Adjustments in case of Corporate Actions

Any adjustment for corporate actions would be carried out on the last day on which a security is traded on a cum basis in the underlying equities market, after the close of trading hours.

Adjustments may entail modifications to positions and / or contract specifications as listed below, such that the basic premise of adjustment laid down above is satisfied:

• Strike Price
• Position
• Market Lot / Multiplier

The adjustments would be carried out on any or all of the above, based on the nature of the corporate action. The adjustments for corporate actions would be carried out on all open positions.

The methodology to be followed for adjustment of various corporate actions to be carried out are as follows:

• Bonus, Stock Splits and Consolidations
  1. Strike Price:
     The new strike price shall be arrived at by dividing the old strike price by the adjustment factor as under.
  2. Futures Base Price:
     The adjusted futures base price shall be arrived at by dividing the old futures price by the adjustment factor as under.
  3. Market Lot / Multiplier:
     The new market lot / multiplier shall be arrived at by multiplying the old market lot by the adjustment factor as under.
  4. Position:
     The new position shall be arrived at by multiplying the old position by the adjustment factor as under.
  5. Adjustment factor:

     Bonus - Ratio A:B	Adjustment factor : (A+B)/B
     Stock Splits and Consolidations Ratio - A : B	Adjustment factor : A/B

  6. The above methodology may result in fractions due to the corporate action e.g. a bonus ratio of 3:7. With a view to minimising fraction settlements, the following methodology is adopted:

     1. Compute value of the position before adjustment
     2. Compute value of the position taking into account the exact adjustment factor
     3. Carry out rounding off for the Strike Price and Market Lot
     4. Compute value of the position based on the revised strike price and market lot

     The difference between 1 and 4 above, if any, is decided in the manner laid down by the relevant authority by adjusting Strike Price or Market lot, so that no forced closure of open position is mandated.

• Dividends
  1. a. Dividends which are below 2% of the market value of the underlying stock, would be deemed to be ordinary dividends and no adjustment in the Strike Price would be made for ordinary dividends. For extra-ordinary dividends, which are at and above 2% of the market value of the underlying security, the Strike Price would be adjusted.
                                                        OR
     b. All cases of dividends, where the listed entity has sought exemption from the timeline prescribed under the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
  2. To decide whether the dividend is "extra-ordinary" (i.e. which are at and above 2% of the market price of the underlying stock.), the market price would mean the closing price of the scrip on the day previous to the date on which the announcement of the dividend is made by the Company after the meeting of the Board of Directors. However, in cases where the announcement of dividend is made after the close of market hours, the same day's closing price would be taken as the market price. Further, if the shareholders of the company in the AGM change the rate of dividend declared by the Board of Directors, then to decide whether the dividend is extra-ordinary or not would be based on the rate of dividend communicated to the exchange after AGM and the closing price of the scrip on the day previous to the date of the AGM.
  3. In case of declaration of "extra-ordinary" dividend by any company, the total dividend amount (special and / or ordinary) would be reduced from all the strike prices of the option contracts on that stock.
  4. Adjustment for Futures contracts: Base price of the futures contracts will be reference rate less aggregate amount of dividend. The reference rate to be reckoned for this purpose shall be daily mark to market settlement price of the relevant futures contract.
  5. Adjustment for Options contracts: The full value of dividend would be deducted from all the cum-dividend strike prices on the ex-dividend date.
  6. The revised strike prices would be applicable from the ex-dividend date specified by the exchange.
• Mergers
  1. On the announcement of the record date for the merger, the exact date of expiration (Last Cum-date) would be informed to members.
  2. After the announcement of the Record Date, no fresh contracts on Futures and Options would be introduced on the underlying, that will cease to exist subsequent to the merger.
  3. Un-expired contracts outstanding as on the last cum-date would be compulsorily settled at the settlement price. The settlement price shall be the closing price of the underlying on the last cum-date.
  4. GTC/GTD orders for the futures & options contracts on the underlying, outstanding at the close of business on the last cum-date would be cancelled by the Exchange.
• Rights
  1. Strike Price:
      The new strike price shall be arrived at by multiplying the old strike price by the adjustment factor as under.
  2. Market Lot / Multiplier: 
       The new market lot / multiplier shall be arrived at by dividing the old market lot by the adjustment factor as under.
  3. Future base price:
       The adjusted futures base price shall be arrived at by multiplying the old futures price by the adjustment factor as under.
  4. Position:
       The new position shall be arrived at by multiplying the old position by the adjustment factor as under.
  5. Adjustment factor:

• Rights Ratio A : B, Underlying close price on the last cum date (P) Issue price of the rights (S) Rights Entitlement (A) Number of Existing shares (B) Total Entitlement (A+B) Benefit per Right Entitlement (C): (P-S) x A Benefits per share (E) : C/ (A+B)

  Adjustment factor = (P-E)/P To be multiplied by old strike price & divided into old lot size to arrive at the new strike price and lot size respectively

  The revised strike/futures prices and the lot size on account of adjustment would appear in decimal places. The strike/futures prices shall be rounded off to the nearest tick size and the lot size shall be rounded off to the nearest integer.
  
  Adjustment of Futures & Options Calculator 
  
  The relevant authority may, on a case by case basis, carry out adjustments for other corporate actions in conformity with the above guidelines, including compulsory closing out, where it deems necessary.