The following table briefly explains some of the common terms used in these FAQs when describing structured products and how they work. Please also refer to the relevant listing documents, which contain important details of how these terms apply in practice. Term What this means 5-day average closing price The average of the closing prices of the underlying stock quoted on each of the 5 business days falling immediately before the expiry date of a standard warrant or inline warrant. This price is used to compare against the exercise price of a standard warrant, and for the case of inline warrants to compare against the upper and lower strike prices, to determine the cash settlement amount at expiry. Active quote A method of providing liquidity by actively inputting orders into the Exchange’s trading system At-the-money A standard warrant or CBBC is at-the-money when the underlying asset price is equal to the strike price. Call price or level A pre-set benchmark price or level of the underlying asset used to determine if a mandatory call event has occurred. Cash settlement amount The potential cash amount payable under a structured product at expiry, calculated in accordance with a payout formula specified in the listing document. CBBC Callable bull or bear contract listed on the Exchange. Closing auction session For a full day trading, closing auction session commences at 4:00 p.m. (12:00 noon for half day trading) and ends at 4:10 p.m. (12:10 p.m. for half day trading). A closing auction allows trades to be executed at the closing price. During a closing auction, market participants may input buy and sell orders, with the price that most volume can be traded at forming the closing price. All orders will then be executed at that price. Entitlement ratio The number of standard warrants or CBBCs needed to buy (or sell) one unit of the underlying asset. For example, a standard warrant linked to stock XYZ that has an entitlement ratio of 10:1 means that the holder of that standard warrant needs 10 standard warrants to acquire one unit of stock XYZ. In general (assuming other trade terms being the same), a standard warrant with a high entitlement ratio will have a lower price generally, and vice versa. European style European-style warrants can only be exercised on the expiry date Exchange The Stock Exchange of Hong Kong Limited. Exercise price or level A pre-set benchmark price or level to determine the potential cash settlement payout at expiry of a standard warrant or CBBC. For the case of inline warrants, it refers to an upper and a lower strike prices or levels used to determine the potential cash settlement payout at expiry. Expiry date The day on which the term of a structured product expires Inline warrants A different type of structured product compared to standard warrants, which offers a fixed cash settlement amount of $1 per warrant when the underlying settlement price or level falls within/at the upper and lower strike prices or levels at expiry, otherwise investors will receive $0.25 per inline warrant. In-the-money A standard warrant or CBBC is in-the-money when the underlying asset price falls above the strike price or level (in the case of call warrant / bull contracts) or below the strike price or level (in the case of put warrant / bear contracts). In-the-range An inline warrant is in-the-range when the underlying falls within or at the upper and lower strike prices or levels. Liquidity provider An Exchange participant appointed by the issuer to provide liquidity for a particular structured product. Listing documents They are supplement listing document and base listing document Lower strike price or level Applies to inline warrants only, being the lower of the two strike prices or levels as part of an inline warrant product terms, use to determine at expiry the cash settlement amount. MCE or Mandatory Call Event An event that occurs when the spot price or level of the underlying asset reaches or goes beyond the call price or level during the term of a CBBC. MCE valuation period A period commencing from the time at which a mandatory call event occurs in respect of a CBBC in a trading session of the Exchange to the end of the following trading session. The MCE valuation period may be extended due to the occurrence of disruption to the trading of the underlying asset. Please see the listing documents of the relevant CBBC for further details. Observation period A period commencing from the first listing date of a CBBC to its last trading day (both days inclusive) in which the issuer will observe if a mandatory call event has occurred in respect of such CBBC. OTC or over-the-counter An off-exchange trading platform where financial instruments are traded directly between two parties on negotiated prices and terms. Out-of-the-money A standard warrant or CBBC is out-of-the-money when the underlying asset price falls below the strike price or level (in the case of call warrant / bull contracts) or above the strike price or level (in the case of put warrant / bear contracts). Out-of-the-range An inline warrant is out-of-the-range when the underlying falls outside the upper and lower strike prices or levels. Product Sheets Product Sheets containing specific product terms and liquidity provision requirements for each type of structured products approved by the Exchange, as published by the Exchange from time to time on the Exchange’s website to provide guidance to structured products issuers for product issuances Quote request A method of providing liquidity by entering orders into the Exchange’s trading system, in response to an investor’s request. Residual value The residual cash payment (if any) paid to an investor in a Category R CBBC upon the occurrence of a mandatory call event. Settlement day A business day on which the settlement services of CCASS are open for use by CCASS participants. In general, a trading day will also be a settlement day, except that Christmas Eve, New Year’s Eve and Lunar New Year’s Eve will normally be prescribed by the Exchange as non-settlement days. Standard warrants Plain vanilla warrants with simple expiration date, strike price or level; call and put types with no additional special features such as those in exotic warrants. Structured products Hong Kong listed structured products which include standard warrants, inline warrants and CBBCs. Underlying asset The asset(s) to which a structured product is linked. Upper strike price or level Applies to inline warrants only, being the higher of the two strike price or level as part of an inline warrant product terms, use to determine at expiry the cash settlement amount. Volatility The degree of change in the price of the underlying asset of a particular warrant: the greater the fluctuations, the higher the volatility. VCM or Volatility control mechanism VCM is a dynamic price limit model applied at the individual instrument level. Where the price deviates more than a predefined percentage within a specific time frame, the instrument will trade within band during a 5-minute cooling off period. This provides a window allowing market participants to reassess their strategies, if necessary. It also helps to re-establish an orderly market during volatile market situations.

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Glossary

The following table briefly explains some of the common terms used in these FAQs when describing structured products and how they work. Please also refer to the relevant listing documents, which contain important details of how these terms apply in practice.

