Expiry and Settlement

No, the expiry day of a CBBC is not the same as the last trading day. Investors can only trade a CBBC on or before the last trading day:

The last trading day falls on the trading day immediately before its expiry date, subject to the occurrence of a mandatory call event following which the CBBC is terminated early and the trading of that CBBC ceases immediately.

All CBBCs currently traded on the Exchange are European style and are cash settled at expiry.

For cash-settled CBBCs that are in-the-money on the expiry date, the CBBC holders are then paid a positive cash settlement amount according to the terms and conditions as set out in the listing documents.

Investors will receive the cash settlement amount (if any) no later than the third settlement day following the expiry date. In general, Christmas Eve, New Year’s Eve and Lunar New Year’s Eve (being half trading days) will normally be prescribed by the Exchange as non-settlement day.

For CBBCs issued on a local stock traded on the Exchange, the settlement price at expiry is calculated based on the closing price of the underlying stock on the trading day before expiry of the CBBCs.

For CBBCs issued on a local index (such as HSI or HSCEI), the settlement price at expiry is based on the final settlement price of the corresponding index futures contract of the same expiry month as the CBBCs traded on the Hong Kong Futures Exchange on the second last business day of the contract month.

For more information about the settlement price at expiry for CBBCs on other underlying assets, please refer to the relevant listing documents.

The issuer may elect to early terminate the CBBCs. Holders of those CBBCs may receive an early termination amount which is determined by the issuer:

(a)  in good faith and a commercially reasonable manner; and

(b)  where applicable, by reference to the determination made by the Exchange in relation to the relevant listed options or futures over the underlying stock. In a past case, such early termination amount has been calculated based on the difference between the exercise price and the offer price of cancelling the underlying stock under the proposed privatisation, adjusted by the entitlement ratio. However, such determination may be different on a case by-case basis.

(a)  Trading suspension or absence of closing price on the original valuation date only - in that case, the closing price on the trading day following the original valuation date will be used as the settlement price at expiry.

(b)  Trading suspension or absence of closing price on the original valuation date and each of the three trading days immediately following the original valuation date - in that case, the closing price on the 4th trading day following the original valuation date will be used as the settlement price at expiry.

(c)  Trading suspension or absence of closing price on the original valuation date and each of the four trading days immediately following the original valuation date - in that case, the settlement price at expiry is determined based on the issuer’s good faith estimate made in accordance with the terms and conditions. Such determination will be made on a case-by-case basis by reference to the prevailing market conditions.

Trading suspension above means suspension of trading of the underlying stock during the last half hour before close of trading.