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CORPORATE ADJUSTMENT

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Abhijeet S
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CORPORATE ADJUSTMENT - September 1st, 2010

CORPORATE ADJUSTMENT

The basis for any adjustment for corporate action is such that the value of the position of the market participant on cum and ex-date for corporate action continues to remain the same as far as possible.

This will facilitate in retaining the relative status of positions viz. in-the-money, at-the-money and out-of-the-money.

Any adjustment for corporate actions is carried out on the last day on which a security is traded on a cum basis in the underlying cash market.

Adjustments mean modifications to positions and/or contract specifications as listed below:


a. Strike price

b. Position

c. Market/Lot/ Multiplier

The adjustments are carried out on any or all of the above based on the nature of the corporate action.

The adjustments for corporate action are carried out on all open, exercised as well as assigned positions.

The corporate actions are broadly classified under stock benefits and cash benefits. The various stock benefits declared by the issuer of capital are:
o Bonus

o Rights

o Merger/ demerger

o Amalgamation

o Splits

o Consolidations

o Hive-off

o Warrants, and

o Secured Premium Notes (SPNs) among others


The cash benefit declared by the issuer of capital is cash dividend.


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