Shareinvestor Event on 17th Nov – questions asked on Pigeonhole
1 What are the differences between DLCs and other products such as CFDs or structured warrants?

For comparisons with other products, please visit our product handbook, Guide to Daily Leverage Certificates (DLC) located at https://dlc.socgen.com/en/education/handbook.

2 What happens to DLCs during extreme market conditions? Please elaborate on how the Airbag Mechanism works in an extreme geopolitical event when market drops drastically and then recovers?

As the market maker of DLCs that it issues, Societe Generale aims to provide quality liquidity in all market situations.

If the underlying asset moves by more than a certain percentage in a day, an Air Bag Mechanism may be triggered to protect some valuable loss protection to investors of the DLCs under certain conditions. Investors should note that the Air Bag Mechanism will also maintain a reduced exposure to the underlying asset even if the underlying asset starts to move in favor of the Daily Leveraged Certificates after the Air Bag Mechanism has been triggered, thereby reducing its ability to recover losses for investors. In any case, do note there is no guarantee the Air Bag Mechanism will prevent investors from losing the entire value of their investment. For details on the Air Bag Mechanism, please visit https://dlc.socgen.com/en/education/handbook for more information.

3 What is the difference in commission fees charged for trading DLCs and CFDs?

Investors are generally being charged on commission on the entire CFDs contract value while for DLCs, they are charged commission on the value of DLCs invested, which is a fraction of the entire exposure.

As an example, if an investor wants to gain exposure in SGD 100,000 of DBS stocks, assuming DBS shares are trading at a price of SGD 25 per share, and CFD and DLCs both charge a commission of 25bps, the indicative charges are as follows:

1. CFDs: The investor needs to buy 4,000 shares of DBS to gain an exposure of a value of SGD 100,000 equivalent of DBS shares. Commission charged on this CFD contract will be 4,000 x 25 x 25bps = SGD 250.

2. DLCs: To gain an exposure of a value of SGD 100,000 of DBS shares with a 5x DBS DLC, the investor would only need to buy SGD 20,000 worth of 5x DBS DLC. Commission charged on this investment will be 20,000 x 25bps = SGD 50, which is only 20% of that of the commissions incurred for trading CFDs.

The examples above are simplified without costs and fees for illustration. In the actual trading of the DLCs, costs and fees are factored in such that the daily performance of the DLCs is not exactly equal to the leverage factor multiplied by the daily performance of the underlying asset.

4 Are DLC holders entitled to or affected by dividends from the relevant underlying stock? For a dividend investor who is looking for constant yield, will DLCs benefit my portfolio?

For DLCs, investors do not get a dividend on the ex-date while the DLC price will not be affected by the dividend amount. When investing in a stock, the investor receives a dividend on an ex-date and the stock price will be adjusted by the dividend amount.

Investors usually hold stocks over a longer period to receive regular dividends. DLCs are not meant for long-term holding due to their leveraged nature and the compounding effect. DLCs are therefore not suitable for dividend investors who are looking for constant yield for long term investment.

5 What happens to DLCs during volatile market conditions?

Due to the compounding effect of a DLC, a volatile market may result in losses to investors in the DLCs. The higher the volatility, the faster the loss in the value of the DLCs due to the effect of compounding. For more details, please visit: https://dlc.socgen.com/en/education/handbook.

6 What are the benefits for trading DLCs?

DLCs are designed for short-term investment nature. It will benefit investors who want to maximize their short term exposure due to market movements, by providing them the opportunity to increase the exposure. Please refer to our DLC handbook at: https://dlc.socgen.com/en/education/handbook.

7 Will the holdings of an investor in the DLC become zero when the DLCs expire or will corresponding new DLCs be obtained by the investor?

Investors who hold a DLC until the expiry date will receive in cash the intrinsic value of the DLC according to the pricing formula stated in the applicable listing document. For an illustrative example on how this intrinsic value is calculated, please refer to the relevant product Supplemental Listing Document at https://dlc.socgen.com/en/product/announcement.

8 Are DLCs more suited for short term trading and closing of positions intraday?

DLCs are meant to be short-term trading products due to their leverage nature and the compounding effect. DLCs can also be used for directional trade and investors may hold DLCs for a longer period. For a tool that illustrates how the DLC price would have behaved historically if held by investors for a longer period, please visit the “Cumulative Return” section at https://dlc.socgen.com/en/product/cumulative-return/code/CPWW.

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Disclaimer: The views, information or opinions expressed during the seminar are solely those of the individuals involved and do not necessarily represent those of Societe Generale, Singapore Branch. This advertisement has not been reviewed by the Monetary Authority of Singapore.