Notice

Telstra Corporation Limited (TLS) $0.02 Special Dividend – Adjustment Implication for ETOs

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Notice reference number: 0216.22.03
Date published: 01/03/22
Effective as of: 02/03/22
Last updated: 01/03/22

Telstra Corporation Limited $0.02 Special Dividend – Adjustment implications for ETOs

ASX Notice No. 0175.22.02 dated 22 February 2022 described the adjustment method that applied to ETOs over Telstra Corporation Limited (ASX Code: TLS) relating to the $0.02 special dividend with ex-dividend date of 2 March 2022.

Effective Date

The effective date of the adjustment is Wednesday, 2 March 2022, when the underlying security commences trading on an ex-dividend basis.

ASX determined that the last cum-dividend VWAP based on trading on ASX markets on Tuesday, 1 March 2022 was $3.9753

Standard Method of Adjustment

For an old contract size of 100 shares, the new contract size will be adjusted, using TMC threshold truncation.

Theoretical New Contract Size = Old Contract Size + (total special dividend paid per Old Contract Size)/(S – OD – SD)

Theoretical New Contract Size = 100 + ($0.02*100)/($3.9753-$0.06-$0.02)

=100.5134 truncated to 100 where the difference of 0.5134 will be cash adjusted based on the below formula.

Strike Factor = Old Contract Size/Theoretical New Contract Size

Strike Factor = 100/100.5134

                                                       = 0.994892

Cash Equalisation Adjustment Payments for Contract Size Roundings

The cash adjustment is calculated by taking the difference between the contract value of the option before and after the adjustment.  Variants to the formula apply for rights style adjustments and when the adjustment occurs on the day of the option’s expiry.

Cash adjustment = (BOP * BUV) – (AOP * AUV)

Where

BUV =Before (adjustment) Unit Value = BP * BU rounded to nearest cent

AUV =After (adjustment) Unit Value = AP * AU rounded to nearest cent

BU = units per lot (multiplier) before the adjustment (old traded entity)

AU = units per lot (multiplier) after the adjustment (old traded entity)

BP = for rights style, =SP/Adjustment Factor, for non-rights style=SP.

AP = for rights style, =SP, for non-rights style=SP * Adjustment Factor.

SP = settlement price of the option if not the options expiry day, otherwise the intrinsic price (underlying price-strike price for calls, strike-underlying price for puts) if on expiry date.  Refer Notes 1 and 2 below

BOP =pre-adjusted open position Refer Notes 1 and 3 below

AOP =post-adjusted open position Refer Notes 1 and 3 below

Note:

1.  Cash adjustments on expiry will apply to exercised positions only.

2.  The intrinsic price used for exercised positions on expiry is based on the adjusted strike price for rights style adjustments and the pre-adjusted strike price for non-rights style adjustments.  Set negative intrinsic prices to zero i.e. if an out of the money is exercised, the intrinsic price and hence cash adjustment is zero.

3.  Pre and post adjusted positions will be the same unless there is a position adjustment factor applied to the open position associated with the adjustment.  For rights style use the start of day position (i.e. exclude any UA trading activity), for non-rights style use the (end-of-day) position prior to the adjustment.

4.  Cash adjustments will also apply to LEPO positions.

5.  For short positions, the result of the cash adjustment formula should have its sign reversed (multiply by -1). For non-LEPO positions the truncation approach ensures that the seller (writer) is always debited and the buyer (taker) is credited.  Because the LEPO strike is usually returned to 1c after the adjustment, the holder of a short LEPO position may be credited and long position may be debited.

