Most Asked Questions
What is LPQ?
What does the number of 1 tick spread products imply?
What is average bid-ask spread?
What does 1 tick Spread Duration measure?
What is liquidity and how important is it?
Should I invest in structured products?
What documents should I read?
Where can I find out more?
Who should I contact if I have any questions about my structured products?
What are standard warrants?
How do warrants work?
How are the rights of a warrant holder different from the rights of a shareholder over the underlying stock?
What are exotic warrants? What are the differences between an exotic warrant and a standard warrant?
What are CBBCs?
How does a CBBC work?
What is the difference between a “Category R” and a “Category N” CBBC?
What are the risks I need to consider before investing in a warrant or CBBC?
If an issuer or its guarantor suffers from a credit rating downgrade such that it no longer meets the eligibility requirements in the Listing Rules, what would happen to its outstanding warrants and CBBCs?
Can derivative warrants or CBBCs be traded during closing auction session?
Can derivative warrants or CBBCs be traded during the 5-minute cooling-off period after the triggering of the VCM?
If an issuer defaults, can I claim back my investment?
What is the additional risk for trading CBBCs as opposed to warrants?
What are the additional risks in trading warrants or CBBCs with overseas underlying assets?
Will I incur any transaction fees in buying or selling warrants or CBBCs on the Exchange?
Do I have to pay any stamp duty?
What is liquidity and why is it relevant to trading in warrants or CBBCs?
What is the role of a liquidity provider?
How to identify liquidity provider quotes?
Why does the liquidity provider sometimes become less active in providing quote?
Does the liquidity provider need to maintain the price for a product at a particular level?
How many liquidity providers can an issuer appoint for each warrant or CBBC in issue?
How do I get the liquidity provider’s information for a warrant or CBBC?
What factors affect the liquidity of a warrant or CBBC, and the way the liquidity provider provides liquidity?
Do I have to trade against the liquidity provider’s bid or ask price?
If the appointed liquidity provider is no longer an Exchange participant, can that liquidity provider continue to provide liquidity? Is an issuer required to appoint another liquidity provider if the existing liquidity provider is disqualified?
What is the Industry Principles? Is compliance with the liquidity standards in the Industry Principles voluntary? How does the Exchange enforce them?
What is “quote request”?
When will the tightened minimum service levels for quote requests take effect?
What does a “minimum holding time of 5 minutes” mean?
Under what circumstances is the liquidity provider not required to provide quote upon request?
What happens to my warrant or CBBC if its underlying asset is suspended from trading?
What do you mean by “fast market”?
What will an issuer do when there is a system failure leading to a service interruption?
What will happen to Quote Requests for the warrant and CBBC, on a day when the underlying was subject to a VCM?
What are “active quotes”?
When will active quotes be implemented by issuers?
Does active quote mean there is continuous quotation available throughout a trading day?
Is there a minimum holding time for active quotes?
What are the criteria for active quotes?
How do I know if an underlying asset of a warrant or CBBC is an “active underlying”?
Where can I find the list of structured products that are subject to active quotes?
Why doesn't the issuer provide active quotes for warrants with less than 30 calendar days remaining term?
What is the difference between CBBCs and warrants?
What information is included in the English short name of a warrant?
What information is included in the English short name of a CBBC?
How can I request prices from a liquidity provider?
What are the tightened minimum service levels for quote requests?
What is “moneyness”? How is it calculated?
Under what circumstances will active quotes be paused or affected temporarily?
Under what circumstances will active quotes be discontinued?
Why do issuers only provide active quotes under specified circumstances?
What is the spread requirement for active quotes?
Why is there a different active quote liquidity service standard (i) between warrants and CBBCs and (ii) between local index and actively traded stock respectively?
How will the provision of Active Quotes be affected for a warrant/CBBC when the underlying security is subject to VCM?
A liquidity provider has provided quotes with 30 spreads in response to my quote request. Has the liquidity provider breached its obligation to quote within the maximum bid-ask spread set out in the relevant listing document?
I made a quote request at 3:15 p.m. with a liquidity provider but it only provided quotes at 3:40 p.m. Has the liquidity provider breached its obligations?
I note a liquidity provider provided a quote in response to a quote request which lasted for 3 minutes only. Has the liquidity provider breached its obligation?
I wanted to sell 1,000 board lots of my warrants and called up the liquidity provider for a quote. Why couldn’t I sell my 1,000 board lots even after I got the quote from the liquidity provider?
I bought a call warrant with a last reported price (or nominal price) of HK$0.01 and that reported price has not moved for a long time. I want to sell my holding in such call warrant. Why can’t I get any quotes from the liquidity provider?
