSwap Confirmation note as follows:Deal typeTransaction DateContract NumberValue dateYou have soldYou have boughtSpot RateInitial Margin payableSwap near leg date4 September 2018C1234566 September 2018*NZD 1,093,613.30AUD 1,000,000.000.9144NZD 54,716.57Deal TypeContract NumberValue dateYou have soldYou have boughtForward RateSwap far leg dateC123457December 2018*AUD 1,000,000.00NZD 1,094,331.360.9138*(being 2 days after the date you undertook thetransaction)*(being 92 days after 4 September 2018)An Initial Margin payment of say 5% of thebought currency (NZD 1,094,331.36 x 5% NZD 54,716.57) will be required which acts as asecurity for the forward element of the swapcontract.The company would need to pay HiFXNZD 1,093,613.30plusamarginofNZD 54,716.57 on or before 6 September 2018and would in return receive AUD 1m.Three months later the company would pay HiFXAUD 1,000,000.00 and would receive backNZD 1,094,331.36 plus the Initial Margin ofNZD 54,716.57.The above example provides an example of onesituation only and does not reflect the specificcircumstances or the obligations that may ariseunder a derivative entered into by you.2.1.3. Margin Call ObligationsA FX Swap is subject to ongoing Marginobligations (Margin Calls) imposed by HiFX whichact as security for your FX Swap (specifically forthe swap far leg date of your FX Swap). You areliable to meet all Margin Calls to HiFX up to thetotal amount of the Sold Currency. Margin Callpayments are credited to your Account with HiFXand are part payment of the Sold Currency.Your Account balance must be more than theminimum amount of Margin cover required byHiFX for your FX Swap(s). If not, a Margin Callmay be made at any time (normally Margin Callsare determined daily) and you are obliged tomeet Margin Calls by paying the requiredamount by the time stipulated in the Margin Call,normally within 2 business days (but may bepayable immediately). If the Margin Call requiredis not received within 2 Business Days some or allof your FX Swaps may be terminated and ClosedOut with you being responsible for (and bearing)any loss arising from the contract being ClosedOut (refer section 2.3 below for furtherinformation on Closing Out FX Swaps). HiFX may,but need not, give you a grace period.It is your responsibility to pay Margin and meetMargin Calls, up to the full amount of the SoldCurrency (on the far leg date), on time and incleared funds, so please keep in mind thepossibility of delays in the banking and paymentssystems.The timing and amount of each Margin Call willdepend on movements in currency prices and thefactors that impact negatively on the marketprice of the currencies involved in your FX Swaps.There are no limits as to how often Margin Callsmay be made but typically Margin Calls areunlikely to be made more than daily.Margin Call exampleIn the example above, where thecompany has swapped NZD for AUD fora 3 month period. The company has paidHiFX NZD 54,716.57 as Initial Margin.For the purposes of this example let'sassume the NZD/AUD forward exchangerate subsequently depreciates to 0.8650.In this situation the far leg date of the FXSwap is said to be Out-Of-The-Money byNZD 61,738.005

Powering you.FEC cover NZD 1,094,331.362.1.5. Method of PaymentCurrent forward ratePayments by you to HiFX must be by way ofelectronic transfer only. HiFX does not acceptpayment by way of cash and/or cheques.AUD 1m / 0.8650 NZD 1,156,069.36Out-Of-The-Money NZD 61,738.00The company has only paid NZD 54,680.67Initial Margin. HiFX will therefore make a MarginCall for a further NZD 7,561.43 (more likely to berounded up to NZD 7,600.00) to ensure it hassufficient moneys from the company to securethe far leg of the FX Swap.The total Margin (once paid) held in respect ofthe FX Swap is NZD 62,316.57 ( 54,716.57 7,600.00) and will be repaid to the company onsettlement day – 4 December 2018.The above example provides an example of onesituation only and does not reflect the specificcircumstances or the obligations that may ariseunder a derivative entered into by you.2.1.4. Settling FX SwapsOn the day of you entering into a FX Swap, HiFXwill send you a Confirmation note which will setout the details of your FX Swap and will adviseyou of the amount(s), currencies and the date(s)upon which you will need to send money to HiFXfor each of the two legs of the FX Swap.When each leg of your FX Swap reaches theValue Date (i.e. the settlement date for your FXSwap), and HiFX has received the balance of yourSold Currency in cleared funds, HiFX theninstructs its bank to send the Bought Currency viainternational payment systems to yournominated account.Any outstanding balance of the Sold Currency tobe paid (once Initial Margin and any laterpayment of Margin, if