Premium Certificate

What are Premium Certificates?

Premium Certificates are financial instruments that can be used to invest in an underlying financial asset, such as a share, a stock index, a currency, a commodity, or an interest rate. The main feature of the Premium Certificates is the payment of fixed premiums over the life of the instrument, regardless of the performance of the underlying asset. At maturity, the investor will receive the issue price plus a premium, if the underlying asset value is equal to or above a specific fixed level (“barrier level”) set at issue date. On the other hand, If the price of underlying asset is below the barrier level the investor is long the underlying asset: the investor will consequently incur a loss equal to that he would have obtained by investing directly in the underlying asset.

Who are Premium Certificates suitable for?

This type of Certificate is designed for investors with a propensity toward high risk, having an expectation of relative stability, moderate rise or fall of a given financial asset. The capital protection is guaranteed as long as the underlying financial asset does not fall below a certain threshold level called Barrier; in this case the investor may be subject to significant losses and the final payoff would reflect the performance of the underlying asset.

Listing and trading of Premium Certificates

Premium Certificates are financial instruments which, in Italy, can be bought or sold on the Multilateral Trading Facilities SeDeX and EuroTLX of the Italian Exchange. Methods and trading hours of such multilateral trading facilities are specified in the relevant Rule books, available on the website of the Italian Exchange. For example, trading in the continuous phase may take place on the open market days from 9:05 am to 5:30pm on SeDeX and from 9:00am to 5:30pm on EuroTLX

Premium Certificate features

UNDERLYING ASSET: a share, share index currency, commodity or any other financial asset upon which the value of the Certificate is dependant;
STRIKE PRICE: the initial reported price of the underlying asset at a date pre-established upon the issuance of the certificate;
BARRIER LEVEL: the value of the underlying under which the investor loses capital protection on the certificate;
MATURITY: the date on which the Certificate ceases to exist or 'matures';
ISSUER: the financial institution issuing the Certificate;
MINIMUM LOT: the minimum number of Certificates that can be bought and sold;
ISIN: the alphanumeric code that uniquely identifies the financial instrument;
FIXED PREMIUM (UNCONDITIONAL): the premium paid to the investor regardless of the performance of the underlying asset;
PREMIUM AT MATURITY (CONDITIONAL): the premium paid at maturity if the barrier level is not exceeded;
MULTIPLIER: The quantity of underlying assets controlled by each certificate, equal to the ratio between i) the subscription price at issue date, and ii) the strike price of the underlying financial asset.

Premium Certificates: how they work

Premium Certificates pays fixed premiums, regardless of the performance of the underlying financial asset. These premiums are paid at fixed dates pre-established upon the issuance of the certificate. At maturity there are two possible scenarios for the investor:

the final value of the underlying financial asset is equal to or above the barrier level: in this case, the certificate pays the issue price plus a pre-established premium;
the final value of the underlying financial asset is below the barrier level: in this case, the investor receives a reimbursement correlated the performance of the underlying asset.

Example of an investment in a Premium Certificate

Let’s assume a Premium Certificate on Eni with the following characteristics:

Maturity	2 years
Issue Price	1000 Eur
Initial Evaluation Date	27/11/2015
Initial Reference Value	€ 15.31
Unconditional fixed premiums	€ 45.00
Payment date of first unconditional fixed premium	27 May 2016
Payment date of second unconditional fixed premium	28 November 2016
Final reporting date	27 November 2017
Conditional premium at maturity	€ 45.00
Multiplier	6.53168
Digital amount	€12.248 (80% of the strike price)

On 27 May 2016 and 28 November 2016, the product pays a premium of €45.00 for each certificate subscribed (total of €90.00). At maturity, there are two possible scenarios for the investor:

Eni share value is equal to or above the barrier level (€12.248). For example, if Eni is priced at €13.00, the investor receives the issue price of €1,000 plus €45.00 for a total of €1,045.00 for each certificate subscribed;
Eni share value is below the barrier level (€12.248). For example, if Eni is priced at €11.50, the investor loses the conditional protection of the capital, incurring a loss. The underlying financial asset has had a 24.89% negative performance. As a result, for each certificate held, the investor will receive €751.11. Then potential losses are mitigated by the premiums (€90.00) received previously. Through the use of the Premium Certificate, instead of incurring a loss of 24.89% tied to the performance of the underlying asset, the investor would have a total loss equal to 15.89%

Chart showing an example of payoff for Premium Certificate

For further information on the terms you can consult the appropriate section GLOSSARY

In order to have access to the documentation and the information included herein relating to the financial instruments (the "Securities"), please represent, warrant and accept without reserve or exception the entire Terms of Use and confirm what follows.

The offer of the Securities (the "Offer") is made to the general public in a specific jurisdiction and any offer, solicitation of an offer, distribution of marketing material relating to the Securities will not be made in the United States of America, Canada, Australia, Japan or any other country where such acts are forbidden without specific exemptions or authorizations from the relevant competent authorities (the "Other Countries").

No Offer may be made in the United States of America, or to any citizen, resident, taxable person in the United States of America ("U.S. Person" or "United States Person" within the meaning of U.S. Securities Laws or other relevant local regulations, a US Person) and no distribution of any documents relating to the Offer may be made in the United States of America. The Securities have not been and will not be registered nor under the United States Securities Act of 1993, as from time to time amended, neither under any financial rules applicable in the United States of America. Neither the Securities and Exchange Commission ("SEC") nor any other supervisory authorities in the United States of America has approved or has not approved the issuance and/or the Offer of the Securities or has taken any position as to the accuracy or inaccuracy of the Prospectus and/or the Final Terms/Condizioni Definitive of the Securities. According to the provisions of the United States Commodity Exchange Act, trading in the Securities has not been approved by the United States Commodity Futures Trading Commission ("CFTC").

The Securities have not been and will not be registered under the existing Securities rules applicable in Canada, Japan, Australia or in the Other Countries, and therefore they may not be, directly or indirectly, offered, sold or otherwise delivered in Canada, Japan, Australia and in the Other Countries or to any citizen, resident, taxable person in Canada, Japan, Australia and the Other Countries and the documentation relating to the Offer may not be distributed in Canada, Japan, Australia and the Other Countries. In any event no person, being US Person under the US Securities Laws or under any other local applicable rule or resident in Canada, Japan, Australia and the Other Countries, may join the Offer.
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I hereby declare that I have read and fully understood and that I agree to comply with the above selling restrictions and undertake not to transmit, directly or indirectly, any document relating to the Offer of the Securities in the United States of America, Canada, Australia, Japan or in the Other Countries.

WARNING: the above declarations constitute self-certification pursuant to Decree by the President of the Republic No. 445 of 28 December 2000, as subsequently amended. False declarations are punishable by law.

I hereby declare that I am not an US Person nor a citizen, a resident or a taxable person of the United States of America or Canada, Australia, Japan or of the Other Countries, nor will I purchase on behalf of or for the benefit of one or more of such persons and I will be responsible for any consequences of such declaration. I hereby further declare that I am not physically present in the United States of America or Canada, Australia, Japan or in the Other Countries.

By indicating 'Accept ' below, you declare that you accept without reserve or exception the entire Terms of Use and any additional notices that may be contained in the sections or on the pages of this web site, and that you will be responsible for any consequences. Otherwise, you should not access this site.