I submitted a quote request to a liquidity provider who responded by saying that there are existing liquidity provider quotes already in the market. Has the liquidity provider breached its obligations to respond to my request?
I asked a liquidity provider to reduce its bid-ask spread which has already met minimum service levels for quote requests. Is the liquidity provider obliged to provide a tighter spread?
Should I still make a quote request for warrants and CBBCs if the liquidity provider is providing active quotes for such products?
I made a quote request for a call warrant over a stock. The liquidity provider claimed that it was exempted from providing quotes due to a significant move in the Hang Seng Index or the overall market. Is the liquidity provider justified to claim an exemption from providing quotes?
I hold a call warrant over a stock, which is due to expire in 15 days. I want to sell it before it expires. Why is there no active quote for it?
I hold a call warrant over an active underlying stock with an exercise price of HK$45. The spot price of the underlying stock is HK$50. Is the stock warrant eligible for active quotes?
I hold a call warrant over HSI, with a strike level at 22900. The spot level of HSI is 18300. Is my index warrant eligible for active quotes?
I hold a bull CBBC linked to Stock X, with a call price of HK$50. The spot price of Stock X is now trading at HK$52. Will the issuer provide active quotes for this CBBC?
I hold a bull CBBC linked to HSI, with a call level of 19000. The spot level of HSI is 19100. Will the issuer provide active quotes for this CBBC?
I hold a HSI warrant which fulfils the active quote criteria prescribed in the Industry Principles. Why there is no active quote provided?
I notice that an issuer provides quotes for the warrants which do not fulfil the active quote criteria but the spread is wider than the maximum bid-ask spread under the active quote requirement. Has the issuer breached the active quote requirement?
What is the “theoretical value” of a warrant or CBBC? How is it determined?
What factors affect the price of a warrant?
Why is the price movement of a warrant not directly proportional to the movements in the price or level of its underlying assets?
What factors affect the price of a CBBC?
Does the price movement of a CBBC always correspond to the movements in the price or level of its underlying assets?
What is the entitlement ratio?
Does entitlement ratio affect the face value of a warrant or CBBC?
What is the premium?
I bought a call warrant linked to the underlying stock with an expiry date of late April. Why did the call warrant trade below its intrinsic value with a negative premium of 1% in mid-March? This seemed unreasonable as the warrant price should at least be equal to its intrinsic value, i.e. the excess of the prevailing market price of the underlying stock over the exercise price of the call warrant.
Why may a bull CBBC linked to the HSI expiring in 6 months sometimes have a negative premium?
What is delta of warrant and CBBC?
What is the difference between effective gearing and gearing?
Why does the price movement of a warrant or CBBC not correspond to the effective gearing?
How does implied volatility of a warrant affect their prices?
How does an issuer decide the implied volatility level of a warrant when pricing the warrant? Why does implied volatility of warrants over the same underlying asset differ between different issuers?
What is historical volatility of underlying asset and where can investor find such information?
Why does the implied volatility of listed and OTC options affect the price of a warrant?
Where can I see information on the implied volatility of an OTC option?
Where can I see information on the implied volatility of a listed option?
How does “funding cost” affect the price of a CBBC and how is it calculated?
What is time value and how does it affect the price of a warrant?
How does further issuance affect the price of a warrant or CBBC?
How does the outstanding quantity affect the price of a warrant or CBBC?
How does the distribution of dividends of an underlying stock affect the price of a warrant or CBBC?
What if the underlying stock eventually declared a dividend lower than expected? How about if the declared dividend is larger than expected?
Will the terms of a warrant or CBBC be adjusted when there is a capital adjustment of the underlying asset?
Will structured products be suspended when the underlying stock is undergoing a merger?
What will be the arrangements on structured products if there is a spin-off of the underlying company and a distribution of specie to shareholders?
I hold a call warrant on a stock underlying. The price of the underlying only dropped by 2%. Why did the liquidity provider’s quote for my call warrant fall much more than 2%?
I bought a call warrant on a stock underlying in the morning trading session, when the underlying was traded at HK$50. The underlying price then dropped to HK$48 and the liquidity provider’s quote also dropped. In the afternoon, the price of the underlying went back to HK$50 but the liquidity provider’s quote was still lower than the price at which I bought the call warrant, why?
I note a warrant launched a week ago was issued at HK$0.25, but its price dropped to HK$0.20 on its first listing date. How could this happen?
I hold a call warrant issued by firm A. There was another warrant with identical terms (same underlying, expiry date and strike price) issued by firm B. Why was price quoted by firm A lower than that quoted by firm B?