any, has been taken intoaccount) must be paid to HiFX no later than thebanking cut-off time on the Business Day beforethe Value Date of the particular FX Swap.All transactions are effected electronically andHiFX retains detailed records of all settlementtransactions.2.2. ENTERING INTO A FX SWAP2.2.1. ENTERING INTO A FX SwapThe following steps describe how you can enterinto a FX Swap with HiFX.The particular terms of each FX Swap are agreedbetween you and HiFX before you enter into a FXSwap with HiFX.In order to transact with us you will first need toestablish an Account – refer to section 10. Oncean Account is opened you can purchase a FXSwap via telephone with the particular termsbeing agreed before you enter into a FX Swapwith HiFX. Contact your HiFX Dealer to discuss your FXSwap transaction. We endeavour to digitallyrecord telephone conversations at all times toensure that instructions can be verified in theevent of a dispute. Based on the quotations received, you willenter into a FX Swap with HiFX, when HiFXaccepts your Order. Once you have agreed with HiFX over thephone to buy a FX Swap, a Confirmation of thetransaction is subsequently sent to you. TheConfirmation gives details of the transactionincluding the amount of Bought Currency, SoldCurrency and the exchange rate for the near legand far leg dates, and the Value Dates of therespective legs. We will separately notify you ofany Initial Margin due. It is your obligation toreview the Confirmation(s) immediately toensure all details are accurate and to report anydiscrepancies within 24 hours. The contents ofthe Confirmation are deemed to have beenaccepted and cannot be disputed after 24hours of HiFX sending the Confirmation. You must provide us details of your ��s name and physical address) toenable the currency payment due to you to godirectly to your nominated destination.6

Powering you.2.3. RIGHTS TO ALTER TERMS ORTERMINATE A FX SWAP2.3.1 Earlier or later delivery of the FX SwapFar Leg dateHiFX may, in its absolute discretion: allow delivery of the far leg date element ofthe FX Swap earlier than the original ValueDate, however that will likely result in anadjustment to the exchange rate for the far legdate element of the FX Swap. allow an extension to the far leg date elementof the FX Swap, however, HiFX may eitheradjust the exchange rate or HiFX may CloseOut the far leg date of the FX Swap at theexisting exchange rate and enter into a newFEC (far leg date of the FX Swap) on agreedterms appropriate to the extension.2.3.2 Terminating a FX SwapA FX Swap can be terminated i.e. Closed Outbefore and up to the Value Date, by you enteringinto an equal and opposite transaction with HiFXusing the prevailing market rates in the followingcircumstances: as set out in the Terms; or by agreement between you and HiFX.Key Close Out events under the Terms include: a breach of a Term by you e.g. using a FXSwap for speculative purposes; your breach of a law e.g. anti-moneylaundering laws; your insolvency or bankruptcy; or your failure to comply with an obligation toHiFX e.g. failure to pay Initial Margin. HIFX determines that the value of all of yourFX Transactions represent a substantial netunrealised loss to you such that failure toterminate one or more of your FX Transactionswill (or is likely to) materially prejudice you oryour capacity to perform under the FXTransactions. This is a safety measure for youand us in the event that you are not monitoringa deteriorating position; HIFX determines there is a material risk of youbeing unable to comply with your obligations toHIFX as and when they fall due, which could bebased for example, on you telling us that youwill not be able to pay the remaining balance ofthe Sold Currency but that date has not yetoccurred; or HIFX considers termination of one or more ofyour FX Transactions is necessary or desirablefor HiFX’s own protection, for example whenvolatile market conditions exist.If we terminate your FX Swap we may set off all orany part of any money paid by you against anyamount actually or contingently due and payableby you to HiFX.A FX Swap contract is Closed Out and the CloseOut gives rise to a profit, you will receive theprofit amount (and any Margin you paid) and aConfirmation advising all details. If the Close Outgives rise to a loss you will be required to payHiFX the amount of the loss. Your Margin amountheld (if any) will be set off against the amountowing to HiFX and a Confirmation will be issuedadvising all details.You will be liable for any loss, costs, fees, chargesor other expenses, including interest, incurred byHiFX in consequence of the Close Out.There are some other termination events set outin the Terms (which you should read carefully)which give us discretions. While we consider it isunlikely that we will need to rely on them exceptin highly unusual cases, you should be aware thatwe have the discretion to terminate your FX Swapin the circumstances set out in the Terms,including if:7

