Hong Kong Exchanges and Clearing Limited (HKEx) has announced arrangements for adjustments to structured products, futures and options related to CK Hutchison Holdings Limited (CKHH) and Hutchison Whampoa Limited (Hutchison) to account for their proposed merger and CKHH’s proposed spin-off of Cheung Kong Property Holdings Limited (CK Property).
Highlights of the adjustment arrangements are set forth below. Investors should consult their brokers for further details, or if they have any questions regarding the adjustments.
Structured Products with Shares of CKHH and Hutchison as Underlying Assets
The listing documents for structured products with the shares of Hutchison as underlying assets contain provisions that deal with the merger of the company. Upon completion of their merger proposal, CKHH shares will replace Hutchison shares as the underlying shares of all existing Hutchison shares-related structured products. Other terms, including entitlement, exercise price and call price, will also be adjusted.
The listing documents for structured products with the shares of CKHH as underlying assets contain provisions that deal with corporate actions of the company, including spin-offs. For the spin-off of CK Property, terms of CKHH structured products, including entitlement, exercise price and call price, will be adjusted on the day following the listing of CK Property.
Trading of structured products with shares of CKHH and Hutchison as underlying assets will be suspended from 27 May to 3 June (both date inclusive). During the suspension period, there will not be any Mandatory Call Events for Callable Bull/Bear Contracts, or CBBCs, linked to CKHH or Hutchison.
Structured product issuers are required to make announcements regarding the above adjustments and trading suspensions, and investors should read the contents of such announcements carefully.
CKHH and Hutchison Futures
Proposed CKHH-Hutchison Merger
Subject to the fulfilment of the conditions precedent to the proposed CKHH Hutchison merger, the following adjustments to Hutchison stock futures contracts will be made on the effective date based on the corporate action announced:
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Underlying Stock Name of the Stock Futures Contracts (Stock Code)
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Hutchison Whampoa Limited (13)
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Corporate Action
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1 Hutchison Share in exchange for 0.684 CKHH Share
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Last Day for Dealing of Hutchison Shares
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26 May 2015
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Effective Date of Corporate Action
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3 June 2015
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For details, please refer to the announcement made by Hutchison.
Trading Arrangements
The trading arrangements for the existing Hutchison stock futures under trading symbol HWL will be as follows:
| 1. |
Suspension of Trading
In view of the closure of the register of member of Hutchison for determining the entitlements to CKHH shares from 29 May 2015 onwards and the commencement of dealings in CKHH shares newly issued to certain Hutchison shareholders, trading of Hutchison stock futures under trading symbol HWL will be suspended from 27 May 2015 to 2 June 2015, both days inclusive.
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| 2. |
Adjustment and Transfer of Outstanding Positions
Outstanding positions of Hutchison stock futures contracts under trading symbol HWL which exist after the market close on 2 June 2015 (the business day immediately before the effective date) will be adjusted and transferred to the adjusted CKHH stock futures contracts under trading symbol CKF. Details of the adjustment procedures are as follows: |
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Adjustment Ratio (AR)
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1 / 0.684 = 1.4620
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Rounded to the nearest 4 decimal places
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Adjusted Contracted Price (ACP)
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Contracted price of outstanding stock futures series x AR
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Rounded to the nearest 2 decimal places
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Adjusted Contract Multiplier (ACM)
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Contracted price of outstanding stock futures series x (1,000 shares / ACP)
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Rounded to the nearest 4 decimal places
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Hutchison stock futures contracts will not be available for trading from the effective date onwards. Adjusted CKHH stock futures contracts under trading symbol CKF will follow the spin-off arrangements stated below.
