Interactive Brokers Financial Products S.A. a Luxembourg Joint Stock Company

Transkript

1 This document comprises a base prospectus with respect to different categories of securities pursuant to Article 22(6) of the Commission Regulation (EC) No. 809/2004 of 29 April 2004 (the Prospectus Regulation) containing non-equity securities within the meaning of No. 4 of Article 22 (6) of the Prospectus Regulation (EC) (the Base Prospectus). Interactive Brokers Financial Products S.A. a Luxembourg Joint Stock Company as Issuer Base Prospectus 25 March 2010 Warrant and Certificate Programme (the Programme) unconditionally and irrevocably guaranteed as to payment and delivery obligations by IBG LLC a Connecticut, U.S.A. Limited Liability Company as Guarantor Under this Programme, Interactive Brokers Financial Products S.A. (the Issuer) may from time to time issue warrants (the Warrants) and certificates (the Certificates) (as specified in the relevant Final Terms) (together the Derivative Securities) in each case guaranteed (such guarantee, as amended or restated from time to time, the Guarantee) by IBG LLC (the Guarantor ). The Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) as Competent Authority under the Prospectus Directive (as defined herein) has approved this Base Prospectus pursuant to 13 paragraph (1) sentence 2 of the German Securities Prospectus Act (Wertpapierprospektgesetz), which requires the scrutiny of the Base Prospectus in relation to its completeness, coherence and comprehensibility. This document contains the binding English language version of the Base Prospectus, including a German language translation of the Summary Note. The Issuer may request BaFin to provide competent authorities in other host Member States within the European Economic Area with a certificate of approval attesting that this Base Prospectus has been drawn up in accordance with the German Securities Prospectus Act which implements the Prospective Directive into German law. This Base Prospectus and the relevant Final Terms together constitute the complete prospectus for the relevant series of the Derivative Securities offered. No person is or has been authorised to give any information or to make any representations, other than those contained in this Base Prospectus, in connection with the Programme or the issue and sale of the Derivative Securities and, if given or made, such information or representations must not be relied upon as having been authorised by the Issuer. Neither the delivery of this Base Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that the information herein is correct as of any time subsequent to the date hereof (except that the Issuer will publish a supplement to this Base Prospectus if and when required pursuant to applicable law in the event of certain material changes occurring subsequent to the publication of this Base Prospectus in accordance with 16 German Securities Prospectus Act).

2 Neither this Base Prospectus nor any other information supplied in connection with the Programme or any Derivative Securities should be considered as a recommendation by the Issuer or any of the Dealers that any recipient of this Base Prospectus or any recipient of any other information supplied in connection with the Programme or any Derivative Securities should purchase any Derivative Securities. Each investor contemplating purchasing any Derivative Securities should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer. Complete information about the Issuer and the Derivative Securities offered would be available only when the Base Prospectus is read together with the relevant Final Terms, which are not yet contained in this document but which will be presented and published as a separate document. All capitalized terms not defined in this Base Prospectus shall have the meaning ascribed to them in the relevant Final Terms. Application may, in the future, be made for inclusion of the Derivative Securities in an alternative segment (Freiverkehr) of any Stock Exchange in Germany or on an equivalent market of a Stock Exchange in any other Member State within the European Economic Area, or the Derivative Securities may not be so listed or so traded at all, in each case as specified in the relevant Final Terms. The Derivative Securities and the Guarantee have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act), or with any securities regulatory authority of any state or other jurisdiction of the United States, and trading in the Derivative Securities has not been approved by the U.S. Commodity Futures Trading Commission under the U.S. Commodity Exchange Act, as amended. The Derivative Securities will be issued in bearer form and are subject to certain U.S. tax law requirements. The Derivative Securities may not be offered, sold or delivered within the United States or, to or for the account or benefit of, any U.S. Person (as defined in the U.S. Internal Revenue Code of 1986, as amended, and regulations thereunder). The Derivative Securities are being offered and sold outside the United States to non-u.s. Persons pursuant to Regulation S under the Securities Act of 1933 (Regulation S) and may not be legally or beneficially owned at any time by any U.S. Person except in certain transactions exempt from the registration requirements of the Securities Act. In case of interests which are initially represented in a Temporary Global Note, these interests will be exchangeable, in whole or in part, for interests in a Permanent Global Note on the day falling 40 days after the relevant issue date (the Exchange Date), upon certification as to non-u.s. beneficial ownership. Arranger and Dealer Timber Hill (Europe) AG The Base Prospectus has been filed with the Competent Authority and has been published on the website of the Issuer ( This Base Prospectus is valid for a period of 12 months from the date of its publication. 2

3 TABLE OF CONTENTS 1 SUMMARY SUMMARY OF RISK FACTORS SUMMARY OF RISKS RELATING TO THE GUARANTOR AND THE ISSUER SUMMARY OF RISKS RELATING TO THE DERIVATIVE SECURITIES SUMMARY OF THE DESCRIPTION OF THE ISSUER SUMMARY OF THE DESCRIPTION OF THE GUARANTOR SUMMARY OF THE DESCRIPTION OF THE DERIVATIVE SECURITIES SUMMARY OF THE DESCRIPTION OF THE PROGRAMME DEUTSCHE ÜBERSETZUNG DER ZUSAMMENFASSUNG ZUSAMMENFASSUNG DER RISIKOFAKTOREN ZUSAMMENFASSUNG DER MIT DER GARANTIN UND DER EMITTENTIN... VERBUNDENEN RISIKEN ZUSAMMENFASSUNG DER MIT DEN DERIVATIVEN WERTPAPIEREN... VERBUNDENEN RISIKEN ZUSAMMENFASSUNG DER BESCHREIBUNG DER EMITTENTIN ZUSAMMENFASSUNG DER BESCHREIBUNG DER GARANTIN ZUSAMMENFASSUNG DER BESCHREIBUNG DER DERIVATIVEN WERTPAPIERE ZUSAMMENFASSUNG DER BESCHREIBUNG DES PROGRAMMES RISK FACTORS RISKS RELATING TO THE GUARANTOR AND THE ISSUER RISKS RELATING TO THE DERIVATIVE SECURITIES RISKS RELATING TO THE UNDERLYINGS INTERACTIVE BROKERS FINANCIAL PRODUCTS S.A. (ISSUER) STATUTORY AUDITORS INFORMATION ABOUT THE ISSUER BUSINESS OVERVIEW ORGANISATIONAL STRUCTURE TREND INFORMATION ADMINISTRATIVE AND MANAGEMENT BODIES BOARD PRACTISES MAJOR SHAREHOLDERS FINANCIAL INFORMATION ADDITIONAL INFORMATION MATERIAL CONTRACTS IBG LLC (GUARANTOR) STATUTORY AUDITORS INFORMATION ABOUT THE GUARANTOR BUSINESS OVERVIEW ORGANISATIONAL STRUCTURE TREND INFORMATION ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES BOARD PRACTISES MAJOR SHAREHOLDERS FINANCIAL INFORMATION ADDITIONAL INFORMATION MATERIAL CONTRACTS WERTPAPIERBEDINGUNGEN / TERMS AND CONDITIONS OF THE DERIVATIVE... SECURITIES OPTIONSSCHEINE / WARRANTS ZERTIFIKATE / CERTIFICATES

