9. The Mandatory Call Event (“MCE”) of CBBCs

  • When the underlying asset price (or level if the underlying asset is an index) reaches or exceeds the Call Price (or level) before expiry date, CBBC will be early terminated upon the occurrence of a MCE and the trading of that CBBC will be ceased immediately
  • For a “Category R” CBBC, the product holders may receive a Residual Value after a MCE occurs. The residual value is calculated as below:
    For a Category R “bull” CBBC = (Settlement Price - Strike Price) / Entitlement Ratio
    For a Category R “bear” CBBC = (Strike Price - Settlement Price) / Entitlement Ratio

    Settlement Price (or level) refers to the lowest spot price or level of the underlying asset during the Observation Period (for a bull contract) or the highest spot price or level of the underlying asset during the Observation Period (for a bear contract).
    Observation Period starts from the moment the mandatory call event occurred and ends at the next complete trading session.

  • Example: for a HSI "Category R" callable bull contract (call price 20000; strike price 19800; entitlement ratio: 1:10000), MCE is triggered when the underlying index level falls to 20000 (call price), and the bull contract is terminated early immediately
    Residual Value = (Settlement Price* - Strike Level) / Entitlement Ratio
    = (19860-19800)/10000 = $0.006

    * assume the lowest index level during the observation period is 19860

The above is a hypothetical case of CBBC for the purpose of illustration only. Past performance is not indicative of future results. The price of the structured products may fall in value as rapidly as it may rise and investors may sustain a total loss of their principal invested.


*Turnover of a warrant or CBBC has no direct relationship with the product's price. Investors should not use turnover as the only indicator when choosing a warrant or CBBC.