Clearing and Settlement Arrangements
| 1. |
Final Settlement of Spot-Month Stock Futures Contracts
On 28 May 2015, the spot month HWL stock futures contracts will be cash-settled based on the final settlement price as determined by the Futures Exchange, which shall be the average of readings of: (i) the midpoints of the best bid and best ask prices for the underlying common share taken at five-minute intervals from five minutes after the start of, and up to five minutes before the end of the Stock Exchange’s Continuous Trading Session, which runs from 9:30 am to 4:00 pm ; and (ii) the closing price of the underlying common share as quoted by the Stock Exchange on 26 May 2015 (the last day for dealing of Hutchison shares). |
Spin-off Proposal
Subject to the fulfilment of the conditions precedent to CKHH’s proposed spin-off of CK Property, the following adjustment to the CKHH stock futures contracts will be made on the ex-date:
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Underlying Stock Name of the Stock Futures Contracts (Stock Code)
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CK Hutchison Holdings Limited (1)
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Corporate Action
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Spin-off and separate listing of CK Property on the Stock Exchange by way of a 100 per cent distribution in specie (Entitlement)
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Entitlement Ratio
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1 (1 CK Property share for every 1 CKHH share)
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Ex-date
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27 May 2015
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Listing Day of CK Property
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3 June 2015
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For details, please refer to the announcement made by CKHH.
Trading Arrangements
| 1. |
Transfer of Outstanding Positions
Outstanding positions of CKHH stock futures under trading symbols CKH and CKB which exist after the market close on 26 May 2015 (the business day immediately before the ex-date) will be transferred on a one-to-one basis to temporary trading symbols CKD and CKE respectively.
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| 2. |
Suspension of Trading
Since the value of the Entitlement will not be available until the value of CK Property is determined, trading of outstanding positions under temporary trading symbols CKD and CKE will be suspended from the ex-date (27 May 2015) to the listing day of CK Property (3 June 2015), both dates inclusive.
For the adjusted CKHH stock futures contracts under trading symbol CKF resulting from the adjustment for the proposed CKHH-Hutchison merger, trading will be suspended on 3 June 2015.
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| 3. |
Introduction of New Stock Futures Contracts for Trading
On the ex-date, new CKHH stock futures contracts based on the standard contract multiplier will be introduced for trading under the standard trading symbol CKH.
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| 4. |
Adjustment to Outstanding Positions upon the Determination of CK Property’s Value
The value of CK Property will be determined by the volume weighted average price, or VWAP, of the auto-matched trades of CK Property on its listing day. When the value of the Entitlement has been determined, adjustment will be made to outstanding positions under trading symbols CKD, CKE and CKF. The adjusted positions will be transferred to trading symbols CKG, CKJ and CKK respectively. Positions under trading symbols CKG, CKJ and CKK will commence trading from the business day immediately after the listing day of CK Property. Details of the adjustment procedures are as follows:
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Adjustment Ratio (AR)
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(Underlying stock closing price before ex-date minus Entitlement) / Underlying stock closing price before ex-date
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Rounded to the nearest 4 decimal places
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Adjusted Contracted Price (ACP)
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Contracted price of outstanding stock futures series x AR
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Rounded to the nearest 2 decimal places
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Adjusted Contract Multiplier (ACM)
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Contracted price of outstanding stock futures series x (No of shares / ACP)
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Rounded to the nearest 4 decimal places
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Note: Entitlement is CK Property’s value times the Entitlement Ratio for each CKHH share.
Below is a summary of the trading arrangements for all CKHH stock futures contracts:
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Standard
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CKH
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CKHH (ex-Entitlement)
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500
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Ex-date
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From ex-date onwards
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Yes
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Adjusted
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CKD
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CKH H & Entitlement
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500
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Ex-date
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Nil
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No
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CKE
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1,000
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CKF
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ACM Note 1
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Effective day of the Hutchison Scheme
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CKG
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CKH H (ex-Entitlement)
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ACM Note 2
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The 1st business day after the listing day of CK Property
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From introduction date to
30 December 2015
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CKJ
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From introduction date to
29 September 2015
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CKK
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From introduction date to
30 December 2015
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Note 1: ACM is determined under the proposed CKHH-Hutchison merger.
Note 2: ACM is determined under the spin-off proposal.
Clearing and Settlement Arrangements
| 1. |
Final Settlement of Spot Month Stock Futures Contracts
On 28 May 2015, the final settlement of the spot month CKHH stock futures contracts will be effected according to normal procedures.
As the value of the Entitlement is not available until the value of CK Property is determined, the CKD and CKE spot month stock futures contracts will first be settled according to the settlement price1 as determined by HKEx’s clearing house for futures and stock index options on 28 May 2015. Final settlement of the CKD and CKE spot month stock futures contracts will be made on 4 June 2015 after the CK Property’s value is determined2.