4 7 FORM OF FINAL TERMS (MUSTER ENDGÜLTIGE BEDINGUNGEN) PART I - GENERAL INFORMATION PART II - INFORMATION ON THE UNDERLYING PART III - RISK FACTORS REGARDING THE UNDERLYING PART IV - INFORMATION ON THE [WARRANTS] [CERTIFICATES] PART V - CONDITIONS OF THE DERIVATIVE SECURITIES SUBSCRIPTION AND SALE TAXATION GENERAL DESCRIPTION OF THE PROGRAMME IMPORTANT NOTICE ABOUT THIS BASE PROSPECTUS ANNEX I - HISTORICAL FINANCIAL INFORMATION OF THE ISSUER ANNEX II - HISTORICAL FINANCIAL INFORMATION OF THE GUARANTOR ANNEX III - FORM OF GUARANTEE SIGNATURE PAGE... U - 1

5 1 SUMMARY The following constitutes a summary (the Summary) of the essential characteristics and risks associated with Interactive Brokers Financial Products S.A. (the Issuer), IBG LLC (the Guarantor) and warrants and certificates (the Derivative Securities) to be issued under the warrant and certificate programme of the Issuer (the Programme). This Summary should be read as an introduction to this prospectus (the Base Prospectus). Any decision by an investor to invest in the Derivative Securities should be based on consideration of this Base Prospectus as a whole, including the supplements thereto (if any) and the relevant final terms (the Final Terms). Where a claim relating to the information contained in this Base Prospectus, any supplement thereto and the relevant Final Terms is brought before a court, the plaintiff investor might, under the national legislation of the contracting states of the European Economic Area, have to bear the costs of translating the Base Prospectus, any supplement thereto and the relevant Final Terms before the legal proceedings are initiated. The Issuer, who has assumed responsibility for this Summary including any translation thereof, can be held liable, but only if the Summary is misleading, inaccurate or inconsistent when read together with the other parts of this Base Prospectus. The following Summary is taken from and qualified in its entirety by the remainder of this Base Prospectus and, in relation to a particular Series of Derivative Securities, the relevant Final Terms. 1.1 SUMMARY OF RISK FACTORS The purchase of the Derivative Securities issued under the Programme is associated with the risks summarised below. The specific risks in relation to the relevant underlying may be set out in the respective Final Terms, which must therefore always be taken into account in assessing the risks associated with an investment in those Derivative Securities. In this respect, investors should apart from the other information on the Issuer, the Guarantor and the Derivative Securities contained in this Base Prospectus and in the Final Terms also consider the description of risks for their investment decision. Investors in the Derivative Securities offered hereby should consider their current financial circumstances and investment objectives and always consult their own financial, legal and tax advisers with regard to the suitability of the relevant Derivative Securities to realise the envisaged investment objective in the light of their personal circumstances before acquiring such Derivative Securities. Should one or more of the circumstances described below occur, this could lead to a material and long-term decline in the price of the Derivative Securities or, in extreme cases, to a total loss of the amount invested by the investor. Even when the Derivative Securities are capital protected at maturity to the extent of the minimum amount repayable (the Minimum Repayment Amount) and hence, the risk of a loss is initially limited, each holder of the Derivative Securities (the Securityholder) bears the risk of the Issuer s situation worsening SUMMARY OF RISKS RELATING TO THE GUARANTOR AND THE ISSUER Summary of risks relating to the Guarantor The Guarantor as the parent company of the Interactive Brokers group of companies (consisting of the Guarantor and its subsidiaries, and also defined as IB Group) is a holding company whose primary assets consist of shares of stock or other equity interests in or amounts due from subsidiaries; hence, almost all of its income is derived from those subsidiaries. Accordingly, the Guarantor will be dependent on dividends and other distributions or loans from its subsidiaries 1 Whether the Derivative Securities are vested with a capital guarantee (i.e. a Minimum Repayment Amount is guaranteed) or without a capital guarantee is set out in the Final Terms. 5

