The Market Abuse Regulation (MAR) and the Criminal Sanctions for Market Abuse Directive (CSMAD), together ‘MAD II’ constitute a review of the EU Market Abuse Directive of 2003. MAD II entered into force on 3 July 2016 and seeks to enhance and harmonise the European Union regime on market abuse. It increases the former scope, introduces new offences such as attempted insider dealing, manipulation of benchmarks and commodities, and enhances requirements on firms operating in the EU financial markets.
MAR imposes requirements on certain communications to clients. Where a communication constitutes an ‘investment recommendation’, certain disclosures must be provided. These disclosures include statements as to certain potential conflicts of interest and as to changes to previous recommendations.
You will find the relevant disclosures below and/or attached to the communications you receive from HSBC when required.
No action is needed from you in regards to these disclosures. Should you have any questions, please speak to your usual HSBC contact.
This is not Independent Investment Research.
This material has been prepared by a member of the sales and trading department of a member of the HSBC Group of companies (“HSBC Group”), and not by HSBC’s Research Department. This is a desk view & not investment advice. Investors must make their own determination & investment decisions.
Further details on the basis of valuations or methodologies, and the underlying assumptions, used to evaluate financial instruments or issuers or to set price targets are stated below:
- Black-Scholes with Default: This financial product is sensitive to both the equity stock modelling and the credit modelling of the same underlying. As such they are valued using a variant of Black-Scholes to factor in the risk of a default on one of the underlying using a Poisson process.
- Variant of Black-Scholes: This financial product has been valued modelling directly the dividend Futures. The expected dividends are obtained through the usual equity market data, and their volatility is modelled using a variant of the Black-Scholes model.
- Variant of Black-Scholes or PDE: This financial product has been valued based on the Black-Scholes framework, using a parametric interpolation for the volatility surface (in maturities and strikes), adjustments for dividend modelling, and the standard data of the forward curves (repo, dividends, interests rates and discount factors).
- Present Value: This financial product has been valued by calculating the difference between the present values of future inflows with the present value of outflows. The present value of the future flows is estimated using the equity forward curves (equity flows) and a discount curve (fixed flows).
- Marked to Market or Present Value: This financial product has been valued by either taking the value of the instrument itself which reflects the current market value or by calculating the present value. The models interpolates the forward values between observable tenors using various rates representing the repo and dividends (by underlying), as well as the market rate (by currency).
- Variant of Replication: Variance swaps have been demonstrated to be theoretically replicable by a static portfolio of vanilla options. In practice a few adjustments are needed (dividend modelling, non-observability of all vanilla prices, etc.). This financial product has been valued using a variant this replication strategy that accounts for these second order effects.
- Variants of Monte-Carlo or PDE: This financial product has been valued using a variant of the industry standard 'Dupire' diffusion model, which relies on a local volatility diffusion calibrated on the whole implied volatility surface (Vanilla prices). The diffusion is used either with a Partial Differential Equation (PDE) engine or a Monte-Carlo engine to obtain the Exotic Option price.
Instruments can fluctuate in price or value and prices, values or income may fall against your interests. Changes in rates of exchange and rates of interest may have an adverse effect on the value, price or income of these instruments. Past performance is not a guide to future performance. Instruments, which are illiquid, may be difficult to sell or realise; it may also be difficult to obtain reliable information about their value or the extent of the risks to which they are exposed. Contingent liability transactions may result in the loss of all the amount originally invested or deposited, and may also require future payments to be made by you. Any forward-looking information contained herein has been prepared on the basis of a number of assumptions any of which may prove to be incorrect, and accordingly actual results may vary.
Opinions, estimates and projections constitute the current judgment of the author as of the date of this report. They do not necessarily reflect the opinions of HSBC and are subject to change without notice. HSBC has no obligation to update, modify or amend this report or to otherwise notify a recipient thereof if any opinion, forecast or estimate set forth herein changes or subsequently becomes inaccurate. Unless otherwise indicated, there are no planned updates to this report at the time of publication. All market data included in this recommendation are dated as at market close on the date prior to this report, unless otherwise indicated.
