Adjustment Methodology

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Bonus Issue
Where the Issuer or Depository Bank in conjunction with the Issuer, carries out a Bonus Issue pursuant to which Underlying Instruments are freely assigned to shareholders, the Adjustment coefficient method is used to amend the Exercise Price of Option Contracts, and the Daily Settlement Prices of Futures and their Contract sizes with effect from the Ex-Day.

The Adjustment coefficient (K) used to amend the Derivative Contracts is calculated as follows:

 

   O
K = -------
    O + N

 

Where:

O = number of Underlying Instruments before the Corporate Action

N = number of freely assigned Underlying Instruments after the Corporate Action

The Exercise Prices of Option Contracts and the Daily Settlement Prices of Future Contracts are amended by means of the Adjustment coefficient (K) as follows:

Eex = Ecum x K



Eex =  adjusted Exercise Price of Option Contracts or adjusted Daily Settlement Price of a Future Contract

Ecum = Exercise Price of Option Contracts before the Corporate Action or Daily Settlement Price of Future Contracts

Option and Future Contract sizes (Aex) are amended by means of the Adjustment coefficient (K) as follows:

       Contract Size
Aex = ------------------
       K

Aex = number of Underlying Instruments after the adjustment (adjusted Contract size)

Rights Issue
Where the Issuer or Depository Bank in conjunction with the Issuer, carries out a Bonus Issue pursuant to which Underlying Instruments are freely assigned to shareholders, the Adjustment coefficient method is used to amend the Exercise Price of Option Contracts, and the Daily Settlement Prices of Futures and their Contract sizes with effect from the Ex-Day.

The Adjustment coefficient (K) used to amend the Derivative Contracts is calculated as follows:

 

   O
K = -------
    O + N

 

Where:

O = number of Underlying Instruments before the Corporate Action

N = number of freely assigned Underlying Instruments after the Corporate Action

The Exercise Prices of Option Contracts and the Daily Settlement Prices of Future Contracts are amended by means of the Adjustment coefficient (K) as follows:

Eex = Ecum x K



Eex =  adjusted Exercise Price of Option Contracts or adjusted Daily Settlement Price of a Future Contract

Ecum = Exercise Price of Option Contracts before the Corporate Action or Daily Settlement Price of Future Contracts

Option and Future Contract sizes (Aex) are amended by means of the Adjustment coefficient (K) as follows:

       Contract Size
Aex = ------------------
       K

Aex = number of Underlying Instruments after the adjustment (adjusted Contract size)

Conversion of underlying instruments
Where the Issuer or Depository Bank in conjunction with the Issuer provides for the conversion of a category of Underlying Instruments into another, which is sufficiently liquid for Option and Future Contracts traded on LSE Derivatives market, the old Option and Future Contracts are replaced by Option and Future Contracts in the new Underlying on the Ex-Day. Consequently, the Derivative Contracts terms, namely the Exercise Price of Option Contracts, the Daily Settlement Price of Future Contracts and their Contract sizes, are modified by the Adjustment Coefficient (K) based on the conversion ratio with effect from the Ex-Day.

The Adjustment coefficient (K) used to amend the Derivative Contracts is calculated as follows:

 

    O
K = -------
    N

 

O = number of Underlying Instruments to be converted

N = number of freely assigned Underlying Instruments offered

The Exercise Prices of Option Contracts and the Daily Settlement Prices of Future Contracts are amended by means of the Adjustment coefficient (K) as follows:

Eex = Ecum x K



Eex =  adjusted Exercise Price of Option Contracts or adjusted Daily Settlement Price of a Future Contract

Ecum = Exercise Price of Option Contracts before the Corporate Action or Daily Settlement Price of Future Contracts

Option and Future Contract sizes (Aex) are amended by means of the Adjustment coefficient (K) as follows:

       Contract Size
Aex  = ------------------
       K

Aex =  number of Underlying Instruments after the adjustment (adjusted Contract size)

If the Underlying Instruments offered are not sufficiently liquid and are not deemed suitable by LSE Derivatives for Option and Future Contracts traded on LSE Derivatives market, all the contracts open on the Ex-Day are closed and cash settled.

