P-Notes definition
Examples of P-Notes in a sentence
Investments in P-Notes involve the same risks associated with a direct investment in the underlying security, currency, or market that they seek to replicate, including, as applicable, foreign, emerging, and frontier risks.
While P-Notes are often listed on an exchange, they are also frequently traded on an OTC basis with the issuing broker or bank.
P-Notes relating to equities usually provide exposure to the underlying equity on a 1:1 basis (i.e., delta 1), they are not bought on margin and they do not embed any leverage.
In addition, P-Notes may trade at a discount to the value of the underlying securities or markets that they seek to replicate.
In addition, P-Notes are generally traded over-the-counter and are subject to counterparty risk.
Such P-Notes will not embed leverage unless otherwise disclosed in the relevant Supplement.
P-Notes are financial instruments which may be used by a Fund to gain indirect exposure to various equity markets in countries where direct investment is either impossible or difficult due to local investment restrictions.
P-Notes constitute general unsecured contractual obligations of the banks or broker-dealers that issue them, and a Fund would be relying on the creditworthiness of such banks or broker-dealers and would have no rights under a P-Note against the issuer of the underlying assets.
P-Notes are also not traded on exchanges but are privately issued, and may be illiquid.
SEBI has also prohibited the issuance of P-Notes by Sub-accounts of FIIs. FIIs and their Sub-accounts are required to wind up their current positions of ODI’s with underlying derivatives within a period of 18 months from October 25, 2007.