Corporate actions that would trigger an adjustment to SSF positions may include stock splits and reverse splits, special distributions (e.g., special dividends as well as spinoffs of subsidiary companies to shareholders, rights distribution etc.), corporate re-organization (e.g., merger and acquisition) and other events that significantly alter the nature of the underlying stocks of the SSF. The goal of corporate action adjustments is to ensure that the SSF continues to reflect , to the extent possible, the economic position of the underlying stock in a fair and equitable manner.

Note that ordinary dividends, including the initiation of ordinary dividends, are not subject to corporate action adjustments.

(i) Adjusting only quantity and price  

Examples include simple n for 1 splits. If ABCD is undergoing a 5 for 1 split, for example, and that SABCD settled at 240.05 on the business day prior to the effective date of the split, a simple adjustment of the quantity and price of existing futures will ensue:

This adjustment to the SSF positions will occur following the close of trading on the day prior to the effective date as well as the daily variation margin after settling to the daily settlement value of 240.05. After the position adjustment, the new position represents the underlying economics as the position immediately before the adjustment due to the split. Following the adjustment, the contract SABCD will resume trading with an adjusted prior day settlement price of 48.01.

For special dividends, a similar adjustment will be applied. If ABCD is paying a special dividend of $20 per share and SABCD settled at 240.05 on the business day prior to the ex-date of the special dividend, the following adjustment will be applied:

Note that only special dividends will be adjusted. Ordinary dividends will not be adjusted.

(ii) Cases when it is impossible to replicate existing positions by adjusting only quantity and price.

Examples include non-integral splits (e.g., 5-for-2 split), distribution stocks of subsidiary companies to shareholders, etc.

Under such circumstances, a substitute ticker symbol will be used to represent the pre-existing positions following the effective date of the corporate action. The original ticker symbol will be re-listed for trading of SSFs based on 100 post-corporate action shares of the underlying stock.

E.g., Assuming that ABCD undergoing 5-for-2 split and SABCD settled at 240.05 on the business day prior to the effective date of the split:

Note that SABC1 is used to warehouse the positions prior to the effective date of the split and will have the same expiration date as the original position. It will have a multiplier of 100 shares. The contract remains available for trading using this substitute ticker symbol and will reopen with a prior day settlement price of 240.05

The ticker symbol SABCD will be relisted for trading concurrently, representing 100 shares of ABCD following the split. These two contracts are expected to trade at different prices, reflecting the fact that the underlying instruments are different.

At the expiration of the SABC1 contract, its final settlement price shall be derived based on the closing price of (post-corporate event) ABCD on the final settlement date as well as the particulars of the adjustment. In this example the final settlement value shall be as follows:

Final settlement price of SABC1 = ( 5/2 ) × Closing price of ABCD

This final settlement value effectively “undoes” the split to recover the value of the original pre-split share of ABCD.

Similarly, the effects on the SSF of a merger/acquisition of the underlying stock can be captured using this method. For instance, assume that: (i) each share of ABCD is exchanged for 0.4501 share of DCBA plus a cash distribution of $5.30; and(ii) the daily settlement of SABCD on the day prior to the effective date of the transaction is 240.05:

At the expiration of the SABC1 contract, its final settlement price shall be derived based on the closing price of DBCA (the successor stock) plus the cash distribution amount:

Final settlement price of SABC1 = 0.4501 × Closing price of DBCA + 5.30

This final settlement value represents the estimated value of one share of ABCD.

While it is impossible to enumerate all possible types of corporate actions, the adjustment methods outlined above shall be appropriately used to ensure fair and equitable treatment to position holders of affected SSFs. The specifics of each adjustment will be published prior to the effective date. Please consult the documentation listed on the pending corporate action adjustment webpage at the CME Group website.

On the day prior to the effective date of the corporate action, trading of SABCD will follow the normal trading schedule of SSFs. Following the close of trading, CME Clearing will perform its normal clearing function, including clearing all outstanding trades and calculating the daily variation for positions in SABCD. Following the open position reporting, CME Clearing will conduct the position adjustments and provide appropriate transaction records and position updates to Clearing members.

The adjusted contracts shall then be reopened for trading at a time announced by CME Group, e.g., 1:00 a.m. ET on the effective date. Please consult the documentations listed on the pending corporate action adjustment webpage at the CME Group website.

*Pending completion of all regulatory review and processes