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Risks and Considerations

Selected Risks & Considerations Associated with the Index

Selected Risks & Considerations Associated with the Index

The BNP Paribas CASA Index II levels are based on the values of notional assets and liabilities.

The BNP Paribas CASA Index II only calculates the exposure to a dynamic, hypothetical portfolio that tracks the excess returns of the underlying components and is purely notional. There is no actual portfolio of assets to which any person makes any investment or has any ownership interest.

No recommendation.

BNP Paribas makes no recommendation as to the suitability for investment of the BNP Paribas CASA Index II or any products or strategies based partly or wholly on the BNP Paribas CASA Index II. You should reach a decision after careful consideration with your advisors.

The strategy or methodology of the BNP Paribas CASA Index II may not be successful

There can be no assurance that the strategy or methodology of the BNP Paribas CASA Index II will achieve its objectives or that the intended strategy of the BNP Paribas CASA Index II will outperform any alternative strategy that might be constructed from the BNP Paribas Index Components or any other assets.

The BNP Paribas CASA Index II level may differ from the value of the BNP Paribas Index Components

The BNP Paribas CASA Index II does not have any direct or indirect ownership interest or rights in the BNP Paribas Index Components (or sub-components thereof). The BNP Paribas CASA Index II level may not reflect the return that may be achieved from an investment in one or more of the BNP Paribas Index Components.

The BNP Paribas CASA Index II and the BNP Paribas Index Components (and sub- components thereof ) contain embedded fees

The BNP Paribas CASA Index II is subject to an annual fee of 0.30% per annum fee and a deduction for the cost of hypothetically implementing the weighted portfolio of BNP Paribas Index Components. As a result of these deductions, the levels of the BNP Paribas CASA Index II will be lower than would otherwise be the case if such fees were not included. Some of the BNP Paribas Index Components (and sub-components thereof) are also subject to a daily deduction of fixed and/or variable fees in connection with the related methodology. As a result of these deductions, the levels of the BNP Paribas Index Components will be lower than would otherwise be the case if such fees were not included. Because the BNP Paribas CASA Index II is linked to the performance of the weighted portfolio of six BNP Paribas Index Components, any deduction of costs or fees from the levels of the BNP Paribas Index Components (and sub-components thereof) will lower the level of the BNP Paribas CASA Index II. The deductions of fees from the levels of the BNP Paribas Index Components are in addition to the deduction of fees from the level of the BNP Paribas CASA Index II and the cumulative effect of these deductions may be significant. The BNP Paribas CASA Index II will not appreciate unless the performance of the BNP Paribas Index Components is sufficient to offset the negative effects of the cumulative fees, and then only to the extent that the total return of the BNP Paribas Index Components is greater than the deducted amounts. As a result of these deductions, the level of the BNP Paribas CASA Index II may decline even if the total return of the BNP Paribas Index Components is positive.

The BNP Paribas CASA Index II has a very limited performance history

Calculation of the BNP Paribas CASA Index II began on 21 April 2022 (the “Launch Date”). Therefore, the BNP Paribas CASA Index II has a very limited performance history and no actual investment which allowed tracking of the performance of the BNP Paribas CASA Index II was possible before this date. The BNP Paribas CASA Index II performance data prior to the Launch Date has been retrospectively calculated using historical market data to the extent such data is available and the same methodology. Although the Index Sponsor believes that these retrospective calculations represent accurately and fairly how the BNP Paribas CASA Index II would have performed before the Launch Date, the BNP Paribas CASA Index II did not, in fact, exist before the Launch Date. Furthermore, the BNP Paribas CASA Index II Methodology was designed, constructed and tested using historical market data and based on knowledge of factors that may have possibly affected their performance. The returns prior to the Launch Date were achieved by means of a retroactive application of such hypothetical index methodology designed with the benefit of hindsight. It is impossible to predict whether the BNP Paribas CASA Index II will rise or fall. The actual performance of the BNP Paribas CASA Index II may bear little relation to its retrospectively calculated performance.

