Daily Leverage Certificates
DLC Hotline: (65) 6226 2828
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For instance, a DLC with a 5 times daily leveraged exposure to the US equity index is based on a Leveraged Strategy referencing closing level of the US equity index as of the Relevant Stock Exchange market close.
During Singapore time zone, the market price of the DLC may be affected by the price of the relevant futures contracts over the US equity index which are trading during the SGX trading hours. Consequentially the market price of the DLC during Singapore Exchange trading hours may deviate from the published levels of the US equity index and/or the Air Bag Trigger Levels during the US trading hours on the same day.
Underlying Type | Product | Airbag Trigger |
---|---|---|
Equity Index | 5x Daily Long 7x Daily Long |
-10% |
Equity Index | 5x Daily Short 7x Daily Short |
+10% |
Investors should note that for DLCs related to US equity index, the Air Bag mechanism may be triggered during the calculation hours of the US equity index when the US exchanges are open for trading i.e. the Air Bag mechanism can be triggered overnight when the SGX is closed. The trigger of an Air Bag mechanism, when the DLCs are not open for trading, will lead to a different Leverage Strategy Closing Level or Leverage Inverse Strategy Closing Level (as applicable), i.e. the value of the DLCs subsequently during the Singapore Exchange trading hours will be based on a different closing level reference for the purpose of the Leveraged Return calculation compared to a case where no Air Bag mechanism would have been triggered. This means that there is a specific risk that overnight, investors incur a significant or even entire loss of the amounts invested, and will not be able to exit their investments in the DLC at that time.
If there is residual value in the DLC after the Air Bag is triggered, then investors will be able to buy/sell the DLC when the SGX opens the next trading day and provided the Designated Market Maker starts providing quotes.
Example of a 5x DLC:
If Air Bag happens overnight when the US equity index goes down (for Long) or up (for Short) by more than 10%, but less than 20% within the Observation Period, then the DLC theoretical value and exposure will be reset when the Air Bag is triggered, and then reset again when the US exchanges close. In this case, DLC theoretical closing value will be different from if there was no Air Bag mechanism in place (which is the same effect as an Air Bag on DLCs with a Singapore or Hong Kong underlying asset, except that investors cannot trade the DLC when this is about to happen). On the next SGX trading day, DLC performance will be based on the reference value determined at US exchange close.
If Air Bag happens overnight when the US equity index goes down (for Long) or up (for Short) by more than 20% within the observation period, the DLC will be permanently suspended on the next SGX trading day and will be delisted subsequently. Investors will lose the entire value of their investment.
Reminder
Terms not defined herein shall have the meanings ascribed thereto in the SLD of the relevant Certificate. Investors should ensure that they understand the nature of the Certificates and carefully study the risk factors set out in the BLD and the relevant SLD. Full disclaimer here.