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EXHIBIT 10(a)
IOWA GRAIN COMPANY
141 West Jackson Boulevard
Suite 1520-A
Chicago, Illinois 60604
BOOKLET NO. 1
WELCOME TO IOWA GRAIN COMPANY
To make your trading as satisfying as possible and to comply with governmental
regulations, we both need to cooperate fully. The process of trading begins
with your completing at least one set of account forms:
BOOKLET No.1 is a General Application which must be read carefully and
signed by EVERY person or group trading commodity futures or options
through Iowa Grain Company and its affiliates.
BOOKLET No.2 is to be reviewed and maintained by you so you may trade
OPTIONS OR FUTURES.
Please be sure that you read and understand everything in these applications.
Fill them out fully and legibly, signing where required. Otherwise, the opening
of your account may be delayed. A new account can be traded only when the
application forms and initial funds are accepted by Iowa Grain Company,
following IB approval.
CUSTOMER AGREEMENT
Basic account agreements required for trading commodity futures and related
financial transactions, for the use of customers of Iowa Grain Company, its
Introducing Brokers, Futures Commission Merchants, and all other associates.
TABLE OF CONTENTS
Fact Sheet and W-9 ............................ 1-3 Corporate Authorization ....................... 15
Duplicate Statements .......................... 3 Trading Authorization ......................... 16
Customer Agreement ............................ 4-11 Third Party Authorization ..................... 17
Risk Disclosure For Futures and Options ....... 11 Special Notice to Customer .................... 18
Individual Account ............................ 12 Guarantee Agreement ........................... 19-20
Personal Trust ................................ 12 C.F.T.C. Option Statement ..................... 21
Joint Account ................................ 13 Hedge Representation Letter ................... 22
Partnership Account ........................... 13 Arbitration Agreement ......................... 23-24
Corporate Account ............................. 14 Notes ......................................... 25
Instruction to Transfer ....................... 26
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Iowa Approval & Date IOWA GRAIN COMPANY Salesman Number
________________________ 141 West Jackson Blvd. _________________
IB Approval & Date Suite 1520-A Account Number
________________________ Chicago, IL 60604 _________________
NEW ACCOUNT FACT SHEET
ACCOUNT IDENTIFICATION
LEGAL ENTITY: (Choose only one) / / Individual / / Partnership Corporation
/ / Trust/Pension/IRA, Keogh (Attach Trust Documentation)
Federal Tax Identification Number: (Complete only one)
Social Security Number: - - Federal Employer ID Number: -
________________ ___________
Legal Account Name:_____________________________________________________________
Additional Account Description: ________________________________________________
INTERNAL REVENUE CODE SUBSTITUTE FORM W-9
If you have NOT furnished Iowa Grain Co. with your taxpayer identification
number (usually your Social Security number) and do NOT sign below, Iowa Grain
Co. must generally withhold 20% of certain income from your account. I hereby
certify under penalties of perjury that I am not subject to backup withholding
under the provisions of Section 3406 (a) (1) (c) of the Internal Revenue Code.
X___________________________________ ________________________________
Signature Date
PLEASE NOTE THAT ALL REQUIRED REGULATORY INFORMATION REPORTING APPLICABLE TO
ACTIVITY WITHIN THIS ACCOUNT (INCLUDING INTERNAL REVENUE SERVICE REPORTING)
WILL BE SUBMITTED WITH THE LEGAL NAME AND FEDERAL TAX IDENTIFICATION NUMBER
STATED ABOVE.
MAILING ADDRESS HOME ADDRESS (If Different)
Street_________________________________ Street__________________________
City __________________________________ City ___________________________
State ______________Zip________________ State________________Zip________
FOR INDIVIDUAL: FOR CORPORATION, PARTNERSHIP OR TRUST:
Date of Birth _________________________ Date Incorporated or Established
Occupation ____________________________ ________________________________
Employer Name _________________________ Person with Primary Account Authority
Employer Address ______________________ ________________________________
_______________________________________ Other Persons Authorized to Act on
Nature of Business or Industry ________ Behalf of Entity Regarding Account
_______________________________________ ________________________________
Home Telephone ________________________ Nature of Business or Industry
Business Telephone ____________________ ________________________________
Facsimile Telephone ___________________ Country of Registration:
Number of Dependents __________________ U.S. / / State ________________
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Are you a U.S. Citizen? Yes / / No / / Other / / _______________________
FINANCIAL INFORMATION
Bank Name: _______________________________ ACCOUNT NUMBERS
Address: _________________________________ Checking: _______________________
_________________________________ Savings: ________________________
_________________________________ Phone: __________________________
FOR INDIVIDUALS - ANNUAL INCOME: NET WORTH:
__________Less than $25,000 __________Less than $25,000
__________$25,000 - $50,000 __________$25,000 - $50,000
__________$50,000 - $100,000 __________$50,000 - $100,000
__________more than $100,000 __________$100,000 - $250,000
__________$250,000 - $500,000
__________more than $500,000
FOR CORPORATIONS: Attach a copy of the most recent audited financial statement.
Please indicate "yes" or "no" for each of the following:
INVESTMENT EXPERIENCE YES HOW NO
MANY DO YOU UNDERSTAND?
YEARS YES NO
COMMODITY FUTURES / / _____ / / BASICS OF FUTURES TRADING? / / / /
COMMODITY OPTIONS / / _____ / / RISK OF LOSS AND THE
STOCKS AND BONDS / / _____ / / POSSIBILITY OF INCURRING A
STOCK OPTIONS / / _____ / / DEBIT BALANCE? / / / /
IS THIS A JOINT ACCOUNT? YES / / NO / / (IF YES, COMPLETE NEXT SECTION.)
FOR INDIVIDUAL (2) OF JOINT ACCOUNT: ANNUAL INCOME: NET WORTH:
Name________________________________ _____Less than $25,000 _____Less than $25,000
Date of Birth ______________________ _____$25,000-$50,000 _____$25,000-$50,000
Occupation _________________________ _____$50,000-$100,000 _____$50,000-$100,000
Employer Name ______________________ _____more than $100,000 _____$100,000-$250,000
Employer Address ___________________ _____$250,000-$500,000
____________________________________
____________________________________ INVESTMENT EXPERIENCE: YES HOW NO
Nature of Business or Industry _____ MANY
____________________________________ YEARS
Business Telephone _________________ Commodity futures / / _______ / /
Facsimile Telephone_________________ Commodity Options / / _______ / /
Number of Dependents____________ Stocks and bonds / / _______ / /
Are you a U.S. Citizen? Yes / / No / / Stock Options / / _______ / /
IF YES TO ANY OF THE ABOVE, INDICATE NAME
OF COMPANY AND ACCOUNT NUMBER _______________________
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PLEASE MAIL DUPLICATE STATEMENTS TO (IF APPLICABLE)
NAME ________________________________ NAME __________________________________
ADDRESS _____________________________ ADDRESS _______________________________
CITY _______STATE _________ZIP ______ CITY ________STATE _________ZIP _______
Have you ever been subject to federal or state bankruptcy proceedings,
receivership or similar actions, voluntarily or involuntarily? / / No / / Yes
If YES, Describe briefly _______________________________________________________
________________________________________________________________________________
Iowa Grain Company reserves the right to request additional financial
information from you in order to continue processing this account.
Do you maintain any other accounts or control the trading in any other accounts
with Iowa Grain Company?
/ / No / / Yes (If yes, list account numbers) ________________________________
Is this a Hedge account? / / No / / Yes (If yes, complete page 22)
Will this account be traded on your behalf by any other person? / / No / / Yes
yes, complete pages 16-18)
Have you ever been in a legal dispute or involved in arbitration proceedings,
arising from a commodities or securities account? / / No / / Yes If YES,
please describe below or on a separate
page. __________________________________________________________________________
Do you have an unsatisfied debit balance on an account with Iowa Grain Company,
or with any other commodities or securities firm? / / No / / Yes.
If YES, please identify the firm, account number and the amount of the
debt ______________________________________________________________________
Are you an "Affiliated Person" of a futures commission merchant or introducing
broker? / / No / / Yes
(The CFTC definition of an "Affiliated Person" is "Any general partner,
officer, director, owner of more than ten percent of the equity interest,
associated person or employee of the futures commission merchant or introducing
broker, and any relative or spouse of any of the foregoing persons, or relative
of such spouse who shares the same home as any of the foregoing persons.")
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CUSTOMER AGREEMENT
In consideration of the acceptance by Iowa Grain Company of one or more
accounts of Customer and its agreement to act as Customer's broker in the
purchase and sale of commodity futures contracts and options thereon, Customer
agrees as follows:
1. ACKNOWLEDGMENT OF RISK
Customer acknowledges that the purchase and sale of commodity futures
contracts, exchange-traded and dealer commodity options ("commodity options")
is speculative, involves a high degree of risk and is suitable only for persons
who can assume the risk of loss in excess of their margin deposits or of the
entire option cost. Customer understands that because of the low margin
normally required in commodity futures trading, price changes in commodity
futures contracts may result in significant Customer losses, which losses may
substantially exceed Customer's margin deposits and any other deposit he may
make. Customer also acknowledges that he has received, has read and understands
this Agreement and understands that brokerage commissions and other
transactions fees for commodity futures contracts and commodity options vary
substantially among brokerage firms.
2. RULES AND REGULATIONS
All transactions executed for Customer's account shall be subject to the
constitution, rules, regulations, and customs, as they may be amended, of the
exchange (and clearing organization) where executed and to the provisions of
any applicable law and to the rules and regulations promulgated from time to
time thereunder. Customer shall hold Iowa Grain and its agents harmless for any
actions taken or not taken in order to comply with any such constitution, law,
rule, regulation or custom and customer shall not be relieved of any obligation
as a result of the failure of Iowa Grain to so comply. If Customer is subject
to regulation, Customer agrees that Iowa Grain has no duty to ascertain or
ensure that customer is in compliance with any governing statutes or rules.
