ProphetX has prepared this statement in straightforward language to help you recognize the potential risks involved in using ProphetX’s electronic direct-access trading system and in trading the derivative instruments offered. Nevertheless, no disclosure document—this one included—can outline every possible risk or scenario you may face. You should not participate in trading through ProphetX unless you fully understand the nature of the transactions, the mechanics of the instruments, and the scope of potential exposure.

Trading in derivatives is not appropriate for many members of the public. You must make an independent determination of whether such activity is right for you in light of your particular circumstances.

There are risks not only in the structure of the instruments themselves but also in the trading system and environment in which they are transacted. Because ProphetX provides direct trading access, you must take the time to carefully review this Risk Disclosure Statement, the descriptions of the instruments offered (including their terms, conditions, payout criteria, and expiration features), and all other governing ProphetX agreements and rules.

Inherent risks of trading derivative instruments on ProphetX

The instruments available through ProphetX involve a high degree of risk and may not be suitable for all participants. Depending on the structure of a given instrument, payouts may be fixed, variable within a specified range, or contingent upon certain criteria being met.

If settlement conditions are not satisfied for your position at expiration, the instrument may expire without value, causing you to lose your entire investment.

Remember: You may sustain a total loss of the funds you commit to a position

Other notable risks include, but are not limited to:

• Liquidity risk – Instruments may not always have sufficient market depth. You may be unable to open, adjust, or close positions at desired prices or in desired quantities.

• Underlying market disruptions – If the reference asset, index, or other benchmark is altered, discontinued, or subject to unexpected events, ProphetX may adjust or terminate the instrument, potentially resulting in outcomes that differ from your expectations.

• Settlement risk – The mechanics of settlement may be delayed, altered, or unclear, which could lead to losses or disputes.

• Market event risk – Volatile or unforeseen moves in the underlying market can significantly impact valuation and payouts. ProphetX may or may not intervene by halting trading.

• Funding and margin risk – Margin calls or increased requirements may obligate you to provide additional funds on short notice. Failure to meet these obligations may lead to the liquidation of positions and further liability.

Regulatory, legal, and contingency risks

Certain derivatives transactions that reference an occurrence, extent of an occurrence, contingency or condition not tied to a physical or financial commodity may be affected by evolving federal or state regulatory actions, pending or potential litigation, or enforcement proceedings that could alter, restrict, or terminate the availability, listing, or clearing of such contracts. ProphetX monitors these developments and maintains contingency planning, risk management policies, and disclosure procedures consistent with applicable Commodity Futures Trading Commission (“CFTC”) regulations and staff guidance (see, e.g., CFTC Staff Advisory No. 25-36, Sept. 30, 2025). Nevertheless, such actions may occur without prior notice and could result in the suspension or forced liquidation of open positions or changes in settlement or payout processes. In such circumstances, the disposition of market participant funds and property may be impacted, and losses may occur.

ProphetX will provide accurate and complete information concerning these risks and will update disclosures as necessary to remain current and not misleading. Market participants should understand that regulatory or judicial developments may require ProphetX or its service providers to modify business operations, rules, or systems in ways that affect trading access or open positions. You are encouraged to review all updates, remain informed of material legal and regulatory changes, and consider these potential impacts when evaluating your participation in derivatives transactions through ProphetX.

Risks of electronic trading

Electronic markets rely on technology, including hardware, software, connectivity, and external power systems. Any of these components can fail or malfunction. In the event of system outages, you may be unable to place, modify, or cancel orders. While ProphetX maintains safeguards, severe disruptions may result in lost data, delayed processing, or order execution errors. ProphetX assumes no responsibility for losses or damages resulting from such events.

Third-party information

ProphetX may provide or display data from independent third-party providers, such as price quotes, indices, or market commentary. ProphetX does not endorse, warrant, or guarantee the accuracy, timeliness, or completeness of any third-party information. Reliance on such information is at your own risk.