6 to generate the funds necessary to meet obligations with respect to the Derivative Securities guaranteed by it and a holder of such Derivative Securities could lose all or part of his investment. IB Group s (including the Guarantor s) financial condition and results of operations, on which payment of any dividends and other distributions or loans to the Guarantor depends, may be affected by uncertain or unfavourable economic, market, legal and other conditions. These conditions include but are not limited to the following risks: Market Risk Competitive Environment Business Environment Liquidity Credit Ratings Credit Exposure Operational Risk Legal, Regulatory and Reputational Risk The term Market Risk describes changes in interest and foreign exchange rates, financial instruments and real estate valuations and increases in volatility. The term Competitive Environment describes the fact that Guarantor s competitive ability in the global financial markets depends on factors such as its reputation, the quality of its services, product innovation, execution ability, pricing, sales and the talent of its employees. The term Business Environment describes the global financial markets being affected by concerns about geopolitical developments. The term Liquidity describes liquidity and liquidity management being affected by the Guarantor s inability, however temporary, to access the long-term or short-term debt, repurchase or securities-lending markets or to draw under credit facilities. The term Credit Ratings describes Guarantor s ability and costs to access to the unsecured funding markets being dependent on its credit ratings. The term Credit Exposure describes the possibility, however unforeseen or remote, that a counterparty may be unable to honour its contractual obligations to the Guarantor. The term Operational Risk describes the risk of loss resulting from inadequate or failed internal or outsourced processes, people, infrastructure and technology systems. The term Legal, Regulatory and Reputational Risk describes any increases in the costs of compliance requirements under, together with the legal, reputational and/or administrative costs of any violation of, the extensive regulation to which the securities and financial services industries are subject in the many jurisdictions in which the Guarantor does business. In particular, such uncertain or unfavourable economic, market, legal and other conditions include but are not limited to risks arising from the following: IB Group may be harmed by global events beyond its control, including overall slowdowns in securities trading. 6

7 Because IB Group revenues and profitability depend on trading volume, they are prone to significant fluctuations and are difficult to predict. IB Group s reliance on its computer software could cause IB Group great financial harm in the event of any disruption or corruption of its computer software. IB Group may experience technology failures while developing its software. IB Group s business could be harmed by a systemic market event. IB Group may incur material trading losses from its market making activities. Reduced spreads in securities pricing, levels of trading activity and trading through market makers and/or specialists could harm IB Group s business. IB Group may incur losses in its market making activities in the event of failures of its proprietary pricing model. The valuation of the financial instruments IB Group hold may result in large and occasionally anomalous swings in the value of its positions and in its earnings in any period. IB Group is exposed to losses due to lack of perfect information. Rules governing specialists and designated market makers may require IB Group to make unprofitable trades or prevent it from making profitable trades. IB Group is subject to potential losses as a result of its clearing and execution activities. IB Group depends on its proprietary technology, and its future results may be impacted if it cannot maintain technological superiority in its industry. The loss of IB Group key employees would materially adversely affect its business. IB Group is exposed to risks associated with its international operations. IB Group does not have fully redundant systems. System failures could harm IB Group s business. Failure of third-party systems on which IB Group rely could adversely affect its business. IB Group s direct market access clearing and non-clearing brokerage operations face intense competition. Any future acquisitions may result in significant transaction expenses, integration and consolidation risks and risks associated with entering new markets, and IB Group may be unable to profitably operate its consolidated company. Internet-related issues may reduce or slow the growth in the use of IB Group s services in the future. IB Group s computer infrastructure may be vulnerable to security breaches. Any such problems could jeopardize confidential information transmitted over the Internet, cause interruptions in its operations or cause IB Group to have liability to third persons. IB Group may not be able to protect its intellectual property rights or may be prevented from using intellectual property necessary for its business. 7

8 IB Group s future success will depend on its response to the demand for new services, products and technologies. The expansion of IB Group s market making activities into forex-based products entails significant risk, and unforeseen events in such business could have an adverse effect on its business, financial condition and results of operation. IB Group is subject to counterparty risk whereby defaults by parties with whom it does business can have an adverse effect on its business, financial condition and/or operating results. Summary of risks relating to the Issuer As each company of IB Group, and in addition to the potential risks outlined in the previous section, the Issuer may be affected by uncertain or unfavourable economic, market, legal and other conditions that are likely to affect IB Group. By purchasing securities issued by the Issuer, investors will take a credit risk on the Issuer (that is the risk of the Issuer not being able to meet its payment obligations (if any) with respect to any securities issued by the Issuer and purchased by the investors). The Issuer may hedge its obligations by offsetting derivatives instruments with other IB Group companies. The Issuer s ability to perform its obligations may therefore be affected by any inability or failure to perform obligations owed to the Issuer by other IB Group companies. The Issuer is not rated and to the extent it taps the unsecured funding markets, its ability to do so may also be dependent on the credit ratings of IB Group. Several IB Group companies are involved in a number of judicial, regulatory and arbitration proceedings concerning matters arising in connection with the conduct of their business. Possible losses in connection with the actions against IB Group may be material to IB Group s operating results for any particular future period, depending on the level of the income for such period. 1.3 SUMMARY OF RISKS RELATING TO THE DERIVATIVE SECURITIES Summary of risks relating to the Warrants An investment in the Warrants carries product-specific risks for the investor. The value of a Warrant is determined not only by changes in the price of the underlying reference (the Underlying) but also depends upon a number of other factors. Accordingly, the value of the Warrants may decline even if the price of the Underlying remains constant. Prospective investors should note that changes in the price of the Underlying on which the Warrant is based (or even the non-occurrence of anticipated changes) can lower the value of a Warrant. This risk is independent of the financial situation of the Issuer. Moreover, one of the key features of the Warrants as warrants is its so-called Leverage Effect: Any change in the value of the Underlying may result in a disproportionate change in the value of the Warrant. The Warrants, consequently, also involve disproportionate loss exposure, if the Underlying develops unfavourably. Therefore, when buying a certain Warrant, it should be noted that the higher the leverage effect of a warrant, the higher the loss exposure involved. In addition, it should be noted that, typically, the shorter the (remaining) maturity of the Warrant, the higher the leverage effect. In addition to the Term of the Warrants, the frequency and intensity of price fluctuations (volatility) in the Underlying, the prevailing interest rates and the level of dividends paid or, as the case may be, to the general development of foreign exchange markets, the following circumstances are, in the Issuer's opinion, the essential factors, which may have an impact on the value of the Warrants and which may create certain risks for the investors in the Warrants. 8