3. ORDERS
Customer authorizes Iowa Grain to make transactions for Customer's account in
accordance with Customer's oral or written instructions. Iowa Grain reserves
the right to refuse to accept any orders. Iowa Grain may process and handle
Customer orders in any manner Iowa Grain believes appropriate. Customer
acknowledges that while Iowa Grain shall execute Customer transactions as
Customer's agent, Iowa Grain shall have absolute discretion over the selection
of floor brokers (whether employees of Iowa Grain or otherwise) utilized in the
execution of such transactions. Iowa Grain shall not be responsible to Customer
in any case for said floor brokers' inability to execute orders, or for errors
or negligence on the part of floor brokers who are not employees of Iowa Grain.
Iowa Grain shall not be responsible in any way for the acts or omissions of
floor brokers selected by customer. Customer agrees to any "cross trade",
involving the account of a floor broker utilized by Iowa Grain or an account of
Iowa Grain deemed to be proprietary on the one hand and Customer's account on
the other, as permitted and defined by any applicable exchange rules.
4. COMMISSIONS AND OTHER CHARGES
Customer shall promptly pay Iowa Grain brokerage commissions and service
charges as in effect from time to time and interest on debit balances, together
with any reasonable charges or expenses, including court costs and attorneys'
fees, incurred in collecting any debit balance or other liability of Customer
to Iowa Grain. Customer shall also pay Iowa Grain's costs and attorneys' fees
incurred in defending against any
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claim brought by Customer in any suit, Arbitration or reparations proceeding in
which Iowa Grain is the prevailing party or in which Customer recovers an
amount less than that offered in settlement by Iowa Grain.
5. MIDAMERICA TRANSACTIONS
Customer acknowledges that the price at which Iowa Grain confirms a transaction
executed on the MidAmerica Commodity Exchange may include a Changer's fee. The
amount of the Changer's fee included in the transaction shall be provided to
the Customer upon written request to Iowa Grain.
6. MARGIN
Iowa Grain may set and revise margin requirements in its absolute discretion.
As used herein, the term margin requirement also includes any amount which may
be due from Customer as a result of options transactions. These requirements
may exceed the margin requirements set by any exchange or other regulatory
authority, may apply to existing positions as well as to new positions and may
differ from those set for any other account of Iowa Grain. Customer shall
maintain adequate funds at all times on deposit with Iowa Grain so as to
continuously meet the margin requirements established by Iowa Grain. Customer
agrees, when required, to wire transfer funds to Iowa Grain and furnish to Iowa
Grain with names of bank officers for immediate verification of such wire
transfer.
If at any time Customer's account does not contain the amount of funds required
to meet Iowa Grain's then applicable margin requirements, Iowa Grain may, in
its absolute discretion and without notice or demand to Customer, close out
Customer's open positions, in whole or in part, or otherwise take action to
protect itself under paragraph 11 hereof. Customer understands and agrees
that Iowa Grain has no obligation to take any such action in the absence of
specific instructions from the Customer. Iowa Grain may in some situations
determine not to take any such actions or not to make a margin demand upon
Customer. However, any such determination by Iowa Grain (including its
decision not to make a margin demand) shall not be construed to be a waiver
by Iowa Grain from taking any action available to it in the future.
7. BROKER MAY LIMIT POSITIONS HELD
Customer acknowledges that Iowa Grain has the right, but no responsibility or
obligation, to limit the number of commodity futures and commodity options
which Customer may maintain or acquire through Iowa Grain at any time. Customer
agrees not to make any trade through Iowa Grain which would have the effect of
exceeding any limitations imposed on Customer by Iowa Grain.
8. DELIVERY
Customer acknowledges that all transactions may result in the making or
accepting of delivery of the underlying commodity or security or other property
("Physical"). Customer agrees that Iowa Grain may, in its sole discretion,
liquidate any short position in Customer's account if Customer has not
delivered to Iowa Grain certificates, receipts, or other appropriate
instruments of delivery at least seven days prior to the time Iowa Grain is
obligated to make a commitment to deliver the Physical on behalf of Customer
under the rules of the applicable exchange and/or clearing organization. If at
any time Customer shall be unable to deliver to Iowa Grain any Physical
underlying a short position in Customer's account, Customer unconditionally
designates Iowa Grain its agent to borrow or buy and deliver the same. Customer
shall immediately pay and indemnify Iowa Grain for all costs, losses, damages
and premiums which Iowa Grain may incur in making such delivery or which Iowa
Grain may sustain from its inability to borrow or buy the underlying Physical.
In the event Iowa Grain takes delivery of any Physical for Customer's account,
Customer agrees to pay all
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delivery, insurance, interest and related charges, and to indemnify Iowa Grain
for any loss Iowa Grain may suffer, directly or indirectly, from a decline in
value of said Physical. Customer expressly acknowledges that, particularly in
volatile markets, the making or accepting of delivery may involve a much higher
degree of risk than liquidating a position by offset.
9. EXERCISE OF OPTION
Customer understands that: (a) in order to exercise a commodity option,
Customer must affirmatively notify Iowa Grain prior to the applicable exercise
and expiration date and time established by Iowa Grain from time to time; (b)
the exercise and expiration date and time established by Iowa Grain may be
earlier than those set by an exchange; and (c) failure to provide such notice
will constitute an abandonment of the option by Customer. Customer understands
and acknowledges that in the absence of a direction to Iowa Grain from Customer
(not later than 6:00 p.m. on the day prior to the last trading day) that
Customer's commodity option position should not be exercised, commodity option
positions held by Customer will be exercised in accordance with the rules then
in effect of the exchange upon which such commodity option was purchased.
10. TRADING AND MARKET RECOMMENDATIONS
Customer acknowledges that: (a) any market recommendations and any information
communicated to Customer by Iowa Grain does not constitute an offer to sell or
the solicitation of an offer to buy any commodity, commodity futures contract
or commodity option; (b) any recommendations and market information as to
proposed transactions, although based upon information obtained from sources
believed to be reliable, may be incomplete and unverified and Iowa Grain makes
no representation, warranty, or guarantee as to the accuracy thereof; and (c)
recommendations to Customer as to any particular transactions at any given time
may differ among Iowa Grain personnel due to diversity in analysis of
fundamental and technical factors and may vary from any standard recommendation
made by Iowa Grain in its market letters or otherwise.
Customer also understands that the market recommendations of Iowa Grain may or
may not be consistent with the market position or intentions of Iowa Grain, its
subsidiaries, affiliates, officers, directors, employees, or agents and that
Iowa Grain will not disclose such positions or intentions to Customer due to
their confidential and proprietary nature.
11. LIQUIDATION
Customer acknowledges that all monies, securities, negotiable instruments, open
positions in futures contracts or options, or other property (collectively
"Property") now or at any future time held in Customer's account or which may
be in Iowa Grain's possession for any purpose, including safekeeping, shall be
subject to a general lien and security interest for the discharge of all
obligations of Customer to Iowa Grain. Iowa Grain may, at any time in its sole
and absolute discretion, liquidate any of the property in order to satisfy any
margin deficiency or any other liability of Customer to Iowa Grain and may
transfer said property to the general ledger account of Iowa Grain, all without
liability on the part of Iowa Grain to Customer or any third party.
12. DEATH, INCAPACITY OR OTHER CUSTOMER INFIRMITY; BROKER'S RIGHT TO LIQUIDATE
In the event that: (a) Customer shall be judicially declared incompetent; (b)
Customer shall die, or in the case of corporation, partnership or other entity,
terminate or be dissolved; (c) a preceding under the Bankruptcy Act, an
assignment for the benefit of creditors, or an application for receiver,
custodian or trustee shall be filed or applied for, by or against Customer; (d)
the property in customer's account shall be
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garnished or attached; (e) the property deposited in Customer's account shall
be determined by Iowa Grain in its sole and absolute discretion, and regardless
of current market quotations, to be inadequate to secure the account; (f)
Customer's account shall incur a deficit balance; (g) Customer shall acquire or
maintain open positions with Iowa Grain in excess of the limit imposed by Iowa
Grain pursuant to the terms of the Agreement; or (h) at any time Iowa Grain for
any reason shall feel insecure with respect to the sufficiency of the property
deposited by Customer or deem it necessary for its protection, Iowa Grain may
close out Customer's account in whole or in part, refuse to accept new orders,
exercise any option, sell any or all of Customer's property held by Iowa Grain,
take an offsetting position in the cash market, buy or sell any securities,
commodities, commodity futures or commodity options contracts, or other
property in or for Customer's account, or cancel any outstanding orders to
close out any account of Customer or to close out any commitment made by Iowa
Grain on behalf of Customer. Such sale, purchase or cancellation may be made at
Iowa Grain's discretion on a contract market or at public auction or at private
sale, without advertising the same and without notice, prior tender, demand or
call upon Customer. No prior tender, demand, call nor prior notice from Iowa
Grain of the time and place of such sale or purchase shall be deemed to be a
waiver of Iowa Grain's right to sell or buy any property held by Iowa Grain, or
owed to Iowa Grain by customer. Iowa Grain may, to extent permitted by law,
purchase the whole or any part thereof free from any right of redemption, and
Customer shall remain liable for and shall pay to Iowa Grain the amount of any
deficiency resulting from any such transactions.
13. PLEDGING AND HYPOTHECATION
All property now or hereafter held or carried by Iowa Grain for Customer may
from time to time and without notice to Customer be carried in Iowa Grain's
general loan account and may be pledged or hypothecated, separately or in
common with other securities and commodities or any other property, for the sum
due to Iowa Grain thereon or for a greater sum and without retaining in Iowa
Grain's possession and control for delivery a like amount of similar securities
or commodities, loaned or invested.
14. COMMUNICATIONS AND REPORTS
All communications, monies, securities, and other property shall be transmitted
to Customer at the account mailing address as shown on the New Account Fact
Sheet or to such other address as Customer may designate in writing. Reports of
executions and all statements of account rendered by Iowa Grain from time to
time to Customer shall be conclusively deemed correct and final unless Customer
gives written notice to the contrary within five days from the date of the
notices in the case of reports of executions and within ten days of the date of
the statement in the case of monthly statements of account. Iowa Grain shall
not be responsible for losses to Customer occasioned by delays or inaccuracies
in the transmission of orders due to failure or malfunctioning of communication
facilities.
