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  • What is Air Bag Mechanism?

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    The Air Bag Mechanism is a safety mechanism that is built into the Daily Leverage Certificates. It is designed to reduce the negative impact of an extreme move in the Underlying Asset during the day if the direction of the Underlying Asset is against investors. In more volatile markets, the Air Bag Mechanism can provide some valuable loss protection to investors.

    Taking a 5 times Daily Leverage Certificates on single stock underlying as an example. The Air Bag will be triggered when the Underlying Asset moves against the Daily Leverage Certificates by 15%, and for 7 times Daily Leverage Certificates on index underlyings, the trigger level is 10% compared to previous close. Investors should note however that the Air Bag Mechanism will also lead to a reduced exposure to the Underlying Asset. If the Underlying Asset starts to move in favor of the Daily Leveraged Certificates after the Air Bag Mechanism has been triggered, the losses recovered for investors will be less than if there is no Airbag event triggered.

    There is no guarantee the Air Bag Mechanism will prevent investors from losing the entire value of their investment.

    The Air Bag Mechanism is triggered when the Underlying Asset reaches the stated Airbag Trigger Level. When the Air Bag Mechanism is triggered, the trading of the Daily Leverage Certificates is suspended, and a 15-minute observation period begins. During the 15-minute observation period the lowest level (for a Daily Long), or highest level (for a Daily Short) of the Underlying Asset is recorded, this level is termed the New Observed Level. Resumption in trading of the Daily Leverage Certificates happens 30 to 45 minutes after the Air Bag Mechanism has been triggered and the leverage of the Daily Leverage Certificates is subsequently applied to the performance of the Underlying Asset computed from the New Observed Level instead of the last closing level.

    The Air Bag Mechanism can be triggered more than once per day, and the new trigger level will be based on the new observed level.