Extended Hours Trading Risk Disclosure
FORM CRS CUSTOMER RELATIONSHIP SUMMARY
Lightspeed Financial Services Group LLC (Lightspeed) is registered with the Securities and Exchange Commission (SEC) as a broker-dealer and is a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC). Brokerage and investment advisory services and fees differ and it is important for you to understand these differences. Free and simple tools are available to research firms and financial professionals at Investor.gov/CRS, which also provides educational materials about broker-dealers, investment adviser, and investing.WHAT INVESTMENT SERVICES AND ADVICE CAN YOU PROVIDE ME?
We offer retail investors the ability to open self-directed brokerage accounts to buy and sell securities. Lightspeed will not provide any recommendations to its clients and will monitor accounts only in respect to its regulatory obligations as a broker dealer. We will not perform any investment monitoring since Lightspeed is not making any recommendations.
New accounts are subject to the following minimum funding requirements
For additional information, please refer to https://www.lightspeed.com/brokerage-services/trading- accounts/funding-information/
Conversation Starter. Ask your financial professional— What is your relevant experience, including your licenses, education and other qualifications? What do these qualifications mean?WHAT FEES WILL I PAY?
Retail investors that open accounts will incur a commission charge that are either priced at a per share rate or a per trade rate. The more trades that are executed in your account will result in more commission charges. It is the retail investors decision to trade as they desire pursuant to their circumstances. A minimum commission charge will be applied to any order of less than 100 shares on the Lightspeed Trader and Sterling Trader platforms. Eze EMS platform will incur a minimum commission charge of $3. Lightspeed Web has a minimum commission of $4.50 for options orders. In addition, if your account has a per share commission set up, your trades will also be subject to routing fees based on the market destination that you select. See https://www.lightspeed.com/pricing/routing-fees/ for details. The Web platform does not charge any routing fees. Certain platforms are charged monthly platform fees and market data fees. See https://www.lightspeed.com/platform-comparison/ for details. Accounts that fall below $15,000 will be charged a $25 monthly minimum commission fee, minus any actual commissions charged in the prior month.
You will pay fees and costs whether you make or lose money on your investments. Fees and costs will reduce any amount of money you make on your investments over time. Please make sure you understand what fees and costs you are paying.
For additional information, please see https://www.lightspeed.com/pricing/routing-fees/ (Routing Fees)
https://www.lightspeed.com/platform-comparison/ (Platform and Market Data fees)
Conversation Starter.Ask your financial professional— Help me understand how these fees and costs might affect my investments.WHAT ARE YOUR LEGAL OBLIGATIONS TO ME WHEN PROVIDING A RECOMMENDATION?
Lightspeed Financial Professionals do not make recommendations to you. We offer you the tools to direct your brokerage account and enter transactions as you see fit based on your objectives and financial circumstances.HOW DOES THE FIRM MAKE MONEY AND WHAT CONFLICTS OF INTEREST DO YOU HAVE?
We do not provide recommendations. The way we make money creates some conflicts with your interests. You should understand and ask us about these conflicts because they can affect the services we provide you. For example, all accounts that fall below $15,000 equity balance will be charged a $25 monthly minimum commission fee, minus any actual commissions charged in the prior month. Lightspeed primarily makes money through the generation of transaction-based commissions. If you are a buy and hold investor, you will be charged the monthly minimum commission fee in months where there is no trading activity in the account. Here are some examples to help you understand what this means:
Conversation Starter.Ask your financial professional— How might your conflicts of interest affect me, and how will you address them?
For additional information, please see https://www.lightspeed.com/pricing/commission/ .HOW DO YOUR FINANCIAL PROFESSIONALS MAKE MONEY?
Lightspeed’s financial professionals are compensated primarily on a base salary. A small number may receive a portion of the commissions generated on certain accounts in addition to their salary.
The majority of our accounts do not have an assigned financial professional to the account thus no individual will receive part of the commissions.DO YOUR FINANCIAL PROFESSIONALS HAVE LEGAL OR DISCIPLINARY HISTORY?
Yes. Visit Investor.gov/CRS for a free and simple search tool to research us and our financial professionals.