15. RECORDING
Recognizing the protection afforded to both Customer and Iowa Grain by the
recording of telephone conversations, Customer acknowledges, authorizes, and
consents to the recording of his telephone conversations with Iowa Grain, or
any of its agents or solicitors, by means of electronic telephone recording
equipment with or without the use of an automatic tone warning device and
ratifies any recordings previously made. Customer hereby authorizes use of such
recorded conversations as evidence by either party in any action or proceeding
arising out of this Agreement.
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16. ACCOUNT NUMBER
Customer agrees that Iowa Grain may, from time to time, change the account
number assigned to any account covered by this agreement, and in such case this
Agreement shall remain in full force and effect. Customer agrees further that
this account, if closed and reopened, as well as all additional accounts opened
by him at Iowa Grain, shall be covered by this same Agreement with the
exception of any new account for which a new customer Agreement is signed.
17. OBLIGATION FOR DEBITS AND OTHER CHARGES
Customer acknowledges his unconditional obligation to pay Iowa Grain the amount
of any and all losses, costs and damages (including costs and attorneys' fees)
sustained by Iowa Grain resulting in any way or arising out of customer's
account including, without limitation, any debit balance which may occur in
customer's account and any charges in connection with delivery of Physicals as
set forth in Paragraph 8 hereof. Any obligation to Iowa Grain pursuant to this
paragraph shall be deemed due and owing to Iowa Grain on the date incurred, and
any unpaid balance thereupon shall bear interest as provided in Paragraph 23
hereof.
18. CUSTOMER REPRESENTATIONS
Customer represents that: (a) Customer (or its officers and directors in the
case of a corporation or partners in the case of a partnership) is not an
employee or affiliate of any contract market, any corporation of which a
contract market owns a majority of the capitol stock, any member of any
contract market, the Commodity Futures Trading Commission or any firm
registered on any contract market except as disclosed on Customer's
Application; (b) Customer and any person who owns any interest in the Account
is 21 years of age or older; (c) Customer is under no disability which would
prevent him from trading commodities, commodity futures contracts, or options
on commodity futures contracts or from understanding and entering into this
Agreement; (d) the statements contained on Customer's Application are true and
correct; (e) no one except Customer has an interest in any account or accounts
carried for Customer by Iowa Grain except as disclosed in writing to Iowa
Grain, and (f) Customer will promptly notify Iowa Grain in writing if any of
the above representations shall materially change or cease to be true and
correct.
This agreement shall not be deemed to be accepted by Iowa Grain or become a
binding Contract between Customer and Iowa Grain until approved by Iowa Grain
at 141 West Jackson Boulevard, Chicago, IL 60604.
19. THIRD PARTY INDEMNIFICATION
Customer acknowledges and agrees that Iowa Grain shall not be responsible to
Customer for any losses resulting from conduct or advice (including but not
limited to errors and negligence) on the part of any broker/dealer, futures
commission merchant, introducing broker, commodity trading advisor, or any
other person or entity introducing Customer to Iowa Grain or having trading
authority over the account of Customer at Iowa Grain. Customer specifically
agrees that Iowa Grain shall have no obligation to supervise the activities of
any such person or entity and Customer will indemnify Iowa Grain and hold Iowa
Grain harmless from and against all losses, liabilities, and damages (including
attorneys' fees) incurred by Iowa Grain as a result of any actions taken or not
taken by such person or entity.
In the event that this is an introduced account, Customer hereby confirms that
customer has appointed the Introducing Broker as Customer's agent and that Iowa
Grain's sole responsibility to Customer shall be to execute, clear and
account for orders transmitted to Iowa Grain on behalf of Customer.
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20. CONSENT TO CREDIT CHECK
Customer authorizes Iowa Grain to contact such banks, financial institutions,
credit agencies, and other references as Iowa Grain shall deem appropriate from
time to time to verify the information regarding Customer which may be provided
by Customer. Customer understands that an investigation may be made pertaining
to his personal and business credit standing and that Customer may make a
written request within a reasonable period of time for complete and accurate
disclosure of its nature and scope.
21. FOREIGN CURRENCY TRANSACTIONS
Customer agrees that any risk or cost resulting from conversion of United
States dollars to other currencies for the purpose of trading foreign
commodities or for transmission from Customer to foreign exchanges or to
Customer from outside of the United States will be borne by Customer.
22. TRANSFER OF FUNDS AUTHORIZATION
In the event that at any time Customer has an account in commodities which
comes under the regulation of the Commodity Futures Trading Commission, and
also an account or transaction in unregulated commodities, then Customer agrees
that until Iowa Grain actually receives written notice to the contrary signed
by customer Iowa Grain is hereby authorized to transfer from Customer's
Regulated Commodity account to any other account of Customer such amount of
excess funds or equities as in Iowa Grain's judgment may be required for margin
or to reduce or pay in full any deficit in such other account. By "Regulated
Commodity" is meant any commodity covered by the Commodity Exchange Act.
23. INTEREST
Wherever under this Agreement interest is chargeable upon amounts owed by
Customer, interest shall be the lesser of the highest rate permitted by law or
two percent above the then prevailing prime rate charged by the Harris Trust
and Savings Bank of Chicago.
24. FORUM SELECTION AND CONSENT TO JURISDICTION
The undersigned ("Customer") agrees to bring any judicial action, including any
complaint, counterclaim, cross-claim or third party complaint, arising
directly, indirectly, or otherwise in connection with, out of, related to or
from this Agreement or any transaction covered hereby or otherwise arising in
connection with the relationship between the parties including any action by
Customer against Iowa Grain or any person who is an officer, agent, employee
or associated person of Iowa Grain at the time the cause of action arises,
only in courts located with the Northern District of Illinois. The
undersigned ("Customer") also consents and submits to the jurisdiction of any
state or federal court located within the Northern District of Illinois.
Customer waives any right Customer may have to transfer or change the venue
of any litigation brought against Customer by Iowa Grain.
25. SUBORDINATION AGREEMENT
Funds of customers trading on United States contract markets may be held in
accounts denominated in a foreign currency with depositories located outside
the United States or its territories if the customer is domiciled in a foreign
country or if the funds are held in connection with contracts priced and
settled hinder or prevent the availability of these funds for distribution to
customers. Such accounts also may be subject to foreign currency exchange rate
risks.
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The customer authorizes the deposit of funds into such foreign depositories.
For customers domiciled in the United States, this authorization permits the
holding of funds in regulated accounts offshore only if such funds are used to
margin, guarantee, or secure positions in such contracts or accrue as a result
of such positions.
In order to avoid the possible dilution of other customer funds, a customer who
has funds held outside the United States must further agree that his claims
based on such funds will be subordinated as described below in the unlikely
event BOTH of the following conditions are met: (1) the customer's futures
commission merchant is placed in receivership or bankruptcy, and (2) there are
insufficient funds available for distribution denominated in the foreign
currency as to which the customer has a claim to satisfy all claims against
those funds.
By signing the accompanying acknowledgment the customer agrees that if both of
the conditions listed above occur, the customer's claim against the futures
commission merchant's assets attributable to funds held overseas in a
particular foreign currency may be satisfied out of segregated customer funds
held in accounts denominated in dollars or other foreign currencies only after
each customer whose funds are held in dollars or in such other foreign
currencies receives its pro-rata portion of such funds. It is further agreed
that in no event may a customer whose funds are held overseas receive more than
its pro-rata share of the aggregate pool consisting of funds held in dollars,
funds held in the particular foreign currency, and non-segregated assets of the
futures commission merchant.
26. LIMITATIONS OF ACTIONS
No legal or administrative action may be commenced arising out of this
agreement or the relationship of Customer with Iowa Grain or any transactions
under this agreement after ONE YEAR after any claim arises. This paragraph acts
as a waiver of the Commodity Exchange Act's two-year statute of limitations for
filing reparations, arbitrations or court proceedings and also acts as a waiver
of other state law limitations periods.
27. GENERAL
If any provisions herein are or should become inconsistent with any present or
future law, rule or regulation of any government or regulatory body having
jurisdiction over the subject matter of this Agreement, such provisions shall
be deemed to be rescinded or modified in accordance with any such law, rule or
regulation. In all other respects, this Agreement shall continue and remain in
full force and effect.
This Agreement shall be governed by the laws of the State of Illinois and shall
be binding upon Customer's estate, executors, administrators, successors and
assigns and shall inure to the benefit of Iowa Grain's successors and assigns
and Iowa Grain may transfer Customer's account to any such successors or
assigns, and to such clearing broker as may be engaged by Iowa Grain from time
to time.
These account forms may not be transferred or assigned without the express
written consent of an officer of Iowa Grain Company. This Agreement is
negotiable.
28. RIGHTS AND REMEDIES
The rights and remedies conferred upon the parties hereto, shall be cumulative,
and the exercise or waiver of any such rights or remedies shall not preclude or
inhibit the exercise of additional rights and remedies.
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29. ENTIRE AGREEMENT
This Agreement, and, if executed, the Arbitration Agreement, any Trading
Authorization Limiting the Purchases and Sales of Commodities, Hedge
Representation Letter, and Risk Disclosure Statement, the terms of which are
incorporated herein by reference, represent the entire agreement between Iowa
Grain and Customer.
This Agreement may be altered or amended by Iowa Grain from time to time by
written notice to Customer. No employee of Iowa Grain has any authority to
waive, modify, or alter in any respect any of the terms of this Agreement and no
supplement or special understanding shall be binding upon Iowa Grain unless one
of Iowa Grain's officers shall have consented thereto in writing.
30. SIGNATURE
This Agreement shall not be deemed to be accepted by Iowa Grain or become a
binding Contract between Customer and Iowa Grain until approved by Iowa Grain
at 141 W. Jackson Boulevard, Chicago, Illinois 60604.
IN THE EVENT THAT THIS IS AN INTRODUCED ACCOUNT, IOWA GRAIN'S ROLE AND
LIABILITY IS LIMITED TO EXECUTION AND CLEARING MATTERS. (See paragraph 19
above)
X __________________________________ _______________________________
Signature Date
____________________________________
Name (Print)
X __________________________________ _______________________________
Signature Date
____________________________________
Name (Print)
________________________________________________________________________________
I HEREBY ACKNOWLEDGE THAT I HAVE RECEIVED, READ, UNDERSTAND AND ACCEPT THE
TERMS OF THE RISK DISCLOSURE FOR FUTURES AND OPTIONS (BOOKLET NO. 2).