The BNP Paribas CASA Index II and some of the BNP Paribas Index Components are subject to the potential use of leverage

The BNP Paribas CASA Index II and one or more of the BNP Paribas Index Components may use leverage to increase the notional exposure to certain components. When a component is leveraged, any movements in the levels of such component will result in greater changes in the level of the BNP Paribas CASA Index II or the BNP Paribas Index Component than if leverage were not used. In particular, the use of leverage will magnify any negative performance of the leveraged component, which, in turn, could adversely affect the level of the BNP Paribas CASA Index II and/or the BNP Paribas Index Component, as applicable.

The BNP Paribas CASA Index II may perform poorly during periods characterized by short-term volatility

The BNP Paribas CASA Index II’s weight allocation strategy is based on recent historical volatility. Each day, the BNP Paribas CASA Index II will allocate a higher weight (up to a specified maximum) to the BNP Paribas Index Components that have exhibited near-term low volatility and a lower weight to the BNP Paribas Index Components that have exhibited near-term high volatility. The BNP Paribas CASA Index II’s weight allocation strategy may be effective at identifying the current market direction in trending markets. However, in non-trending, sideways markets, such a strategy is subject to “whipsaws”. A whipsaw occurs when the market reverses and does the opposite of what has recently occurred, resulting in a trading loss during the particular period. Consequently, the BNP Paribas CASA Index II may perform poorly in non- trending, “choppy” markets characterized by short-term volatility.

The BNP Paribas CASA Index II’s weight allocation strategy is based on momentum investing. Momentum investing strategies are effective at identifying the current market direction in trending markets. However, in non-trending, sideways markets, momentum investment strategies are subject to “whipsaws”. A whipsaw occurs when the market reverses and does the opposite of what is indicated by the trend indicator, resulting in a trading loss during the particular period. Consequently, the BNP Paribas CASA Index II may perform poorly in non-trending, “choppy” markets characterized by short-term volatility.

There are risks associated with an index methodology that attempts to replicate a momentum-based allocation strategy

One or more of the BNP Paribas Index Components is constructed using what is generally known as a momentum-based allocation strategy to construct its hypothetical portfolio of underlying components. A momentum-based allocation strategy generally seeks to capitalize on positive market price trends based on the supposition that such trends may continue. However, there is no guarantee that trends existing in a prior period will continue in the future. A momentum- based allocation strategy is different from a strategy that seeks long-term exposure to a hypothetical portfolio consisting of constant components with fixed weights. The BNP Paribas Index Component may fail to realize gains that could occur as a result of obtaining exposures to financial instruments that have experienced negative returns, but which subsequently experience a sudden spike in positive returns. As a result, if market conditions do not represent a continuation of prior observed trends, the level of the BNP Paribas Index Component, which is rebalanced based on prior trends, may decline.

One or more of the BNP Paribas Index Components will be synthetically short.

One or more of the BNP Paribas Index Components’ (and sub-components thereof) strategy is implemented by synthetically replicating a “short” position on their component(s). Accordingly, such short position will not benefit from any positive price movements of such component(s) and may limit appreciation of the BNP Paribas Index Component notwithstanding appreciation of its component.

There is short exposure to some components of BNP Paribas Index Components and such exposure may result in a significant drop in the level of the BNP Paribas Index Components

Since one or more of the BNP Paribas Index Components’ (and sub- components thereof) synthetically replicates a short position on their component(s), a positive return on such component will have a negative impact on the level of the BNP Paribas Index Component. Accordingly, if the component posts significant positive returns, it may have a large negative impact on the level of the BNP Paribas Index Component. In addition, due to its short position on the component(s), the level of the BNP Paribas Index Component could potentially fall to zero without the value of the underlying component falling to zero.

One or more of the BNP Paribas Index Components is subject to volatility risk

One or more of the BNP Paribas Index Components aim to generate returns by gaining synthetic exposure to the spread between the implied and realized volatility of an underlying reference asset. If the realized volatility of such reference asset were to increase sharply, then the performance of the BNP Paribas Index Component may decrease significantly during such periods of high volatility.

