| Product Features |
| Q: |
What are CBBC? |
| A: |
CBBC Supermarket (CBBC) are structured
products or derivative products that track the performance of an
underlying asset (or assets). They are issued either as Bull or Bear
contracts, allowing investors to take bullish (Bull Contract) or
bearish (Bear Contract) positions on the underlying asset with a
relatively small capital outlay.
CBBC expire at a fixed date.
However, during their life, they may be called immediately by the
issuers if the price of the underlying asset reaches a given level,
known as the Call Price, before expiry. The Call Price is lower than
the Spot Price at the time of issue for a Bull Contract whereas the
Call Price is higher than the Spot Price at the time of issue for a
Bear Contract.
There are two categories of CBBC: those with
no residual value (N) and those with a possibility of residual value
(R). Once the price of the underlying asset of a CBBC reaches the
Call Price, a category N CBBC becomes worthless while a category R
CBBC may still be entitled to a residual payment from the issuer. |
| |
|
| Q: |
How is the residual value of a
category R CBBC (i.e. with residual value) calculated? |
| A: |
Once the price the underlying asset of
a CBBC reaches, falls below (for Bull Contract) or rises above (for
Bear Contract) the Call Price, a category R CBBC may receive a
residual payment from the issuer. The residual payment is based on
the minimum (for Bull Contract) or maximum trade price (for Bear
Contract) of the underlying asset during the period between the
occurrence of the Mandatory Call Event and the end of the next
trading session, subject to the final announcement by the issuer in
respect of its actual payout. In cases where the minimum price of
the underlying asset of a Bull Contract reaches or falls below the
Strike Price, or the maximum price of the underlying asset of a Bear
Contract reaches or exceeds the Strike Price, there will not be any
residual payment. |
| |
|
| Q: |
How do CBBC work? |
| A: |
A CBBC is generally issued at a price
that represents the difference between the Spot Price of the
underlying asset and the Strike Price of the CBBC, plus a small
premium (which is usually the funding cost). The Strike Price can be
equal to the Call Price or lower (for a Bull CBBC)/higher (for a
Bear CBBC) than the Call Price. The following example illustrates
how a Bull CBBC works:
Example: Category N
Bull Contract
(Without Residual Value) |
Example: Category R
Bull Contract
(With Residual Value) |
| At the Time of Issuance |
 |
Underlying asset |
Stock X |
|
Spot Price |
$110 |
|
Strike Price (fixed at issue) |
$90 |
|
Call Price (fixed at issue) |
$90 |
|
Funding costs |
$7.2 |
|
Contract entitlement |
100 : 1 |
|
Expiry |
12 months |
Theoretical price of Bull Contract at
issue
= (Spot - Strike + Funding costs) / Contract
Entitlement
= ($110 - $90 + $7.2) / 100 |
$0.272 |
Value of one board lot (10,000
shares)
= $0.272 x 10,000 shares |
$2,720 |
|
| At the Time of Issuance |
|
Underlying asset |
Stock X |
|
Spot Price |
$110 |
|
Strike Price (fixed at issue) |
$90 |
|
Call Price (fixed at issue) |
$95 |
|
Funding costs |
$7.2 |
|
Contract entitlement |
100 : 1 |
|
Expiry |
12 months |
Theoretical price of Bull Contract at
issue
= (Spot - Strike + Funding costs) / Contract
Entitlement
= ($110 - $90 + $7.2) / 100 |
$0.272 |
Value of one board lot (10,000
shares)
= $0.272 x 10,000 shares |
$2,720 |
|
If Spot Price falls to
$95
The Contract is still traded in the market
as the call price has not yet been reached. |
If Spot Price falls to
$95
Reach the Call Price |
|
Mandatory Call Event occurs |
|
|
The Bull Contract is knocked out and
trading is terminated |
|
| |
Residual value of the Bull Contract
at Call
= (Minimum Price* - Strike Price)/Contract
Entitlement
= ($92 - $90)/100 |
$0.02 |
| Value of one board lot: |
$200 |
| * Minimum trade price of underlying
asset during the period between occurrence of the
Mandatory Call Event and the end of the next trading
session (there are two trading sessions on each trading
day: morning and afternoon); assumed to be $92 for this
illustration. In cases where the Minimum Price falls to
or below the Strike Price, there will not be any
residual value. |
|
If Spot Price falls to
$90
Reach the Call Price |
|
Mandatory Call Event occurs |
|
The Bull Contract is knocked out and trading is
terminated |
|
The Bull Contract becomes worthless |
|
If Spot Price falls to
$90
Not applicable |
| If not called
before expiry |
|
At expiry, Closing Price of Stock X |
$130 |
| |
Theoretical value of Bull Contract
at expiry
= (Closing Price - Strike Price)/Contract
Entitlement
= ($130 - $90)/100 |
$0.4 |
Value of one board lot
(10,000 shares)
= $0.4 x 10,000 shares |
$4,000 |
| In this case, Investor
will receive $4,000 in cash. |
|
| If not called before expiry (as in
Category N Bull Contract example) |
|
At expiry, Closing Price of Stock X |
$130 |
| |
Theoretical value of Bull Contract
at expiry
= (Closing Price - Strike Price)/Contract
Entitlement
= ($130 - $90)/100 |
$0.4 |
Value of one board lot
(10,000 shares)
= $0.4 x 10,000 shares |
$4,000 |
| In this case, Investor will receive $4,000
in cash. |
|
|
| |
|
| Q: |
What underlying assets are
available? |
| A: |
According to the announcement of the
HKEx, the eligible underlying assets for CBBC issuance upon product
launch include the five Hong Kong stocks (HSBC Holdings, Hutchison,
PetroChina, China Mobile and Cheung Kong), the Hang Seng Index and
Hang Seng China Enterprises Index, overseas stocks, overseas
indices, currencies and commodities. Other underlying assets may be
added later subject to further consultation with the SFC. |