Powering you.3. RISKS OF THESE DERIVATIVES3.1 PRODUCT RISKSThe significant risks for an investor that arise fromHiFX’s FX Swap are set out below.Opportunity cost:Once you have fixed your exchange rate for thefar leg date of the FX Swap you have locked in arate for a future delivery date and will not beable to take advantage of subsequentfavourable exchange rate movements shouldthat occur, in relation to your committed foreigncurrency exposure. On the other hand, you willbe protected from any adverse exchange ratemovements.Not a regulated market:The FX Transactions offered by HiFX are notcovered by the rules of a regulated exchange ormarket. You will be unable to transfer yourcontract with HiFX to another party i.e., itcannot be traded on an exchange or a market. Ifyou want to exit your FX Swap, you will need toenter into a Close Out Transaction with HiFX(refer section 2.3.2 above)You can reduce your risk by carefully readingthis PDS, the Terms and taking independentadvice on the legal and financial aspectsrelevant to you.Failure to deliverThe consequence of a failure by you to make apayment or delivery is that your FX Swap maybe terminated by HiFX which may result in youincurring loss (refer section 2.3.2 above).Risk that your circumstances have changedIf the reason for you entering into a FX Swapceases to exist (for example, a contract to sellgoods overseas falls through) or your foreignexchange needs change prior to the Value Dateof the far leg date of your FX Swap, you maywant to consider Closing Out the far leg dateelement of the FX Swap early as you are notable to cancel the transaction or transfer yourobligations to anybody else. This may result ina loss to you if the exchange rate has movedunfavourably (refer section 2.3.2 above).3.2 ISSUER RISKSWhen you enter into any of HiFX’s derivativeproducts you have a counterparty or credit risk,on the basis HiFX is the product issuer, that HiFXwill perform its obligations to you. Hence you areexposed to the risk that HiFX becomes insolventand is unable to meet its obligations under theFX Swap.HiFX’s creditworthiness has not been assessedby an approved rating agency. This means thatHiFX has not received an independent opinionof its capability and willingness to repay its debtsfrom an approved source. None of HiFX’sobligations to you are guaranteed or secured byHiFX’s ultimate parent company, EuronetWorldwide Inc or any other related company.The following description helps you understandthe important aspects of your counterparty riskthat you are exposed to with HiFX and to assessthe credit worthiness of HiFX.3.2.1. HiFX hedges its own foreign exchangeexposureYour credit risk exposure to HiFX is partiallymitigated because HiFX hedges its FXTransactions (including FX Swaps) with you andother clients, so HiFX has the funds to pay youout on settlement. HiFX is in the business ofproviding clients with currency services, and isnot a speculative dealing business.Once you have entered into a FX Swap withHiFX, HiFX will manage the position with itsother FX transactions it has agreed to byentering into its own FX contracts (in its ownname, on its own account) with one of severalestablished banking counterparties it choosesfrom (referred to here as a Hedge Counterparty).This hedging does not require an exact hedge ofeach individual FX transaction (because therecould be at any time a lot of clients’ FXtransactions covering a lot of combinations ofvariables) so the net positions are hedged byHiFX within limits and in accordance with HiFX’srisk management policies, such that, over timeHiFX has limited or minimal market exposure tolater changes in the value of the FX transactions.In order to enter into those transactions, HiFX isrequired to deposit money (as security) with therelevant Hedge Counterparty to maintain HiFX’shedge contracts. HiFX funds these paymentobligations to its Hedge Counterparties fromfunds held in its STAs. Since HiFX hedges its netexposure to currency, individual hedge contractsgenerally do not relate only to one FXtransaction.8