One or more of the BNP Paribas Index Components may utilize a “long- short” strategy and be subject to additional risks

One or more of the BNP Paribas Index Components employs a technique generally known as a “long-short” strategy. This means the BNP Paribas Index Component may include both synthetic “long” positions and synthetic “short” positions. Unlike long positions, short positions are subject to unlimited risk of loss because there is no limit on the amount by which the price that the relevant asset may appreciate before the short position is closed. Short positions will not benefit from any positive price movements of the relevant sub-components and may limit appreciation of the BNP Paribas Index Component notwithstanding appreciation of the sub-component(s).

The level of carry calculated for some BNP Paribas Index Components may not be indicative of future performance

The BNP Paribas GALAXY G10 ER USD Index is designed to take positions in its components based on a calculation of the expected carry return on the currency pair underlying each component. Its methodology assigns weights to its components based on this calculation of carry, taking long positions in components associated with higher carry and short position in components associated with lower carry. The selection mechanism limits the number of currency pairs which may be selected. Certain currency pairs which are not selected based on these criteria may outperform some currency pairs which have been selected. There can be no assurance that currency pairs with higher carry will outperform currency pairs with lower carry. The strategy employed by the BNP Paribas GALAXY G10 ER USD Index may perform poorly during periods of higher risk aversion.

Components of some of the BNP Paribas Index Components may not reflect publicly available prices

The components of the BNP Paribas GALAXY G10 ER USD Index are intended to reflect the hypothetical present value of a simulated FX Forward. Such hypothetical present value is determined using a simplified valuation model developed by BNP Paribas or one of its affiliates that is not publicly available. The valuation model may produce results that may differ from calculations by other sources using the same market data.

The volatility of commodities prices may adversely affect some of the BNP Paribas Index Components

One or more of the BNP Paribas Index Components is comprised of commodities futures contracts. Commodities prices are highly volatile and are affected by numerous factors in addition to economic activity.

These include political events, weather, labor activity, direct government intervention, such as embargos, and supply disruptions in major producing or consuming regions. Those events tend to affect prices worldwide, regardless of the location of the event. Market expectations about these events and speculative activity also cause prices to fluctuate. These factors may adversely affect the performance of the BNP Paribas Index Components.

One or more of the BNP Paribas Index Components may be highly concentrated in one or more regions, industries or economic sectors

The BNP Paribas CASA Index II is designed to provide exposure to a diversified portfolio of assets, including a variety of asset classes and geographical regions. Exposure to any particular BNP Paribas Index Component may vary over time, and may be reduced to zero. As a result, the exposure of the BNP Paribas CASA Index II may be concentrated in one or more asset classes or geographic regions at any time. Such concentration may increase the risks that the price, value or level of other assets in these geographic regions, industries or economic sectors or the levels of the BNP Paribas Index Components may decline, thereby adversely affecting the BNP Paribas CASA Index II level.

For example, a financial crisis could erupt in a particular geographic region, industry or economic sector and lead to sharp declines in the currencies, equities markets and other asset prices in that geographic region, industry or economic sector, threatening the particular financial systems, disrupting economies and causing political upheaval. A financial crisis or other event in any geographic region, industry or economic sector could have a negative impact on some or all of the BNP Paribas Index Components and the BNP Paribas CASA Index II.

Risks relating to the futures markets may adversely affect some of the BNP Paribas Index Components

Some of the components (or sub-components thereof) of BNP Paribas Index Components are futures contracts. The prices of futures contracts may be affected by a number of factors, including but not limited to changes in supply and demand relationships, interest rates and governmental and regulatory policies. The policies of the exchanges on which the futures contracts trade may include certain trading restrictions, margin requirements and other requirements, which are subject to change and may have a negative impact on prices. Futures markets are subject to temporary distortions or other disruptions due to various factors, including lack of liquidity in the markets, participation of speculators, and government regulation and intervention. These factors and can cause the prices of futures contracts to be volatile and unpredictable, and may adversely impact the BNP Paribas Index Component.

Prices of futures contracts are subject to sudden changes and can change dramatically over short periods of time, even when they have been relatively stable for an extended period of time. Such changes may result in a dramatic decline in the level of the BNP Paribas Index Component.