9 Each potential investor must determine, based on its own independent review and such professional advice as it deems appropriate under the circumstances, that its acquisition of the Warrants is fully consistent with its (or if it is acquiring the Warrants in a fiduciary capacity, the beneficiary's) financial needs, objectives and condition, complies and is fully consistent with all investment policies, guidelines and restrictions applicable to it (whether acquiring the Warrants as principal or in a fiduciary capacity) and is a fit, proper and suitable investment for it (or if it is acquiring the Warrants in a fiduciary capacity, for the beneficiary), notwithstanding the clear and substantial risks inherent in investing in or holding the Warrants. Further features of the Warrant structure Prior to investing in the Warrants, prospective investors should note that the following special features of the Warrants, if specified in the relevant Final Terms, may have an impact on the value of the Warrants or, as the case may be, on any amount, if any, payable according to the Conditions of the Warrants and that the Warrants accordingly have special risk profiles: Extent of participation in the performance of the Underlying The application of the Ratio within the determination of the Option Right results in the Warrants being in economic terms similar to a direct investment in the Underlying but being nonetheless not fully comparable with such a direct investment, in particular because the Securityholders do not participate in the relevant performance by a 1:1 ratio, but by the proportion of the relevant Ratio. Exchange rate risk If so specified in the relevant Final Terms of the Warrants, the Securityholder's right vested in the Warrants is determined on the basis of a currency other than the Settlement Currency, currency unit or calculation unit and/or, also the value of the Underlying is determined in such a currency other than the Settlement Currency, currency unit or calculation unit. Potential investors should, therefore, be aware that investments in these Warrants could entail risks due to fluctuating exchange rates, and that the risk of loss does not depend solely on the performance of the Underlying but also on unfavourable developments in the value of the foreign currency, currency unit or calculation unit. Such developments can additionally increase the Securityholders' exposure to losses, because an unfavourable performance of the relevant currency exchange rate may correspondingly decrease the value of the purchased Warrants during their term or, as the case may be, the level of the Settlement Amount. Currency exchange rates are determined by factors of offer and demand on the international currency exchange markets, which are themselves exposed to economic factors, speculations and measures by governments and central banks (for example monetary controls or restrictions). Special Features of Warrants on currency exchange rates, commodities or, as the case may be, precious metals In cases of currency exchange rates, commodities or, as the case may be, precious metals used as the Underlying, it should be noted that the values are traded 24 hours a day through the time zones of Australia, Asia, Europe and America. Potential investors of the Warrants should, therefore, be aware that a relevant limit or, as the case may be, threshold described in the Conditions of the Warrants, may be reached, exceeded or fallen short at any time and even outside of local or business hours of the Issuer, the Calculation Agent or the Offeror. Limitation of the exercise of the Option Right by the Securityholders If so specified in the relevant Final Terms of the Warrants, the Securityholder's right vested in those Warrants, which are directly or indirectly based on German equities as the Underlying, may, in accordance with the Conditions of the Warrants, not be exercised on certain days, i.e. on the day, on which the shareholders' general meeting of the German stock corporation, the share of which is used for the purposes of the Warrants, takes place, and on the calculation date (ex 9

10 dividend day) immediately preceding such day. In addition, the relevant Final Terms may also stipulate that the Warrants may be exercised by the Securityholders on certain dates only. In the event that the Exercise Notice is not duly received by this Exercise Date, the Warrants cannot be exercised until the next Exercise Date stated in the Conditions of the Warrants. Limitation of the exercise of the Option Right by the Securityholders by Minimum Exercise Size If so specified in the relevant Final Terms of the Warrants, any Securityholder must in accordance with the Conditions of the Warrants tender a specified minimum number of the Warrants, in order to exercise the Option Right vested in the Warrants, so-called Minimum Exercise Size. Holders with less than the specified Minimum Exercise Size of Warrants will, therefore, either have to sell their Warrants or purchase additional Warrants (incurring transaction costs in each case). Termination and Early Redemption at the option of the Issuer Potential investors in the Warrants should furthermore be aware that the Issuer is, pursuant to the Conditions of the Warrants, entitled to terminate and redeem the Warrants in total prior to Expiration Date. In case the Issuer terminates and redeems the Warrants prior to Expiration Date, the Securityholder is entitled to demand the payment of an amount in relation to this early redemption. However, the Securityholder is not entitled to request any further payments on the Warrants after the relevant termination date. The Securityholder, therefore, bears the risk of not participating in the performance of the Underlying, to the expected extent and during the expected period. In case of a termination of the Warrants by the Issuer, the Securityholder bears the risk of a reinvestment, i.e. the investor bears the risk that it will have to re-invest the amount, if any, paid by the Issuer in case of termination at market conditions, which are less favourable than those prevailing at the time of the acquisition of the Warrants. No termination right of the Securityholders The Securityholders do not have a termination right and the Warrants may, hence, not be terminated by the Securityholders during their term. Prior to the maturity of the Warrants the realisation of the economic value of the Warrants (or parts thereof), if any, is, consequently and except for the Issuer's termination and early redemption of the Warrants or, as the case may be, and if specified in the relevant Final Terms, an exercise of the Option Right by the Securityholders in accordance with the Conditions of the Warrants, only possible by way of selling the Warrants. Possible decline in the Price of the Underlying after termination of the Warrants In the event that the term of the Warrants is terminated early by the Issuer pursuant to the Conditions of the Warrants, potential investors of the Warrants should note that any negative performance of price of the Underlying between the announcement of the termination by the Issuer and the determination of the price of the Underlying relevant for calculation of the then payable cash amount are borne by the Securityholders. Adverse Impact of adjustments of the Option Right In case of the occurrence of a potential adjustment event, the Issuer shall be entitled, if so specified in the relevant Final Terms of the Warrants, to effect adjustments according to the Conditions of the Warrants. These adjustments might have a negative impact on the value of the Warrants. 10