Conversation Starter.Ask your financial professional— As a financial professional, do you have any disciplinary history? For what type of conduct?ADDITIONAL INFORMATION
For additional information about our services, please visit our web sites at https://www.lightspeed.com/ . If you would like additional, up-to-date information or a copy of this disclosure, please call 1-888-577-3123
Conversation Starter.Ask your financial professional— Who is my primary contact person? Is he or she a representative of an investment adviser or a broker-dealer? Who can I talk to if I have concerns about how this person is treating me?
We are furnishing this document to you to provide some basic facts about purchasing securities on margin, and to alert you to the risks involved with trading securities in a margin account. Before trading stocks in a margin account, you should carefully review the margin agreement provided by your broker. Consult your broker regarding any questions or concerns you may have with your margin accounts.
When you purchase securities, you may pay for the securities in full or you may borrow part of the purchase price from your brokerage firm. If you choose to borrow funds from your firm, you will open a margin account with the firm. The securities purchased are the firm s collateral for the loan to you. If the securities in your account decline in value, so does the value of the collateral supporting your loan, and as a result, the firm can take action, such as issue a margin call and/or sell securities in your account, in order to maintain the required equity in the account.
It is important that you fully understand the risks involved in trading securities on margin. These risks include the following:YOU CAN LOSE MORE FUNDS THAN YOU DEPOSIT IN THE MARGIN ACCOUNT.
A decline in the value of securities that are purchased on margin may require you to provide additional funds to the firm that has made the loan to avoid the forced sale of those securities or other securities in your account.THE FIRM CAN FORCE THE SALE OF SECURITIES IN YOUR ACCOUNT.
If the equity in your account falls below the maintenance margin requirements under the law, or the firm s higher house requirements, the firm can sell the securities in your account to cover the margin deficiency. You also will be responsible for any shortfall in the account after such a sale.THE FIRM CAN SELL YOUR SECURITIES WITHOUT CONTACTING YOU.
Some investors mistakenly believe that a firm must contact them for a margin call to be valid, and that the firm cannot liquidate securities in their accounts to meet the call unless the firm has contacted them first. This is not the case. Most firms will attempt to notify their customers of margin calls, but they are not required to do so. However, even if a firm has contacted a customer and provided a specific date by which the customer can meet a margin call, the firm can still take necessary steps to protect its financial interest, including immediately selling the securities without notice to the customer.YOU ARE NOT ENTITLED TO CHOOSE WHICH SECURITY IN YOUR MARGIN ACCOUNT IS LIQUIDATED OR SOLD TO MEET A MARGIN CALL.
Because the securities are collateral for the margin loan, the firm has the right to decide which security to sell in order to protect its interests.THE FIRM CAN INCREASE ITS HOUSE MAINTENANCE MARGIN REQUIREMENT AT ANY TIME AND IS NOT REQUIRED TO PROVIDE YOU ADVANCE WRITTEN NOTICE.
These changes in firm policy often take effect immediately and may result in the issuance of a maintenance margin call. Your failure to satisfy the call may cause the member to liquidate or sell securities in your account.YOU ARE NOT ENTITLED TO AN EXTENSION OF TIME ON A MARGIN CALL.
While an extension of time to meet margin requirements may be available to customers under certain conditions, a customer does not have a right to the extension.
DAY-TRADING RISK DISCLOSURE STATEMENT
You should consider the following points before engaging in a day-trading strategy. For purposes of this notice, a “day-trading strategy” means an overall trading strategy characterized by the regular transmission by a customer of intra-day orders to effect both purchase and sale transactions in the same security or securities.DAY TRADING CAN BE EXTREMELY RISKY.
Day trading generally is not appropriate for someone of limited resources and limited investment or trading experience and low risk tolerance. You should be prepared to lose all of the funds that you use for day trading. In particular, you should not fund day-trading activities with retirement savings, student loans, second mortgages, emergency funds, funds set aside for purposes such as education or home ownership, or funds required to meet your living expenses. Further, certain evidence indicates that an investment of less than $50,000 will significantly impair the ability of a day trader to make a profit. Of course, an investment of $50,000 or more will in no way guarantee success.BE CAUTIOUS OF CLAIMS OF LARGE PROFITS FROM DAY TRADING.
You should be wary of advertisements or other statements that emphasize the potential for large profits in day trading. Day trading can also lead to large and immediate financial losses.DAY TRADING REQUIRES KNOWLEDGE OF SECURITIES MARKETS.
