Glossary

The final payout of a locked-in return warrant is determined by averaging the locked-in profits (including zero profits) on all the fixing dates.

Funds are priced based on the immediately subsequent net asset value.

The shares publicly owned and available for trading

A fund that invests in a number of hedge funds.

An analysis method that looks into the financials and operations of a company.

A futures contract represents a commitment to buy or sell a predefined amount of its underlying asset at a predetermined price on a specified future date.

Using a low-priced instrument to gain exposure to the price movement of another instrument of a higher value.

Gearing ratios measure the sensitivity of a warrant price to any change in the underlying asset price. Simple gearing measures how many times the underlying asset costs more than the warrant you buy. Effective gearing measures the expected rate of change in the theoretical warrant price with respect to a 1% change in the underlying asset price.

A resolution to be voted in an annual general meeting that grants the right to a company listed on the SEHK to increase its share capital by up to 20%.

Shareholder meetings convened by a listed company annually or for a special purpose.

A market under the Stock Exchange of Hong Kong targeting growth companies for listing.

A type of funds that offers fund holders a guaranteed rate of return barring certain pre-determined conditions.

Shares of Mainland-incorporated enterprises which are listed in Hong Kong and denominated in Hong Kong dollar.

A defensive strategy to reduce the risk of unfavourable price movements of a financial instrument by taking an opposite position in another related instrument, usually a derivative like a futures or an options contract.

Funds that adopt a variety of alternative investment strategies.

Hong Kong Interbank Offer Rate

Hong Kong Securities and Clearing Company Limited, the clearing house of the cash market in Hong Kong.

The front-line regulator of banks in Hong Kong

The document that indicates the projected amounts of money that an investor can get back at different time periods before the end of the term of an investment-linked assurance scheme (ILAS).

The volatility of the underlying asset price “implied” by the market price of a warrant, calculated by working backwards through a certain option pricing model from the warrant price.

A fund whose investment return is linked to the performance of a particular index.

Independent non-executive directors

Transactions in stocks or derivatives conducted based on insider information in order to make profits or avoid losses.

When the underlying asset price is above the exercise price of a call warrant/option or below the exercise price of a put warrant/option.

For a call warrant, its intrinsic value is the higher of 0 or (underlying asset price – exercise price). For a put warrant, it is the higher of 0 or (exercise price – underlying asset price).

A life insurance policy that combines with fund investments.

The company responsible for receiving, assessing and determining claims against Investor Compensation Fund.

The fund established for compensating investors for their losses in their investment in products traded on Hong Kong Exchanges and Clearing due to broker default.

An account opened in an investor’s own name at CCASS to keep his own shares.

Companies that hold SFC licences for conducting regulated activities in Hong Kong.

An order type to buy/sell a security at a specified or a better price.

The designated brokerage responsible for providing liquidity for a derivative warrant by either responding to quote requests or inputting quotes continuously.

There are two types of listing documents for derivative warrants. The base listing document sets out the background and financial strength of the issuer or the guarantor (if there is one). The supplemental listing document carries specific information about a derivative warrant’s features and terms.

An exotic warrant that locks in the profits on periodic fixing dates when the warrant is in-the-money. Zero profits are locked in when the warrant is at-the-money or out-of-the-money.

A market under the Stock Exchange of Hong Kong that targets established companies for listing.

A demand to a margin account holder to deposit cash or securities when the account holder’s equity in a margin account falls below the maintenance requirement set by a brokerage.

An order type to buy/sell a security at the current market price.

An exotic warrant that has a “knock-in price” in addition to the exercise price. It will gain a profit only if it is in-the-money with respect to the “knock-in price”, but the amount of the profit is determined by reference to the exercise price instead of the “knock-in” price.

A collective investment scheme that is established as a limited liability company.

Net asset value, which is equal to the total assets value minus liabilities of a fund and then divided by the number of units of a fund.

Non-executive directors

A shareholder whose shares are usually held through a brokerage or bank and the shares are normally registered in the name of nominee.

An option is a contract that gives the buyer the right, but not the obligation, to buy or sell a predetermined quantity of the specified underlying asset at a particular price in the future.

Over-the-counter market

When the underlying asset price is below the exercise price of a call warrant/option or above the exercise price of a put warrant/option.

Document that lists out the investment objectives, asset mix and trading mechanism of a fund.

Document that lists out the features and risks, trading mechanism of a structured product.

The value shown on the face of a stock, bond, note which is set by the issuer

Stocks of lower price

This is the profit locked-in by comparing the periodic reference price with the exercise price of a locked-in return warrant on each fixing date.

It refers to the average of the closing prices of the underlying (usually a stock) on the five trading days immediately before the fixing date.

Persons to whom new shares are issued in a placing.

A fund raising method where shares of a listed company are issued to selected persons.

A broker firm may re-pledge margin clients’ stocks to its banker for loan facilities. If a broker firm is in financial difficulties, the bank may sell the re-pledged stocks to pay off the loans. In such a case, a margin client may not be able to get back all his shares. This is known as pooling risk.