Refer to table below for adjusted strike and contract size

OLD SIZE NEW SIZE OLD STRIKE (CENTS) NEW STRIKE (CENTS) Exercise
100 100 1 1 E
100 100 187 186 A
100 100 191 190 A
100 100 193 192 A
100 100 194 193 A
100 100 196 195 A
100 100 210 209 A
100 100 212 211 A
100 100 214 213 A
100 100 216 215 A
100 100 230 229 A
100 100 232 231 A
100 100 234 233 A
100 100 236 235 A
100 100 238 237 A
100 100 249 248 A
100 100 251 250 A
100 100 253 252 A
100 100 256 255 A
100 100 258 257 A
100 100 262 261 A
100 100 268 267 A
100 100 270 269 A
100 100 272 271 A
100 100 275 274 A
100 100 278 277 A
100 100 282 281 A
100 100 287 286 A
100 100 289 288 A
100 100 292 291 A
100 100 293 292 E
100 100 295 293 A
100 100 296 294 A
100 100 298 296 A
100 100 300 298 A
100 100 302 300 A
100 100 305 303 A
100 100 306 304 A
100 100 309 307 A
100 100 310 308 A
100 100 310 308 E
100 100 312 310 A
100 100 313 311 E
100 100 315 313 A
100 100 316 314 A
100 100 316 314 E
100 100 317 315 E
100 100 318 316 A
100 100 319 317 A
100 100 319 317 E
100 100 320 318 A
100 100 321 319 E
100 100 322 320 A
100 100 324 322 A
100 100 325 323 A
100 100 328 326 A
100 100 329 327 E
100 100 330 328 A
100 100 331 329 A
100 100 332 330 E
100 100 334 332 A
100 100 335 333 A
100 100 335 333 E
100 100 336 334 E
100 100 337 335 A
100 100 338 336 A
100 100 338 336 E
100 100 340 338 A
100 100 341 339 A
100 100 341 339 E
100 100 342 340 E
100 100 344 342 A
100 100 345 343 E
100 100 347 345 A
100 100 348 346 E
100 100 350 348 A
100 100 351 349 E
100 100 354 352 A
100 100 355 353 E
100 100 357 355 A
100 100 358 356 E
100 100 360 358 A
100 100 361 359 E
100 100 364 362 A
100 100 365 363 E
100 100 366 364 A
100 100 367 365 E
100 100 369 367 A
100 100 370 368 A
100 100 370 368 E
100 100 371 369 E
100 100 373 371 A
100 100 374 372 E
100 100 376 374 A
100 100 377 375 A
100 100 377 375 E
100 100 378 376 E
100 100 379 377 A
100 100 380 378 A
100 100 380 378 E
100 100 381 379 E
100 100 383 381 A
100 100 384 382 E
100 100 386 384 A
100 100 387 385 E
100 100 389 387 A
100 100 390 388 A
100 100 390 388 E
100 100 391 389 E
100 100 393 391 A
100 100 394 392 E
100 100 396 394 A
100 100 397 395 A
100 100 397 395 E
100 100 398 396 E
100 100 399 397 A
100 100 400 398 A
100 100 400 398 E
100 100 401 399 E
100 100 402 400 A
100 100 403 401 A
100 100 403 401 E
100 100 404 402 E
100 100 405 403 A
100 100 406 404 E
100 100 409 407 A
100 100 410 408 A
100 100 410 408 E
100 100 411 409 A
100 100 411 409 E
100 100 412 410 E
100 100 413 411 A
100 100 414 412 E
100 100 415 413 A
100 100 416 414 E
100 100 417 415 A
100 100 418 416 E
100 100 419 417 A
100 100 420 418 A
100 100 420 418 E
100 100 421 419 A
100 100 421 419 E
100 100 422 420 E
100 100 423 421 A
100 100 424 422 E
100 100 425 423 A
100 100 426 424 E
100 100 429 427 A
100 100 430 428 A
100 100 430 428 E
100 100 431 429 A
100 100 431 429 E
100 100 432 430 E
100 100 433 431 A
100 100 434 432 E
100 100 435 433 A
100 100 436 434 E
100 100 437 435 A
100 100 438 436 E
100 100 439 437 A
100 100 440 438 A
100 100 440 438 E
100 100 441 439 E
100 100 443 441 A
100 100 444 442 A
100 100 444 442 E
100 100 445 443 E
100 100 448 446 A
100 100 449 447 E
100 100 450 448 A
100 100 451 449 E
100 100 452 450 A
100 100 453 451 A
100 100 453 451 E
100 100 454 452 E
100 100 456 454 A
100 100 457 455 A
100 100 457 455 E
100 100 458 456 E
100 100 459 457 A
100 100 460 458 A
100 100 460 458 E
100 100 461 459 E
100 100 462 460 A
100 100 463 461 A
100 100 463 461 E
100 100 464 462 E
100 100 467 465 A
100 100 468 466 E
100 100 469 467 A
100 100 470 468 A
100 100 471 469 A
100 100 472 470 A
100 100 472 470 E
100 100 476 474 A
100 100 477 475 E
100 100 478 476 A
100 100 480 478 A
100 100 481 479 A
100 100 481 479 E
100 100 482 480 A
100 100 482 480 E
100 100 486 484 A
100 100 487 485 E
100 100 490 487 A
100 100 491 488 A
100 100 492 489 E
100 100 496 493 A
100 100 500 497 A
100 100 503 500 A
100 100 507 504 A
100 100 508 505 E
100 100 511 508 A
100 100 527 524 A
100 100 536 533 A
100 100 537 534 E
100 100 541 538 A
100 100 583 580 A
100 100 584 581 E
100 100 608 605 A
100 100 609 606 E

Need more information?

Issued by

Greg Fitzpatrick, Senior Manager, Clearing Operations

Contact information

William Ward

clearing@asx.com.au

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