Directive for the Listing of Derivatives

Transcription

1 Directive The Listing of Derivatives Directive for the Listing of Derivatives Basis Art. 29 LR (revised version 2000) Decisions of 1 March 2000, 17 May 2006 and 29 October 2008 Entry into force 1 June 2000, 1 June 2006 and 1 January 2009 Purpose of the Directive Definitions and examples of derivatives Options/Warrants Synthetically hedged warrants This Directive for the Listing of Derivatives ( Directive ) lays down the requirements pertaining to issuers, products and disclosure for the listing of derivatives on the SWX Swiss Exchange ( SWX ). It supplements and elucidates the appli - cable provisions of the Listing Rules ( LR ). Derivatives within the context of this Directive are deemed to be financial instruments that are issued as securities on a large scale with uniform features and are characterised by their value being dependent upon that of some other product ( underlying instrument ). Underlying instruments in this respect can be namely equity securities, bonds, indices, currencies, interest rates, precious metals, commodities, funds or baskets consisting of any of those underlying instruments. The admissible underlying instruments will be explained in more detail in ref. nos. 28 ff., below, which pertains to admissible underlying instruments. Convertible bonds are not deemed to be derivatives within the context of this Directive. Derivatives in this sense (with no intention that the following overview be considered all-inclusive) are in particular: In return for payment of the warrant/option price (premium), a warrant/option grants the buyer the right, but not the obliga tion, to purchase (call option/warrant) or sell (put option/warrant) a predetermined amount of a specific underlying instrument on or before a predetermined point in time (the expiration date) for a predetermined price (exercise price). The issuer of such warrants secures the financial obligations ari sing from the issue in a synthetic manner (also referred to as dynamic/synthetic hedging )

2 Admission of Securities to the SWX Swiss Exchange Writers warrants ( Stillhalter- Optionen ) Shareholder and employee options Warrants associated with warrant bonds Combined derivative products In the listing prospectus, the issuer does not need to provide any specific details on the method of hedging that will be employed. The issuer of such warrants secures the financial obligations arising from the issue by physically depositing the corresponding number of underlying instruments required to ensure that the issuer can at any time fulfil its obligation to deliver such securities; as a part of this, the issuer is granted either a real secu rity claim (right of pledge) on the underlying instruments that are on deposit, or, in case the issuer itself holds ownership of the underlying instruments on deposit, a right of pledge is granted in favour of the warrant holders. In addition, writers warrants are generally issued on an agency basis, i.e. in the name of the issuer, but for the account of the writer. The expression Stillhalter- Optionen may be used only if the conditions described here are fulfilled. In the listing prospectus, the issuer of writers warrants must provide specific details of the manner in which the issue is secured. This type of option gives the owner (shareholder or em - ployee) the right to receive equity securities of the issuer of the options. As a rule, they are distributed as shareholder options in place of or in combination with a cash dividend or offered to employees of the issuer as a salary component or gratuity within the frame work of an incentive programme. Warrants associated with warrant bonds, as well as warrants that are issued by a third party in connection with a given bond offering, are actually issued together with warrant bonds but as a rule are detachable from the bond. Once detached, they trade independently from the original bonds and qualify as stand-alone securities. Futures and options in particular count among the traditional derivatives, whereby the former do not fall under this Directive. Combined products such as capital-guaranteed derivatives and warrant (i.e. convertible) bonds consist of a combination of different financial instruments normally a bond with warrants or a conversion right