The par or face value of a bond

The document that explains the objectives of the fund options available under investment-linked assurance scheme (ILAS), return calculations, etc.

A listed company withdraws its listing on a stock exchange.

Give holders the right to sell a given amount of the underlying asset at a predetermined exercise price within a certain period.

Give holders the right to sell a given amount of the underlying asset at a predetermined exercise price within a certain period.

Document that provides details of an imminent offer of shares or bonds by a company.

Also called offering document, which lists out the investment objectives, asset mix and trading mechanism of a fund.

The percentage by which a warrant price exceeds its intrinsic value. Normally expressed as a percentage of the underlying asset price.

The price of an option contract.

A futures contract is at a premium if the contract’s going price is higher than that of the underlying asset.

Called REIT in abbreviation, a fund that invests in a portfolio of income-generating real estates.

Shares of companies incorporated outside Mainland but their business, assets, markets and ownership have a strong Mainland orientation.

Banks registered with the SFC for conducting regulated activities in Hong Kong

A shareholder of a company whose shares are registered in his own name

A private company that updates the share register of a listed company.

The term refers to 10 types of business activities regulated by the SFC, including dealing in securities, dealing in futures contracts, asset management, advising on corporate finance among others.

The risk that a bond holder will get lesser return when he re-invests the proceeds from a callable bond being called by the issuer

Bank staff who can perform regulated activities defined under Securities and Futures Ordinance

Individuals who oversees the daily operation of an SFC-licensed corporation

A rights issue allows existing shareholders to subscribe for new shares in proportion of their existing shareholding by exercising the rights allotted to them.

Stocks of relatively smaller listed companies and are generally of lower market capitalisation.

An instruction to CCASS where an investor can transfer his stockholding from one broker’s account at CCASS to another broker’s account at CCASS without involving physical scrip.

A number of existing shares is combined to become a new share.

Also called share subdivision in which an existing share is divided into a number of new shares.

A risk-adjusted return indicator defined as the annual return of an investment tool divided by its annualised standard deviation.

A trading strategy by which an investor attempts to gain profits by first selling a security that he borrows from a brokerage/third party and then
buying it back at a lower price.

A risk-adjusted return indicator defined as the annual return of an investment tool divided by its downside deviation of its return.

SGM in abbreviation, a shareholder meeting called by a directors or shareholders holding a certain amount of voting rights in aggregate to discuss
a particular resolution.

A company that conducts due diligence and facilitates a company to list on the Stock Exchange of Hong Kong.

The difference between bid and offer quotes.

A sub-account under a broker’s account at CCASS to keep the stocks of a designated client only

An order type to buy a price above or sell at a price below a specified price

An exotic warrant which combines a call warrant and a put warrant with the same underlying asset, exercise price and expiry date. It is suitable for those investors who anticipate a significant upward or downward movement in the underlying asset price.

Also called exercise price, the predefined price at which a warrant or an option holder trades the underlying asset.

Warrants issued by a listed company, giving holders the rights to buy the underlying shares of the company.

Trading in the shares of a listed company is stopped.

Synthetic products whose returns are linked with their underlying assets.

Take control over a corporation by another corporation, through acquisition or merger.

The number of that warrant outstanding in the market

The amount the price of a warrant exceeds its intrinsic value. For a call warrant, its intrinsic value is the higher of 0 or (underlying asset price – exercise price). For a put warrant, it is the higher of 0 or (exercise price – underlying asset price).

A fund raising method where existing major shareholders first place their shares to independent persons and then subscribe for the new shares issued by a listed company

A company safekeeps the assets of a unit trust.

A fund that has not been authorised by the SFC.

A collective investment scheme operates under a trust system.

Unlisted retail structured products include equity-linked deposits, equity-linked notes, equity-linked investments, credit-linked notes, fund-linked notes, commodity-linked notes and index-linked notes.

An indicator of the extent of the price fluctuation of a financial instrument, usually expressed by the annualised standard deviation of the daily price change. A high volatility indicates that the instrument’s price moves up and down by a large extent over a period of time.

A voting method where the number of votes a shareholder has is equal to the number of shares he holds.

A voting method where each shareholder attending a general meeting has one vote only.

An instrument that gives investors the right, but not the obligation, to buy or sell the underlying asset, usually a stock, at a pre-set price on or before a specified date.

An exotic warrant that will cease trading and pay the holders a fixed rebate if it is “knocked” out during a predefined “window period” by reference to a pre-set “barrier price” (i.e. For a window barrier call warrant, the closing price of the underlying asset is equal to or lower than the barrier price on any trading day during the window period.

For a window barrier put warrant, the closing price of the underlying asset is
equal to or higher than the barrier price on any trading day during the window period.).

A callable bond’s rate of return derived by dividing the total coupon and principal to be received before the bond is called by its current price.

A bond’s rate of return derived by dividing the total coupon and principal an investor receives for holding the bond until its maturity by the bond’s current price.