11 Negative effect of ancillary costs Commissions and other transaction costs incurred in connection with the purchase or sale of Warrants may result in charges, particularly in combination with a low order value, which can substantially reduce any settlement amount, if any, to be paid under the Warrants. Before acquiring a Warrant, prospective investors should therefore inform themselves of all costs incurred through the purchase or sale of the Security, including any costs charged by their custodian banks upon purchase and maturity of the Warrants. Transactions to offset or limit risk Prospective investors of the Warrants should not rely on the ability to conclude transactions at any time during the Term of the Warrants that will allow them to offset or limit relevant risks. This depends on the market situation and the prevailing conditions. Transactions designed to offset or limit risks might only be possible at an unfavourable market price that will entail a loss for investors. Trading in the Warrants / Illiquidity It is not possible to predict if and to what extent a secondary market may develop in the Warrants or at what price the Warrants will trade in the secondary market or whether such market will be liquid or illiquid. Potential investors therefore should not rely on the ability to sell Warrants at a specific time or at a specific price. Representation and Custody of the Warrants The Warrants under this Programme are issued in bearer form and represented by one or more Permanent Global Note(s) or one or more Temporary Global Note(s), respectively. The Permanent Global Note and the Temporary Global Note are kept in custody by the Depositary Agent on behalf of the Clearing Agent (CA) in accordance with the applicable rules and regulations of the Depository Agent and the Clearing Agent. The Warrants are transferable as co-ownership interests in the Permanent Global Note or, as the case may be, the Temporary Global Note in accordance with the relevant CA Rules and may be transferred within the collective securities settlement procedure in the Minimum Trading Size only. Such transfer becomes effective upon registration of the transfer in the records of the Clearing Agent. Securityholders will have to rely on the procedures of the Depositary Agent and the Clearing Agent for transfer, payment and communication with the Issuer. Securityholders are not entitled to request the delivery of definitive Warrants. The Issuer has no responsibility or liability under any circumstances for any acts and omissions of the Depository Agent or the Clearing Agent, as the case may be, as well as for any losses which might occur to a Securityholder out of such acts and omissions in general and for the records relating to, or payments made in respect of, beneficial interests of the Securityholder, in particular. Pricing of Warrants Unlike most other Warrants the pricing of these Warrants is regularly not based on the principle of offer and demand in relation to Warrants, since the secondary market traders might quote independent bid and offer prices. This price calculation is based on price calculation models prevailing in the market, whereas the theoretical value of the Warrants is, in principle, determined on the basis of the value of the Underlying and the value of other features attached to the Warrants, each of which features may, in economic terms, be represented by another derivative financial instrument. The potentially quoted prices do not necessarily correspond to the Warrants' intrinsic value as determined by a trader. 11

12 Expansion of the spread between bid and offer prices In special market situations, where the Issuer is completely unable to conclude hedging transactions, or where such transactions are very difficult to conclude, the spread between the bid and offer prices may be temporarily expanded, in order to limit the economic risks to the Issuer. Therefore, Securityholders who wish to sell their Warrants via a stock exchange or in the over-the-counter trading might sell at a price considerably lower than the actual price of the Warrants at the time of their sale. Borrowed funds If the purchase of Warrants is financed by borrowed funds and investors' expectations are not met, they not only suffer the loss incurred under the Warrants, but in addition also have to pay interest on and repay the loan. This produces a substantial increase in investors' risk of loss. Investors of Warrants should never rely on being able to redeem and pay interest on the loan through gains from a Warrants transaction. Rather, before financing the purchase of a Security with borrowed funds, the investors' financial situations should be assessed, as to their ability to pay interest on or redeem the loan immediately, even if they incur losses instead of the expected gains. The effect on the Warrants of hedging transactions by the Issuer The Issuer may use all or some of the proceeds received from the sale of the Warrants to enter into hedging transactions relating to the risks incurred in issuing the Warrants. In such a case, the Issuer or one of its affiliated companies may conclude transactions that correspond to the Issuer's obligations arising from the Warrants. Generally speaking, this type of transaction will be concluded before or on the Issue Date of the Warrants, although these transactions can also be concluded after the Warrants have been issued. The Issuer or one of its affiliated companies may at any time take the necessary steps for the closing out of any hedging transactions. The market price of the Underlying might, in certain cases, be negatively affected by such transactions. The entering into or the closing out of such hedging transactions may in relation to the securities value, which is depending on the occurrence of a certain event in relation to the Underlying, influence the likelihood of this event to occur or not to occur. General Therefore, it is expressly recommended that any potential investor familiarises himself with the specific risk profile of the product type described in this Prospectus and that any investor seeks the advice of a professional, if necessary. Potential investors are expressly made aware of the fact that the Warrants constitute a risk investment which can lead to the loss of the invested capital. Apart from the specific risk profile of the product type the investor bears the risk of the Issuer's and the Guarantor s financial situation worsening, in particular the insolvency of the Issuer and/or the Guarantor. As a result, prospective investors must be prepared and able to accept a partial or even a total loss of the invested capital. Any investors interested in purchasing the Warrants should assess their financial situation, to ensure that they are in a position to bear the risks of loss connected with the Warrants. Potential Conflicts of Interest The Issuer and/or its affiliates may engage in trading activities (including hedging activities) that may give rise to conflicts of interest. The Issuer and/or its affiliates may actively trade in the Underlying of the Derivative Securities, other instruments or derivatives, exchange-traded options or exchange-traded futures contracts referenced to the Underlying, or may issue other securities or derivatives referenced to the Underlying. These activities may give rise to conflicts of interest and may affect the price of the Underlying or the Derivative Securities referenced to the Underlying. 12

