Risk Disclosures For Perpetual Futures Products

IMPORTANT  

Trading in perpetual futures products and using the trading and related services involve risks, some of which are set out below. These risks, and additional risks arising either now or in the future, could result in the loss, failure or destruction of your assets, inability to receive any benefits available to you, other losses and termination of our trading and related services.  

You must consider carefully whether the risks set out below, as well as all other applicable risks, are acceptable to you prior to any digital asset transaction.  

You must seek professional advice regarding your particular situation before trading in the digital assets or using the trading and related services.  

THE RISK OF LOSS IN TRANSACTIONS INVOLVING PERPETUAL FUTURES PRODUCTS CAN BE SUBSTANTIAL. YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRANSACTIONS ARE SUITABLE FOR YOU IN LIGHT OF YOUR INVESTMENT OBJECTIVES, FINANCIAL CIRCUMSTANCES, RISK TOLERANCE AND INVESTMENT EXPERIENCE. YOU SHOULD BE CAPABLE OF BEARING A TOTAL LOSS OF THE COLLATERAL AND OTHER ASSETS ALLOCATED BY YOU TO SUPPORT YOUR PERPETUAL FUTURES POSITIONS. PERPETUAL FUTURES PRODUCTS ARE COMPLEX, HIGHLY LEVERAGED DERIVATIVE PRODUCTS AND ARE NOT SUITABLE FOR ALL INVESTORS. IN CONSIDERING WHETHER TO TRADE OR INVEST, YOU SHOULD INFORM YOURSELF AND BE AWARE OF THE RISKS GENERALLY, AND IN PARTICULAR SHOULD NOTE THE FOLLOWING SPECIFIC RISK FACTORS WHICH MAY APPLY TO ANY GIVEN PERPETUAL FUTURES CONTRACTS TRANSACTION. 

Perpetual Futures Products are intended only for those Clients whom HMF permits to access the product in accordance with applicable law and HMF’s product eligibility, onboarding, knowledge assessment and account opening requirements from time to time. Unless otherwise defined in this document, capitalized terms shall have the same meaning as the “Investor Business Terms” and the “Additional Terms Applicable to Perpetual Futures Products”.

1.    Perpetual Futures Products is a derivative product and may not be suitable for all investors. Before investing, investors should understand its nature and risks, such as extremely high price volatility of Virtual Asset futures and the value of the Virtual Asset futures may decline significantly, including to zero. All the risks relating to the underlying Virtual Assets may be magnified as trading in Virtual Asset futures is inherently risky - the underlying Virtual Assets are speculative in nature and leverage is used in futures trading. Perpetual Futures Products are complex, leveraged derivative contracts that allow you to speculate on the price movements of an underlying Virtual Asset (e.g., Bitcoin or Ethereum) or an index of such assets without owning the asset itself. Unlike traditional futures, Perpetual Futures Products have no fixed expiry date, enabling positions to be held indefinitely. Key features include:

•    price tracking and convergence mechanism: Perpetual Futures Products aim to track the spot price of the underlying asset through a funding rate mechanism, where periodic payments are exchanged between long and short position holders to align the Perpetual Futures Product price with the spot market.

•    leverage and margining: positions are leveraged, meaning you can control a larger notional value with a smaller initial margin. Your potential losses are limited to the margin posted, but gains and losses are amplified.

•    trading and settlement: trades are executed on our platform via order matching. Positions are managed through margin requirements, real-time mark-to-market valuations, and automated liquidation processes to prevent credit exposure. Settlement occurs via funding rate payments (at least every 24 hours) and upon position closure.

•    risk management: we employ robust mechanisms, including an insurance fund and loss allocation procedures (e.g., auto-deleveraging), to maintain market integrity.

By trading Perpetual Futures Products, you acknowledge that these characteristics can lead to rapid and substantial financial outcomes, positive or negative. Always monitor your positions closely, as market conditions can change unpredictably.

Perpetual Futures Products are intended for sophisticated investors and may only be made available by HMF to Clients who satisfy HMF’s applicable eligibility requirements, including any professional investor classification, onboarding, product approval and derivatives knowledge assessment requirements that HMF may impose from time to time.