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For detailed trading and clearing operations arrangements, please refer to the HKFE circular.
CKHH and Hutchison Options
Proposed CKHH-Hutchison Merger
Subject to the fulfilment of the conditions precedent to the proposed CKHH-Hutchison merger, the following adjustments to Hutchison stock option will be made on the effective date based on the corporate action announced:
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Underlying Stock Name of the Stock Futures Contracts (Stock Code)
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Hutchison Whampoa Limited (13)
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Corporate Action
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1 Hutchison Share in exchange for 0.684 CKHH Share
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Last Day for Dealing of Hutchison Shares
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26 May 2015
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Effective Date of Corporate Action
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3 June 2015
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For details, please refer to the announcement made by Hutchison.
Trading Arrangements
The trading arrangements for the existing Hutchison stock options under trading symbol HWL will be as follows:
| 1. |
Suspension of Trading and Exercise
In view of the closure of the register of member of Hutchison for determining the entitlements to CKHH shares from 29 May 2015 onwards and the commencement of dealings in CKHH shares newly issued to certain Hutchison shareholders, trading of Hutchison stock options under trading symbol HWL will be suspended from 27 May 2015 to 2 June 2015, both days inclusive. During the same period, Hutchison stock options cannot be exercised as Hutchison shares resulting from exercise will only be delivered after the latest time (28 May 2015) for lodging transfers of shares in order to be entitled to CKHH shares.
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| 2. |
Adjustment and Transfer of Outstanding Positions
Outstanding positions of Hutchison stock options under trading symbol HWL which exist after the market close on 2 June 2015 (the business day immediately before the effective date) will be adjusted and transferred to the adjusted CKHH stock options under trading symbol CKF. Details of the adjustment procedures are as follows:
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Adjustment Ratio (AR)
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1 / 0.684 = 1.4620
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Rounded to the nearest 4 decimal places
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Adjusted Exercise Price (AEP)
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Exercise price of outstanding stock option series x AR
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Rounded to the nearest 2 decimal places
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Adjusted Contract Size (ACS)
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Exercise price of outstanding stock option series x (1,000 shares / AEP)
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Rounded to the nearest 4 decimal places
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Hutchison stock options will not be available for trading from effective date onwards. The adjusted CKHH stock options under trading symbol CKF shall follow the spin-off arrangements stated below.
Clearing and Settlement Arrangements
| 1. |
Arrangement for Spot Month Stock Options Contract on Expiry Day
On expiry day (28 May 2015), the normal automatic exercise arrangement will not be applied for spot month HWL stock option series. All in-the-money HWL spot month stock option series will be exercised/assigned and settled in cash according to the difference between the exercise price of the spot month stock option series and the settlement price as determined by HKEx’s clearing house for stock options3. |
Spin-off Proposal
Subject to the fulfilment of the conditions precedent to CKHH’s proposed spin-off of CK Property, the following adjustment to the CKHH stock options will be made on the ex-date:
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Underlying Stock Name of the Stock Option Contracts (Stock Code)
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CK Hutchison Holdings Limited (1)
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Corporate Action
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Spin-off and separate listing of CK Property on the Stock Exchange by way of a 100 per cent distribution in specie (Entitlement)
|
|
Entitlement Ratio
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1 (1 CK Property share for every 1 CKH share)
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Ex-date
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27 May 2015
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Listing Day of CK Property
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3 June 2015
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For details, please refer to the announcement made by CKHH.
Trading Arrangements
| 1. |
Transfer of Outstanding Positions
Outstanding positions of CKHH stock options under trading symbols CKH and CKB which exist after the market close on 26 May 2015 (the business day immediately before the ex-date) will be transferred on a one-to-one basis to temporary trading symbols CKD and CKE respectively.
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| 2. |
Suspension of Trading
Since the value of the Entitlement will not be available until the value of CK Property is determined, trading of outstanding positions under temporary trading symbols CKD and CKE will be suspended from the ex-date (27 May 2015) to the listing day of CK Property (3 June 2015), both dates inclusive.
For adjusted CKHH stock options under trading symbol CKF resulting from the adjustment in relation to the proposed CKHH-Hutchison merger, trading will be suspended on 3 June 2015.