13 Summary of risks relating to the Certificates An investment in the Certificates carries product-specific risks for the investor. The value of Certificates is determined not only by changes in the price of the Underlying, but also depends upon a number of other factors. Accordingly, the value of the Certificates may decline even if the price of the Underlying remains constant. The Certificates constitute investment instruments involving a particularly high degree of risk. As compared to other investments, Certificates involve a substantial level of loss exposure, including the total loss of the amounts invested, and transaction costs incurred. Prospective investors should note that changes in the price of the Underlying on which the Certificate is based (or even the non-occurrence of anticipated price changes) can lower the value of a Certificate. In the light of typically limited maturity of the Certificates, there is no certainty that the value of the Certificate will recover before the Certificates reach maturity. This risk is independent of the financial situation of the Issuer. Prospective investors of the Certificates should recognise that the Certificates constitute a risk investment which can lead to a total loss of their investment in the Certificates. Even if the Certificates are capital protected at maturity to the extent of the Minimum Repayment Amount and, hence, the risk of a loss is initially limited, the investor bears the risk of the Issuer's and the Guarantor's financial situation worsening. Potential investors must therefore be prepared and able to sustain a partial or even a total loss of the invested capital. Any investors interested in purchasing the Certificates should assess their financial situation, to ensure that they are in a position to bear the risks of loss connected with the Certificates. In addition to the Term of the Certificates, the frequency and intensity of price fluctuations (volatility) in the Underlying, the prevailing interest rates and the level of dividends paid or, as the case may be, to the general development of foreign exchange markets, the following circumstances are, in the Issuer's opinion, the essential factors, which may have an impact on the value of the Certificates and which may create certain risks for the investors in the Certificates: Features of the Certificate structure Prior to investing in the Certificates, prospective investors should note that the following special features of the Certificates may have an impact on the value of the Certificates or on any amount payable according to the Terms and Conditions and that the Certificates accordingly have special risk profiles. Extent of participation in the performance of the Underlying The application of the Ratio within the determination of the Certificate Right results in the Certificates being in economic terms similar to a direct investment in the Underlying, but being nonetheless not fully comparable with such a direct investment, in particular because the Securityholders do not participate in the relevant performance by a 1:1 ratio, but by the proportion of the Ratio only. Limitation of potential profits to the Cap Amount Prospective investors should furthermore consider that the Settlement Amount under the Certificates is limited to the Cap Amount as determined in the Terms and Conditions. In contrast to a direct investment in the Underlying the potential profit of the Certificates is, therefore, limited to the Cap Amount. Existence of a currency exchange rate risk If so specified in relevant Final Terms, the value of the Underlying is determined in a currency other than the Settlement Currency, currency unit or calculation unit. Potential investors should, therefore, be aware that investments in these Certificates could entail risks due to fluctuating exchange rates, and that the risk of loss does not depend solely on the performance of the 13

14 Underlying, but also on unfavourable developments in the value of the foreign currency, currency unit or calculation unit. Such developments can additionally increase the Securityholders' exposure to losses, because an unfavourable performance of the relevant currency exchange rate may correspondingly decrease the value of the purchased Certificates during their term or the level of the Settlement Amount. Currency exchange rates are determined by factors of offer and demand on the international currency exchange markets, which are themselves exposed to economic factors, speculations and measures by governments and central banks (for example monetary controls or restrictions). Special Features of Certificates on currency exchange rates, commodities or, as the case may be, precious metals In cases of currency exchange rates, commodities or, as the case may be, precious metals used as the Underlying, it should be noted that the values are traded 24 hours a day through the time zones of Australia, Asia, Europe and America. Potential investors of the Certificates should, therefore, be aware that a relevant limit or, as the case may be, threshold described in the Terms and Conditions of the Certificates, may be reached, exceeded or fallen short at any time and even outside of local business hours of the Issuer, the Calculation Agent or the Offeror. The capital protection only applies at the end of the term of the Certificates If so specified in the relevant Final Terms, the Certificates are as at the end of their term capital protected to the extent of the Minimum Repayment Amount, i.e. the investor receives at the end of the term disregarding the actual performance of the Underlying in any case the Minimum Repayment Amount. If an investor acquires the Certificates after the issue at a price, which is higher than the Minimum Repayment Amount, the prospective investor should be aware that the proportional capital protection only refers to the lower Minimum Repayment Amount. In this context, it has to be considered that the capital protection only applies at the end of the term, provided that the Certificates have not been terminated. The cash amount to be paid in case of an early redemption of the Certificates can be considerably below the amount, which would be payable as a minimum at the end of the term of the Certificates, where the capital protection applies to the extent of the relevant Minimum Repayment Amount. Potential investors of the Certificates should furthermore recognise that despite the capital protection to the extent of the relevant Minimum Repayment Amount, the investor bears the risk of the Issuer's and the Guarantor s financial ability. Prospective investors must therefore be prepared and able to sustain a partial or even a total loss of the capital invested. Purchasers of the Certificates should in any case assess their financial situation, to ensure that they are in a position to bear the risks of loss connected with the Certificates. Termination and Early Redemption at the option of the Issuer Potential investors in the Certificates should furthermore be aware that the Issuer is in case of the occurrence of a Termination Event, pursuant to the Terms and Conditions, entitled to terminate and redeem the Certificates in total prior to the Expiration Date. In case the Issuer terminates and redeems the Certificates prior to the Expiration Date, the Securityholder is entitled to demand the payment of an amount in relation to the early redemption. However, the Securityholder is not entitled to request any further payments on the Certificates after the Termination Date. The Securityholder, therefore, bears the risk of not participating in the performance of the Underlying to the expected extent and during the expected period. 14