X __________________________________ _______________________________
Signature Date
____________________________________
Name (Print)
X __________________________________ _______________________________
Signature Date
____________________________________
Name (Print)
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13
A. INDIVIDUAL ACCOUNT
Customer represents that this is an individual or sole proprietorship account
and no one else has an interest in this account.
X __________________________________ _______________________________
Signature Date
____________________________________
Name (Print)
B. PERSONAL TRUST: IRA: KEOGH PLAN: PENSION OR PROFIT SHARING TRUST OR PLAN
The undersigned Trustee warrants and represents that he is a Trustee of
_____________________ , a duly formed Trust (Plan), dated _____________, 19 __,
for the benefit of _____________________ and a copy of the instrument by which
he was appointed Trustee is attached. Trustee represents that he has a proper
authority to sign this Customer Agreement and all related documents on behalf
of the Trust (Plan) and specifically represents that he or any successor
Trustee is authorized to trade commodities, commodity futures contracts and
options thereon for the account and risk of the Trust (Plan).
In the case of Keogh Plans, Pension and Profit Sharing Trusts, and other
entities governed by the Employee Retirement Insurance Security Act, Trustee
acknowledges that the amount of assets of said entity allowed to be invested in
such commodities is subject to a "prudent man" standard. Trustee acknowledges
that any investment decisions made on behalf of such entity is solely that of
the entity's internal investment management and not of Iowa Grain. Trustee
expressly acknowledges that Iowa Grain is not its agent or fiduciary with
respect to any "prudent man" standard, statutory or otherwise, and indemnifies
Iowa Grain for any losses resulting from any breach of said standard.
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C. JOINT ACCOUNT.
Each of us agree that the liability of each of us with respect to said account
shall be joint and several
Each of us shall have authority: (1) to give any instructions with respect to
the account, including but not limited to instructions with respect to buying
or selling or withdrawals of excess funds; (2) to receive any demands, notices,
confirmations, reports, statements and other communications of any kind; (3) to
sign any other documents related to the opening or maintenance of the account;
and (4) generally to deal with Iowa Grain in connection herewith as fully and
completely as if the other joint tenant or tenants had no interest herein. Iowa
Grain shall be under no duty or obligation to inquire into the purpose or
propriety of any instruction given and shall be under no obligation to see to
the application of any funds so delivered; however, no payments shall be made
by Iowa Grain except in the name of the account.
/ / Tenants in common / / Tenants with right of survivorship
X __________________________________ _______________________________
Signature Date
____________________________________
Name (Print)
X __________________________________ _______________________________
Signature Date
____________________________________
Name (Print)
D. PARTNERSHIP ACCOUNT (GENERAL OR LIMITED).
The undersigned, _______________________________________, hereby represents to
you that he is a general partner in a general or limited partnership
known as _________________________________ (the "Partnership"), and attached
hereto is a copy of its signed Partnership Agreement. In consideration of your
opening one or more commodities accounts for and in the name of the Partnership,
the undersigned further represents that as a partner in the Partnership having a
significant interest therein, he has proper authority to sign this Agreement and
all related documents on behalf of Partnership and, for the account and risk of
the Partnership, to buy, sell, and trade in commodities, commodity futures
contracts and options thereon of every kind whatsoever, and to borrow money for
such purposes in said account in accordance with your terms and conditions.
X __________________________________ _______________________________
Signature Date
____________________________________
Name (Print)
13
15
E. CORPORATE ACCOUNT.
Customer represents and warrants that the Corporation is duly organized and in
good standing under the laws of its state of incorporation and that trading in
commodities, commodity futures contracts and options thereon is within the
powers granted to it. The undersigned represents that he has full authority to
enter into this Agreement on behalf of the Corporation and is concurrently
furnishing to Iowa Grain a Corporate Authorization as prescribed by Iowa Grain.
____________________________________
NAME OF CORPORATION
______________________________ By: ________________________________
Date
Title: _________________________________
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CORPORATE AUTHORIZATION
I, __________________________________________________________________________
Secretary of _____________________________________________________________ a
corporation organized under the laws of the State of _______________ having its
principal office at ___________________________________________ DO HEREBY
CERTIFY THAT at a meeting of the Board of Directors of said corporation duly
held on the ___________ day of _________________, 19_, the following
resolutions were duly adopted, that said resolutions have not been amended,
rescinded or revoked, and are in no way in conflict with any of the
provisions of the charter of by-laws of said corporation:
(1) RESOLVED: That _______________________________ of this corporation, or
(Name and Office Held)
such other person as this corporation may designate from time to time in either
writing or by his apparent authority be and hereby are authorized to trade
in commodity futures contracts and options thereon for the account and risk of
this corporation through and with Iowa Grain Company, as now constituted or
hereafter constituted, the authority hereby granted including the power to do
any and/or all of the following:
(a) To buy, sell and trade commodity futures contracts and
options thereon, on margin or otherwise;
(b) To deposit with and withdraw from said firm money, commodity
futures contracts and options, securities and any other property;
(c) To receive requests and demands for additional margin,
notices of intention to sell or purchase and other notices and
demand of whatsoever character;
(d) To receive and acquiesce in the correctness of such notices,
statements of account and other records and documents.
(2) RESOLVED: That Iowa Grain be directed to send duplicates of written
confirmations of all commodity trades effected by Iowa Grain for this
corporation and all statements of account of this corporation with Iowa Grain
and other pertinent records and documents to __________________________________
_______________________________________________________________________________
(The person named here cannot be the officer named in (1) above)
at ____________________________________________________________________________
(Address)
who is hereby authorized to receive and acquiesce in the correctness of such
confirmations, statements, and other records and documents:
(3) RESOLVED: That any and all past transactions which may have been
heretofore made on behalf of this corporation through or with Iowa Grain be and
they hereby are ratified;
(4) RESOLVED: That Iowa Grain is authorized to act upon the authority of
these resolutions until receipt of a certificate showing rescission or
modification thereof signed by the Secretary of this corporation and under its
seal, and that Iowa Grain is also authorized to recognize and deal with
officers of this corporation whose names are set forth in this certificate,
until receipt by Iowa Grain of a further certificate, setting forth the names
of another person or persons as such officers.
IN WITNESS THEREOF, I have hereunto subscribed my name and affixed the seal of
said corporation this ___________________ day of _________________, 19___.
SEAL OF CORPORATION ____________________________________
Secretary
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TRADING AUTHORIZATION LIMITED TO PURCHASES AND SALES OF COMMODITIES
The undersigned hereby authorizes __________________________________________
whose address is __________________________________________as his agent and
attorney-in-fact to buy and sell commodities, commodity futures contracts
and options thereon for the undersigned's account and risk. The undersigned
hereby agrees to indemnify and hold you harmless from all loss, cost,
indebtedness and liabilities arising therefrom.
In all such purchases and sales you are authorized to follow the instructions
of the aforesaid agent in every respect concerning the undersigned's account
with you; and except as herein otherwise provided, he is authorized to act for
the undersigned in the same manner and with the same force and effect as the
undersigned might or could do with respect to such purchases and sales as well
as with respect to all other things necessary or incidental thereto, except
that he is not authorized to withdraw any money, securities, or other property
either in the name of the undersigned or otherwise.
The undersigned hereby ratifies and confirms any and all transactions with you
heretofore or hereafter made by the aforesaid agent on behalf of or for the
account of the undersigned.
This authorization and indemnity is in addition to (and in no way limits or
restricts) any rights which you may have under any other agreement between you
and the undersigned.
This authorization and indemnity is a continuing one and shall remain in full
force and effect until revoked by the undersigned by a written notice addressed
to you and delivered to you at the above address, but such revocation shall not
affect any liability in any way resulting from transactions initiated prior to
such revocation. This authorization and indemnity shall inure to your benefit
and that of your successors and assigns.
I have carefully examined the provisions of this document by which I have given
trading control over my account to _________________________________________
and I understand fully the obligations which I have assumed by executing this
document. I understand:
(1) that your firm is in no way responsible for any loss to me occasioned
by the actions of the individual or organization named above and that your firm
does not, by implication or otherwise, endorse the operating methods of such
individual or organization;
(2) that neither the Chicago Board of Trade, the Chicago Mercantile
Exchange and/or any other futures exchange has jurisdiction over a non-member
who is not employed by one of its members, and that if I give to such
individual or organization authority to exercise any of my right over my
account I do so at my own risk.
X ______________________________________ _______________________________
Signature Date
________________________________________
Name (Print)
X ______________________________________ _______________________________
Signature Date
________________________________________
Name (Print)
16
18
THIRD PARTY AUTHORIZATION
SIGNED BY TRADER AND CUSTOMER
The National Futures Association requires:
An acknowledgment from the customer that the customer has received a
disclosure document from the account controller, or a written statement from
the account controller explaining why the account controller is not required to
provide a disclosure document to the customer.
AGREEMENT OF ACCOUNT CONTROLLER:
I am not required to provide a disclosure document to my customer because I am
exempt from registering as a Commodity Trading Advisor (CTA) as indicated
below:
______ a) I have provided advice to 15 or fewer persons during the past 12 months and do not hold myself out generally to the
public as a CTA.
______ b) I am a (1) dealer, processor, broker, or seller in cash market transactions or (2) nonprofit, voluntary membership,
general farm organization, who provides advice on the sale or purchase of commodities; and any trading advice is solely
incidental to the conduct of my business.
______ c) I am registered under the Commodity Exchange Act in another capacity and my advice is solely incidental to my principal
business or employment in such registered capacity.
______ d) I am a relative of the account holder. My relationship to the customer is
_____________________________________________.
______ e) Other (Please explain) ______________________________________________________________________________.
I agree to hold Iowa Grain Company harmless and indemnify Iowa Grain for any
cost, expense, or debit balance (including reasonable attorney fees) incurred
by Iowa Grain as a result of my activity.