I hold a bull CBBC issued by firm X which will expire in six months. There was another CBBC with identical terms (same underlying, expiry date, strike price and call price) issued by firm Y. Why was price quoted by firm X lower than that quoted by firm Y?
I hold a HSI call warrant which was last traded at HK$0.01. The HSI increased by more than 3% but the liquidity provider refused to quote and the warrant’s last traded price still remained at HK$0.01. Why didn’t the liquidity provider’s quote increase in line with the underlying?
A call warrant had 70% of its volume outstanding in the market. Why did the price of the warrant drop while the price of the underlying remained unchanged?
I hold a call warrant which will expire in 10 days. Why did the liquidity provider’s quote fall by 10% despite an increase in the price of the underlying by 1%?
I hold a very deep in-the-money call warrant linked to HSI and expiring in June (in 2 months) with entitlement ratio 10,000. The delta of the warrant is almost 1. The HSI index increased 150 points while HSI June futures contracts increased 110 points. The warrant price increased by HK$0.011 (equivalent to 110 index points) only. Why did it not increase by around HK$0.015 (equivalent to 150 index points)?
I hold a bull CBBC linked to the HSI expiring in 6 months. The spot level of the HSI increased by 0.1% since I bought the CBBC during the day. Why did the price of the CBBC remain unchanged despite an increase in the spot level of the HSI?
I hold a bull CBBC linked to HSI expiring in 6 months and the entitlement ratio is 10,000. The bull CBBC was about 400 points to be knocked out. HSI index and futures both increased by 100 points but the bull CBBC only increased by HK$0.009.
I hold a bull contract. The spot price of the underlying was trading close to the call price. Why did the bull contract drop to HK$0.015 while the stock dropped only by HK$0.01 given the entitlement ratio is 1?
Why does the liquidity provider quote wider spread for a warrant with an illiquid stock underlying than a liquid or blue chip underlying?
I hold a call warrant on HSI. I understand the call warrant price should drop as the HSI drops. However, why did the liquidity provider lower the bid price only but not the ask price. This deprives my chance of buying more call warrant at a lower price.
I hold a call warrant linked to an HSI constituent security and the entitlement ratio is 1. The closing price of the warrant and the underlying was as below.
I hold a bull CBBC linked to an HSI constituent stock. The CBBC was still trading until close of the market at 4:00 p.m. I noted that the CBBC was knocked out subsequently at around 4:10 p.m. How could the CBBC be knocked out after market close at 4:00 p.m.?
I hold a call warrant with an exercise price of HK$12.28 and the entitlement is 1 share. The underlying company announced a bonus issue of one bonus share for every ten existing shares. How does the bonus issue affect the price and the terms of the call warrant?
Will I receive any payment if a mandatory call event occurs and how is MCE valuation period determined?
I hold a call warrant on a stock underlying with its expiry date on 14 June. On 5 April, the underlying declared a final dividend and the ex-dividend date of the underlying falls on 29 May. The ex-dividend date of the final dividend for last year was 17 June. How does this affect the price of the warrants?
I hold a CBBC and my broker confirmed that I had sold the CBBC during a pre-opening session. However, the broker later told me the trade was cancelled as a mandatory call event had occurred during the pre-opening session. What is that about?
Can I trade in a warrant or CBBC on the expiry date?
How and when are warrants and CBBCs settled?
How is the settlement price at expiry of a warrant calculated?
How is the settlement price at expiry of a CBBC calculated?
An underlying stock will be delisted and cancelled for cash by way of privatisation. What will I get if I am holding warrants or CBBCs linked to that stock?
What is the method of determining the 5-day average closing price of the underlying stocks when there is a trading suspension or no closing price (e.g. typhoon no. 8) on the following day(s)?
What is the method of determining the settlement price at expiry of a CBBC when there is a trading suspension or no closing price (e.g. typhoon no. 8) for the underlying stocks on the following day(s)?
How to compare between the US CBBCs and US Warrants?
How would US CBBC move by 1 tick?
Can US CBBC trigger Mandatory Call Event during Hong Kong Trading Hours?
For US CBBC, how to calculate the Residual Value?
At Expiry, how to calculate Settlement Value for US CBBC?
Why should I invest in US Stock Warrants?
What factors affect the price of a US stock warrant?
How to trade post-company result with a US stock warrant before the opening of US stock market?
How to hedge your long position risk of a US stock with a US stock put warrant?
How to calculate the cash settlement value of a US Stock Warrant at expiry?
How can you trade USD-denominated Warrants?
Will the listing date be affected in the event of an exceptional situation occurring after launch date?
Will structured products be available for trading under severe weather trading?