3 Directive The Listing of Derivatives Capital-guaranteed derivatives Capital-guaranteed derivatives consist of a combination of different financial instruments, normally a fixed-income security with associated warrants or a conversion right. Both the warrant and the conversion right enable the holder to participate in the price movement of one or more underlying instruments. The fixed-income security guarantees the investor that he will re ceive repayment of all or a significant portion of his original investment. Among the most common capital-guaranteed derivatives are the so-called GROI (Guaranteed Return on Investment), CPU(N) (Capital Protected Unit [Note]), PIP (Protected Index Participation) and IGLU (Index Growth Linked Unit) Reverse convertible without capital protection Reverse convertible with capital protection Products for which cash or securities will be delivered A reverse convertible is a combination of a fixed-income security and an option, or a stock with an associated option posi tion. In the former case, the investor receives up front a fixed-in come security. At the same time, he stands as seller of a put option and in case he also participates in a possible rise in the value of the underlying instrument as purchaser of a call option. Under cir cum stances, the investor is obligated upon expiration to ac quire the underlying instrument at the exercise price. That will be the case if, on the expiration date, the underlying instrument lies at or below the exercise price. Should its price be above the exercise price on expiration date, the issuer will not exercise its put option. The investor receives repayment of the nominal value, exercises, as the case may be, his call option and thus receives in addition a cash payment of the proportional increase in value of the underlying instrument. Among this type of product are, for example, the so-called TORO (Title or Return Options), BLOC (Buy Low or Cash), REVEXUS (Reverse Exchangeable Units), and GOAL (Geldoder Aktienlieferung, i.e. cash or stock delivery). In the case of reverse convertibles with capital protection, a further option position supplements the fixed-income security and previously described put and call positions. This takes place by not only the investor s standing as the seller of a put option to the issuer, but also by the issuer s selling a put to the investor. Once the issuer exercises its put option upon expiration and delivers to the investor the underlying instrument that has fallen in value at the price of the amount originally invested, the investor will in turn exercise his own put and deliver back to the issuer the underlying

4 Admission of Securities to the SWX Swiss Exchange instruments against a demand for pay ment of the mutually agreed-upon (and comparatively lower) exer cise price (= capital protection). Requirements for the issuers of derivatives Admissible underlying instruments Insofar as no differing or supplemental requirements are specified hereinafter, the prerequisites for listing with respect to the issuers are in keeping with Arts LR. Derivatives may be listed if the issuer fulfils at least one of the following criteria: a. the issuer is fully subject to the Swiss Banking Act (BankA) or, as a securities dealer, to the Stock Exchange Act (SESTA); b. the issuer is subject to a comparable foreign super visory authority, whereby certification of such supervision and proof of the comparability must be provided by the issuer. Furthermore, derivatives may be listed independently of the afore men tioned requirements if the derivatives entitle the holder to acquire securities or surrogate instruments that have been issued by the issuer of the derivatives or an af - filiated group company and such securities have been created or authorised as follows: a. securities held in reserve (fully paid up to at least par value); b. authorised capital (authorised by resolution of the gene - ral meeting of shareholders); c. conditional capital (authorised by resolution of the gene - ral meeting of shareholders); d. bonds (authorised by resolution of the board of directors). Derivatives may be listed if they are directly or indirectly associa ted with underlying instruments that are regularly priced in the marketplace. In particular, the following groups of underlying instruments are admissible: a. equity securities or bonds which are listed on or have been admitted to trading on the SWX; b. foreign equity securities or bonds, insofar as they are listed on or have been approved by the responsible authorities for trading on an official securities exchange

5 Directive The Listing of Derivatives in the country of domicile of the issuer of the underlying instruments or on some other internationally recognised exchange; Minimum capitalisation c. indices based on the prices of the aforementioned under lying instruments, insofar as the respective index is recalculated at regular intervals and publicised accordingly; d. freely convertible currencies; e. interest rates; f. banking-standardised precious metals specifically gold, silver and platinum; g. commodities traded on an official domestic or foreign fu tures exchange; h. investment funds which are listed in the main segment of the SWX or on another securities exchange recognised by the SWX and the offering or distribution of which either in or from Switzerland has been approved, and which primarily invest in the aforementioned underlying instruments; i. baskets consisting of the aforementioned underlying instruments. At the time of submission of the listing application, the capitalisation of the entire issue of derivatives (number of securities x issuance price) must amount to a minimum of CHF 1 million. (cancelled) (cancelled) a. (cancelled) b. (cancelled) c. (cancelled) d. (cancelled) e. (cancelled) f. (cancelled) g. (cancelled) h. (cancelled) i. (cancelled)

