HKEx Prepared to Adjust PCCW Futures and Options Contracts

Market Operations

27 Dec 2002

Hong Kong Exchanges and Clearing Limited (HKEx) has prepared to adjust its PCCW Limited (PCCW) Futures contract and PCCW Options contract following the company's 6 December proposal to consolidate every five shares of $0.05 each in the issued and unissued share capital of PCCW into one share of $0.25. Subject to approval by PCCW 's shareholders and the Stock Exchange of Hong Kong, dealings in the new shares are expected to commence on 8 January 2003.

Futures Contract

If the proposal is approved the following adjustments would be effective from the market open on Wednesday, 8 January.

The contract multiplier of all outstanding positions in PCCW Futures Contracts would be adjusted from 1,000 shares to 200 shares;
The contracted prices of all outstanding positions in PCCW Futures Contracts would be multiplied by 5;
The adjusted contract with trading symbol PCA and the standard contract with trading symbol PCC would be available for trading in parallel on HKATS, the Hong Kong Futures Automated Trading System; and
The adjusted contract and the standard contract would be distinct contracts with contract multipliers of 200 and 1,000 newly consolidated shares of PCCW respectively.

In addition, the minimum margins to be collected by an Exchange Participant from its clients in respect of their dealings in PCCW Futures contracts would be adjusted with effect from 8 January, if the proposal were approved.

Options Contract

After the close of business on 7 January 2003:

All existing series PCCW Options contracts would be adjusted by the adjustment ratio of 5, i.e. the adjusted exercise price would be 5 times the old exercise price. The adjusted contract size would be reduced to 200 new shares of PCCW per contract. All other contract terms such as expiration month would remain unchanged. As a result of the adjustment, the adjusted contract size would carry odd lots. Investors would need to consult their brokers for the adjustment results on or after 8 January 2003.
The number of open positions in the old series would be transferred to the respective adjusted series. It should be noted that only the exercise price and contract size would be adjusted and there would not be any changes to the number of open positions after the adjustment. All such positions would be traded and settled under the adjusted contract terms of adjusted exercise price and adjusted contract size per contract from 8 January 2003 onward.

From the open of the market on 8 January 2003:

PCCW Standard Series (1000 shares per contract; HKATS code PCC, TOPS version code "0") would be available for trading and PCCW Adjusted Series (see contract details above; HKATS code PCA, TOPS version code "1") would be available for trading until the close of business on 29 September 2003. Price information on the PCC and PCA series would be displayed in Teletext pages 3009/10 and 3075/76 respectively.
PCC and PCA would be distinct series and it would not be possible to offset the positions in each version against the other. Investors should pay attention to the series specifications whenever dealing with PCCW Options contracts, particularly when placing orders or exercising instructions.

Investors should consult their brokers for further details on the PCCW Futures and Options contracts.

Updated 27 Dec 2002