Negative roll returns associated with futures contracts may adversely affect the performance of some of the BNP Paribas Index Components

Some of the components (or sub-components thereof) of BNP Paribas Index Components are futures contracts. Unlike common securities, futures contracts, by their terms, have stated expirations. As the futures contracts that comprise the BNP Paribas Index Component (or sub- component) approach expiration, they are synthetically replaced by a contract with a later expiration. Excluding other considerations, if prices are higher in the distant delivery months than in the nearer delivery months, the notional purchase of the futures contract with the later expiration date would take place at a price that is higher than the price of the futures contract that is expiring, thereby creating a negative “roll return.” Negative roll returns may adversely affect the level of the BNP Paribas Index Component (or sub-component) which in turn may have a negative effect on the BNP Paribas CASA Index II (or BNP Paribas Index Component). Because of the potential effects of negative roll returns, it is possible for the level of the BNP Paribas Index Component (or sub-component) to decrease over time, even when the near-term or spot price of the underlying futures contract is stable or increasing.

Consistent trends in the performance of components of BNP Paribas Index Components may not be indicative of such future performance

One or more of the BNP Paribas Index Components is designed to track consistent trends in the performance of its components. The methodology for such BNP Paribas Index Component assigns weights to its components based on the performance of such components over a specified period in the past. There can be no assurance that performance trends existing in the past will continue in the future. The strategy employed by the BNP Paribas Index Component may perform poorly during non-trending periods or periods characterized by high volatility.

Actual volatility of the BNP Paribas Index Component may not equal the target volatility

One or more of the BNP Paribas Index Components may employ a volatility control mechanism with the objective of limiting the volatility of the level of such BNP Paribas Index Component. There can be no assurance that any particular volatility control mechanism will achieve its specific volatility target. There can be no assurance that the performance of any component of the BNP Paribas Index Component or the BNP Paribas Index Component will be below a specific volatility target at any point in time, or will remain below a specific volatility target in the future.

Volatility control may limit the performance of the BNP Paribas Index Component

A volatility control mechanism with the objective of maintaining a specified level of volatility may be employed by one or more of the BNP Paribas Index Components, which may reduce the weighting of the component(s) composed in such BNP Paribas Index Component. This mechanism may limit the performance of the BNP Paribas Index Component which in turn may limit the performance of the BNP Paribas CASA Index II. The expected volatility of the BNP Paribas Index Component may be estimated using historical volatility, which may not be indicative of future levels of volatility. There can be no assurance that a specified level of volatility will be achieved.

Historical volatility may be a poor indicator of future volatility

One or more of the BNP Paribas Index Components measures the expected risk of their respective components based on historical volatility. There can be no assurance that the historical volatility of such components will be indicative of future volatility. In addition, other potential measures of volatility may be more predictive of future volatility than historical volatility. As a result, the measure of expected risk used by the methodology of the BNP Paribas Index Component may be less accurate than other measures that could have been used.

The value or performance of the BNP Paribas Index Components may offset each other

Changes in value or return of the BNP Paribas Index Components may not correlate with each other. The impact on the BNP Paribas CASA Index II level of an increase in the value of one or more BNP Paribas Index Components may be reduced or offset by the decrease in value of other BNP Paribas Index Components.

Performance amongst the BNP Paribas Index Components comprising the BNP Paribas CASA Index II may become highly correlated from time to time, including, but not limited to, a period in which there is a substantial decline in the relevant markets. High correlation during periods of market decline may have a negative impact on the BNP Paribas CASA Index II. The correlation amongst BNP Paribas Index Components comprised in the BNP Paribas CASA Index II may change over time. Any historical trend in correlation amongst the BNP Paribas Index Components is not an indication of such correlation at any time in the future. Publicly available information related to the BNP Paribas CASA Index II is limited

The BNP Paribas CASA Index II is a custom index developed by BNP Paribas, the Index Sponsor. There is limited information relating to the BNP Paribas CASA Index II that is publicly available. None of BNP Paribas, the Index Sponsor, the Index Calculation Agent, any market data provider or any other source is required to make information publicly available relating to the composition, method of calculation or rebalancing of the BNP Paribas CASA Index II unless otherwise agreed in writing or required by law. Additional information is available solely through the Index Sponsor and may be provided subject to certain restrictions. Only a limited amount of historical data exists with respect to the BNP Paribas CASA Index II. Use of the BNP Paribas CASA Index II or investment in any financial instrument or transaction that references the BNP Paribas CASA Index II may involve a greater risk than one or more indices with a more established performance record.