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| 3. |
Introduction of New Stock Option Series for Trading
On the ex-date, new CKHH stock option series based on the standard contract size will be introduced for trading under the standard trading symbol CKH.
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| 4. |
Adjustment to Outstanding Positions upon the Determination of CK Property’s Value
The value of CK Property will be determined by VWAP of the auto-matched trades of CK Property on its listing day. When the value of the Entitlement has been determined, adjustment will be made to outstanding positions under trading symbols CKD, CKE and CKF. The adjusted positions will be transferred to trading symbols CKG, CKJ and CKK respectively. Positions under trading symbols CKG, CKJ and CKK will commence trading from the business day immediately after the listing day of CK Property. Details of the adjustment procedures are as follows:
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Adjustment Ratio (AR)
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(Underlying stock closing price before ex-date minus Entitlement) / Underlying stock closing price before ex-date
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Rounded to the nearest 4 decimal places
|
|
Adjusted Exercise Price (AEP)
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Exercise price of outstanding stock option series x AR
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Rounded to the nearest 2 decimal places
|
|
Adjusted Contract Size (ACS)
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Exercise price of outstanding stock option series x (No. of shares / AEP)
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Rounded to the nearest 4 decimal places
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Note: Entitlement is CK Property’s value times the Entitlement Ratio for each CKHH share.
Below is a summary of the trading arrangement for all CKHH stock option contracts:
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Standard
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CKH
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CKHH (Ex-Entitlement)
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500
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Ex-date
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From ex-date onwards
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Yes
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Adjusted
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CKD
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CKHH & Entitlement
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500
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Ex-date
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Nil
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No
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CKE
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1,000
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CKF
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ACSNote 1
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Effective day of the Hutchison Scheme
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CKG
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CKHH (Ex-Entitlement)
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ACSNote 2
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The 1st business day after the listing day of CK Property
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From introduction date to 30 March 2016
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CKJ
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CKK
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Note 1: ACS is determined under the proposed CKHH-Hutchison merger.
Note 2: ACS is determined under the spin-off proposal.
Clearing and Settlement Arrangements
| 1. |
Arrangement for Spot Month Stock Options on Expiry Day
On expiry day (28 May 2015), the normal automatic exercise arrangement will not be applied for spot month CKD and CKE stock option series. While all other exercise and assignment arrangements of the standard CKH stock option series will be as normal, market participants should note the following settlement arrangements relating to the exercise and assignment of the CKD, CKE and CKF stock option series:
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(a) |
Settlement Amount: payment/receipt of the full settlement amount (according to the exercise price of the CKD, CKE and CKF stock option series) via CCASS, HKEx’s Central Clearing and Settlement System;
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(b) |
CKHH shares portion: delivery/receipt of ex-entitlement CKHH shares via CCASS. Results of exercise and assignment of the CKD, CKE and CKF stock option series and the resulted settlement obligation of the full settlement amount and CKHH shares portion will be shown in a DCASS report (DCASS is HKEx’s Derivatives Clearing and Settlement System); and
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(c) |
Entitlement portion (CK Property shares): settlement in cash according to the Entitlement Ratio and CK Property value. The cash settlement will be pending until CK Property’s value is determined and will be settled on the first business day after the listing day of CK Property. |
For detailed trading and clearing operational arrangement, please refer to the SEHK circular.
| 1 |
The settlement price as determined by HKEx’s clearing house for futures and stock index options is the sum of (i) the Final Settlement Price of the CKHH (ie ex-entitlement CKHH) spot month stock futures contracts and (ii) a proxy price of CK Property (ie the closing price difference of CKHH on the ex-date and the trading day prior to the ex-date).
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| 2 |
The value of CK Property will be determined by VWAP of the auto-matched trades of CK Property on its listing day on the Stock Exchange. On 4 June 2015, any difference between the 28 May CK Property proxy price and the CK Property’s value determined will be debited/credited to Participants.
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| 3 |
The settlement price for spot month HWL stock option is determined based on the methodology adopted for the determination of the Final Settlement Price of spot month HWL stock futures on the last day for dealing of Hutchison shares (26 May 2015).
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Ends