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Hong Kong Futures Exchange, a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited, and the SEHK Options Clearing House, a wholly-owned member of Hong Kong Exchanges and Clearing Limited group, have jointly announced the arrangements for adjustments to the contract terms of all open futures and options contracts on shares of New World Development Company Limited (NWD) and CNOOC Limited (CNOOC) to account for a proposed NWD rights issue and a proposed share split by CNOOC.
Highlights of the adjustment arrangements are attached. Investors should consult their brokers for further details.
NWD Futures and Options Contracts:
NWD announced on 13 February 2004 a proposed 2-for-5 rights issue and trading in the shares on an ex-rights basis is expected to begin on 11 March 2004. The capital adjustment to NWD futures and options contracts will only be made if the closing price of NWD shares on 10 March 2004, the business day immediately preceding the ex-rights date, is not equal to $5.40 per share.
NWD Futures Contracts
Immediately before the market open on 11 March 2004 (the ex-rights date):
The adjusted contracted prices (ACP) will be determined by the following formula and rounded to the nearest two decimal places:
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Contracted prices of outstanding NWD futures contracts times [5 + (2 x $5.40 / S)] / (5 + 2) where S is the closing price of NWD shares on 10 March 2004
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An adjusted contract multiplier will be determined by the following formula and rounded to the nearest whole number:
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| Contracted prices of outstanding NWD futures contracts times 1,000 / ACP |
On 11 March 2004:
Adjusted NWD futures contracts will be traded under a temporary trading symbol NWA until the expiration of the existing March, April, May, June and September 2004 contracts respectively or until all outstanding positions in any contract month are closed, whichever occurs first. Contract months for the adjusted contracts will be immediately suspended for trading when there is no outstanding position after the market close on the trading day prior to the ex-rights date; and
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The available contract months for NWD futures contracts with the original contract multiplier of 1,000 shares, under the original trading symbolNWD, will be March, April, May, June and September 2004.
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After the adjustments of all outstanding positions in NWD futures contracts which are expected to take effect on the ex-rights date, there will be two sets of NWD futures contracts. The adjusted contracts with trading symbol NWA and the standard contracts with the trading symbol NWD will be available for trading in parallel. The adjusted contracts with the adjusted contract multiplier and the standard contracts with the standard contract multiplier of 1,000 shares of NWD are distinct contracts.
NWD Options Contracts
After the close of business on 10 March 2004:
The adjusted exercise price will be R times the old exercise price where R is the adjustment ratio which can only be determined by reference to the closing price of NWD on 10 March 2004.
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The adjusted contract size will be the old contract value divided by the adjusted exercise price. As a result of the adjustment, the adjusted contract size will carry odd lots as well as fractions of a share.
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Open positions
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The number of open positions in the old series will be transferred to the respective adjusted series. Only the exercise price and contract size are being adjusted, there will not be any changes to the number of open positions after the adjustment. All such open contracts will be traded and settled under the adjusted exercise price and the adjusted contract size per contract from 11 March 2004 onwards.
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Generation of standard series
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New series with a standard contract size of 1,000 shares per contract will be generated in accordance with Operational Trading Procedures so that there will be five series (one at-the-money, two in-the-money and two out-of-the-money) in each of the expiration months of April, May, June and September 2004 available for trading on or after 11 March 2004. However, the five new standard series in the expiration month of March 2004 will only be generated and available for trading on or after 12 March 2004.
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CNOOC Futures and Options Contracts:
CNOOC announced a share split proposal on 26 January 2004 in which each of the existing issued and unissued shares in the capital of the company would be split into five shares. The proposal is conditional upon the approval of CNOOC shareholders at an extraordinary general meeting on 16 March 2004 and the approval of the Listing Committee of the Stock Exchange.
CNOOC Futures Contracts
Immediately before the market open on 17 March 2004:
| Adjusted contracted prices (ACP) will be determined by dividing the contracted prices of outstanding CNOOC futures contract by five and rounded to nearest two decimal places; and an adjusted contract multiplier will be determined by adjusting the contract multiplier of CNOOC futures contracts from 500 to 2,500 shares. |
On 17 March 2004:
Adjusted CNOOC futures contracts will be traded under temporary trading symbolCNAuntil the expiration of the existing March, April, May, June and September 2004 contracts respectively or until all outstanding positions in any contract month are closed, whichever occurs first. Contract months for the adjusted contracts will be immediately suspended for trading when there is no outstanding position after the market close on the trading day prior to the effective date; and
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The available contract months for CNOOC futures contracts with the standard contract multiplier of 1,000 split shares, under the original trading symbolCNC, will be April, May, June and September 2004. The contract month of March 2004 will not be listed underCNC.
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After the adjustments to all outstanding positions in CNOOC futures contracts which are expected to take effect on the effective date, there will be two sets of CNOOC futures contracts: the adjusted contracts with the trading symbolCNAand the standard contracts with the trading symbolCNCwill be available for trading in parallel. The adjusted contracts with the adjusted contract multiplier of 2,500 shares and the standard contracts with the standard contract multiplier of 1,000 shares of CNOOC are distinct contracts.
CNOOC Options Contracts
After the close of business on 16 March 2004:
The contract terms of all existing CNOOC series will be adjusted by the ratio of 0.2 (the adjusted exercise price will be 0.2 times the old exercise price) and the adjusted contract size will be increased to 2,500 split shares of CNOOC per contract.
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All other contract terms such as expiration month will remain unchanged.
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As a result of the adjustment, the adjusted contract size will carry odd lots.
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Generation of standard series
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The board lot for trading will be changed to 1,000 shares after the split. Subject to approval by Securities and Futures Commission of the necessary Operational Trading Procedures, new series with a standard contract size of 1,000 shares per contract will be generated, so that there will be five series (one at-the-money, two in-the-money and two out-of-the-money) in each of the expiration months of April, May, June and September 2004 available for trading on 17 March 2004, assuming the underlying price would be 0.2 times the pre-split price of CNOOC as of the close of 16 March 2004. There will not be any standard series for the spot month of March 2004.
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