15 In case of a termination of the Certificates by the Issuer, the Securityholder bears the risk of a reinvestment, i.e. the investor bears the risk that it will have to re-invest the Termination Amount, if any, paid by the Issuer in case of termination at market conditions, which are less favourable than those prevailing at the time of the acquisition of the Certificates. No termination right of the Securityholders The Securityholders do not have a termination right and the Certificates may, hence, not be terminated by the Securityholders during their term. Prior to the maturity of the Certificates the realisation of the economic value of the Certificates (or parts thereof), if any, is, consequently and except for the Issuer's termination and early redemption, only possible by way of selling the Certificates. The selling of the Certificates requires that market participants are willing to acquire the Certificates at a certain price. In case that no market participants are readily available, the value of the Certificates may not be realised. The Issuer is not obligated under the issuance of these Certificates towards the Securityholders to compensate for or to repurchase the Certificates. Possible decline in the Price of the Underlying after termination of the Certificates In the event that the term of the Certificates is terminated early by the Issuer pursuant to the Terms and Conditions of the Certificates, potential investors of the Certificates should note that any negative performance of the Price of the Underlying between the announcement of the termination by the Issuer and the determination of the Price of the Underlying relevant for calculation of the then payable Termination Amount are borne by the Securityholders. Adverse Impact of adjustments of the Certificate Right In case of the occurrence of a potential adjustment event, the Issuer shall be entitled to effect adjustments according to the Terms and Conditions. These adjustments might have a negative impact on the value of the Certificates. Effect of ancillary costs Commissions and other transaction costs incurred in connection with the purchase or sale of Certificates may result in charges, particularly in combination with a low order value, which can substantially reduce any settlement amount to be paid under the Certificates. Before acquiring a Certificate, prospective investors should therefore inform themselves of all costs incurred through the purchase or sale of the Certificate, including any costs charged by their custodian banks upon purchase and maturity of the Securities. Transactions to offset or limit risk Prospective investors of the Certificates should not rely on the ability to conclude transactions at any time during the Term of the Certificates that will allow them to offset or limit relevant risks. This depends on the market situation and the prevailing conditions. Transactions designed to offset or limit risks might only be possible at an unfavourable market price that will entail a loss for investors. Trading in the Certificates and Illiquidity It is not possible to predict if and to what extent a secondary market may develop in the Certificates or at what price the Certificates will trade in the secondary market or whether such market will be liquid or illiquid. Potential investors therefore should not rely on the ability to sell Certificates at a specific time or at a specific price. Representation and Custody of the Certificates The Certificates under this Programme are issued in bearer form and represented by one or more Permanent Global Note(s) or one or more Temporary Global Note(s), respectively. 15

16 The Permanent Global Note and the Temporary Global Note are kept in custody by the Depositary Agent on behalf of the Clearing Agent in accordance with the applicable rules and regulations of the Depository Agent and the Clearing Agent. The Certificates are transferable as co-ownership interests in the Permanent Global Note or, as the case may be, the Temporary Global Note in accordance with the relevant CA Rules and may be transferred within the collective securities settlement procedure in the Minimum Trading Size only. Such transfer becomes effective upon registration of the transfer in the records of the Clearing Agent. Securityholders will have to rely on the procedures of the Depositary Agent and the Clearing Agent for transfer, payment and communication with the Issuer. Securityholders are not entitled to request the delivery of definitive Certificates. The Issuer has no responsibility or liability under any circumstances for any acts and omissions of the Depository Agent or the Clearing Agent, as the case may be, as well as for any losses which might occur to a Securityholder out of such acts and omissions in general and for the records relating to, or payments made in respect of, beneficial interests of the Securityholder, in particular. Pricing of Certificates Unlike most other securities the pricing of these Certificates is regularly not based on the principle of offer and demand in relation to Certificates, since the secondary market traders might quote independent bid and offer prices. This price calculation is based on price calculation models prevailing in the market, whereas the theoretical value of the Certificates is, in principle, determined on the basis of the value of the Underlying and the value of other features attached to the Certificates, each of which features may, in economic terms, be represented by another derivative financial instrument. The potentially quoted prices do not necessarily correspond to the Certificates' intrinsic value as determined by a trader. Expansion of the spread between bid and offer prices In special market situations, where the Issuer is completely unable to conclude hedging transactions, or where such transactions are very difficult to conclude, the spread between the bid and offer prices may be temporarily expanded, in order to limit the economic risks to the Issuer. Therefore, Securityholders who wish to sell their Certificates via a securities exchange or in the over-the-counter trading might sell at a price considerably lower than the actual price of the Certificates at the time of their sale. Borrowed funds If the purchase of Certificates is financed by borrowed funds and investors' expectations are not met, they not only suffer the loss incurred under the Certificates, but in addition also have to pay interest on and repay the loan. This produces a substantial increase in investors' risk of loss. Investors of Certificates should never rely on being able to redeem and pay interest on the loan through gains from a Certificates transaction. Rather, before financing the purchase of a Certificate with borrowed funds, the investors' financial situations should be assessed, as to their ability to pay interest on or redeem the loan immediately, even if they incur losses instead of the expected gains. The effect on the Certificates of hedging transactions by the Issuer The Issuer may use all or some of the proceeds received from the sale of the Certificates to enter into hedging transactions relating to the risks incurred in issuing the Certificates. In such a case, the Issuer or one of its affiliated companies may conclude transactions that correspond to the Issuer's obligations arising from the Certificates. Generally speaking, this type of transaction will be concluded before or on the Issue Date of the Certificates, although these transactions can also be concluded after the Certificates have been issued. The Issuer or one of its affiliated companies may at any time take the necessary steps for the closing out of any hedging 16

