Risk Disclosure Document

1. Risk Disclosure

This document contains important information on trading in the Equity and Derivatives (F&O) Segments of the Stock Exchanges. All prospective clients should read this document carefully before trading. Stock Exchanges/SEBI neither singly nor jointly, expressly nor impliedly, guarantee or make any representation concerning the completeness, adequacy or accuracy of this disclosure document, nor have they endorsed or passed any merit on participating in these trading segments. This brief statement does not disclose all the risks and other significant aspects of trading.

In light of the risks involved, you should undertake transactions only if you understand the nature of the relationship into which you are entering and the extent of your exposure to risk. Trading in equity shares, derivatives contracts, or other instruments traded on the Stock Exchanges carries varying elements of risk and is generally not an appropriate avenue for someone of limited resources, limited investment/trading experience, and low risk tolerance. You should carefully consider whether such trading is suitable for you in light of your financial condition.

In case you trade through StellarEdge and suffer adverse consequences or loss, you shall be solely responsible for the same, and Stock Exchanges/Clearing Corporation/SEBI shall not be responsible in any manner. It will not be open for you to take a plea that no adequate disclosure regarding risks was made, or that you were not explained the full risk involved by StellarEdge. You must acknowledge and accept that there can be no guarantee of profits, or no exception from losses, while executing orders for purchase and/or sale of securities or derivatives contracts.

Your dealings through StellarEdge shall be subject to fulfilling certain formalities, including filling the Know Your Client (KYC) form, and reading the Rights & Obligations and Do's and Don'ts documents, and are subject to the Rules, Byelaws, and Regulations of the relevant Stock Exchanges and SEBI guidelines and circulars in force from time to time. No consideration to trade should be made without thoroughly understanding and reviewing the risks involved. If you are unsure, you must seek professional advice.

2. Basic Risks

2.1 Risk of Higher Volatility

Volatility refers to the dynamic changes in price that a security or derivatives contract undergoes when trading activity continues on the Stock Exchanges. Generally, higher the volatility of a security or contract, greater is its price swings. There may be greater volatility in thinly traded securities than in active securities. As a result, your order may only be partially executed, not executed at all, or executed at a price substantially different from the last traded price, resulting in notional or real losses.

2.2 Risk of Lower Liquidity

Liquidity refers to the ability of market participants to buy and/or sell securities expeditiously at a competitive price and with minimal price difference. There may be a risk of lower liquidity in some securities as compared to active securities. As a result, your order may only be partially executed, executed with a relatively greater price difference, or may not be executed at all. Buying or selling securities as part of a day trading strategy may also result in losses.

2.3 Risk of Wider Spreads

Spread refers to the difference between the best buy price and best sell price. Lower liquidity and higher volatility may result in wider than normal spreads for less liquid or illiquid securities, hampering better price formation.

2.4 Risk-Reducing Orders

The placing of orders (e.g., 'stop loss' or 'limit' orders) intended to limit losses to certain amounts may not always be effective, because rapid movement in market conditions may make it impossible to execute such orders. A 'market' order will be executed promptly but at the available price, which may differ from the last traded price. A 'limit' order will be executed only at the specified price or better, but may not be executed at all. A stop loss order converts to a market/limit order once the trigger price is reached or traded through, and there is no assurance it will be executable.

2.5 Risk of News Announcements

News announcements that may impact the price of a security or derivatives contract may occur during trading, and when combined with lower liquidity and higher volatility, may suddenly cause an unexpected positive or negative price movement.

2.6 Risk of Rumours

Rumours about companies/currencies at times circulate through word of mouth, newspapers, websites, or news agencies. Investors should be wary of, and should desist from, acting on rumours.

2.7 System Risk

High volume trading frequently occurs at market opening and before market close, and may also occur at any point during the day, causing delays in order execution or confirmation. Under certain market conditions, it may be difficult or impossible to liquidate a position at a reasonable price, or at all, when there are no outstanding orders on either side, or if trading is halted due to unusual trading activity, circuit filters, or other reasons.

2.8 System/Network Congestion

Trading on exchanges is conducted in electronic mode, based on satellite/leased line communications and computer systems. There exists a possibility of communication failure, system problems, or delayed response, which may result in delay or failure to process buy or sell orders. Although such problems may be temporary, when you have outstanding open positions or unexecuted orders, this represents a risk because of your obligation to settle all executed transactions.

3. Additional Risks Specific to Derivatives (F&O) Trading

3.1 Effect of Leverage or Gearing

In the derivatives market, the amount of margin is small relative to the value of the contract, so transactions are 'leveraged' or 'geared'. This provides the possibility of greater profit, but also greater loss, in comparison to the margin amount. If prices move against you, you may lose part or all of your margin amount in a relatively short period, and the loss may exceed the original margin amount.

• Futures trading involves daily settlement (mark-to-market) of all positions. If the contract moves against you, you will be required to deposit the resulting loss amount within a stipulated time, generally before commencement of trading the next day.
• If you fail to deposit the additional amount by the deadline, or if an outstanding debt occurs in your account, StellarEdge may liquidate part or all of your position. You will be liable for any losses incurred due to such close-outs.
• Under certain market conditions, it may be difficult or impossible to execute transactions, due to illiquidity or suspension of trading from price limits or circuit breakers.
• To maintain market stability, margin rates may change, including increases in cash margin requirements, which may also apply to existing open positions, requiring you to put up additional margin or reduce your positions.
• You must ask StellarEdge to provide full details of the derivatives contracts you plan to trade, including contract specifications and associated obligations.

3.2 Risk of Option Holders

An option holder runs the risk of losing the entire amount paid for the option in a relatively short period. This reflects the nature of an option as a wasting asset, which becomes worthless on expiry. An option holder who neither sells the option in the secondary market nor exercises it prior to expiration will necessarily lose the entire investment. The Exchanges may impose exercise restrictions at certain times in specified circumstances.

3.3 Risk of Option Writers

If the price movement of the underlying is not in the anticipated direction, an option writer runs the risk of losing a substantial amount. This risk may be reduced by hedging positions, but even hedged positions may carry significant risk. Transactions involving multiple options in combination (spreads) present additional, more complex risks and should only be undertaken with a thorough understanding of the strategy.

4. Acknowledgement

By opening and operating a trading account with StellarEdge, the client acknowledges having read, understood, and accepted this Risk Disclosure Document and confirms that trading in the Equity and Derivatives segments is being undertaken with full knowledge of the risks described above.