6 Admission of Securities to the SWX Swiss Exchange Obligation to produce a prospectus j. (cancelled) k. (cancelled) For warrants associated with warrant bonds, the total capita lisation of the bond issue is the determining amount. Issuers of derivatives are subject to the disclosure provisions as laid out in the LR (namely, Arts. 32 ff.). The issuers of derivatives have three ways of fulfilling the disclosure obligation: For each individual issue, a complete listing prospectus is drawn up. This must contain all material information with respect to the issuer, the derivative security and the underlying instrument. With respect to information pertaining to the issuer, referral may be made to a previous listing prospectus in accordance with the provisions of the LR (Art. 42). The issuer of derivatives has the possibility of publishing once a year a complete set of basic documentation ; this basic documentation will contain details only on the issuer as required pursuant to the LR. The basic documentation must be approved by the Admission Board in order for the issuer to be able to limit itself to the publication of a short-form prospectus for each additional issue during a 12-month time frame. This ( shortform prospectus contains information related to the deri - va tive security ( terms and conditions ) and the associated underlying instruments. Reference to the basic documentation is required, and in all cases the basic documentation must accompany the short-form prospectus. Together, the basic documentation and short-form prospectus comprise the listing prospectus. The issuer of derivatives has the possibility to establish an issuance programme with respect to various types of deriva - tives, under which individual issues can then be issued. The programme documentation must be submitted to the SWX for approval. The programme documentation must consist of one portion in which all information on the issuer can be found. The document will contain one or more additional portions in which details of the terms and conditions that will apply to

7 Directive The Listing of Derivatives the respective offerings of individual types of derivatives issues are provided. For each issue, a supplemental document ( pricing supplement ) must be produced in which the details of the terms and conditions are spelled out; if the programme has been formu lated appropriately, this can be made in schematic form. In ad dition, the pricing supplement must contain the required details on the respective underlying instruments. Together, the programme documentation and the pricing supplement comprise the listing prospectus. For all three of the above-mentioned means of documentation, the principle of timely information applies. This means that, in the first case above, the reference possibility is only in force as long as the information in the listing prospectus to which reference is being made is still current. If material changes have taken place with respect to the previously disclosed informa tion which are not contained in the annual or interim financial reports either, then such information is to be disclosed concurrently with the respective issue. In the cases described in ref. nos and above, the documentation may either be updated if, when and as needed, or appropriate supplemental documents can be produced which in all cases must be provided along with the other documents that constitute the documentation; this entire documentation then constitutes the listing prospectus. For each issue, the associated documentation must contain a no material change declaration as well as the prescribed responsibility clause in addition to the legally valid signature of the issuer Listing notice (cancelled) (cancelled) (cancelled) (cancelled) a. (cancelled) b. (cancelled) c. (cancelled) d. (cancelled)

8 Admission of Securities to the SWX Swiss Exchange Listing procedure The listing procedure is in keeping with Arts. 50 ff. LR. The issuer has the possibility to make use of the procedure for provisional admission in accordance with Arts. 61 ff. LR. In such an instance, the following points are to be observed: a. The issuer must submit to the SWX an application form, which may be obtained from the Admission Board, as well as the so-called term sheet which spells out the terms and conditions of the respective issue. The application form must contain all information necessary for the establishment and description of the derivative security. If the form has been completed in full, commencement of provisional trading will take place at the earliest three exchange trading days sub sequent to the receipt of the application. The SWX is free to determine the exact date. b. The issuer is then obligated to submit the listing application within a two-month time frame in order to ensure that the listing on the SWX is effected. If the documentation provided contains differences from the most recently submitted details, then those changes must be high lighted in a copy of the new documentation. The SWX checks the requirements for listing, and ensures that the listing documentation that is submitted is in keeping with the LR. If the issuer opts to make use of the so-called basic documentation procedure or the issuance programme approach within the context of this Directive, then the SWX will limit its exa mination to: a. a thorough check of the complete set of basic documenta tion prepared once annually or, as the case may be, the programme documentation. The issuer must therefore submit the respec tive documents to the Admission Board in a timely manner. Approval of the documentation will be granted and notified to the issuer at the latest within a four-week time frame; b. checking of the application form for provisional admission; as well as c. a review of the short-form prospectus that must be published in connection with each issue or, as the case may be, the corresponding supplemental or additional documents

9 Directive The Listing of Derivatives Follow-up disclosure Sanctions Supersession of previous provisions Transitional applicability The obligation to provide follow-up disclosure is in keeping with Arts LR. If basic documentation within the context of this Directive is published, then such must contain information as to where the related annual and interim financial statements may be obtained. The SWX reserves the right to pronounce sanctions pursuant to the LR (Arts. 81 and 82 LR). This Directive supersedes the Directive pertaining to the listing of warrants ( Optionsscheine ) of 18 May 1993 and Admission Board Message No. 5/96 of 29 October Upon taking effect, this Directive is applicable to all listing procedures related to definitive applications that have been received subsequent to such effective date

10 Admission of Securities to the SWX Swiss Exchange