The BNP Paribas CASA Index II and the BNP Paribas Index Components may be subject to corrections

In the event that the Index Sponsor, the Index Calculation Agent or any of their affiliates becomes aware of any error, miscalculation or other discrepancy in the calculation of the BNP Paribas CASA Index II or any BNP Paribas Index Component, the Index Sponsor will determine if a correction is required, taking into consideration the source of the error and the impact on the level of the BNP Paribas CASA Index II. If a correction is to be made, the Index Calculation Agent will correct and republish the affected index level(s) in accordance with the rules for such index. In certain circumstances, corrections will not be made and the index level will remain uncorrected. The Index Sponsor and the Index Calculation Agent shall have no liability for any loss arising from or related to any such error or miscalculation.

The BNP Paribas CASA Index II is an excess return index

The BNP Paribas CASA Index II is an “Excess Return” index, and reflects the performance of the BNP Paribas Index Components, which require little or no cash to obtain the economic exposure and risk that is the objective of the BNP Paribas CASA Index II. The level of the BNP Paribas CASA Index II does not reflect interest from cash instruments or other related returns that might be realized when obtaining the performance of an index that would require a cash investment equal to the value of the BNP Paribas CASA Index II.

BNP Paribas Arbitrage SNC, an affiliate of the Index Sponsor of the BNP Paribas CASA Index II, BNP Paribas, is the Index Calculation Agent who is responsible for calculating the levels of the BNP Paribas CASA Index II

The policies and calculations for which the Index Calculation Agent is responsible could have an impact, positive or negative, on the level of the BNP Paribas CASA Index II. BNP Paribas and its affiliates are under no obligation to consider your interest as an investor in a product linked to the BNP Paribas CASA Index II.

Legal and regulatory regimes may affect the BNP Paribas CASA Index II or the BNP Paribas Index Components

The BNP Paribas CASA Index II and the BNP Paribas Index Components (and sub- components thereof) are subject to legal and regulatory regimes in various regions and, in some cases, in other countries that may change in ways that could negatively affect the BNP Paribas CASA Index II or the BNP Paribas Index Components. Changes to the applicable legal or regulatory regimes may have a negative impact on the BNP Paribas CASA Index II level and/or the value of any transactions that reference the BNP Paribas CASA Index II.

The BNP Paribas Index Components (and sub-components thereof) that are traded on one or more public exchanges are subject to the rules of the relevant exchange. Such rules may be changed or revised in a manner that adversely affects the BNP Paribas Index Components and may adversely affect the BNP Paribas CASA Index II.

Contact us if you wish to know more about the BNP Paribas Catalyst Systematic Alpha Index II
 

The BNP Paribas Catalyst Systematic Alpha Index II (the “BNP Paribas CASA Index II”) is the exclusive property of BNP Paribas or one of its affiliates (BNP Paribas and its affiliates are hereinafter called “BNPP”) and is determined, composed and calculated by BNPP. “BNP”, “BNPP”, “BNP Paribas”, “BNP Paribas Catalyst Systematic Alpha Index”, and “BNP Paribas CASA Index II” (collectively, the “BNPP Marks”) are trademarks or service marks of BNPP. The BNP Paribas CASA Index II is the exclusive property of BNP Paribas (the “Index Sponsor”). BNP Paribas Arbitrage SNC (the “Index Calculation Agent”) and the Index Sponsor do not guarantee the accuracy and/or completeness of the composition, calculation, publication and adjustment of the BNP Paribas CASA Index II, any data included therein, or any data from which it is based, and the Index Calculation Agent and the Index Sponsor shall have no liability for any errors, omissions, or interruptions therein. The Index Calculation Agent and the Index Sponsor make no warranty, express or implied, as to results to be obtained from the use of the BNP Paribas CASA Index II. The Index Calculation Agent and the Index Sponsor make no express or implied warranties, and expressly disclaim all warranties of merchantability or fitness for a particular purpose or use with respect to the BNP Paribas CASA Index II or any data included therein. Without limiting any of the foregoing, in no event shall the Index Calculation Agent and the Index Sponsor have any liability for any special, punitive, indirect, or consequential damages (including lost profits), even if notified of the possibility of such damages.