Mergers
Where a Company approves a merger whereby it is merged with another Company, if the Underlying Instruments of the merging Company are sufficiently liquid and suitable for Option and Future Contracts traded on LSE Derivatives market, the old Underlying Instruments of Option or Future Contracts are replaced with the new Underlying Instruments of the merged Company on the Ex-Day and consequently, the Derivative Contracts terms are modified by the Adjustment coefficient (K) which is based on the merger ratio.

The Adjustment coefficient (K) used to amend the Derivative Contracts is calculated as follows:

 

    O
K = -------
    N

 

O = number of Underlying Instruments of the old pre-merger Company

N = number of Underlying Instruments of the merged Company

The Exercise Prices of Option Contracts and the Daily Settlement Prices of Future Contracts are amended by means of the Adjustment coefficient (K) as follows:

Eex = Ecum x K



Eex =  adjusted Exercise Price of Option Contracts or adjusted Daily Settlement Price of a Future Contract

Ecum = Exercise Price of Option Contracts before the Corporate Action or Daily Settlement Price of Future Contracts

Option and Future Contract sizes (Aex) are amended by means of the Adjustment coefficient (K) as follows:

       Contract Size
Aex  = --------------------
       K

Aex =  number of Underlying Instruments after the adjustment (adjusted Contract size)

If the new Underlying Instruments of the merged Company are not sufficiently liquid and suitable for Option and Future Contracts traded on LSE Derivatives market, all the Contracts open on the Ex-Day are closed and cash settled.

Delisting
Whenever a Company, whose financial instruments constitute the Underlying of Derivative Contracts, is being delisted as a consequence of liquidation or bankruptcy, Option and Future Contracts are closed and cash settled at their intrinsic value.

In the case of delisting for reasons other than liquidation or bankruptcy, Option and Future Contracts are closed and cash settled at their TFV.

Splits, reverse splits and DR ratio changes
Where the Issuer carries out a split or a reverse split or the Depository Bank carries our a DR ratio change, the Adjustment coefficient method is used to amend the Exercise Price of Option Contracts, the Daily Settlement Prices of Futures and their Contract sizes with effect from the Ex-Day.

The Adjustment coefficient (K) used to amend the Derivative Contracts is calculated as follows:

 

    O
K = -------
    N

 

O = number of Underlying Instruments before the Corporate Action

N = number of Underlying Instruments after the Corporate Action

The Exercise Prices of Option Contracts and the Daily Settlement Prices of Future Contracts are amended by means of the Adjustment coefficient (K) as follows:

Eex = Ecum x K



Eex =  adjusted Exercise Price of Option Contracts or adjusted Daily Settlement Price of a Future Contract

Ecum = Exercise Price of Option Contracts before the Corporate Action or Daily Settlement Price of Future Contracts

Option and Future Contract sizes (Aex) are amended by means of the Adjustment coefficient (K) as follows:

       Contract Size
Aex  = --------------------
       K

Aex =  number of Underlying Instruments after the adjustment (adjusted Contract size)

Demergers
Where a Company approves a de-merger either the Replacement method or the Adjustment coefficient method can be used to adjust Derivative Contracts with effect from the Ex-Day. The choice is made by taking into consideration the characteristics of the de-merger, such as the size of the de-merged firm and the liquidity of both the de-merged and parent companies.

Replacement method:

The Underlying Instruments of Option or Future Contracts are replaced with a basket composed of the Underlying of both the parent and the de-merged firms on the basis of the de-merger ratio. The Exercise Price on Options or the Daily Settlement Price of Future Contracts do not change.

