HSBC plans low volatility ETF-linked notes; JPMorgan sells 12.75% notes tied to Aruba Networks

By Sheri Kasprzak

New York, Oct. 16 – Amid structured products action Thursday, HSBC USA Inc. announced plans to offer 0% trigger performance securities linked to the PowerShares S&P 500 Low Volatility Portfolio exchange-traded fund, according to a filing with the Securities and Exchange Commission.

The fund invests at least 90% of its total assets in common stocks that comprise the index. The index is compiled, maintained and calculated by S&P and consists of 100 stocks from the S&P 500 index with the lowest realized volatility over the past 12 months, according to the fund’s information page.

Notes pay 145% to 155% of gain

Looking to the terms, the securities, which are due Oct. 31, 2019, pay at maturity par of $10 plus 145% to 155% of any fund gain. The exact participation rate will be set at pricing.

If the fund finishes at or above the trigger level, 75% of the initial level, but at or below the initial level, the payout will be par.

Otherwise, investors will be fully exposed to any losses.

Pricing on the notes is expected for Oct. 28.

HSBC Securities (USA) Inc. is the underwriter. UBS Financial Services Inc. is the agent.

JPMorgan prices notes

Elsewhere, JPMorgan Chase & Co. priced $2,164,000 of 12.75% upside autocallable reverse exchangeable notes due Oct. 19, 2015 linked to the common stock of Aruba Networks, Inc., according to a 424B2 filing with the SEC.

The offering is one of several higher-coupon deals in the market during the week. Insiders have pointed to recent volatility, especially in a difficult earnings season.

Interest is payable monthly.

The notes will be called at par if Aruba Networks stock closes at or above the initial share price on April 14 or July 14, 2015.

If the notes are not called, the payout at maturity will be par unless the final share price is less than the buffer level, 60% of the initial share price, in which case the payout will be a number of Aruba Networks shares equal to $1,000 divided by the initial share price or, at the issuer’s option, a cash amount equal to the value of those shares.

J.P. Morgan Securities LLC is the agent.

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