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Following up on its 7 November 2017 news release “Arrangements of Wharf Holdings Structured Products, Futures And Options Need to be Adjusted”, Hong Kong Exchanges and Clearing Limited (HKEX) announced today (Tuesday) that with a view towards protecting market integrity and maintaining an orderly market, and after consultation with the Securities and Futures Commission (SFC) pursuant to the applicable Trading Rules, it will apply a minimum value of 0.25 to the Adjustment Ratio (AR) of the Capital Adjustment to The Wharf (Holdings) Ltd (Wharf) Options and Futures.
Imposing a minimum value on the AR will prevent the scenario that the contract sizes of the Wharf Options and Futures become so abnormally high that they could jeopardise the orderliness of the underlying market. Details of the floor applied to the AR as follows:
OPTIONS
| Adjustment Term | Formula | Remarks |
|---|---|---|
| Adjustment Ratio (AR) | (Underlying stock closing price before the ex-date minus Entitlement) / Underlying stock closing price before the ex-date | Rounded to the nearest 4 decimal places with a floor value of 0.25 to be applied |
| Adjusted Exercise Price (AEP) | Exercise price of outstanding stock option series x AR | Rounded to the nearest 2 decimal places |
| Adjusted Contract Size, or ACS | Exercise price of outstanding stock option series x (1,000 shares / AEP) | Rounded to the nearest 4 decimal places |
| Adjustment Term | Formula | Remarks |
|---|
For definition of Entitlement, please see Note below following table.
FUTURES
| Adjustment Term | Formula | Remarks |
|---|---|---|
| Adjustment Ratio (AR) | (Underlying stock closing price before the ex-date minus Entitlement) / Underlying stock closing price before the ex-date | Rounded to the nearest 4 decimal places with a floor value of 0.25 to be applied |
| Adjusted Contract Price (ACP) | Contracted price of outstanding stock futures series x AR | Rounded to the nearest 2 decimal places |
| Adjusted Contract Multiplier, or ACM | Contracted price of outstanding stock futures series x (1,000 shares / ACP) | Rounded to the nearest 4 decimal places |
| Adjustment Term | Formula | Remarks |
|---|
Note: Entitlement is Wharf Real Estate Investment Company Limited’s (Wharf REIC) stock price times the entitlement ratio for each Wharf share. The stock price of Wharf REIC will be determined by the volume weighted average price, or VWAP, of auto-matched trades of Wharf REIC on its listing day on the Stock Exchange.
The aim is to provide an orderly market. The market was given advance notice in circulars (Options and Futures) issued today.
For further details, please refer to the Wharf Options circulars issued on 7 and 10 November 2017 and Wharf Futures circulars issued on 7 and 10 November 2017.
HKEX will closely monitor trading of Wharf and Wharf REIC shares to ensure market orderliness. Any suspected manipulation will be reported to the SFC.