_____________________________ __________________________________________
Date Third Party Account Controller Signature
FOR THE CUSTOMER:
I acknowledge that the Third Party Account Controller has provided me with a
disclosure document or a written statement explaining why the Account
Controller is not required to provide me with a disclosure document.
______________________________________ ____________________________________
Date Customer's Signature
______________________________________ ____________________________________
Date Customer's Signature
17
19
SPECIAL NOTICE TO CUSTOMERS
We have received a document by which you have granted trading authority or
control over your commodity account carried by us to ________________________.
Since the risk factor is high in futures trading, only genuine "risk" funds
should be used in such trading. A person who does not have extra capital he can
afford to lose should not trade in the futures market. No "safe" trading system
has ever been devised, and no one can guarantee you profits or freedom from
loss. In fact, no one can even guarantee to limit the extent of your loss.
Even though you have granted trading authority to another, you should keep
posted on what is going on in your account. We shall send you a confirmation of
every trade made for your account. In addition, we shall send you monthly
statements showing your ledger balance, the exact position in your account, the
net profit or loss in all contracts closed since the date of your last previous
statement, and the net unrealized profit and loss in all open contracts marked
to the market. You should carefully review these statements. If you have any
questions, call us.
The Trading authorization over your account remains in effect until revoked by
you in writing. If for any reason you wish to revoke the trading authorization
which you have given, please bear this in mind.
X _______________________________ ___________________________________
Signature Date
_________________________________
Name (Print)
X _______________________________ ___________________________________
Signature Date
_________________________________
Name (Print)
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20
GUARANTEE AGREEMENT
THIS SECTION MUST BE COMPLETED IF THE CUSTOMER'S ACCOUNT IS
GUARANTEED BY ANOTHER PARTY
FOR VALUE RECEIVED, and in consideration of Iowa Grain Company ("Iowa
Grain") entering into transactions for and on behalf of the account
of____________, the person named below, (the "Guarantor") hereby
unconditionally guarantees to Iowa Grain, its successors and assigns, prompt
payment when due of all liabilities, debts, obligations, claims, losses,
commitments (and any expenses including reasonable attorney's fees arising
therefrom) incurred by the Customer pursuant to transactions heretofore or
hereafter entered into between Iowa and the customer ("Obligations"),
irrespective of the validity or enforceability of any instrument evidencing any
such Obligations by reason of the Customer, or the commencement against the
Customer of a case on bankruptcy or any other law affecting creditors' rights
generally or the seeking of a trustee, receiver, liquidator, custodian or other
similar official.
The Guarantor agrees that Iowa Grain shall have a lien on and a continuing
security interest in all the Guarantor's property (and the proceeds of any
thereof) in whatever form now or hereafter held by Iowa Grain including but not
limited to securities, commodity futures contracts, monies and after acquired
property held or carried in the Guarantor's account or accounts (the
"Guarantor's Property") as security for the payment of all of the Guarantor's
Obligations to Iowa Grain arising under this guarantee for as long as the
guarantee and the Obligations incurred by the Customer are outstanding.
Iowa Grain may proceed at any time, in its sole discretion, and without prior
demand or notice, to enforce said lien by the sale of any of the Guarantor's
Property in any manner and upon such terms as it may determine. The assertions
or enforcement by Iowa Grain of said lien or any demand that the Guarantor
perform its Obligation under this guarantee, or any action or proceedings
brought to enforce this guarantee shall not release the Guarantor as guarantor
or otherwise affect this guarantee, or the liability of the Guarantor for any
Obligations incurred by the Customer and shall not release or otherwise affect
this lien.
The Guarantor hereby waives any requirement that Iowa Grain shall take legal
action against the Customer before enforcing this guarantee and waives any
requirements as to diligence, demand for payment, receipt of duplicate copies
of the Customer's monthly statements or notices of the Customer's Obligations,
including those concerning the conduct or closing of any accounts or of
acceptance of this guarantee. This guarantee is in addition to (and in no way
limits or restricts) any rights which Iowa Grain may have under any other
agreement between it and the Guarantor. This is a continuing guarantee governed
by the laws of the State of Illinois which shall remain in full force and affect
and be binding upon the Guarantor until written notice of its revocation shall
actually be received by Iowa Grain at 141 W. Jackson Boulevard, Chicago,
Illinois, 60604, Attention: Compliance Department. No such revocation shall
release the Guarantor or affect in any manner the rights by Iowa Grain
under this guarantee with respect to any obligation arising prior to actual
receipt by Iowa Grain in liquidating the Customer's account within a reasonable
time subsequent to the receipt of such notice.
If the Guarantor is an individual, this guarantee shall be binding upon the
respective estate, heirs, personal representatives, and successors. Death
of the Guarantor shall not terminate liability hereunder until receipt by Iowa
Grain of written notice to the Compliance Department, at the address set forth
above of such death and the estate, heirs, personal representatives or successor
of Guarantor shall remain liable for all Obligations incurred prior to receipt
of such notice and also for any losses
19
21
which may be incurred in liquidating the Customer's accounts within a
reasonable time subsequent to receipt of such notice.
Guarantor hereby submits to the jurisdiction of any state or federal court
located within Cook County, Illinois and agrees that any action proceeding or
claim for relief arising out of, or in any way related to, this agreement shall
be brought only in such courts. Guarantor further agrees that service of
process by certified mail to the address stated below shall be deemed effective
ten (10) days after mailing unless Guarantor has previously notified Iowa Grain
in writing of a change in address in which case service to that address in the
manner described above shall be effective.
___________________________________ _______________________________
Authorized Signatory Account Title
___________________________________ _______________________________
Print Name Account Number
___________________________________ _______________________________
Name of Guarantor Title
___________________________________ _______________________________
Guarantor's Account Number (if any) Date
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C.F.T.C. REQUIRED OPTION CUSTOMER STATEMENT OF OCCUPATIONAL CATEGORIES
Please answer the following questions about your commodity futures options
trading account:
My account is: (check one) _________ Commercial or Non-Commercial _____________
If your account is COMMERCIAL, please select the appropriate Occupational
Category box for all options contracts for which you will be a participant.
COMMODITY OCCUPATIONAL COMMODITY OCCUPATIONAL
CATEGORIES CATEGORIES
SUGAR & COCOA, _ 1. Producer FINANCIAL _ 23. Other Commercial
AND COFFEE "C" _ 2. Merchant or Dealer INSTRUMENTS/ _ 24. Importers/Exporters
_ 3. Refiner/Processor of FOREIGN of Goods and Services
Raw Commodities EXCHANGE _ 25. Investor/Issuer of
_4. Manufacturer of Foreign Currency
Intermediate or Final Denominated Securities
Products
_5. Other Commercial
METALS/ _6. Miner/Producer GRAINS, SOYBEANS _ 26. Grain or Soybean
PRECIOUS METALS _7. Primary or Secondary AND SOYBEAN Producer
Refiner PRODUCTS _ 27. Producer
_8. Dealer (Metal Cooperative
Merchant) _ 28. Elevator Operator or
_9. Commercial End User Merchant Other than a
_46. Fabricator or Alloyer Producer Cooperative
_11. Other Commercial _ 29. Processor, including
Feed
_ 30. Livestock Feeder or
Producer
_ 47. Soybean Oil Refiner
_ 31. Other Commercial
PETROLEUM _ 39. Crude Oil Producer LIVESTOCK AND _ 32. Farmer or Rancher
_ 40. Crude Oil Reseller FROZEN PORK _ 33. Commercial Feedlot
_ 12. Refiner BELLIES Operator
_ 13. Product Marketer _ 34. Other Livestock
and/or Distributor Feeder
_ 14. End User _ 35. Marketing Agency
_ 15. Other Commercial and/or Commission
Merchant
_ 37. Meat Wholesaler,
Retailer, or Buyer
_ 38. Other Commercial
FINANCIAL _ 16. Savings and Loan, COTTON AND FROZEN _ 41. Producer/Grower
INSTRUMENTS/ Mortgage Bank or Thrift CONCENTRATED _ 42. Producer Grower
FOREIGN Institution ORANGE JUICE Cooperative
EXCHANGE _ 17. Commercial Bank _ 43. Merchant/
_ 18. Insurance Company Wholesaler
_ 19. Pension or _ 44. Mill Operator/
Retirement Fund Processor
_ 20. Mutual Fund _ 45. Other Commercial
_ 21. Broker/Dealer
_ 22. Foundation or
Endowment
21
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HEDGE ACCOUNT REPRESENTATION LETTER
Gentlemen:
Without limiting or modifying the general provisions of my Customer Agreement
with you, you are hereby notified that with respect to the commodities listed
below any and all positions taken in the above mentioned account will be bona
fide hedges which are used to offset or reduce price risks as an integral part
of my business.
___________________________ ___________________________
___________________________ ___________________________
___________________________
My business of_______________________________________________________________
requires hedging the commodities identified above. I understand that my
transactions in commodities other than those indicated here will be charged
speculative margins and I agree to notify you of any changes affecting the
hedging designation of the commodities identified above. I also agree to provide
you with verification of the foregoing upon your request.
This notification is a continuing one and shall remain in force until canceled
by me in writing.
I understand that the Commodity Futures Trading Commission requires you to give
every hedging customer an opportunity to specify whether, in the unlikely event
of your bankruptcy, such customer prefers that open commodity contracts held
in a hedging account be liquidated by the trustee without seeking customer
instructions.
_____________ I would not prefer such liquidation.
_____________ I would prefer such liquidation.
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ARBITRATION AGREEMENT
YOU NEED NOT SIGN THIS AGREEMENT TO OPEN AN ACCOUNT WITH IOWA GRAIN. SEE 17 CFR
180.1-180.5.
Iowa Grain and the undersigned Customer agree that any controversies arising
out of or relating to any of the Customer's accounts with Iowa Grain, relating
to transactions with Iowa Grain and/or its employees, affiliates, and/or agents
or arising out of the Customer Agreement executed by the Customer, including
any counterclaims to any action brought against Customer by or on behalf of
Iowa Grain, shall be settled by arbitration in accordance with the rules, then
in effect, of any contract market where the transaction(s) giving rise to the
controversy were or could have been executed, the American Arbitration
Association or the National Futures Association. The laws of the State of
Illinois shall govern any arbitration.