The distribution of all ratings published by HSBC in the previous 12 months is as follows:
Buy 62.81 per cent (1.78 per cent HSBC provided IB services to)
Sell 21.16 per cent (0.60 per cent HSBC provided IB services to)
Hold 6.57 per cent (0.09 per cent HSBC provided IB services to)
Other 13.93 per cent (0.26 per cent HSBC provided IB services to)
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Notwithstanding the steps taken to manage conflicts, HSBC and any Connected Company may have interests which conflict with your interests and may owe duties to other clients which would otherwise conflict with the duties owed by HSBC to you. HSBC may recommend to you as a client, trade ideas, financial instruments, or services, in which it or any Connected Company, or a person with whom it has an association, or one of its other clients, may have an interest, relationship or arrangement that is material in relation to the transaction concerned. HSBC, or Connected Companies, or a person with whom any of them has an association, may be dealing as principal for HSBC or its own account, and could be matching a recommendation for a transaction with that of another client. In particular, but without limitation, HSBC may make recommendations to you or execute transactions on your behalf without prior notification to you of the fact that in doing so, where HSBC (or a Connected Company) is or may be (i) Selling financial instruments to, or buying financial instrument from, you as principal on its own account or that of a Connected Company or otherwise dealing or arranging deals in circumstances involving a Connected Company or making a market or dealing in financial instrument for its own account;(ii) Matching an order executed on your behalf with an order from another person (who may be a Connected Company) or otherwise acting as agent for, and receiving commission from, you and/or each such person;(iii) Acting or may have acted as financial adviser or providing services to other clients who have interests in the relevant financial instrument such as being the financial adviser or lending banker to the borrower or issuer whose financial instrument you are buying or selling, or acting for that borrower or issuer in a take-over bid, or acting for another borrower or issuer seeking to acquire that company;(iv) Acting or may have acted as financial adviser to or having some other relationship or arrangement with, the issuer or holder of the relevant financial instrument or another person who has an interest in such financial instrument;(v) In relation to transactions in financial instrument which are not listed instruments, being a member of an advisory or negotiating committee acting for a group of holders of those financial instrument (of which you may be one) in negotiations with an issuer of such financial instrument and gaining information affecting financial instrument in that capacity; (vi) Effecting or arranging transactions on your behalf in:(a) Units in a unit trust or other collective investment scheme which is managed or operated by HSBC or by a Connected Company or in respect of which HSBC or a Connected Company is a trustee or adviser;(b) financial instrument in which HSBC has a material interest as a result of the issue of such financial instrument having been sponsored or underwritten by HSBC or by a Connected Company or in relation to which a commission is paid to HSBC or a Connected Company by a third party with which HSBC or a Connected Company has a marketing arrangement;(c) financial instrument whose issuer is HSBC or a Connected Company;(vii) Allowed a commission by a third party if the transaction takes place.
HSBC and HSBC Group members will from time to time sell to and buy from customers the securities/instruments, or hold positions in, both equity and debt (including derivatives) of companies covered in this recommendation on a principal or agency basis and act as a market maker or liquidity provider in those securities/instruments. The employees of the sales and trading department of HSBC principally responsible for the preparation of this recommendation are in part compensated based on the profitability of HSBC, which includes sales and trading activities and the compensation may be linked to any fees resulting from the transactions undertaken by particular sales and trading desks.
This document is issued by a member of the HSBC Group of companies (“HSBC Group”). Where this document refers to “you” it refers to you or your organisation.]
The sales and trading department of HSBC may make markets in instruments or products to which this material relates. Accordingly, recipients should not regard this document as an objective or independent explanation of the matters contained herein. This document has not been prepared in accordance with regulatory requirements designed to promote the independence of investment research and is not subject to the same prohibitions relating to dealing ahead of the dissemination of independent investment research. Information contained herein should not be regarded as independent investment research for the purposes of the rules of any relevant regulatory body.
HSBC has based this document on information obtained from sources it believes to be reliable but which have not been independently verified. Opinions expressed may differ from the opinions expressed by other divisions of HSBC, including its research department. Opinions and estimates expressed are our present opinions only and may change at any time without notice. In addition, the analysis provided is not sufficient to inform an investment decision. Any charts and graphs included are from publicly available sources or proprietary data. Where information is from public sources, HSBC accepts no responsibility for its accuracy. Any indicative trade details provided should not be regarded as complete or as representing the actual terms on which HSBC may trade. Figures included in this document may relate to past performance or simulated past performance (together “past performance”). Past performance is not a reliable indicator of future performance. Any reference in this document to accounting, insurance or other regulations is based on HSBC’s interpretation and may not have been verified with relevant regulatory bodies.
This document is for the exclusive use of the person to whom it is provided by HSBC and is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution would be contrary to law or regulation. The recipient agrees to keep confidential at all times this document and information contained in it or made available by HSBC in connection with it. This document is intended to be distributed in its entirety. Reproduction or dissemination of this document, in whole or in part, or disclosure of any of its contents, without the prior consent of HSBC, is prohibited. Unless governing law permits otherwise, you must contact a HSBC Group member in your home jurisdiction if you wish to use HSBC Group services in effecting a transaction in any investment mentioned in this document. HSBC is under no obligation to keep current the information in this document.
This document is for information purposes and convenient reference. You are solely responsible for making your own independent appraisal of, and investigation into, the products, investments and transactions referred to in this document and you should not regard any information in this document as constituting investment advice. Neither HSBC nor any of its affiliates is responsible for providing you with legal, tax or other specialist advice and you should make your own arrangements in respect of this accordingly.
The issue of this document shall not be regarded as creating any form of adviser/client relationship, and HSBC may only be regarded by you as acting on your behalf as financial adviser or otherwise following the execution of an engagement letter on mutually satisfactory terms.
Except in the case of fraudulent misrepresentation, neither HSBC nor any of its affiliates, officers, directors, employees or agents accepts any liability for any loss or damage arising out of the use of all or part of this material.
This document is a “financial promotion” issued by a member of the HSBC Group of companies (“HSBC Group”).
Last updated: 25th April 2019