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Risks

Risk Warnings

The following is a list of general risk factors which should be taken into consideration when deciding whether to purchase Exchange Traded Products (ETP) (hereafter also referred to as "Product(s)"). It is not meant to be an exhaustive list of all the relevant risks and investors should refer to the "Risk Factors" section in the Base Prospectus for the J.P. Morgan Structured Products B.V. - Programme for the issuance of Notes, Warrants and Certificates (the "Programme") (each, a "Base Prospectus") (which will be updated, supplemented or replaced from time to time and which will be published on this website) for a comprehensive description of the relevant risk factors in relation to the Products.

 

GENERAL RISK FACTORS

Capital at risk

  • The Products are not principal protected and an investor may lose up to all of the capital invested. The Products do not, unless expressly stated, generate any income on capital invested such as coupon payments.

Credit Risk

  • The Products are subject to the credit risk of J.P. Morgan Structured Products B.V. (the “Issuer”) and J.P. Morgan Securities plc, (the "Guarantor"). The Products are unsecured obligations of the Issuer and the Guarantor. Any default by the Issuer and the Guarantor on its payment obligations would reduce the return on the Products, possibly to zero.

The market value of the Products may be less than the issue price

  • The market value of the Products on the issue date and thereafter may be less than the original issue price and may be volatile. The market value of the Products is subject to many factors which could adversely affect the value of the Products. An investor may lose some or all of its investment if it chooses to sell the Products prior to maturity and the sale price it receives is less than its initial investment.

Liquidity Risk

  • Secondary market trading may be limited, and investors may not be able to sell their Products prior to scheduled maturity. Investors should note that J.P. Morgan is very likely to be the only entity facilitating secondary market trading for the Products. J.P. Morgan does not commit and is not under any obligation legal or otherwise towards investors to quote bid and ask prices for the Products. Any such prices may be available only during normal trading hours and under normal market conditions and there may be certain circumstances such as a disruption event in relation to the reference asset or unanticipated technical system outages or trading suspensions on the relevant exchange will may result in prices not being available. If at any time J.P. Morgan does not act as market maker, it is likely that there would be little or no secondary market for the Products. Investors should therefore not rely on being able to purchase or sell the Products at any time.

Unscheduled early termination risk

  • The Products may be redeemed or terminated (as applicable) prior to their scheduled maturity, and in such case investors may receive back less than the original investment or even lose all of their investment. Furthermore investors may not be able to reinvest the proceeds in an equivalent investment.

Changes in tax law

  • Changes in tax law could adversely affect the value and/or the market value of the Products or may change the tax treatment of the relevant Products. Any such tax treatment will not take into account the personal tax considerations in relation to a particular investor. Investors should obtain appropriate professional tax advice where necessary to consider the implications of investing in the Products for their own particular tax circumstances. 

Discretionary determinations by the Calculation Agent and Issuer

  • The Calculation Agent and/or the Issuer have the power to make discretionary determinations under the Products, which may include the following: The ability to determine whether certain events have occurred such as a disruption event in relation to the reference asset or a tax event; the ability to make adjustments upon the occurrence of such events that may affect any calculation or payment under the products or to early redeem the Products; or the ability to determine certain values under the Products, subject to the terms and conditions of the Products. Any of these may have a material adverse effect on the Products and investors may receive back less than the original investment or even lose all of their investment.

Potential conflicts of interest

  • J.P. Morgan is subject to various potential conflicts of interest in respect of the Products, which could have an adverse effect on the Products, including:
  • J.P. Morgan affiliates may take positions in or deal with the reference asset which may not take into account the interests of investors;
  • the Calculation Agent, which will generally be a J.P. Morgan affiliate, has broad discretionary powers which may not take into account the interests of investors;
  • J.P. Morgan may have confidential information relating to the reference asset and/or the Products; and
  • a J.P. Morgan affiliate is the hedge counterparty to the Issuer’s obligations under the Products and may hedge its exposure to the Products by opening positions in the reference asset (or components of the reference asset) and other instruments linked to the reference asset (or components of the reference asset), or enter into similar transactions as part of their normal activities. These could potentially impact the level of the reference asset and indirectly, the value of the Products.