2.    Perpetual futures contracts are complex products and the trading of Perpetual Futures Products is high risk. The market price of any perpetual futures contracts may not reflect the price of spot markets in the applicable underlying Virtual Assets, and may fluctuate significantly in response to the value of the underlying Virtual Asset’s(s') price, supply and demand, and other market factors. This discrepancy can lead to inaccurate profit/loss calculations, unfair margin calls, or liquidations based on non-representative prices. Hypothetical Scenario: Our index calculates the BTC underlying at USD 68,800, but the actual spot (aggregated from exchanges) is USD 68,000. Your long position shows an unrealized gain of USD 800, but upon closure, the settlement reflects the lower spot, turning it into a break-even or minor loss. The market price of a Perpetual Futures Product may diverge, potentially materially and for sustained periods, from the spot price of the relevant underlying Virtual Asset or from prices on other trading venues. Although the product is designed to align with the underlying asset through funding and other pricing mechanisms, there is no assurance that convergence will occur when you expect, or at all, during stressed or dislocated market conditions.

3.    The valuation of Virtual Assets and Virtual Asset related products is usually not transparent, and highly speculative. Virtual Asset related products are highly speculative products and their prices can fluctuate greatly within a short period of time. In high volatility, Perpetual Futures Product prices may deviate widely from the spot due to funding imbalances or rapid sentiment shifts. This can amplify losses if the divergence persists against your position, even if the underlying eventually converges. Hypothetical Scenario: During a flash crash, the BTC Perpetual Futures Product trades at USD 62,000 while the spot is USD 65,000. Your long position at 10x leverage loses USD 30,000 (60% of margin) in minutes, triggering partial liquidation before convergence restores the price. Prices of Virtual Assets and Perpetual Futures Products may be affected by thin liquidity, concentration of holdings, large positions, market manipulation, systems incidents, forks, protocol changes, cyber events, exchange failures, stablecoin dislocations, regulatory action and sudden changes in market sentiment. Any such event may cause abrupt price moves, widen spreads, reduce liquidity and adversely affect your ability to maintain, close or reduce a Position.

4.    Funding payments may be volatile and, in extreme market conditions, may become large. Even if the market price of the relevant Perpetual Futures Product moves in your favour, you may still incur losses as a result of repeated funding payments, fees, slippage, liquidation, or a combination of these factors. The longer you maintain a Position, the greater the risk that cumulative funding and fees will adversely affect your returns.

5.    Without expiry-forced convergence, prices may not align naturally, relying solely on funding rates which can be ineffective in prolonged imbalances. Long-term holders face indefinite divergence, increasing holding costs and risk of non-convergence. Hypothetical Scenario: In a sustained bull market, the Perpetual Futures Product premiums to spot by 5% without expiry pressure. Your short position incurs cumulative funding losses of USD 3,400 over a month (based on ~0.05% daily average adverse rate on ~$680,000 notional), forcing closure at a loss despite spot price stability.

6.    The risk of loss is substantial. Under exceptional market circumstances, the price of Virtual Assets and hence the price of Virtual Asset futures may drop to zero, or rise sharply, in a short period of time. An investor should be prepared to lose the full value of the collateral and other assets allocated to support their Perpetual Futures Positions within a single day. Due to leverage and the risks outlined herein, you could lose your entire margin (and thus investment) in a Perpetual Futures Product position, with no recovery possible. In adverse moves, losses are capped at posted margin but can occur rapidly, leaving no residual value. Hypothetical Scenario: You enter a 10x leveraged long BTC Perpetual Futures Product with USD 6,800 margin (notional USD 68,000). The price drops 10%, amplified to a 100% loss on your position, resulting in full liquidation and zero recovery.

7.    Leverage magnifies both gains and losses. A relatively small adverse movement in the market may have a disproportionately large negative effect on your Position and may rapidly cause your Equity to fall below the applicable Maintenance Margin Requirement, resulting in forced liquidation or other close-out action.

8.    Virtual Asset markets are highly volatile, with sudden price jumps (gaps) that can skip over stop orders or liquidation thresholds. Gaps can cause positions to liquidate at worse-than-expected prices, leading to greater losses. Hypothetical Scenario: BTC spot gaps down from USD68,000 to USD 61,200 overnight due to news. Your long Perpetual Futures Product liquidates at USD 60,000 (beyond your USD 65,000 threshold), resulting in a total margin wipeout of USD 6,800 plus slippage.