BNP PARIBAS HAS DEVELOPED, MAINTAINS AND IS THE SOLE PARTY RESPONSIBLE FOR THE METHODOLOGY THAT IS EMPLOYED IN CONNECTION WITH THE BNP Paribas CASA Index II. PROSPECTIVE INVESTORS ARE ADVISED TO MAKE AN INVESTMENT IN ANY PRODUCT ONLY AFTER CAREFULLY CONSIDERING THE RISKS ASSOCIATED WITH INVESTING IN SUCH PRODUCT, AS DETAILED IN A PROSPECTUS OR SIMILAR DOCUMENT THAT IS PREPARED BY OR ON BEHALF OF THE ISSUER OF THE PRODUCT OR THE INDEX SPONSOR.

BNPP may license the BNP Paribas CASA Index II to one or more companies (each, a “Company”) for use in a product offered or issued by the Company. The products are not, in whole or in part, sponsored, structured, priced, endorsed, offered, sold, issued or promoted by BNPP or any of its affiliates, or any third party licensor of information to BNPP. BNPP reserves the right to amend or adjust the BNP Paribas CASA Index II methodology from time to time and accepts no liability for any such amendment or adjustment. BNPP is not under any obligation to continue the calculation, publication or dissemination of the BNP Paribas CASA Index II and accepts no liability for any suspension or interruption in the calculation thereof. Neither BNPP nor any of its affiliates accepts any liability in connection with the publication or use of the level of the BNP Paribas CASA Index II at any given time.

BNPP may enter into derivative transactions or issue financial instruments (the “Index Products”) linked to the BNP Paribas CASA Index II. The BNP Paribas CASA Index II Products are not in any way sponsored, endorsed, sold or promoted by the sponsor of any index component (or sub-component thereof) which may comprise the BNP Paribas CASA Index II (the “Underlying Index”) that is not affiliated with BNPP (each such sponsor, an “Underlying Index Sponsor”). The Underlying Index Sponsors make no representation whatsoever, whether express or implied, either as to the results to be obtained from the use of the relevant Underlying Index and/or the levels at which the relevant Underlying Index stands at any particular time on any particular date or otherwise. No Underlying Index Sponsor shall be liable (whether in negligence or otherwise) to any person for any error in the relevant Underlying Index and the relevant Underlying Index Sponsor is under no obligation to advise any person of any error therein. None of the Underlying Index Sponsors makes any representation whatsoever, whether express or implied, as to the advisability of purchasing or investing in, or assuming any risk in connection with, the BNP Paribas CASA Index II Products. BNPP shall have no liability to any party for any act or failure to act by any Underlying Index Sponsor in connection with the calculation, adjustment or maintenance of the relevant Underlying Index and have no affiliation with or control over any Underlying Index or the relevant Underlying Index Sponsor or the computation, composition or dissemination of any Underlying Index. Although BNPP will obtain information concerning each Underlying Index from publicly available sources that it believes reliable, it will not independently verify this information. Accordingly, no representation, warranty or undertaking (express or implied) is made and no responsibility is accepted by BNPP as to the accuracy, completeness and timeliness of information concerning any Underlying Index.

BNPP may act in a number of different capacities in relation to the BNP Paribas CASA Index II and/or products linked to the BNP Paribas CASA Index II, which may include, but not be limited to, acting as hedging counterparty, index sponsor and/or index calculation agent.

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