Risks relating to specific reference assets

  • Investors are exposed to further risks stemming from the type of reference asset and the behaviour of its market prices as the amount they may receive at maturity depends on the development of the price of the reference asset (e.g. shares, indices, commodities etc.). Investors should only invest in Products if they are familiar with the relevant reference asset and have a comprehensive understanding of the type of reference asset itself, the market and other rules of the relevant reference asset.
  • The Products may have foreign exchange risks where payments under the Products will be made in a currency which is different from the currency of the reference asset; furthermore, an investor bears a currency risk if its account to which amounts is paid is held in a currency other than the currency of the Product.
  • There are risks in investing in Products which are linked directly or indirectly to emerging market reference asset(s) or currencies. Investors will be exposed to the risks of volatility, governmental intervention and the lack of a developed system of law which are associated with such jurisdictions. There is likely to be less liquidity in emerging market markets as compared to the liquidity in developed markets and less favourable growth prospects, capital reinvestment, resources and self-sufficiency.
  • Investors have no rights of ownership in the reference asset and no J.P. Morgan affiliate is under any obligation to acquire and hold any reference asset.
  • The past performance of a reference asset at the time the Products are issued is not indicative of the future performance of the reference asset.

Risks relating to shares as reference assets

  • The performance of the share depends upon macroeconomic factors and company-specific factors which may adversely affect the value of the Products.
  • Investors have no claim against the share issuer or have recourse to the share. The issuer of a share may take any actions in respect of such share without regard to the interests of the investors in the Products, and any of these actions could adversely affect the market value of the Products.
  • Adjustments to the condition of the Products made by the Calculation Agent following the occurrence of potential adjustment events, merger events, tender offers, de-listing, nationalisations, insolvencies or additional disruption events affecting the share may have an adverse effect on the value of the Products.

Risks relating to depositary receipts as reference assets

  • Investors are exposed to the risk that redemption amounts on the Products do not reflect direct investment in the shares underlying the depositary receipts.
  • Purchasers of the underlying shares represented by depositary receipts may not be recognised as the actual beneficial owner of such underlying shares. If this occurs, the holders of depositary receipts will lose the rights under the underlying shares and the Products will become worthless.
  • Distributions on the underlying shares represented by the depositary receipts may not be passed on to the purchasers of the depositary receipts, which may affect the value of the depositary receipts.
  • Following the occurrence of certain corporate events specified in the conditions of the Products in relation to the underlying shares represented by the depositary receipts or issuer of such underlying shares, the conditions of the Products may be adjusted or the affected underlying shares and depositary receipts may be replaced.

Risks relating to exchange traded funds as reference assets

  • Investors are exposed to the risk that redemption amounts on the Products do not reflect an investment directly linked to the index underlying an exchange traded fund ("ETF"), or in the shares comprising such index. This may therefore result in a lower yield than a direct investment in such index or shares.
  • The management company, trustee or sponsor of an ETF may take any actions in respect of such ETF without regard to the interests of the investors in the Products, and any of these actions could adversely affect the market value of the Products.

Risks relating to indices as reference assets

  • The performance of an index depends upon macroeconomic factors relating to the shares or other components comprising such index, and in the case of share components, company-specific factors. Investors are exposed to the risk that returns on the Products do not reflect a direct investment in underlying shares or other assets comprising an index.
  • If the index rules provide that dividends on its components do not increase the index level, investors will not participate in such dividends. Even if the index rules provide that dividends are reinvested (thereby increasing the index level), in some cases, the dividends may not be fully reinvested in an index.
  • A change in the composition or discontinuance of an index may affect the index level and adversely affect the market value of the Products.
  • If an index adjustment event occurs, the Calculation Agent has broad discretion to make certain determinations and adjustments, to replace the original index with another and/or to cause early redemption of the Products, any of which may be adverse to investors.

 

PRODUCT SPECIFIC RISK FACTORS

The following risk factors apply specifically to the Products specified below and should be read in conjunction will the preceding risk factors.

 

Risk Factors relating to Turbos

  • Fixed term – The term of Turbos is fixed. Subject to the occurrence of a Knock-Out Event, Turbos will automatically be exercised on the Valuation Date. Holders of Turbos do not have the right to exercise the Turbos during the term.
  • Knock-Out Event – If a Knock-Out Event occurs, the term of the Turbos ends automatically and the Turbos expire worthless. A Knock-Out Event occurs if the reference asset reaches or falls below (in the case of Turbo Long) or reaches or exceeds (in the case of Turbo Short) a Knock-Out Barrier level at any time during the term of the Product.
  • Reference asset risk – The price of the Turbos during the term depends in particular on the price of the reference asset during the term. Generally, the price of the Turbos falls when the price of the reference asset falls (Turbo Long) or rises (Turbo Short). A decrease or increase in the reference asset typically has a disproportionately great effect on the price of the Turbos. In addition to the price of the reference asset, the price of the Turbos is also dependent on the volatility of the reference asset, the lending costs, the interest rate level, and any dividend expectations, if applicable.
  • Leverage risk – Due to the leverage effect Turbos involve disproportionate risks of loss compared to a direct investment in the reference asset. In respect of a Turbo Long, a small decrease in the value of the reference asset will lead to a proportionately greater decrease in the value of the Turbo Long. Conversely, in respect of a Turbo Short, a small increase in the value of the reference asset will lead to a proportionately greater decrease in the value of the Turbo Short.