9.    In order to trade Perpetual Futures Products, the Client must post eligible Collateral accepted by HMF for that product from time to time. Depending on market movements, fees, funding payments and other debits, the Client’s Positions may be liquidated and the Client may sustain a total loss of the Collateral and other assets allocated to support the relevant Positions. Futures contract trading can be highly leveraged, with a relatively small amount of funds used to establish a position having a much greater notional exposure. As a result, a relatively small price movement in a Virtual Asset futures contract may have a proportionally large adverse impact on your Position. For instance, a small price decrease on a 20x leveraged long position could result in a 20x loss relative to the margin allocated to that position, subject to the platform’s liquidation and loss allocation mechanics. Short positions will lose money when the price of the underlying Virtual Asset rises, which is the opposite economic exposure to holding the underlying Virtual Asset itself. Further, short positions will lose money when the price of the underlying Virtual Asset rises, a result that is opposite from holding the underlying Virtual Asset. In extreme volatility, multiple positions may liquidate simultaneously, exacerbating price moves and creating a feedback loop. This can accelerate losses across the market, affecting even well-margined positions through indirect pressure. Hypothetical Scenario: A market downturn triggers initial liquidations, pushing BTC down 10%. This cascades, liquidating your long position (initially safe at 20% buffer) as the price drops another 15%, leading to full loss of USD 6,800 margin.

10.    Clients are exposed to high concentration risk in a single reference asset (e.g. bitcoin or ether) and/or a single futures contract. Clients with substantial investments in Virtual Asset futures may be exposed to higher concentration risks. Without a fixed expiry, Perpetual Futures Products do not automatically settle, and low liquidity can make it hard to exit positions at desired prices, especially during off-peak hours or for less popular assets. You may face slippage, wider spreads, or inability to close, leading to prolonged exposure to adverse moves and potential forced liquidations. Hypothetical Scenario: You attempt to close a long BTC Perpetual Futures Product during a low-volume weekend. Due to thin order books, your market order executes at USD 65,000 instead of the quoted USD 67,000, resulting in a USD 2,000 loss (3% slippage on notional) that could have been avoided in a more liquid market. Your exposure may also be concentrated in a single platform, a single product design, a single margin asset, a single settlement mechanism, or a small number of liquidity providers, backstop providers, market makers or reference exchanges. Any disruption affecting one or more of these may have a material adverse effect on your Positions and recoveries.

11.    In severe scenarios, backstop liquidity providers may be unavailable, forcing reliance on insurance funds or auto-deleveraging. Delays or unfavorable executions can increase losses during closures. Hypothetical Scenario: During a default event, no providers step in for your opposing position. The system resorts to insurance subsidization, but depletion leads to partial auto-deleveraging, closing part of your profitable short at a suboptimal price and reducing gains by USD 1,400.

12.    You may be unable to open, close, reduce or hedge a Position at your preferred price or at all. Market illiquidity, sudden volatility, price gaps, trading halts, system throttles, risk controls, rejected orders, unavailable counterparties, insufficient depth, API failures, and disruptions affecting market makers or liquidity backstop providers may prevent or delay execution.

13.    If the market moves against a Position, or if funding, fees or other debits reduce Equity, the Client may need promptly to allocate additional eligible Collateral or reduce or close Positions in order to avoid liquidation. If the Client fails to do so in time, HMF may reject new Orders, cancel open Orders, force-reduce or liquidate Positions, or take other protective action without prior notice where permitted under the applicable terms. Funding rates can fluctuate significantly based on market sentiment and supply/demand imbalances between long and short positions. This may increase your holding costs unpredictably, eroding profits or exacerbating losses over time. If rates turn against your position (e.g., positive rates for longs in a bearish market), you may incur ongoing payments that reduce your equity, potentially triggering liquidation even if the underlying price moves in your favor. Hypothetical Scenario: You hold a long BTC Perpetual Futures Product position. The funding rate spikes from 0.01% to 0.1% per 8-hour period due to increased short interest. Over 24 hours, you pay USD 204 in funding (0.3% of notional), reducing your equity from USD 6,800 to USD 6,596. If the spot price remains flat, this could push you closer to maintenance margin thresholds.

14.    The mark price, index price, funding rate, maintenance margin requirement, bankruptcy price, liquidation thresholds, insurance fund parameters and other key product parameters may change over time in accordance with the applicable terms, methodologies and disclosures published by HMF. Such changes may affect your ability to maintain Positions, the timing of liquidation, the amount of any funding payment and your realised or unrealised profit and loss.