Day trading requires in-depth knowledge of the securities markets and trading techniques and strategies. In attempting to profit through day trading, you must compete with professional, licensed traders employed by securities firms. You should have appropriate experience before engaging in day trading.DAY TRADING REQUIRES KNOWLEDGE OF A FIRM’S OPERATIONS.
You should be familiar with a securities firm’s business practices, including the operation of the firm’s order execution systems and procedures. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a stock suddenly drops, or if trading is halted due to recent news events or unusual trading activity. The more volatile a stock is, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to system failures.DAY TRADING WILL GENERATE SUBSTANTIAL COMMISSIONS, EVEN IF THE PER-TRADE COST IS LOW.
Day trading involves aggressive trading, and generally you will pay commissions on each trade. The total daily commissions that you pay on your trades will add to your losses or significantly reduce your earnings. For instance, assuming that a trade costs $16 and an average of 29 transactions are conducted per day, an investor would need to generate an annual profit of $111,360 just to cover commission expenses.DAY TRADING ON MARGIN OR SHORT SELLING MAY RESULT IN LOSSES BEYOND YOUR INITIAL INVESTMENT.
When you day trade with funds borrowed from a firm or someone else, you can lose more than the funds you originally placed at risk. A decline in the value of the securities that are purchased may require you to provide additional funds to the firm to avoid the forced sales of those securities or other securities in your account. Short selling as part of your day trading strategy also may lead to extraordinary losses, because you may have to purchase the stock at a very high price in order to cover a short position.POTENTIAL REGISTRATION REQUIREMENTS.
Persons providing investment advice for others or managing securities accounts for others may need to register as either an “Investment Advisor” under the Investment Advisors Act of 1940 or as a “Broker” or “Dealer” under the Securities Exchange Act of 1934. Such activities may also trigger state registration requirements.
PAYMENT FOR ORDER FLOW DISCLOSURE STATEMENT
Lightspeed may receive payment for order flow in the form of order flow rebates and net rebates which is aggregated with exchange fees incurred that may result in a net payment received. The source and nature of such compensation received will be furnished upon written request.
NOTE CONCERNING SEC RULE 606
Securities and Exchange Commission Rule 606 of Regulation NMS requires all broker-dealers to make publicly available a quarterly report with regard to their order routing practices for non-directed orders in NMS stocks that are submitted on a held basis and of non-directed orders, that are customer orders in NMS securities that are option contracts broken down by calendar month. The Rule excludes from the quarterly report those orders that are directed by a customer to a particular exchange or market for execution.
Lightspeed Financial Services Group LLC’s report is available on the Quarterly Order Routing Disclosure Reports page. Click on the appropriate quarter to access the data for the relevant time-period.
In addition, customers may request disclosure of the venues to which their orders were routed on a held basis in NMS stocks in the six months prior to the request. For orders in NMS securities that are option contracts, customers may request the identity of the venue to which their orders were routed for execution in the six months prior to the request, whether the orders were directed orders or non-directed orders, and the time of the transactions, if any, that resulted from such orders. Contact the Lightspeed Client Services at 888-577-3123 for any such request.
VOLATILE MARKETS MESSAGE
What are volatile markets? A volatile market is a high-volume trading session marked by extreme price fluctuations and order imbalances resulting from numerous investors entering buy or sell orders for the same security simultaneously. Because of these imbalances, wide price variances in short periods of time are common. On any given day, volatile markets can affect a particular security, groups of securities or the market as a whole. Volatile markets can be caused by material news announcements, market developments and even trading halts taking place in less volatile securities. System access, system response times, system performance and trade executions may be adversely affected during volatile market conditions.
There are risks of trading in volatile markets including, but not limited to, the following: Inaccurate or late price quotes, market order execution prices significantly different from the current price quote, delays in trade executions, delays in open order cancellation requests and delays in trade confirmation reporting. Limit orders can eliminate several of the risks associated with volatile markets. A limit order will limit the execution price to the limit price specified or better, whereas a market order will execute at the current market price. Failure to use a limit order in volatile market conditions could result in customers paying more to purchase securities or receiving less on the sale of securities.
Placing cancel requests on open orders means the customer is sending a message to the system, which in turn sends that cancellation request to the exchange. In volatile markets this process can be significantly delayed. Order execution confirmations may be delayed during volatile markets.
