Cuboid Logic Ltd provides its new type of foreign exchange financial instrument called Range CFDs directly to its customers and via its partner brokers. The Range CFD system is multi-tenant, which means that multiple brokers use the same instance to separately serve their own customers, in own secure and exclusive virtual computing environments. You can choose where to trade Range CFDs.
This document describes the Range CFDs product.
You can purchase CFDs, where the value of the CFD varies as a function of an assets financial performance, and then sell the CFD at any time up to a maximum time (expiry time).
You can sell your CFD at any time at a price derived from the capital markets. The CFD can be bought by the broker or another customer who accesses the Range CFD system from CUBOID LOGIC or another website operator, because the Range CFDs system is multi-tenant. The CFD can be traded among customers several times prior to its expiry.
Title to the CFD passes to the buyer upon purchase of the CFD.
If the customer has not sold the CFD at the “expiry time”, the CFD is automatically sold at the pre-agreed price by the customer to the market maker.
Investment returns are calculated using underlying asset data and the Vector Algorithm.
The Vector Algorithm parallelises sequential pricing algorithms such as Roux, Zastawniak, Black, Scholes and Merton based on the binomial tree model to produce high-speed derivative contracts and accurate projections.
You buy such contracts and make returns based on actual market performance as indicated below (the red part indicates unsuccessful part).
Such market performance consists of a finite number of trades. During intensive trading, such trades may occur only some milliseconds apart. Conversely, during low liquidity hours such as midnight GMT, trades may be 10 seconds apart.
In the above example, a customer investing in a prolonged peak commencing at 13:36 would receive a good return on investment.
The size of the return is a function of how many trades during the time period are inside and outside the range respectively.
If all trades in the time period are inside the price range, then the return is the Maximum Potential Return. If only a proportion is inside the range, then the return is that proportion of the Maximum Potential Return. If no prices are within the range, then the return is zero.
Let’s assume that a USD/GBP FOREX trade has the following parameters at the time of making the investment 12.00 on the same day as the expiry of the trade:
The trade means, that if the asset price is between 1.0 and 1.1 at all times between 14:00 and 15:00 hours of that day, the investment returns 500.00 EUR.
That means that all other trades during that time are conducted within the 1.0 to 1.1 price range.
If some prices during that time period are outside the 1.0 to 1.1 price range, then the return on the investment is reduced pro rata accordingly.
This means that the return on the investment can be any value between zero and 500.00 EUR in this example.
By way of example – if a total of 12,345 trades in the asset occurred between 14:00 and 15:00 and 321 of such trades were outside the 1.0 to 1.1 range, then the return would have been:
Customers trade Range CFDs because they are interested in trading financial derivative with prices based on the market performance of underlying assets such as:
Currencies (e.g. EUR/USD);
Indices (e.g. Hang Seng 33); and
Commodities (e.g. Gold).
Range CFDs allow an investor to invest in an underlying asset and expect to receive a return on the investment if the value of the underlying asset is within a range of prices in the CFD.
Customers can buy a Range CFDs for a specified amount (strike price for the investment) and sell the Range CFDs before or at a certain time in the CFD (return at expiration time).
The customer chooses the asset class and type, commencement time, expiry time, maximum and minimum prices, the investment size and consequently sees the maximum expiry time return and minimum return for the investment.
At the time of making the investment, the customer knows at least one possible return for the investment (“Maximum Potential Return”).
Prior to expiration, the customer may sell the CFD to receive a level of return set entirely by market conditions.
Upon expiration, the investment may return any value up to the Max return depending on how right the investment was.
The Range CFDs user interface is similar to the user interface in for traditional MT4 Forex trading as shown below.
For such a more advanced trade to yield a positive return, the price needs to remain within the min/max boundaries from the commencement time to the expiry time.
The investment may also only partly be right, which means the expiry time return could be any amount up to the one known possible outcome as shown below.
Markets in Financial
Point (4) of Section C of Annex 1 to Directive 2004/39/EC lists the financial instruments covered by this Directive. This list covers, among others, any derivative contracts relating to securities, currencies, interest rates or yields, or other derivative instruments (point (4) of Section C Annex I) as well as derivatives relating to commodities that are settled in cash or that can be physically settled provided they have the characteristics of other derivative financial instruments (points (5) (6) and (7) of Section C Annex I and Article 38 of the Implementing Regulation No 1287/2006).
Range CFDs have the features of a derivative contract settled in cash (cf Articles 37 and 38 of the Implementing Regulation No 1287/2006), that meet the definition of ‘financial instruments’ laid down in Section C of Annex I to MiFID.
Financial Services and
Markets Act 2000
An investment in Range CFDs gives rights under contract the purpose of which is to secure a profit or avoid a loss by reference to fluctuations in —
- the value or price of property of any description; or
- an index or other factor designated for that purpose in the contract.
Please see the description in the Financial Services and Markets Act 2000 / c. 8 / Schedule 2 / Part II / Contracts for differences for reference.
Markets in Financial
Financial Services and
Markets Act 2000
Range CFDs are a foreign exchange financial instrument used for clear, fast and intuitive online trading. You can see the maximum potential return before investing, and your losses cannot exceed your investment.
Place a cube on the chart to represent the price range and the time range of your trade, select the size of your investment, and trade.
Your CFD will then move to the left, as time progresses, and you see whether the price indeed does go through your CFD.
Your investment return grows, the longer the price is inside your CFD cube.
- If the price goes all the way through your cube, your return is the maximum potential return.
- If the price only partly goes through your cube, you pro rata make a smaller return.
- If the price misses your cube entirely, you do not make a return on your investment.