Circular No. 3
(CIR3)

Circular No. 3 - Practice for the Listing of Derivatives (Circular No. 3, CIR3)

Status on 7 December 2018 Basis Listing Rules, Additional Rules Derivatives, and implementing decrees

This Circular clarifies practice for the listing of derivatives, and provides additional detail. The Circu- 1 lar is amended and updated continually.

1 CONNEXOR Events

According to Title 1 Directive Debt Securities Specific Structures (DDSS), and Annex 3 Directive Reg- 2 ular Reporting Obligations, point 2.03, issuers of derivatives with path-dependent structures are obliged to inform SIX Swiss Exchange immediately by telephone of changes to the price parameters of a derivative, or if certain thresholds (e.g. a knock-out level) are reached and, if necessary, to communicate the new data that is to be recorded. Additionally, under Title 1 Directive Debt Securities Specific Structures (DDSS), and Annex 3 Direct- 3 ive Regular Reporting Obligations, point 2.03, an Official Notice must be sent to listing@sixgroup.com. This Official Notice will be published by SIX Swiss Exchange. Following the introduction of Internet Based Events, the two reporting obligations described above 4 may now be fulfilled alternatively via CONNEXOR Events. If the event in question is reported via CONNEXOR Events, the system will automatically generate and publish an Official Notice on the basis of the data that has been submitted. In cases in which the derivative expires immediately, the system will also trigger the suspension of trading in that derivative, without the issuer needing to take any further action. If the issuer uses CONNEXOR Events to fulfil its reporting obligation, it is no longer required either 5 to submit an Official Notice to listing@six-group.com, or to notify Exchange Operations at SIX Swiss Exchange by telephone on +41 (0)58 399 24 75. The foregoing is nonetheless conditional on the issuer having successfully completed the test 6 phase associated with the use of CONNEXOR Events. SIX Swiss Exchange must be certain that reports are being transmitted via CONNEXOR Events before the issuer may change to this new method of reporting.

2 Adjustments to barriers / exercise prices

In March 2004 the Regulatory Board (then the Admission Board) approved the listing of a dynamic 7 derivative1 with a roll-over effect for the first time. Listing was approved on the condition that, for technical reasons, the adjustments to the derivative – specifically the roll-over process itself – could take place no more than once a week. This practice was communicated in Admission Board Communiqué no. 9/2004, dated 30 August 2004.

1 Dynamic derivatives are derivatives whose underlying or product structure (e.g. setting of new exercise price, adjustments to thresholds in the case of products with path-dependent structures) may be changed or adapted during their term according to previously determined and objectively comprehensible rules (Art. 8 DDSS).

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Circular No. 3 07/12/2018

Following applicable SIX Exchange Regulation AG ("SIX Exchange Regulation") practices, to date the 9 principle of weekly amendments only has also applied to periodic amendments to barriers and exercise prices for other dynamic product structures, such as open-end knock-out options. Market participants have increasingly been calling upon SIX Exchange Regulation to provide the fa- 10 cility to list on SIX Swiss Exchange derivatives that feature daily adjustments to barriers and exercise prices. This practice applies to all derivatives whose barriers or exercise prices are amended during their 11 term in accordance with previously defined and objectively comprehensible criteria. With immediate effect, barriers (e.g. stop-loss / knock-out levels) and exercise prices for dynamic 12 derivatives may be amended in accordance with their product terms on a daily basis, by means of the publication of an Official Notice. The following rules must be observed strictly when drawing up an Official Notice: – Relevant information concerning all of the derivatives that are to be amended must be collated and sent to SIX Exchange Regulation in a single Official Notice; – The date of entry into force of the actual amendments to barriers and exercise prices must be stated explicitly; – When the Official Notice is sent, it must be accompanied by a specific note stating that it must be published before the start of trading; – The Official Notice must be sent to listing@six-group.com by 7.30 a.m. at the latest on the day on which it enters into force. Issuers' obligations in connection with the listing and the maintenance of listing of such derivatives 13 continue to apply in full even where daily adjustments are made. The most important provisions in this respect are given below (this list is not exhaustive): – Directive Debt Securities Specific Structures (DDSS), specifically its provisions on the listing of derivatives with path-dependent structures (Art. 4 et seqq. DDSS); – Reporting obligations in connection with an adjustment to the terms of the security, e.g. with regard to the exercise price (Annex 3 Directive Regular Reporting Obligations, point 2.01, Reporting Obligations regarding the Maintenance of Listing); – Reporting obligations upon the achievement of threshold values that could impact the price or

valuation of the derivative (Annex 3 Directive Regular Reporting Obligations, point 2.03).

3 Listing of Collateral Secured Instruments (COSI)

SIX Swiss Exchange Ltd offers a service for the collateralisation of structured products that are lis- 14 ted on SIX Swiss Exchange ("Collateral Secured Instruments"). To reduce investor risk, collateral for the instruments must be lodged in favour of SIX Swiss Exchange. Should a realisation event occur, the Collateral Secured Instruments will fall due for payment after the period defined in the "Framework Agreement for Collateral Secured Instruments" between SIX Swiss Exchange Ltd, SIX SIS Ltd, the issuer and the guarantor ("Framework Agreement"). This automatically gives rise to a claim on the part of the investors against SIX Swiss Exchange for payment of their pro-rata shares of the net proceeds from the realisation of collateral. The way in which the collateralisation mechanism works is described in the SIX Swiss Exchange in- 15 formation sheet on Collateral Secured Instruments. The information sheet is available on the SIX Swiss Exchange website at (http://www.six-swiss-exchange.com/download/admission/cosi/investor_info_en.pdf). The Framework Agreement lays down the precise terms on which instruments are collateralised.