CUSTOMER IDENTIFICATION PROGRAM NOTICE
Important Information You Need To Know About Opening A New Account To help the government fight the funding of terrorism and money laundering activities, federal law requires financial institutions to obtain, verify and record information that identifies each person who opens an account.
This Notice answers some questions about Lightspeeds’s Customer Identification Program.
What types of information will you need to provide? When you open an account, Lightspeed is required to collect information such as the following from you:
A corporation, partnership, trust or other legal entity may need to provide other information, such as its principal place of business, local office, employer identification number, certified articles of incorporation, government-issued business license, a partnership agreement, or a trust agreement.
US Department of the Treasury, Securities and Exchange Commission, FINRA, and New York Stock Exchange rules already require you to provide most of this information. These rules may also require you to provide additional information, such as your net worth, annual income, occupation, employment information, investment experience and objectives, and risk tolerance.
What happens if you don’t provide the information requested or your identity cannot be verified? Lightspeed may not be able to open an account or carry out transactions for you. If Lightspeed has already opened an account for you, it may have to be closed.
We thank you for your patience and hope that you will support the financial industry’s efforts to deny terrorists and money launderers access to America’s financial system.
DISASTER RECOVERY AND BUSINESS CONTINUITY
Lightspeed Financial Services Group LLC (“Lightspeed”) has developed a Disaster Recovery and Business Continuity Plan (“Plan”) in the event that a function deemed critical to Lightspeed’s ongoing business operations fails. The plan will assist Lightspeed in minimizing any business operational issues that result from an unexpected event or disaster.
Lightspeed’s policy is to respond to a Significant Business Disruption (SBD) by safeguarding employees’ lives and Company property, making a financial and operational assessment, quickly recovering and resuming operations, protecting all of the firm’s books and records, and allowing customers to transact business. In the event that the Company determines that it is unable to continue business, Lightspeed will assure customers prompt access to their funds and securities.
Lightspeed’s plan anticipates two kinds of SBDs, internal and external. Internal SBDs affect only Lightspeed’s ability to communicate and do business, such as a failure of a critical system, or a fire in the Lightspeed offices. External SBDs prevent the operation of the securities markets or a number of firms, such as a terrorist attack, a city flood, or a wide-scale, regional disruption.
In the event of an SBD, Lightspeed intends to continue its operations to the extent reasonable and practical under the circumstances and will place utmost priority in re-establishing the data and operational systems necessary to provide our customers with prompt access to their funds and securities, and with the ability to close out open positions. We will continue to take orders through any of the methods that are available and reliable, and in addition, as communications permit, we will inform our customers what alternatives they have to send their orders to us.
Lightspeed does not maintain custody of customers’ funds or securities, which are maintained by our clearing firm. In the unlikely event that we determine we are unable to continue our business as a result of an SBD, we will assure customers prompt access to their funds and securities through our clearing firms. Customers who are not introduced by Lightspeed to their clearing firm are advised to contact that firm for information about business continuity plans and contingencies in the event of a business disruption to their trading.
Lightspeed backs up its records on a periodic basis, keeping copies of essential databases, software programs, and other records offsite. Additionally, our clearing brokers have records of all customer activity that has been submitted to them. Overviews of the Plans of our clearing brokers can be found online at the following web sites:TYPES OF DISRUPTIONS
Lightspeed’s Plan foresees three general classes of business disruptions:
Significant but not Catastrophic Disruption at Lightspeed’s Office Limited disruptions affecting communications lines, computer hardware, or other related systems typically can be addressed through the use of certain redundant systems used by staff in various office locations.
Catastrophic Disruption at Lightspeed’s Office The Company’s response to a catastrophic disruption at our Office will depend on the extent of the damage. In the event of a total loss of Lightspeed’s Office, the Firm is able to shift various data processing and service duties to alternative offices of Lightspeed. We also will coordinate with our clearing firms to permit customers to close out open positions. In addition, as communications permit, we will inform our customers what alternatives they have to send their orders to us.
Beyond the initial aftermath of the total loss of Lightspeed’s Office, the Company would evaluate the nature of the disruption, the availability of our systems and personnel, our financial condition, the condition of the national and global financial markets, and other factors, as appropriate, to determine whether to restore full brokerage operations or to discontinue brokerage operations and assist customers in transferring their accounts elsewhere.