The adjusted Contract Sizes (Aex) of Option or Future Contracts is equal to the sum of the number of Underlying Instruments of the parent Company (Contract Size) and of the de-merged Company (Contract Size)

      Aex = Contract Size+ Contract Size

Adjustment coefficient method:The Adjustment coefficient (K) used to amend the Derivative Contracts is calculated as follows:

 

    Pex
K = -------
    Pcum

 

Pex = theoretical price of the Underlying Instrument ex demerger

Pcum = Cum Price of the Underlying Instrument

The valuation of the de-merged firm (DeMe * Vde-merged) and the de-merger ratio (DeMe) are taken into account when determining the theoretical price Ex de-merger:

      Pex = Pcum - DeMe * Vde-merged 

The Exercise Prices of Option Contracts and the Daily Settlement Prices of Future Contracts are amended by means of the Adjustment coefficient (K) as follows:

Eex = Ecum x K



Eex =  adjusted Exercise Price of Option Contracts or adjusted Daily Settlement Price of a Future Contract

Ecum = Exercise Price of Option Contracts before the Corporate Action or Daily Settlement Price of Future Contracts

Option and Future Contract sizes (Aex) are amended by means of the Adjustment coefficient (K) as follows:

       Contract Size
Aex  = --------------------
       K

Aex =  number of Underlying Instruments after the adjustment (adjusted Contract size)

Extraordinary dividends
Where the Issuer or Depository Bank in conjunction with the Issuer decides and announces a dividend deemed to be extraordinary, the Derivative Contract terms, namely the Exercise Price of Option Contracts, the Daily Settlement Price of a Future Contract and their Contract sizes, are modified by the Adjustment coefficient (K) with effect from the Ex-Day.

Both cash and scrip dividends can be deemed to be extraordinary if the Company classifies them as such. The dividends not classified as such by the Company may be considered by LSE Derivatives as being extraordinary if they are of any additional nature with respect to the Company's normal dividend policy.

The Adjustment coefficient (K) used to amend the Derivative Contracts is calculated as follows:

        Pcum - Dord - Dext 
K = ------------------------
       Pcum - Dord 

Where:

Pcum  = Cum Price

Dord  = amount of the ordinary dividend

Dext  = amount of the extraordinary dividend

The Exercise Prices of Option Contracts and the Daily Settlement Prices of Future Contracts are amended by means of the Adjustment coefficient (K) as follows:

Eex = Ecum x K



Eex =  adjusted Exercise Price of Option Contracts or adjusted Daily Settlement Price of a Future Contract

Ecum = Exercise Price of Option Contracts before the Corporate Action or Daily Settlement Price of Future Contracts

Option and Future Contract sizes (Aex) are amended by means of the Adjustment coefficient (K) as follows:

       Contract Size
Aex  = --------------------
       K

Aex =  number of Underlying Instruments after the adjustment (adjusted Contract size)

Takeovers and Partial Public Tender offers
Where a Company is subject to a takeover, adjustments of Derivative Contracts may imply the replacement of the Underlying Instruments with the Underlying Instruments of the new Company offered, or the application of the Theoretical Fair Value (TFV).

These adjustments take effect only at the end of the offer period, given the offer results.

The following adjustments might be applied:

- in the case of exchange offers, if the Underlying Instruments offered in exchange are sufficiently liquid and suitable for Option and Future Contracts traded on LSE Derivatives market, then the Underlying of Derivative Contracts might be replaced with the Underlying Instruments offered.

- in the case of tender or exchange offers which include a cash component, if the cash is less than 2/3 of the total offer consideration and the Underlying Instruments offered in exchange are sufficiently liquid and suitable for Option and Future Contracts traded on LSE Derivatives market, then the Underlying of Derivative Contracts might be replaced with the Underlying Instruments offered.

- in any case, if the acquiring Company announces holding of at least 90% of the Underlying Instruments or voting rights of the acquired Company and whenever the replacement of the Underlying Instruments is not possible, the Theoretical Fair Value (TFV) method, meaning the closure and cash settlement of all open positions, is applied.

- in the case of a Partial Public Tender Offer, if the last price of the shares is less than the Tender Offer price the last day of acceptance, Derivative Contracts will be adjusted according to the following formula:

       Pcum  - (% of shares to be purchased) × (tender offer price)
Pex =  ------------------------------------------------------------------------
       1 - (% of shares to be purchased)

Where

Pex = theoretical price of the Underlying Instrument ex Partial Public Tender Offer

Pcum = last price of the Underlying Instruments the last day of acceptance