17 transactions. The Price of the Underlying might, in certain cases, be negatively affected by these transactions. General Therefore, it is expressly recommended that any potential investor familiarises himself with the specific risk profile of the product type described in this Prospectus and that any investor seeks the advice of a professional, if necessary. Potential investors are expressly made aware of the fact that the Certificates constitute a risk investment which can lead to the loss of the invested capital. Even when the Certificates are capital protected at maturity to the extent of the Minimum Repayment Amount and, hence, the risk of a loss is initially limited, the investor bears the risk of the Issuer's and the Guarantor s financial situation worsening, in particular the insolvency of the Issuer and/or the Guarantor. As a result, prospective investors must be prepared and able to accept a partial or even a total loss of the invested capital. Any investors interested in purchasing the Certificates should assess their financial situation, to ensure that they are in a position to bear the risks of loss connected with the Certificates. Potential Conflicts of Interest The Issuer and/or its affiliates may engage in trading activities (including hedging activities) that may give rise to conflicts of interest. The Issuer and/or its affiliates may actively trade in the Underlying of the Derivative Securities, other instruments or derivatives, exchange-traded options or exchange-traded futures contracts referenced to the Underlying, or may issue other securities or derivatives referenced to the Underlying. These activities may give rise to conflicts of interest and may affect the price of the Underlying or the Derivative Securities referenced to the Underlying. 1.4 SUMMARY OF THE DESCRIPTION OF THE ISSUER Statutory Auditors For the period between 8 January 2009 and 31 December 2009, BDO AUDIT S.A., 2, av. Charles de Gaulle, L-2013 Luxembourg, Grand Duchy of Luxembourg, is appointed as the independent auditor of the Issuer. Information about the Issuer The Issuer acts under its legal name Interactive Brokers Financial Products S.A. and under its commercial name IBFP. The Issuer was incorporated under the laws of the Grand Duchy of Luxembourg under its legal name Interactive Brokers Financial Products S.A. on 8 January 2009 and registered in the commercial register of Grand Duchy of Luxembourg on 19 January 2009 under No. B The head office of the Issuer is located at L-2453 Luxembourg, 19, rue Eugène Ruppert. Its telephone number is Business Overview The Issuer, a special purpose vehicle, is 100% owned by the Guarantor, which is the parent company of the Interactive Brokers group of companies (collectively IB Group). IB Group is an automated global electronic market maker and broker specializing in routing orders and executing and processing trades in securities, futures and foreign exchange instruments on more than 80 electronic exchanges and trading venues around the world. In the U.S., IB Group s business is conducted from its headquarters in Greenwich, Connecticut and from Chicago, Illinois. Abroad, IB Group conducts business through offices located in Canada, England, Switzerland, 17

18 Hong Kong, India, Australia and Japan. The Issuer intends to offer the Derivative Securities in the Federal Republic of Germany and may decide to offer them at a later stage in other countries within the European Economic Area. Pursuant to Article 4 of its Articles of Association the Issuer operates all financial transactions, including the issue of both securities and any other financial instruments of any nature and in any currency to private and institutional investors and to borrow in any other form; to enter into swap agreements and other derivative transactions and to pledge, mortgage or charge or otherwise create security interests in and over its assets, property and rights to secure the payment or repayment of any amounts payable by the Issuer under or in respect of any bond, note, debenture or debt instrument of any kind, issued from time to time by the Issuer. Without limiting any of the foregoing, the Issuer may use its funds for the setting up, the management, the development, the acquisition and the disposal of debt and other securities or other financial instruments; to participate in the creation, the development and/ or the control of any enterprise; to acquire by way of investment, subscription, underwriting or by option to purchase or any other way whatever, securities or other financial instruments; to realize such securities or other financial instruments by way of sale, transfer, exchange or otherwise and to grant to the companies in which it has participating interests any support, loans, advances or guarantees. In general, the Issuer may employ any techniques and instruments relating to its assets and/or investments for the purpose of their efficient management, including techniques and instruments to protect against exchange risks and interest rate risks; it may take any controlling and supervisory measures and carry out any financial, moveable or immovable commercial and industrial operation which it may deem useful in the accomplishment and development of its purpose. Organisational Structure Trend Information Administrative and Management Bodies Board of Directors The Issuer is 100% owned by the Guarantor, a limited liability company organized under the laws of the State of Connecticut, U.S.A. There has been no material adverse change in the prospects of the Issuer since the date of its last published audited financial statements. The Issuer s governing bodies are the Board of Directors (Verwaltungsrat) and the general shareholder s meeting (Generalversammlung). The Board of Directors currently consists of three members: Earl H. Nemser is also the Vice Chairman of the Guarantor and a director and Vice Chairman of 18

19 Interactive Brokers Group, Inc. He also serves as director and/or officer for various subsidiaries of the Guarantor. Mr. Nemser is also Special Counsel to the law firm of Dechert LLP, which provides legal services to the Guarantor and Interactive Brokers Group, Inc. Roger Ryff, also Vice President of Timber Hill (Europe) AG Jean Lambert Address of the Board of Directors General Meeting of Shareholders Conflict of Interests Board Practices Major Shareholders 19, rue Eugène Ruppert, L-2453 Luxembourg The Guarantor as the sole shareholder will exercise the powers of the general meeting of Shareholders. There are no potential conflicts of interests of the members of the administrative, management and supervisory bodies between their duties to the Issuer and their private interests and/or other duties. The Luxembourg Corporate Governance Code does not apply to the Issuer as the Issuer is not a member of the Luxembourg Stock Exchange. The Luxembourg Corporate Governance Code is a document of the Luxembourg Stock Exchange which is primarily applicable for companies listed at this stock exchange. The Issuer is of the opinion that the code is tailored to the needs of stock companies and the application of the code to the Issuer as a special purpose vehicle is not reasonable. Hence, the Issuer does not voluntarily submit to the Luxembourg Corporate Governance Code. The Issuer is 100% owned by the Guarantor. Historical Financial Information The following table sets out in summary form the balance sheet, income statement and cash flow statement of the Issuer, which have been extracted from the audited individual financial statements of the Issuer for the period beginning from the start of the Issuer s business operations until 31 December The individual financial statements have been drawn up in accordance with International Financial Reporting Standards (IFRS). 19

20 Balance Sheet (in Euro) 31 December 2009 Assets Cash and cash equivalents 199,732 Receivable from affiliate 4,816,004 Total assets 5,015,736 Liabilities and equity Liabilities: Payable to affiliate 60,863 Accounts payable, accrued expenses and other liabilities 25,493 86,356 Equity: Stockholder s equity Common stock, EUR1,000 stated value per share: Authorized, Issued and Outstanding: 5,000 shares at 31 December 2009 Net Loss 5,000,000 (70,620) Total stockholder s equity 4,929,380 Total liabilities and equity 5,015,736 Income Statement (in Euro) Period from 8 January through 31 December 2009 Revenues: Translation losses (21) Interest income 16,009 Total revenues 15,988 Interest expense - 15,988 Total net revenues Non-interest expenses: Communications 154 General and administrative 86,454 Total non-interest expenses 86,608 Loss before income taxes (70,620) Income tax expense - Net loss (70,620) 20