Powering you.3.2.2. Risks from HiFX’s Hedge Counterparties3.2.4. Solvency of HiFXYour credit risk exposure to HiFX is partiallymitigated because HiFX hedges with severalestablished banking counterparties.Whenever you consider your credit risk exposureto HiFX, you should consider how to assess thesolvency of HiFX.HiFX may use a number of Hedge Counterpartiesfrom time to time (thereby spreading the risk bynot having exposure concentrated in a singlecounterparty).HiFX’s most recent annual directors’ report andan audited annual financial report are availablefree on request by contacting HiFX or can beobtained from the following website:The particular Hedge Counterparties used byHiFX may change from time to time and may notbe known by HiFX in advance of your FXTransaction.Since HiFX is liable to you as principal on your FXSwap, HiFX is exposed to the insolvency of itsHedge Counterparties, or other defaults whichaffect its Hedge Counterparties. It is possible thata Hedge Counterparty may become insolvent,which could affect HiFX’s financial capacity tomeet its obligations to you since HiFX is alsoexposed to those Hedge Counterpartiesperforming their contracts with HiFX. To reducethis risk, HiFX undertakes risk management in itsselection and monitoring of its HedgeCounterparties, all of whom are part ofestablished, reputable and regulated bankinggroups with investment grade ratings from theleading international credit ratings agencies.HiFX’s Hedge Counterparties used for hedgingactivities are:Bank of New Zealandwww.bnz.co.nzDeutsche Bank AGwww.db.comBarclays Bank Plcwww.barclays.co.ukBank of America Merrill Lynch www.bofaml.com3.2.3. Security Trust ArrangementsYour credit risk exposure to HiFX is reducedbecause:(a) For New Zealand Retail Clients, Margin wereceive from you is kept in a Derivatives InvestorMoney Account which is a statutory pooledtrust account (refer section 5 below for furtherinformation on how HiFX treats funds andproperty received from you);(b) HiFX has adopted additional protection forits clients by creating a security arrangement infavour of its clients that also protect settlementmoney which is not protected by the DerivativeInvestor Money Account (refer “Additionalclient protection provided by HiFX for clientpayments” in Section 7 for further information).www.business.govt.nz/disclose.The solvency of HiFX should not be assessed onlyby reference to historical financial informationabout HiFX. HiFX solvency also depends onmanaging all of its business risks, including butnot limited to its capitalisation, its cash flow, itscounterparty risks, its risk management systemsand actual implementation of those riskmanagement systems.You should take into account all of those factorsand not rely only on past financial statementssince that could become out of date.HiFX, under its New Zealand derivatives issuerlicence, must also meet and maintain a minimumamount of capital adequacy, surplus liquid fundsand net tangible assets. These conditions areimposed upon HiFX to ensure it has adequatesolvency to run its business. These calculationsare audited each year.3.3. RISKS WHEN ENTERING ORSETTLING THE DERIVATIVESThe significant risks that arise from the processesby which FX Swaps are entered into or settled areset out below.Market disruptions:A market disruption may mean that you may beunable to deal in FX Transactions when desired,and you may suffer a loss as a result of that.Common examples of disruptions include the“crash” of a computer-based trading system.Systems Risk:HiFX relies on a number of technologicalsolutions to provide you with efficient foreignexchange services. In this regard HiFX relies onbanks and third party international settlementsystem providers to assist in currency transfersbetween accounts. HiFX does not have controlover these third party systems and is not liableto you for their failure or delay.9

Powering you.4. FEESHiFX does not charge commissions or a fee foryou to enter into a FX Swap. HiFX earns itsrevenue from the spread between the rate HiFXachieves on its Hedge Contracts with its HedgeCounterparties and your FX Swap price. Thespread you pay is built into our exchange rates.This spread will vary in accordance with: the size of the FX transaction (the larger thetransaction size the smaller the spread) the currencies involved (major currencies havesmaller spreads than minor currencies) and the Value Date (the longer the perioduntil we exchange currencies the larger thespread)The spread is determined at the time you enterinto a FX Swap, is payable as part of the contractand is paid when you make payment for thecontract.4.1. TRANSFER FEENo fee is charged by HiFX under its HiFX orCurrency Online brands for the onward paymentof your purchased currency unless the SoldCurrency amount of your transaction is belowNZD 10,000.00 (or its foreign currencyequivalent) called a Transfer Threshold. HiFXdoes no

dates and exchange rates). The exchange rates offered by HiFX in a FX Swap are determined by: The amount of the currencies being swapped; The exchange rates on offer in the foreign exchange market place for the currencies involved; The future date (far leg date) wh