City-Wide, Regional or Other Disruption that Temporarily Limits Access and/or the Functioning of the Lightspeed Office For a city-wide, regional or other disruption that temporarily limits access to and/or the functioning of the Lightspeed Office, the Company’s response would vary dependent upon the exact nature of the disruption and its impact on the financial markets and our Waltham office. These types of disruptions include the Company having to evacuate the Office temporarily due to a bomb threat or smoke damage on another floor. Lightspeed’s response would be similar to a catastrophic disruption to the Lightspeed offices; however, restoration of full services would be quicker, but resumption time is dependent upon the exact nature of the disruption.ONGOING ENHANCEMENTS
The Waltham office is in a geographically separate region and is intended to be able to assume most functions of our other locations when dealing with the Lightspeed trading system and related activities in the event of a disruption in the Main or other offices. Please contact Lightspeed at (888) 577-3123 for further details about these capabilities. Lightspeed’s Business Continuity Plan, including this disclosure, will be amended to reflect new capabilities and enhancements.DISCLAIMERS
There are innumerable potential causes of a business disruption, and the events that cause them may vary significantly in nature, size, scope, severity, duration and geographic location, and will result in distinct degrees of harm to human life; firm assets; the banks, exchanges, securities firms and ECNs with which the firm conducts business; and local, regional and national systems infrastructure (e.g., telecommunications, Internet connectivity, power generation and transportation) that could affect Lightspeed’s recovery in a variety of ways. Lightspeed reserves the right to flexibly respond to business disruptions in a situation-specific manner which the Company deems appropriate.
Nothing in this document is intended to provide a guarantee or warranty regarding the actions or performance of Lightspeed Financial Services Group LLC, its computer systems, or its personnel in the event of a significant business disruption. Lightspeed may modify its Disaster Recovery and Business Continuity Plan and this disclosure at any time. The Company will post updates to this disclosure on our website.
RISKS ASSOCIATED WITH THE USE OF STOP ORDERS
Stop prices are not guaranteed execution prices. A “stop order” becomes a “market order” when the “stop price” is reached and firms are required to execute a market order fully and promptly at the current market price. Therefore, the price at which a stop order ultimately is executed may be very different from the entered “stop price.” Accordingly, while you may receive a prompt execution of a stop order that becomes a market order, during volatile market conditions, the execution may be at a significantly different price from the stop price if the market is moving rapidly.
Stop orders may be triggered by a short-lived, dramatic price change. During periods of volatile market conditions, the price of a stock can move significantly in a short period of time and trigger an execution of a stop order (and the stock may later resume trading at its prior price level). It is important to understand that if your stop order is triggered under these circumstances, you may sell at an undesirable price even though the price of the stock may stabilize during the same trading day.
Sell stop orders may exacerbate price declines during times of extreme volatility. The activation of sell stop orders may add downward price pressure on a security. If triggered during a precipitous price decline, a sell stop order also is more likely to result in an execution, well below the stop price.
Placing a “limit price” on a stop order may help manage some of these risks. A stop order with a “limit price” (a “stop limit” order) becomes a “limit order” when the stock reaches the “stop price.” A “limit order” is an order to buy or sell a security for an amount no worse than a specific price (i.e., the “limit price”). By using a stop limit order instead of a regular stop order, you may receive additional certainty with respect to the price that you receive for the stock. However, you should be aware that, because brokers cannot sell for a price that is lower (or buy for a price that is higher) than the limit price selected, there is the possibility that the order will not be executed at all. Lightspeed encourages the use of limit orders in cases where you prioritize achieving a desired target price more than getting an immediate execution irrespective of price.
NOTICE REGARDING USA PATRIOT ACT SECTION 311
Pursuant to U.S. regulations issued under section 311 of the USA Patriot Act, 31 CFR 103.192, we are prohibited from opening or maintaining an account for, or on behalf of the specified entities/ banks listed below:
The regulations also require us to notify you that your account with Lightspeed may not be used to provide the above listed entities with access to our Firm. If we become aware that the specified entities/banks are indirectly using your account at Lightspeed, we will be required to take appropriate steps to prevent such access, including terminating your account.