Term	What this means
5-day average closing price	The average of the closing prices of the underlying stock quoted on each of the 5 business days falling immediately before the expiry date of a standard warrant or inline warrant. This price is used to compare against the exercise price of a standard warrant, and for the case of inline warrants to compare against the upper and lower strike prices, to determine the cash settlement amount at expiry.
Active quote	A method of providing liquidity by actively inputting orders into the Exchange’s trading system
At-the-money	A standard warrant or CBBC is at-the-money when the underlying asset price is equal to the strike price.
Call price or level	A pre-set benchmark price or level of the underlying asset used to determine if a mandatory call event has occurred.
Cash settlement amount	The potential cash amount payable under a structured product at expiry, calculated in accordance with a payout formula specified in the listing document.
CBBC	Callable bull or bear contract listed on the Exchange.
Closing auction session	For a full day trading, closing auction session commences at 4:00 p.m. (12:00 noon for half day trading) and ends at 4:10 p.m. (12:10 p.m. for half day trading). A closing auction allows trades to be executed at the closing price. During a closing auction, market participants may input buy and sell orders, with the price that most volume can be traded at forming the closing price. All orders will then be executed at that price.
Entitlement ratio	The number of standard warrants or CBBCs needed to buy (or sell) one unit of the underlying asset. For example, a standard warrant linked to stock XYZ that has an entitlement ratio of 10:1 means that the holder of that standard warrant needs 10 standard warrants to acquire one unit of stock XYZ. In general (assuming other trade terms being the same), a standard warrant with a high entitlement ratio will have a lower price generally, and vice versa.
European style	European-style warrants can only be exercised on the expiry date
Exchange	The Stock Exchange of Hong Kong Limited.
Exercise price or level	A pre-set benchmark price or level to determine the potential cash settlement payout at expiry of a standard warrant or CBBC. For the case of inline warrants, it refers to an upper and a lower strike prices or levels used to determine the potential cash settlement payout at expiry.
Expiry date	The day on which the term of a structured product expires
Inline warrants	A different type of structured product compared to standard warrants, which offers a fixed cash settlement amount of $1 per warrant when the underlying settlement price or level falls within/at the upper and lower strike prices or levels at expiry, otherwise investors will receive $0.25 per inline warrant.
In-the-money	A standard warrant or CBBC is in-the-money when the underlying asset price falls above the strike price or level (in the case of call warrant / bull contracts) or below the strike price or level (in the case of put warrant / bear contracts).
In-the-range	An inline warrant is in-the-range when the underlying falls within or at the upper and lower strike prices or levels.
Liquidity provider	An Exchange participant appointed by the issuer to provide liquidity for a particular structured product.
Listing documents	They are supplement listing document and base listing document
Lower strike price or level	Applies to inline warrants only, being the lower of the two strike prices or levels as part of an inline warrant product terms, use to determine at expiry the cash settlement amount.
MCE or Mandatory Call Event	An event that occurs when the spot price or level of the underlying asset reaches or goes beyond the call price or level during the term of a CBBC.
MCE valuation period	A period commencing from the time at which a mandatory call event occurs in respect of a CBBC in a trading session of the Exchange to the end of the following trading session. The MCE valuation period may be extended due to the occurrence of disruption to the trading of the underlying asset. Please see the listing documents of the relevant CBBC for further details.
Observation period	A period commencing from the first listing date of a CBBC to its last trading day (both days inclusive) in which the issuer will observe if a mandatory call event has occurred in respect of such CBBC.
OTC or over-the-counter	An off-exchange trading platform where financial instruments are traded directly between two parties on negotiated prices and terms.
Out-of-the-money	A standard warrant or CBBC is out-of-the-money when the underlying asset price falls below the strike price or level (in the case of call warrant / bull contracts) or above the strike price or level (in the case of put warrant / bear contracts).
Out-of-the-range	An inline warrant is out-of-the-range when the underlying falls outside the upper and lower strike prices or levels.
Product Sheets	Product Sheets containing specific product terms and liquidity provision requirements for each type of structured products approved by the Exchange, as published by the Exchange from time to time on the Exchange’s website to provide guidance to structured products issuers for product issuances
Quote request	A method of providing liquidity by entering orders into the Exchange’s trading system, in response to an investor’s request.
Residual value	The residual cash payment (if any) paid to an investor in a Category R CBBC upon the occurrence of a mandatory call event.
Settlement day	A business day on which the settlement services of CCASS are open for use by CCASS participants. In general, a trading day will also be a settlement day, except that Christmas Eve, New Year’s Eve and Lunar New Year’s Eve will normally be prescribed by the Exchange as non-settlement days.
Standard warrants	Plain vanilla warrants with simple expiration date, strike price or level; call and put types with no additional special features such as those in exotic warrants.
Structured products	Hong Kong listed structured products which include standard warrants, inline warrants and CBBCs.
Underlying asset	The asset(s) to which a structured product is linked.
Upper strike price or level	Applies to inline warrants only, being the higher of the two strike price or level as part of an inline warrant product terms, use to determine at expiry the cash settlement amount.
Volatility	The degree of change in the price of the underlying asset of a particular warrant: the greater the fluctuations, the higher the volatility.
VCM or Volatility control mechanism	VCM is a dynamic price limit model applied at the individual instrument level. Where the price deviates more than a predefined percentage within a specific time frame, the instrument will trade within band during a 5-minute cooling off period. This provides a window allowing market participants to reassess their strategies, if necessary. It also helps to re-establish an orderly market during volatile market situations.

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