| |
|
| Trading of CBBC |
| Q: |
Can I sell CBBC in odd lots? |
| A: |
No. The HKEx only accepts board lot
trading on CBBC for both buy and sell orders. While other trading
arrangement is the same as that for listed shares. |
| |
|
| Q: |
Under what circumstances will CBBC
order status change from "executed" to "unexecuted"? |
| A: |
CBBC will be called immediately when
the price of the underlying asset reaches a pre-determined level
known as the Call Price before the expiration date ("Mandatory Call
Event"). The issuer of the CBBC informs HKEx about the Mandatory
Call Event and the call time, and the HKEx suspends the trading of
that CBBC on behalf of the issuer. There may be a possible time
delay between the Mandatory Call Event and the suspension of the
trading of the CBBC. In such case, any CBBC trades executed after
the exact Mandatory Call Event time will be cancelled. We can only
inform customers of the latest order status upon receipt of final
confirmation from the HKEx. The status of orders received after the
Mandatory Call Event will thus change from "executed" to
"unexecuted". At the same time, for a CBBC buy order, the buying
amount which is earmarked for settlement purpose will then be
released immediately. |
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|
| Q: |
How do I know the final order
status of my CBBC traded today? |
| A: |
We can only inform you of the latest
order status from "executed" to "unexecuted" upon receipt of final
confirmation from the HKEx. If you place your order through
electronic channels such as internet and automated hotline, you MUST
check your final status in Order Status through the specific
electronic channels: - after 8 pm in respect of CBBC linked to
locally listed stocks / local index
- after 2 pm the next
working day in respect of CBBC linked to foreign stocks / index
If you place your order through the operator-assisted
hotline, we will call you in case of a revoked order. You can also
enquire through internet and automated hotline during the above
mentioned timing. |
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|
| Q: |
If my CBBC sell order is revoked,
will my buying power be affected? |
| A: |
The receivable funds from the revoked
CBBC sell order will be cancelled as well. In the event that there
is any outstanding buy order using these receivable funds, you must
settle any resulting overdraft in the settlement account with enough
funds before T+2 to avoid unauthorized overdraft. The Bank reserves
the right to sell the related securities to offset any unauthorized
overdraft. |
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|
| Q: |
If my CBBC order is executed
partially before the mandatory call time and then partially after
the mandatory call time, will the complete order be revoked? |
| A: |
No. Only those quantities executed
after the Mandatory Call Event time will be revoked. Quantities
executed before the Mandatory Call Event time will be settled as
usual on T+2. |
| |
|
| Q: |
Do I have to pay any transaction
fees on top of the purchase amount for CBBC? |
| A: |
The charges for trading CBBC is the
same as that for local securities trading. Apart from the purchase
amount, you may also need to pay brokerage fees and third-party
transaction charges such as stamp duty, SFC transaction levy,
trading fee, etc. For details, please refer to the Securities Services Charges. |
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|
| Settlement |
| Q: |
When can I receive the residual
value if my CBBC (Category R) upon the occurrence of the Mandatory
Call Event? |
| A: |
| Mandatory Call
Event |
Payment of Residual Value |
| Occurrence in the morning trading session (including the pre-opening session) |
|
The price* will be valuated on the day of
the occurrence of the Mandatory Call Event under the terms of issuance. Issuer will pay the
residual value (if any) via Hong Kong Securities
Clearing Company Limited ("HKSCC") 3 working
days after the valuation day.
|
| |
e.g. if the Mandatory Call Event occurs in
the morning trading session on Monday,
the residual value will be paid on Thursday via HKSCC, provided that such
days are not holidays).
|
|
Upon receipt of the residual value, the Bank will
deposit the relevant amount to your specified deposit
account. |
|
| Occurrence in the afternoon
trading session |
|
The price* will be
valuated in the next day of the occurrence of the
Mandatory Call Event under the terms of
issuance. Issuer will pay the residual value (if any)
via Hong Kong Securities Clearing Company Limited
("HKSCC") 3 working days after the valuation
day.
|
| |
e.g. if the Mandatory Call Event
occurs in the afternoon trading session
on Monday, the residual value will be paid on Fridayvia HKSCC, provided that such
days are not holidays).
|
|
Upon receipt of the residual value,
the Bank will deposit the relevant amount to your
specified deposit account. |
|
* Based on
the minimum (Bull Contract) or maximum trade price (Bear Contract)
of the underlying asset during the period between the occurrence of
the Mandatory Call Event and the end of the next trading session,
subject to the final announcement by the issuer. |
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|
| Q: |
When will I receive the settlement
amount at expiry? |
| A: |
Issuer will pay the settlement amount
via HKSCC after the 2 working days after the expiry date. Upon
receipt of the settlement amount (e.g. if the expiry date is on
Monday, the settlement amount will be paid on Wednesday via HKSCC,
provided that such days are not holidays), the Bank will deposit the
relevant amount to your specified deposit
account. |