At such time as the Customer may notify Iowa Grain of its intention to submit a
claim to arbitration, or at such time as Iowa Grain may notify the Customer of
its intention to submit a claim to arbitration, the Customer will have the
opportunity to elect a forum for conducting the proceedings.
Within ten business days after Iowa Grain receives the Customer's notice of
intention to arbitrate or upon the Customer's receipt of Iowa Grain's notice of
intention to arbitrate, Iowa Grain will provide the Customer with a list of the
organizations specified above and a copy of their arbitration rules. The
Customer shall within 45 days of receipt of said list notify Iowa Grain of its
election of forum. If the Customer fails to make such an election, Iowa Grain
will then have the right to select the forum of its choice.
It is further understood that Iowa Grain will pay any incremental fees which
may be assessed by the chosen forum if a mixed panel decides the claim unless
the arbitrators in a particular proceeding determine that the Customer has
acted in bad faith in initiating or conducting that proceeding.
THREE FORUMS EXIST FOR THE RESOLUTION OF COMMODITY DISPUTES: CIVIL COURT
LITIGATION, REPARATIONS AT THE COMMODITY FUTURES TRADING COMMISSION (CFTC) AND
ARBITRATION CONDUCTED BY A SELF-REGULATORY OR OTHER PRIVATE ORGANIZATION.
THE CFTC RECOGNIZES THAT THE OPPORTUNITY TO SETTLE DISPUTES BY ARBITRATION MAY
IN SOME CASES PROVIDE MANY BENEFITS TO CUSTOMERS, INCLUDING THE ABILITY TO
OBTAIN AN EXPEDITIOUS AND FINAL RESOLUTION OF DISPUTES WITHOUT INCURRING
SUBSTANTIAL COSTS. THE CFTC REQUIRES, HOWEVER, THAT EACH CUSTOMER INDIVIDUALLY
EXAMINE THE RELATIVE MERITS OF ARBITRATION AND THAT YOUR CONSENT TO THIS
ARBITRATION AGREEMENT BE VOLUNTARY.
BY SIGNING THIS AGREEMENT, YOU: (1) MAY BE WAIVING YOUR RIGHT TO SUE IN A COURT
OF LAW; AND (2) ARE AGREEING TO BE BOUND BY ARBITRATION OF ANY CLAIMS OR
COUNTERCLAIMS WHICH YOU OR IOWA GRAIN MAY SUBMIT TO ARBITRATION UNDER THIS
AGREEMENT. YOU ARE NOT, HOWEVER WAIVING YOUR RIGHT TO ELECT INSTEAD TO PETITION
THE CFTC TO INSTITUTE REPARATIONS PROCEEDINGS UNDER SECTION 14 OF THE COMMODITY
EXCHANGE ACT WITH RESPECT TO ANY DISPUTE WHICH MAY BE ARBITRATED PURSUANT TO
THIS AGREEMENT. IN THE EVENT A DISPUTE ARISES, YOU WILL BE NOTIFIED IF IOWA
GRAIN INTENDS TO SUBMIT THE DISPUTE TO ARBITRATION. IF YOU BELIEVE A VIOLATION
OF THE COMMODITY EXCHANGE ACT IS INVOLVED AND IF YOU PREFER TO REQUEST A
SECTION 14
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"REPARATIONS" PROCEEDING BEFORE THE CFTC, YOU WILL HAVE 45 DAYS FROM THE DATE
OF SUCH NOTICE IN WHICH TO MAKE THAT ELECTION.
The Customer understands that if he seeks reparations under Section 14 of the
CEA and the Commodity Futures Trading Commission declines to institute
reparation proceedings, all claims or grievances will be subject to this
arbitration agreement. Customer further understands and agrees that aspects of
claims or grievances that are not subject to the reparation procedure, i.e., do
not constitute a violation of the Commodity Exchange Act, as amended, (the
"CEA") or rules thereunder, may be immediately submitted to arbitration. When
executed this Arbitration Agreement is an integral part of the Customer
Agreement and is incorporated therein by reference.
X _________________________________________ ______________________________
Signature Date
___________________________________________
Name (Print)
X _________________________________________ ______________________________
Signature Date
___________________________________________
Name (Print)
24
26
NOTES
NOTICE TO CUSTOMERS
EACH TRANSACTION ENTERED INTO ON YOUR BEHALF WILL BE CONFIRMED IN WRITING AND
MAILED TO YOU NO LATER THAN THE BUSINESS DAY FOLLOWING THE DAY ANY SUCH
TRANSACTION SHOULD TAKE PLACE.
IOWA GRAIN WILL ENDEAVOR TO PROVIDE ORAL CONFIRMATIONS OF ALL FILLS ON THE DAY
AN ORDER IS EXECUTED BUT DOES NOT GUARANTEE THAT ORAL CONFIRMATIONS WILL BE
INITIATED BY IOWA GRAIN ON ANY ORDER. A CUSTOMER REQUIRING ORAL CONFIRMATION OF
TRADES SHOULD CONTACT IOWA GRAIN PRIOR TO THE CLOSE OF TRADING IF ORAL NOTICE
OF A FILL HAS NOT ALREADY BEEN RECEIVED.
SHOULD YOU RECEIVE A COMBINED COMMODITY STATEMENT WHICH CONTAINS TRANSACTIONS,
QUANTITIES, CONTRACT MONTH, PRICES, ETC. THAT YOU BELIEVE TO BE INCORRECT, YOU
MUST IMMEDIATELY CONTACT IOWA GRAIN.
SHOULD YOU FAIL TO RECEIVE A COMBINED COMMODITY STATEMENT WITHIN A REASONABLE
TIME CONFIRMING ANY TRANSACTION WHICH YOU HAVE REASON TO BELIEVE WAS MADE ON
YOUR BEHALF, YOU MUST IMMEDIATELY CALL IOWA GRAIN.
SHOULD YOU RECEIVE A MONTHLY ACCOUNT STATEMENT THAT CONTAINS ANY INFORMATION
THAT YOU BELIEVE TO BE INCOMPLETE OR INACCURATE, YOU MUST IMMEDIATELY CALL IOWA
GRAIN.
PLEASE BE ADVISED THAT YOUR FAILURE IN ANY CASE TO FOLLOW THE ABOVE PROCEDURES
SHALL BE DEEMED AS A RATIFICATION BY YOU OF ANY TRADES WHICH APPEAR ON ANY SUCH
COMBINED COMMODITY OR MONTHLY ACCOUNT STATEMENTS AND SHALL BE DEEMED A WAIVER
BY YOU OF ANY INACCURACY, OR INCOMPLETENESS REGARDING THE SAME PURSUANT TO
SECTION 16 OF YOUR CUSTOMER AGREEMENT WITH IOWA GRAIN OR OTHERWISE.
IOWA GRAIN STRONGLY RECOMMENDS THAT YOU RETAIN THIS NOTICE WITH YOUR ACCOUNT
RECORDS.
25
27
INSTRUCTIONS TO TRANSFER ACCOUNT AND CUSTOMER DECLARATION OF
OWNERSHIP
TO: Date:
_______________________________________________ __________________________
Name of firm where account(s) is now carried
_______________________________________________ __________________________
Account Title Present account no.
_______________________________________________ __________________________
Account Title Present account no.
_______________________________________________ __________________________
Account Title Present account no.
To whom it may concern:
Regarding the above account(s), this is my authorization to you to promptly
deliver to Iowa Grain Company, 141 W. Jackson Boulevard, Chicago, Illinois
60604, said accounts, including all open positions and ledger balances. Kindly
send me a confirmation of this transfer, including information on prices of
original long and short positions, debit or credit balances, and any treasury
bills or securities held as margin or security.
Also, please cancel any and all open orders for my accounts.
I understand that new account forms will be required by Iowa Grain Company.
Further instructions: _________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
____________________________________________________
Yours truly,
__________________________________ x ____________________________________
Date Customer's Signature
X_____________________________________
Customer's Signature
______________________________________
Customer's name-printed
Received at Iowa Grain Company ______________________ Date: ___________________
SIGNATURES MUST MATCH DOCUMENTS
26
28
IOWA GRAIN COMPANY
141 West Jackson Boulevard
Chicago, Illinois 60604
BOOKLET NO. 2
WELCOME TO IOWA GRAIN COMPANY
SINCE TRADES INVOLVE AN IMMEDIATE OBLIGATION BY IOWA GRAIN COMPANY TO THE
RESPECTIVE EXCHANGE, YOUR TRADING CAN BEGIN ONLY WHEN FUNDS ARE MADE OUT TO
IOWA GRAIN COMPANY, AND PROVIDED BY EITHER
A. A BANK WIRE to the Harris Bank of Chicago, for the account of Iowa Grain
Company, Customer Segregated Account 302-72-57. The ABA routing number, if
necessary, is 071-000-288. (Be sure to include your name and account
number.)
B. A CERTIFIED CHECK, CASHIER'S CHECK OR MONEY ORDER made payable to Iowa
Grain Company, will also allow you to begin trading immediately. If you
are a new account, personal checks, money market checks and savings & loan
checks may require clearance before you can trade. NEVER mail cash
currencies! NEVER GIVE CASH TO YOUR SALESMAN!
C. If you are TRANSFERRING your account from another firm, fill out the
transfer form, return it to Iowa Grain Company with the other required
documents (via your IB), and we will transfer positions and funds
accordingly.
WHEN YOUR ACCOUNT IS OPEN AND TRADING, READ YOUR STATEMENTS CAREFULLY, AS SOON
AS THEY ARE RECEIVED. IF YOU PLAN TO BE AWAY, CHECK IN WITH YOUR BROKER AS
FREQUENTLY AS PRUDENT! DO NOT DELAY REVIEWING YOUR TRADING STATUS....THIS IS
IMPORTANT! IF YOU HAVE ANY QUESTIONS ABOUT AN INDIVIDUAL TRADE OR YOUR BALANCE
OR POSITION, EITHER PHONE YOUR ACCOUNT REPRESENTATIVE (BROKER) IMMEDIATELY, OR
IF HE OR SHE IS UNAVAILABLE OR A PROBLEM IS NOT RESOLVED AT ONCE, CALL THE IOWA
GRAIN COMPANY COMPLIANCE DIRECTOR IN CHICAGO AT 312-786-9760.