 

Risk Factors relating to Unlimited Turbo

  • No fixed term – Unlimited Turbo do not have a fixed term. The term ends either:

(a) when a Knock-Out Event occurs, which is if the reference asset reaches or falls below (in the case of Unlimited Turbo Long) or reaches or exceeds (in the case of Unlimited Turbo Short) a Knock-Out Barrier level at any time during the term of the Products;

or

(b) when the Unlimited Turbo are exercised by the investor or terminated by the Issuer.

Holders should not rely on being able to hold a position in the Unlimited Turbo for an extended period of time.

  • Knock-Out Event –If a Knock-Out Event occurs, the Unlimited Turbo will expire worthless. The probability that a Knock-Out Event occurs is increased due to the recurring adjustment of the Knock-Out Barrier while the price of the reference asset remains constant, (and in the case of Unlimited Short) if the prevailing floating rate of interest falls below the financing spread. The longer an investor holds the Unlimited Turbo in these cases, the higher is the risk of loss of the invested capital.
  • Issuer termination right – The Issuer exercises its ordinary termination right in its reasonable discretion and is not subject to any commitments regarding the exercise of its ordinary termination right. The higher the volatility of the reference asset or the more illiquid the market in financial instruments linked to the reference asset (including the futures and lending market), the more likely it is that the Issuer will make use of its ordinary termination right. Investors should not rely on being able to hold a position in the Unlimited Turbo for an extended period of time.
  • Reference asset risk – The price of the Unlimited Turbo during the term depends in particular on the price of the reference asset during the term. Generally, the price of the Unlimited Turbo falls when the price of the reference asset falls (Unlimited Turbo Long) or rises (Unlimited Turbo Short). A decrease or increase in the reference asset typically has a disproportionately great effect on the price of the Unlimited Turbo. In addition to the price of the reference asset, the price of the Unlimited Turbo is also dependent on the volatility of the reference asset, the lending costs, the interest rate level, and any dividend expectations, if applicable.

  • Leverage risk – Due to the leverage effect the Unlimited Turbo involve disproportionate risks of loss compared to a direct investment in the reference asset. In respect of a Unlimited Turbo Long, a small decrease in the value of the reference asset will lead to a proportionately greater decrease in the value of the Unlimited Turbo Long. Conversely, in respect of a Unlimited Turbo Short, a small increase in the value of the reference asset will lead to a proportionately greater decrease in the value of the Unlimited Turbo Short.

 

Risk Factors relating to Mini Futures

  • No fixed term – Mini Futures do not have a fixed term. The term ends either:


(a) when a Stop-Loss Event occurs, which is if the reference asset reaches or falls below (in the case of Mini Futures Long) or reaches or exceeds (in the case of Mini Futures Short) a Stop-Loss Barrier level at any time during the term of the Products;

or

(b) when the Mini Futures are exercised by the investor or terminated by the Issuer.

Holders should not rely on being able to hold a position in the Mini Futures for an extended period of time.

  • Stop-Loss Event – If a Stop-Loss Event occurs, the Mini Futures will expire worthless, subject to a potential payout of the residual amount. The probability that a Stop-Loss Event occurs is increased due to the recurring adjustment of the Stop-Loss Barrier while the price of the reference asset remains constant, (and in the case of Mini Futures Short) if the prevailing floating rate of interest falls below the financing spread. The longer an investor holds the Mini Futures in these cases, the higher is the risk of loss of the invested capital.
  • Issuer termination right – The Issuer exercises its ordinary termination right in its reasonable discretion and is not subject to any commitments regarding the exercise of its ordinary termination right. The higher the volatility of the reference asset or the more illiquid the market in financial instruments linked to the reference asset (including the futures and lending market), the more likely it is that the Issuer will make use of its ordinary termination right. Investors should not rely on being able to hold a position in the Mini Futures for an extended period of time.
  • Reference asset risk – The price of the Mini Futures during the term depends in particular on the price of the reference asset during the term. Generally, the price of the Mini Futures falls when the price of the reference asset falls (Mini Futures Long) or rises (Mini Futures Short). A decrease or increase in the reference asset typically has a disproportionately great effect on the price of the Mini Futures. In addition to the price of the reference asset, the price of the Mini Futures is also dependent on the volatility of the reference asset, the lending costs, the interest rate level, and any dividend expectations, if applicable.
  • Leverage risk – Due to the leverage effect the Mini Futures involve disproportionate risks of loss compared to a direct investment in the reference asset. In respect of a Mini Futures Long, a small decrease in the value of the reference asset will lead to a proportionately greater decrease in the value of the Mini Futures Long. Conversely, in respect of a Mini Futures Short, a small increase in the value of the reference asset will lead to a proportionately greater decrease in the value of the Mini Futures Short.