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A Framework Agreement, as described under ref. no. 4 must be concluded before Collateral Se- 16 cured Instruments may be admitted provisionally to trading or listed on the Exchange. Applications for the provisional admission to trading of Collateral-Secured Instruments must be 17 submitted via CONNEXOR Listing (IBT) only. Investors must have access to the information that they need to make an informed assessment of 18 the collateralisation arrangement. To this end, the listing prospectus must include a separate section that contains the text passage on the collateralisation of instruments that is defined in the Framework Agreement. No amendments, deletions or additions may be made to this text passage. Furthermore, the entire "Framework Agreement for Collateral Secured Instruments" forms an in- 19 tegral part of the listing prospectus under the rules on incorporation by reference, and a German original or English translation must be given out to prospective investors free of charge upon request. The listing prospectus must contain a reference to where prospective investors may obtain the Framework Agreement. Further information on the collateralisation of instruments listed on SIX Swiss Exchange can be 20 found on the SIX Swiss Exchange website at http://www.six-swiss-exchange.com/issuers/services/

4 Express charges for the registration and reissuance of derivatives

programmes In view of forthcoming reissues and registrations of issuance programmes for derivatives, SIX Ex- 21 change Regulation would like to remind that applications for the first-time registration or the reissue of issuance programmes must be submitted 20 exchange days prior to the target registration date (Art. 23 para. 2 Additional Rules Derivatives, ARD). If applications for the registration and reissue of issuance programmes for derivatives are not sub- 22 mitted by the set deadline SIX Exchange Regulation may, without prior notice, levy an express charge of a maximum of CHF 20,000 (Clause 3.4 List of Charges RegBod). The deadline of 20 exchange days is met with the submission of the application, including the draft 23 issuance programme. In line with common practice, to ensure that deadlines are met SIX Exchange Regulation will also 24 accept submissions of applications for the registration and reissue of issuance programmes that are submitted by issuers or their recognised representation by e-mail. In such cases, please note that applications must always be sent to listing@six-group.com. The sender of the e-mail is responsible for ensuring that SIX Exchange Regulation has received the application, for example by requesting confirmation of receipt. The application, bearing the original signatures and appendices, must then be submitted on paper.

5 Requirements for cryptocurrencies as an underlying instrument for

derivatives Cryptocurrencies are permitted as an underlying instrument for derivatives, provided the following 25 criteria have been met. Prior to registering a derivative for provisional admission, the issuer must ascertain whether the following criteria are still being met.

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Circular No. 3 07/12/2018

Cryptocurrencies are permitted as underlying instruments if they are issued as coins (tokens, in the 26 sense of units from a project, which are often issued as part of an initial coin offering, are not permitted as underlying instruments) which are based on open-source software that functions according to the principles of blockchain technology. Consensus protocol must be applied and transactions must be verified by network participants using a clearly defined process. The issue of further units of the cryptocurrency must be clearly defined and must not systematically favour any individual persons. At the time of applying for provisional admission to trading, the cryptocurrency must be among the 27 15 largest cryptocurrencies, as measured by market capitalisation in USD. The details on the following website will serve as a reference: https://coinmarketcap.com/coins/ It must be ensured that the prices for the cryptocurrency used are set regularly and are readily 28 available to the public on the internet. In addition, it must be confirmed that the cryptocurrency can be traded directly against an established fiat currency (e.g. USD or EUR) and that a price feed is available via a reputable information system, such as SIX Financial Information, Bloomberg or Reuters. At least one trading venue must be available, which meets the following criteria: It offers trading 29 against an established fiat currency; It creates transparency by publishing prices. The trading venue provides an Application Programming Interface and the venue’s website must be available at least in English. Whenever a cryptocurrency is used for the first time, SIX Exchange Regulation must be informed 30 how the aforementioned criteria have been met prior to submitting the request for provisional admission via e-mail to listing@six-group.com. In the event of a fork in the cryptocurrency used as an underlying instrument during the term of a 31 derivative traded on the SIX Swiss Exchange, the derivative, which refers to the new cryptocurrency and is allocated to the existing investors without a countervalue, may also be admitted to trading. Another way of settling such a fork is permitted, for instance, by adding the new cryptocurrency as

an extra underlying instrument of the existing product. This may be done provided the new cryptocurrency fulfils all the requirements outlined above, except the one that refers to a placing among the 15 largest cryptocurrencies. The provisional admission of new derivatives to the new cryptocurrency is possible only if all the re- 32 quirements have been met, including the one that refers to a placing among the 15 largest cryptocurrencies. Furthermore, the listing prospectus must provide details on the following points relating to crypto- 33 currencies: – The main differences, and resultant risks, between traditional currencies and the cryptocurrency must be laid down. They include, in particular, intrinsic value unavailable, trading of the cryptocurrency on non-regulated online exchanges, small trading volume and higher volatility. – The specific risks relating to products in cryptocurrencies, particularly fraud risks and hacker attack risks, must be outlined. SIX Exchange Regulation reserves the right to request the inclusion of additional information in the 34 listing prospectus, provided the cryptocurrency and/or the product structure render it necessary.

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