Tutorials

Determination of the Cash Settlement Amount

Mathematically, the formulae relating to Cash Settlement Amount per warrant are expressed as:

• For call warrant: 1/Conversion Ratio x (Settlement Price - Exercise Price)
• For put warrant: 1/Conversion Ratio x (Exercise Price - Settlement Price)

The Cash Settlement Amount per warrant for a call warrant is the difference between the Settlement Price and the Exercise Price, multiplied by the reciprocal of the conversion ratio.

The Cash Settlement Amount per warrant for a put warrant is the difference between the Exercise Price and the Settlement Price, multiplied by the reciprocal of the conversion ratio.

Determination of the Settlement Price

The only unknown in the Cash Settlement Amount formula is the Settlement Price. The Settlement Price is determined as the arithmetic average of the official closing prices of the underlying share on each of the 5 Exchange Business Days (each a "Valuation Date") immediately preceding the Expiry Date.

Suppose the Expiry is the 10th, the 5 Valuation Dates are the 3rd, 6th, 7th, 8th and 9th.

The Cash Settlement Amount payment date for warrants listed on the SGX shall be no later than 4 Business Days following the expiry date.

The Cash Settlement Amount payment date for warrants listed on the HKEx shall be no later than 3 Business Days following the expiry date.

Does the warrant-holder furnish an exercise notice?
If automatic exercise is applicable to a warrant, the warrantholder does not need to furnish an exercise notice. If the Cash Settlement Amount is positive (ie the warrant is in-the-money), the warrant will be automatically exercised. The Cash Settlement Amount will be credited to the warrant holder by the Cash Settlement Amount payment date.