MAKE ALL CHECKS PAYABLE TO: IOWA GRAIN COMPANY
THIS BOOKLET IS YOURS TO KEEP
RISK DISCLOSURE STATEMENT FOR FUTURES AND OPTIONS
INTRODUCTION
This Disclosure Statement is divided into three parts.
Part I of this Risk Disclosure Statement For Futures and Options contains
disclosures regarding exchange-traded commodity futures and options trading
which the Commodity Futures Trading Commission requires to be made. Part II
contains CFTC Regulation 190.10 (C), Disclosure Statement For Non-Cash Margin.
Part III contains additional information. A customer should review Part I of
this Disclosure Statement in connection with Parts II and III.
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RISK DISCLOSURE STATEMENT FOR FUTURES AND OPTIONS
THIS BRIEF STATEMENT DOES NOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT
ASPECTS OF TRADING IN FUTURES AND OPTIONS. IN LIGHT OF THE RISKS, YOU SHOULD
UNDERTAKE SUCH TRANSACTIONS ONLY IF YOU UNDERSTAND THE NATURE OF THE CONTRACTS
(AND CONTRACTUAL RELATIONSHIPS) INTO WHICH YOU ARE ENTERING AND THE EXTENT OF
YOUR EXPOSURE TO RISK. TRADING IN FUTURES AND OPTIONS IS NOT SUITABLE FOR MANY
MEMBERS OF THE PUBLIC. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS
APPROPRIATE FOR YOU IN LIGHT OF YOUR EXPERIENCE, OBJECTIVES, FINANCIAL
RESOURCES AND OTHER RELEVANT CIRCUMSTANCES.
FUTURES
1. Effect of 'Leverage' or 'Gearing'
Transactions in futures carry a high degree of risk. The amount of initial
margin is small relative to the value of the futures contract so that
transactions are 'leveraged' or 'geared'. A relatively small market movement
will have a proportionately larger impact on the funds you have deposited or
will have to deposit: this may work against you as well as for you. You may
sustain a total loss of initial margin funds and any additional funds deposited
with the firm to maintain your position. If the market moves against your
position or margin levels are increased, you may be called upon to pay
substantial additional funds on short notice to maintain your position. If you
fail to comply with a request for additional funds within the time prescribed,
your position may be liquidated at a loss and you will be liable for any
resulting deficit.
2. Risk-reducing orders or strategies
The placing of certain orders (e.g. 'stop-loss' orders, where permitted under
local law, or 'stop-limit' orders) which are intended to limit losses to
certain amounts may not be effective because market conditions may make it
impossible to execute such orders. Strategies using combinations of positions,
such as 'spread' and 'straddle' positions may be as risky as taking simple
'long' or 'short' positions.
OPTIONS
3. Variable degree of risk
Transactions in options carry a high degree of risk. Purchasers and sellers of
options should familiarize themselves with the type of option (i.e. put or
call) which they contemplate trading and the associated risks. You should
calculate the extent to which the value of the options must increase for your
position to become profitable, taking into account the premium and all
transaction costs.
The purchaser of options may offset or exercise the options or allow the
options to expire. The exercise of an option results either in a cash
settlement or the purchaser acquiring or delivering the underlying interest. If
the option is on a future, the purchaser will acquire a futures position with
associated liabilities for margin (see the section on Futures above). If the
purchased options expire worthless, you will suffer a total loss of your
investment which will consist of the option premium plus transaction costs. If
you are contemplating purchasing deep-out-of-the-money options, you should be
aware that the hence of such options becoming profitable ordinarily is remote.
Selling ('writing' or 'granting') an option generally entails considerably
greater risk than purchasing options. Although the premium received by the
seller is fixed, the seller may sustain a loss well in excess of that amount.
The seller will be liable for additional margin to maintain the position if the
market moves unfavorably. The seller will also be exposed to the risk of the
purchaser exercising the option and the seller will be obligated to either
settle the option in cash or to acquire or deliver the underlying interest. If
the option is on a future, the seller will acquire a position in a future with
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associated liabilities for margin (see the section on Futures above). If the
position is 'covered' by the seller holding a corresponding position in the
underlying interest or a future or another option, the risk may be reduced. If
the option is not covered, the risk of loss can be unlimited.
Certain exchanges in some jurisdictions permit deferred payment of the option
premium, exposing the purchaser to liability for margin payments not exceeding
the amount of the premium. The purchaser is still subject to the risk of losing
the premium and transaction costs. When the option is exercised or expires, the
purchaser is responsible for any unpaid premium outstanding at that time.
ADDITIONAL RISKS COMMON TO FUTURES AND OPTIONS.
4. Terms and conditions of contracts
You should ask the firm with which you deal about the term and conditions of
the specific futures or options which you are trading and associated
obligations (e.g. the circumstances under which you may become obligated to
make or take delivery of the underlying interest of a futures contract and, in
respect of options, expiration dates and restrictions on the time for
exercise). Under certain circumstances the specifications of outstanding
contracts (including the exercise price of an option) may be modified by the
exchange or clearing house to reflect changes in the underlying interest.
5. Suspension or restriction of trading and pricing relationships
Market conditions (e.g. illiquidity) and/or the operation of the rules of
certain markets (e.g. the suspension of trading in any contract or contract
month because of price limits or 'circuit breakers') may increase the risk of
loss by making it difficult or impossible to effect transactions or
liquidate/offset positions. If you have sold options, this may increase the
risk of loss.
Further, normal pricing relationships between the underlying interest and the
future, and the underlying interest and the option may not exist. This can
occur when, for example, the futures contract underlying the option is subject
to the price limits while the option is not. The absence of an underlying
reference price may make it difficult to judge 'fair' value.
6. Deposited cash and property
You should familiarize yourself with the protections accorded money or other
property you deposit for domestic and foreign transactions, particularly in the
event of a firm insolvency and or bankruptcy. The extent to which you may
recover your money or property may be governed by specific legislation or local
rules. In some jurisdictions, property which has been specifically identifiable
as your own will be pro-rated in the same manner as cash for purposes of
distribution in the event of a shortfall.
7. Commission and other charges
Before you begin to trade, you should obtain a clear explanation of all
commissions, fees and other charges for which you will be liable. These charges
will effect your net profit (if any) or increase your loss.
8. Transaction in other jurisdictions
Transactions on markets in other jurisdictions, including markets formerly
linked to a domestic market, may expose you to additional risk. Such markets
may be subject to regulation which may offer different or diminished investor
protection. Before you trade you should inquire about any rules relevant to
your
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particular transactions. Your local regulatory authority will be unable to
compel the enforcement of the rules of regulatory authorities or markets in
other jurisdictions where your transactions have been effected. You should ask
the firm with which you deal for details about the types of redress available
in both your home jurisdiction and other relevant jurisdictions before you
start to trade.
9. Currency risks
The profit or loss in transactions in foreign currency denomination contracts
(whether they are traded in your own or another jurisdiction) will be affected
by fluctuations in currency rates where there is a need to convert from the
currency denomination of the contract to another currency.
10. Trading facilities
Most open-outcry and electronic trading facilities are supported by computer
based component systems for the order-routing, execution, matching,
registration or clearing of trades. As with all facilities and systems, they
are vulnerable to temporary disruption or failure. Your ability to recover
certain losses may be subject to limits on liability imposed by the system
provider, the market, the clearing house and/or member firms. Such limits may
vary, you should ask the firm with which you deal for details in this respect.
11. Electronic trading
Trading on an electronic trading system may differ not only from trading in an
open-outcry market but also may differ from trading on other electronic trading
systems. If you undertake transactions on an electronic trading system, you
will be exposed to risks associated with the system including the failure of
hardware and software. The result of any system failure may be that your order
is either not executed according to your instructions or is not executed at
all.
12. Off-exchange transactions
In some jurisdictions, and only then in restricted circumstances, firms are
permitted to effect off-exchange transactions. The firm with which you
deal may be acting as your counterparty to the transaction. It may be difficult
or impossible to liquidate an existing position, to assess the value, to
determine a fair price or to assess the exposure to risk. For these reasons,
those transactions may involve increased risks. Off-exchange transactions may be
less regulated or subject to a separate regulatory regime. Before you undertake
such transactions, you should familiarize yourself with applicable rules and
attendant risks.
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PART II
DISCLOSURE STATEMENT FOR NON-CASH MARGIN
CFTC REGULATION 190.10 (c)
THIS STATEMENT IS FURNISHED TO YOU BECAUSE RULE 190.10 (c) OF THE COMMODITY
FUTURES TRADING COMMISSION REQUIRES IT FOR REASONS OF FAIR NOTICE UNRELATED TO
THIS COMPANY'S CURRENT FINANCIAL CONDITION.
1. YOU SHOULD KNOW THAT IN THE UNLIKELY EVENT OF THIS COMPANY'S BANKRUPTCY,
PROPERTY, INCLUDING PROPERTY SPECIFICALLY TRACEABLE TO YOU, WILL BE RETURNED,
TRANSFERRED OR DISTRIBUTED TO YOU, OR ON YOUR BEHALF, ONLY TO THE EXTENT OF
YOUR PRO RATA SHARE OF ALL PROPERTY AVAILABLE FOR DISTRIBUTION TO CUSTOMERS.
2. NOTICE CONCERNING THE TERMS FOR THE RETURN OF SPECIFICALLY IDENTIFIABLE
PROPERTY WILL BE BY PUBLICATION IN A NEWSPAPER OF GENERAL CIRCULATION.
3. THE COMMISSION'S REGULATIONS CONCERNING BANKRUPTCIES OF COMMODITY BROKERS
CAN BE FOUND AT 17 CODE OF FEDERAL REGULATIONS PART 190.
