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CBBC are traded on AMS/3 of the Exchange during regular trading hours in board lot multiples (e.g. one board lot equals 10,000 shares), settled on T+2 (T being the transaction day). Stock codes for CBBC are assigned to start with 6 (i.e. 6XXX).
Similar to the stock trading arrangements, transaction fees include brokerage commission, transaction levy, trading fee, CCASS settlement fee and investor compensation levy (suspended since December 2005). Stamp duty is in general not applicable to cash-settled CBBC, but investors are advised to refer to the listing documents for information.
Investor Compensation Fund covers the losses due to default of licensed intermediaries or authorized financial institutions. However, default by issuers will not be covered by the fund.
In any cases of stock suspension from trading on the Exchange, the related CBBC will also be suspended from trading until trading of the underlying stock resumes. For trading suspensions involving overseas stocks, investors should refer to the arrangements stated in the CBBC listing documents.
CBBC Liquidity Providers
CBBC issuers are required to appoint a Liquidity Provider for each of their listed CBBC. Each Liquidity Provider should have a broker number of either 95XX or 96xx for identification. An investor can request a quote from a Liquidity Provider if the listing document states that quotes are provided upon request. For CBBC with Liquidity Providers that respond to quote requests, the telephone numbers of the Liquidity Providers are available on the CBBC stock page of AMS/3, in the listing document and on the HKEx website.
The exact obligations of the Liquidity Provider for each CBBC are shown in the listing document. In normal circumstances, Liquidity Providers should provide liquidity for CBBC issues through continuous quotes or in response to quote requests from five minutes after the market has opened until the market closes. The Liquidity Provider should provide liquidity for at least 10 board lots of the CBBC. An issuer must specify the maximum spread between the bid and offer prices for its CBBC and the maximum response time in the listing document.
Capital adjustments
For CBBC with underlying Hong Kong stocks, the Call Price, Strike Price and entitlement ratio will be adjusted if there is a capital adjustment (including dividend adjustment) to the underlying stocks, the adjustment of the CBBC must follow the prevailing principles of stock futures/stock options, when applicable.
Usually no adjustment for ordinary cash dividends is made for stock futures/stock options but for other cash distribution such as cash bonus, special or extraordinary dividend, adjustment would be made if the value of payment is at least 2% or more of the share's closing price on the day of the announcement.
For CBBC with underlying Hong Kong indices, there will not be adjustments for capital adjustments to any of the underlying index's constituent stocks. For CBBC with other underlying assets, investors should refer to the CBBC listing documents.
Investors are advised to take note of any announcements relating to capital adjustments to the underlying stock(s) for the CBBC they hold. Trading of the CBBC may be more volatile between the adjustment announcement by the company and the ex-date.
Short selling
Short selling is only allowed for the respective Liquidity Providers of CBBC.
Expiry day and last trading day
Each CBBC has a unique expiry date as specified by the issuer in the listing document. On expiry date, CBBC cannot be sold. The expiry day of CBBC is not the same as the last trading day. The last trading day is the same as the Mandatory Call Event day (if called before expiry) or one trading day before the expiry day of the CBBC (if not called).
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