15.    You may be required to make funding payments if the rate is unfavorable to your position (e.g., longs pay shorts when rates are positive), leading to direct deductions from your account. These payments accumulate and can turn a profitable position into a loss or force early closure to avoid further erosion. Hypothetical Scenario: In a short BTC Perpetual Futures Product position, the funding rate turns negative (shorts pay longs) due to bullish momentum. You pay USD 136 per day for a week (total USD 952), wiping out unrealized gains from a minor price drop and leaving you with a net loss despite correct directional prediction.

16.    Perpetual Futures Products do not expire and Clients will be required to make payments for long periods of time.

17.    Investors may sustain a total loss of any Collateral and other assets allocated to establish or maintain a Position. If sufficient eligible Collateral is not available within the time required by HMF’s systems and rules, the Client’s Collateral may be used, applied, transferred, converted, sold or otherwise dealt with in accordance with the applicable terms, and forced position reduction, liquidation, close-out, novation, settlement and other loss-allocation actions may be taken without the Client’s consent. It is the responsibility of the Client to ensure that sufficient eligible margin is maintained in the Account at all times when there are outstanding Positions.

18.    If the Client activates any optional functionality allowing assets outside the portion of the Client’s Account allocated to Perpetual Futures Products to be used in connection with such Positions, the Client may incur losses beyond the Collateral allocated to those Positions, and assets held for spot trading or other products may be used to satisfy liabilities arising from Perpetual Futures Products. This functionality is not active by default and is subject to separate disclosures, acknowledgements, consents and supplemental terms.

19.    In addition to the above, Clients should also note:

(i)    Clients should be aware that when the auto-deleveraging mechanism is triggered, their Positions may be forcibly closed, reduced, terminated, re-matched or otherwise affected at the Bankruptcy Price of the Defaulting Client, and the realised outcome may differ, potentially materially, from the outcome that would have occurred if they had been able to close or maintain their Positions in ordinary market conditions. If another client defaults and losses exceed available resources (e.g., insurance fund), we may close non-defaulting positions (e.g., via auto-deleveraging) to cover shortfalls, potentially at unfavorable prices. As a non-defaulting client, your open position could be forcibly closed, reducing potential profits or increasing losses to mutualize risks. Hypothetical Scenario: A large default depletes the insurance fund. Your profitable long BTC Perpetual Futures Product (unrealized gain USD 2,720) is auto-deleveraged against an opposing position at the defaulting party's bankruptcy price, crystallizing only USD 680 gain and exposing you to immediate market re-entry risks.

(ii)    HMF may at its sole discretion, subject to applicable law and the applicable terms, suspend, restrict, delist, terminate or otherwise cease offering any Perpetual Futures Product or access to related services. If this occurs, open Positions may be restricted, reduced, settled, closed out or otherwise handled in accordance with the applicable terms, and investors may suffer losses.

(iii)    HMF is not your contract counterparty to trades executed on the platform. Contracts are between Clients, and the legal and economic relationships between counterparties may change through offsetting trades, novation, liquidation, ADL or other close-out mechanisms in accordance with the applicable terms.

(iv)    In the event that a Position becomes subject to liquidation, HMF may apply a pre-defined liquidation waterfall that may include, in the order determined by HMF for the relevant product, transfer or close-out against one or more liquidity backstop providers, on-market liquidation supported by the insurance fund, and auto-deleveraging. Any such process may occur rapidly and without prior notice to you.

(v)    The insurance fund may not always be sufficient to absorb all losses or support all liquidations. Its operation may be subject to limits, suspension thresholds, circuit-breakers, parameter changes or other controls disclosed by HMF from time to time. If the insurance fund is unavailable, depleted, suspended, insufficient or otherwise constrained, ADL or other loss-allocation mechanisms may be triggered.

(vi)    A non-defaulting Client may still be adversely affected by another Client’s default, market illiquidity or operation of the liquidation waterfall, including through delayed execution, changed counterparties, reduced recoveries, forced close-out under ADL, or inability to maintain the original economic exposure.

(vii)    HMF may publish, and revise from time to time, key product parameters, margin methodologies, liquidation thresholds, mark price methodology, ADL ranking methodology, insurance fund balances or related disclosures. Those disclosures are important to your trading decisions, and you are responsible for reviewing them.