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PART III
ADDITIONAL DISCLOSURE MATERIAL
1. MECHANICS OF OPTION TRADING
The options described herein are limited to those which may be traded on a
commodity exchange designated by the Commodity Futures Trading Commission to
list commodity options. The options are bought and sold on the trading floor of
the exchange authorized to trade a particular option and the options are traded
pursuant to the rules of that exchange. The exchange sets the option contract
months, trading hours, price fluctuations, margins, expiration dates and strike
prices. The amount of the premium is determined at the time of the purchase of
the option through competitive bids and offers on the exchange floor.
The option itself is a contractual right to buy, in the case of a call option,
or to sell, in the case of a put option, a futures contract or physical
commodity underlying the option, at a stated strike price prior to the
expiration date and time of the option. The purchaser of an option may: 1)
offset the option before expiration date and time, 2) exercise the option
before expiration date and time, or 3) let the option expire.
If the option purchaser does not offset or exercise the option by expiration
date and time, the purchaser loses the premium paid, commissions and all other
costs incurred in purchasing the option.
A CUSTOMER WHO HAS PURCHASED AN OPTION AND WISHES TO EXERCISE THE OPTION MUST
NOTIFY THE ACCOUNT EXECUTIVE HANDLING THE CUSTOMER'S ACCOUNT TWO DAYS PRIOR TO
THE LAST DAY SPECIFIED BY THE EXCHANGE. When a customer exercises an option, he
purchases or sells the quantity of commodity futures contracts or underlying
physical commodity specified in the option contract at the strike price. In the
case of a futures option, the customer will thus acquire a long futures
position in the case of a call option and a short futures position in the case
of a put option. Once an option is exercised the customer is subject to all the
risks, margin requirements and commissions associated with commodity futures
trading.
Certain exchanges may have provisions for the automatic exercise of
in-the-money options. In the absence of instructions from the customer in
accordance with the provisions of the Customer Agreement that commodity option
positions should not be exercised, Iowa will follow the automatic exercise
provisions specified by respective exchanges. The adherence by Iowa to such
provisions may cause the exercise of an option that the customer has not
specifically ordered. A customer is fully responsible for learning and
understanding the specifications of options contracts that he may trade.
2. PURCHASE PRICE OF THE OPTION AND OTHER COSTS
The purchase price of an option includes the premium, commission, and other
fees and charges.
(a) Premium. The amount of the premium is determined at the time of the
purchase of the option through competitive bids and offers on the exchange
floor. Iowa Grain requires the estimated amount of the premium to be in
the customer's account prior to the purchase of the option.
(b) Commission. The amount of the commission is determined by Iowa Grain and
is subject to change by Iowa Grain at any time. Iowa Grain charges its
customers a commission of the purchase of an option. When a futures option
is exercised, the customer is charged an additional commission upon
liquidation of the underlying futures contract.
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(c) Other Fees and Charges. When an option or a resulting contract is
purchased or sold, Iowa Grain may charge its customers additional fees
imposed by Iowa Grain or by governmental or self-regulatory authorities
such as exchanges or the National Futures Association.
The Iowa Grain account executive will provide the customer with the following
amounts, or approximations of such amounts, prior to the first commodity option
transaction: the premium, commission, and other fees and charges to be incurred
in connection with the commodity option transaction and with the exercise of a
commodity option.
3. THE GRANTOR'S MARGIN REQUIREMENTS AND OBLIGATIONS
(a) Margin. The exchanges upon which commodity options are traded require the
grantor (seller) of an option to deposit an amount of funds as "initial
margin" when an option position is opened. After depositing initial
margin, the grantor is obligated to maintain a level of margin funds in
his account called "maintenance margin", which may require payment of
additional funds in the event of adverse market movement. The grantor of
an option is subject to risk of substantial losses which may be many times
greater than the margin deposit required to open the option position.
The exchanges set minimum margin requirements that Iowa Grain must receive and
maintain from the grantor. Iowa Grain may, from time to time, at its discretion
require margin higher than the minimum margin set by the relevant exchange. In
addition, the margin requirements of the various exchanges may differ. A
customer should contact his account executive for specific information on
margin requirements for any option position customer is considering.
The failure on the part of an option grantor to maintain the required margin on
the option position may result in liquidation of the grantor's option position.
However, any such liquidation of the grantor's option position will not affect
the option purchaser's option position or right to exercise a purchased option
any time prior to the expiration date of the option.
If the granted option is exercised by the option purchaser, then the grantor
(seller) is obligated to sell, in the case of a call option, or purchase, in
the case of a put option, an underlying futures contract or physical commodity.
If the grantor does not already have an offsetting position in the underlying
futures contract he is required to margin the resulting futures position.
(b) Commission. The amount of commission is determined by Iowa Grain and is
subject to change by Iowa Grain at any time. Iowa Grain charges grantors a
commission on the sale of an option. When a futures option is exercised
the customer is charged additional commissions applicable to all futures
transactions involving the underlying futures contract.
(c) Other Fees and Charges. When an option or a resulting futures contract is
purchased or sold, Iowa Grain may charge its customers additional fees
imposed by Iowa Grain or by governmental or self-regulatory authorities
such as exchanges or the National Futures Association.
ADDITIONAL RISKS
A. Trading may be illiquid.
As discussed above, exchange rules govern trading of exchange-traded options.
Options are bought and sold on the trading floor of the exchange authorized to
list that particular option for trading. The trading mechanisms are designed to
provide for competitive execution and to make available to buyers and sellers a
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continuous market in which an option once purchased can later be sold, and in
which an option, once granted, can later be liquidated by an offsetting
purchase. There is no guarantee, however, that purchases or sales of options
can be offset at the price or time desired.
The commodity options market may become illiquid in certain contract months for
short periods of time. In an illiquid market there may be insufficient buyers
or sellers to execute an order to purchase or sell an option and it may become
impossible to offset an option position. Markets may become illiquid due to:
(i) insufficient trading interest in certain options; (ii) exchange imposed
restrictions on certain options; (iii) trading halts, suspensions or other
restrictions may be imposed; (iv) unusual or unforeseen circumstances may
interrupt normal exchange operations; (v) exchanges could discontinue or
restrict trading of commodity options. In such circumstances the offset market
could cease to exist; however, existing options would continue to be
exercisable in accordance with their terms (subject to the imposition of
exercise restrictions by the exchange where the option is listed.)
If it is not possible to effect offsetting transactions in a particular option,
in order to realize a profit the holder of a long futures option position would
have to exercise the option and either offset or comply with margin
requirements for the underlying futures contract. In this situation, the holder
of a short futures option position could not terminate his obligations unless
or until the option was exercised or expired. In addition, because many of the
same factors affect the underlying futures market it may be difficult or
impossible to liquidate the resulting futures position because of lack of
liquidity.
B. Exercise of the Option.
A customer should be aware that when a futures option is exercised, the
customer is subject to all the risks associated with commodity futures
trading. Therefore, although the purchaser of a futures option is only
subject to the risk of loss of the premium, commission and transaction costs
incurred in purchasing the option, the holder of a futures contract is
subject to risk of substantial losses as a result of adverse market
movements. Such losses may be many times greater than the margin deposit
required to open the futures contract position.
C. Failure to Satisfy Margin or Premium Obligations.
Iowa Grain requires the estimated amount of the premium or the required amount
of margin to be in a customer's account prior to the purchase, sale or exercise
of a commodity option. If a customer fails to fulfill these obligations, Iowa
Grain may liquidate the open positions in customer's account.
D. Daily Price Limits.
The principal commodity exchanges on which Iowa Grain trades on behalf of its
customers limit fluctuation in commodity futures contract prices during a
single day by regulations referred to as "daily limits." These exchanges may
also limit the amount of fluctuation in the price of an option contract in a
single day. Where daily limits are in effect for a commodity option contract
they establish the maximum amount the premium may vary from the previous day's
settlement price. Once the premium price has increased or decreased to the
limit point, no trades may be executed at prices beyond the daily limit and
positions in the option contract can neither be taken nor liquidated unless
traders are willing to effect trades at or within the limit. The "daily limit"
rule does not limit the losses which may be incurred, because a limit move
could prevent the liquidation of an unfavorable option position. Option premium
prices may move the daily limit for several consecutive trading days, thus
preventing liquidation and subjecting a customer with a position to potential
substantial losses.
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After a futures option is exercised the customer may also be subject to limit
moves in the applicable commodity futures contract.
E. Transfer of Accounts.
A customer may transfer his option account from one futures commission merchant
to another provided that the other futures commission merchant is willing to
accept the account. A customer who wishes to make such a transfer should
contact his new futures commission merchant for instructions. However,
customers should be aware that there may be a commission, costs, fees or other
charges related to transfers and these may be assessed by both Iowa Grain and
your new broker.
EXERCISE AND ASSIGNMENT POLICY
Exercise and assignment is the procedure by which an option position is
converted into a futures position. The buyer of an option on a futures contract
has the right (but not the obligation) to assume a specified futures position
at a predetermined price (the exercise or strike price) at any time prior to
the expiration of the option. The seller of the option must assume the opposite
futures position if the buyer exercises this right.
There are four major differences between exercising an option on a futures
position and making delivery on a futures contract:
(1) An option may be exercised on any business day between its sale and
expiration.
(2) An option is exercised by the buyer's Clearing Member while a selling
Clearing Member is randomly selected to satisfy the obligation of the
option.
(3) An option contract does not have to be exercised; it may be allowed to
expire, or be liquidated (offset).
(4) When an option is exercised, assignment of the short and long futures
position is accomplished by the Clearing House or Corporation through a
book entry into the futures clearing system. The Clearing Members of the
buyer and the seller are assigned futures positions at the strike price,
and are subject to immediate variation margin calls.
The commodity exchanges have various provisions for exercising
in-the-money options at expiration date. Customers have an obligation to
monitor in-the-money options as the expiration dates approach.
Iowa Grain has procedures for assigning exercise notices to customers on a
first-in-first-out non-preferential basis when it receives a notice from the
clearing house or corporation.
When an account executive's customer, who has a short option position, is
assigned an exercise notice, the account executive (AP) should attempt to
notify such customer prior to trading the next business day. If the assigned
futures position results in an open futures position, as opposed to offsetting
an existing futures position, the customer must promptly pay any additional
margins required.
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