 

Risk Factors relating to Warrants

  • Fixed term – The term of Warrants is fixed. Warrants will automatically redeem five days after their Valuation Date and pay out the maximum of zero and the difference between the strike and the price of the reference asset on the Valuation Date. (Price of the reference asset minus strike for Call Warrants and strike minus price of the reference asset for Put Warrants). For European style Warrants, the Valuation Date is a fixed date at the end of its term and the return will based on the level of the reference asset at that time which may be higher or lower as seen over the life of the product. For American style Warrants, the Valuation Date is either on or around the day on which the holder exercises the product or the date at the end of its term if it has not been exercised. Holders need to be aware of this difference and that if they choose to exercise an American style Warrant before the end of its term, they will lose out on any potential increase in its price after exercise.
  • Reference asset risk – The price of the Warrant during the term depends in particular on the price of the reference asset during the term. Generally, the price of the Warrant falls when the price of the reference asset falls (Call Warrant) or rises (Put Warrant). In addition to the price of the reference asset, the price of the Warrant is also dependent on the volatility of the reference asset, whereby a decrease of the expected volatility of the reference asset generally leads to a decrease of the price of the Warrant, the lending costs, the interest rate level, and any dividend expectations, if applicable.
  • Leverage risk – Due to their leverage Warrants involve disproportionate risks of loss compared to a direct investment in the reference asset. In respect of a Call Warrant, a small decrease in the value of the reference asset can lead to a proportionately greater decrease in the value of the Call Warrant. Conversely, in respect of a Put Warrant, a small increase in the value of the reference asset can lead to a proportionately greater decrease in the value of the Put Warrant.

 

Risk Factors relating to Discount Certificates

  • Fixed term – The term of Discount Certificates is fixed. At final valuation Discount Certificates will pay out the lower of the price of the reference asset on the Valuation Date and the Cap.  If the price of the reference asset on the Valuation Date is below the purchase price of the Discount Certificate, the investor will suffer a loss. If the reference asset has fallen to zero, the investor will suffer a total loss of his invested capital.
  • Reference asset risk – The price of the Discount Certificate during the term depends in particular on the price of the reference asset during the term. Generally, the price of the Discount Certificate falls when the price of the reference asset falls. In addition to the price of the reference asset, the price of the Discount Certificate is also dependent on the volatility of the reference asset, the lending costs, the interest rate level, and any dividend expectations, if applicable.
  • Maximum Return – The holder does not benefit in any price movement of the reference asset above the Cap. Therefore the potential return on the Discount Certificate is limited.

 

 

Applicable costs, charges and fees


There may be applicable costs, charges or fees payable to an intermediary when buying or selling the Product and which could adversely affect the value of the Products.

As noted below, in the section entitled "Discretionary determinations by the Calculation Agent and Issuer", the Calculation Agent and Issuer are able to make certain discretionary determinations with respect to the Products. Such determinations can impact the value of the Products e.g. the determination and implementation of a Financing Spread.

Disclaimer

The Products are complex financial instruments and may include embedded derivatives. You are solely responsible for deciding whether any investment or transaction is suitable for you based upon your investment goals, financial situation and tolerance for risk. The information on this website is for information purposes only and is not intended to amount to advice on which you should rely, or as an offer or solicitation for the purchase or sale of any financial instrument. Persons accessing this website are advised to obtain appropriate professional advice where necessary, including legal, tax, accounting advice or any other advice including suitability implications for your particular circumstances.

Any Products to be issued will be issued in accordance with the terms set out in the relevant Base Prospectus together with the corresponding final terms for these Products. The final terms will be available on the start of the public offer of the Products. The offering of products shall be based solely on the final terms and the terms contained therein shall be binding between the J.P. Morgan and the investor. An electronic version of the Base Prospectus is contained within the Library section of this website.

Investors are not able to purchase or sell the financial products described on this website directly from or to J.P. Morgan, but must purchase or sell the products from or to their own banks or brokers. This information contained on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law. Not all products and services are available in all geographical areas. The information on this page is subject to change. Although we make reasonable efforts to update the information on this page, we make no representations, warranties or guarantees, whether express or implied, that the content on this page is accurate, complete or up-to-date.

The payment of any amounts due as a result of the purchase or sale of the Products is subject to the credit risk of the Issuer and the Guarantor. The products are unsecured obligations. They are not deposits and are not protected under any deposit insurance scheme.

J.P. Morgan Securities plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority and is a member of the London Stock Exchange. Additional J.P. Morgan regulatory disclosures can be found at the following website address: https://www.jpmorgan.com/global/disclosures

 

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