Calculation of Registration Fee
| Title of Each Class of Securities Offered |
Maximum Aggregate Offering Price |
Amount of Registration Fee(1) | ||
| Debt Securities | $4,950,000 | $637.56 |
(1) Calculated in accordance with Rule 457(r) of the Securities Act of 1933, as amended.
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-180289
PRICING SUPPLEMENT
Dated January 17, 2014
(To Prospectus dated March 22, 2012,
Prospectus Supplement dated March 22, 2012 and
ETF Underlying Supplement dated March 22, 2012)
HSBC
USA Inc.
Accelerated Market Participation SecuritiesTM
(“AMPS”)
| } | $4,950,000 AMPSTM linked to the iShares® FTSE China Large-Cap ETF |
| } | Maturity of approximately two years |
| } | 2x exposure to any positive return of the reference asset, subject to a maximum return of 50% |
| } | One-for-one downside exposure to any negative return of the reference asset |
| } | All payments on the securities are subject to the credit risk of HSBC USA Inc. |
The Accelerated Market Participation SecuritiesTM (“AMPS” or, each a “security” and collectively the “securities") offered hereunder will not be listed on any U.S. securities exchange or automated quotation system. The securities will not bear interest.
Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of the securities or passed upon the accuracy or the adequacy of this document, the accompanying prospectus, prospectus supplement or ETF underlying supplement. Any representation to the contrary is a criminal offense. We have appointed HSBC Securities (USA) Inc., an affiliate of ours, as the agent for the sale of the securities. HSBC Securities (USA) Inc. will purchase the securities from us for distribution to other registered broker-dealers or will offer the securities directly to investors. In addition, HSBC Securities (USA) Inc. or another of its affiliates or agents may use this pricing supplement in market-making transactions in any securities after their initial sale. Unless we or our agent informs you otherwise in the confirmation of sale, this pricing supplement is being used in a market-making transaction. See “Supplemental Plan of Distribution (Conflicts of Interest)” on page PS-13 of this pricing supplement.
Investment in the securities involves certain risks. You should refer to “Risk Factors” beginning on page PS-5 of this document, page S-3 of the accompanying prospectus supplement and page S-2 of the accompanying ETF Underlying Supplement.
The Estimated Initial Value of the securities on the Pricing Date is $969 per security, which is less than the price to public. The market value of the securities at any time will reflect many factors and cannot be predicted with accuracy. See “Estimated Initial Value” on page PS-2 and “Risk Factors” beginning on page PS-5 of this document for additional information.
| Price to Public | Underwriting Discount1 | Proceeds to Issuer | |
| Per security / Total | $1,000.00 / $4,950,000.00 | $17.50 / $86,625.00 | $982.50 / $4,863,375.00 |
1 HSBC USA Inc. or one of our affiliates may pay varying underwriting discounts of up to 1.75% per $1,000 Principal Amount in connection with the distribution of the securities to other registered broker-dealers. See “Supplemental Plan of Distribution (Conflicts of Interest)” on page PS-13 of this pricing supplement.
The Securities:
| Are Not FDIC Insured | Are Not Bank Guaranteed | May Lose Value |
|
HSBC USA Inc. Accelerated Market Participation SecuritiesTM (AMPS) |
 |
Linked to the iShares® FTSE China Large-Cap ETF
This pricing supplement relates to an offering of Accelerated Market Participation Securities. The securities will have the terms described in this pricing supplement and the accompanying prospectus supplement, prospectus and ETF underlying supplement. If the terms of the securities offered hereby are inconsistent with those described in the accompanying prospectus supplement, prospectus or underlying supplement, the terms described in this pricing supplement shall control. You should be willing to forgo interest and dividend payments during the term of the securities and, if the Reference Return is negative, lose up to 100% of your principal.
This pricing supplement relates to an offering of securities linked to the performance of the iShares® FTSE China Large-Cap ETF (the “Reference Asset”). The purchaser of a security will acquire a senior unsecured debt security of HSBC USA Inc. linked to the Reference Asset, as described below. The following key terms relate to the offering of securities:
| Issuer: | HSBC USA Inc. |
| Principal Amount: | $1,000 per security |
| Reference Asset: | The iShares® FTSE China Large-Cap ETF (Ticker: FXI) |
| Trade Date: | January 17, 2014 |
| Pricing Date: | January 17, 2014 |
| Original Issue Date: | January 23, 2014 |
| Final Valuation Date: | January 19, 2016, subject to adjustment as described under “Additional Terms of the Notes—Valuation Dates” in the accompanying ETF Underlying Supplement. |
| Maturity Date: | January 22, 2016. The Maturity Date is subject to adjustment as described under “Additional Terms of the Notes—Coupon Payment Dates, Call Payment Dates and Maturity Date” in the accompanying ETF Underlying Supplement. |
| Payment at Maturity: | On the Maturity Date, for each security, we will pay you the Final Settlement Value. |
| Reference Return: |
The quotient, expressed as a percentage, calculated as follows:
Final Price – Initial Price Initial Price |
| Final Settlement Value: |
If the Reference Return is greater than or equal to zero, you will receive a cash payment on the Maturity Date, per $1,000 Principal Amount, equal to the lesser of: (a) $1,000 + ($1,000 × Reference Return x Upside Participation Rate); and (b) $1,000 + ($1,000 × Maximum Cap).
If the Reference Return is less than zero, you will receive a cash payment on the Maturity Date, per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 × Reference Return).
Under these circumstances, you will lose 1% of the Principal Amount for each percentage point that the Reference Return is negative. For example, if the Reference Return is -30%, you will suffer a 30% loss and receive 70% of the Principal Amount, subject to the credit risk of HSBC. If the Reference Return is less than zero, you will lose up to 100% of your investment. |
| Upside Participation Rate: | 200% |
| Maximum Cap: | 50% |
| Initial Price: | $35.80, which was the Official Closing Price of the Reference Asset on the Pricing Date. |
| Final Price: | The Official Closing Price of the Reference Asset on the Final Valuation Date. |
| Official Closing Price: | The closing price of the Reference Asset on any scheduled trading day as determined by the calculation agent based upon the price displayed on Bloomberg Professional® service page “FXI UP <EQUITY>”, or on any successor page on the Bloomberg Professional® service or any successor service, as applicable, subject to adjustment by the Calculation Agent as described under “Additional Note Terms — Antidilution and Reorganization Adjustments” in the accompanying ETF Underlying Supplement. |
| Form of Securities: | Book-Entry |
| Listing: | The securities will not be listed on any U.S. securities exchange or quotation system. |
| Estimated Initial Value: | The Estimated Initial Value of the securities is less than the price you pay to purchase the securities. The Estimated Initial Value does not represent a minimum price at which we or any of our affiliates would be willing to purchase your securities in the secondary market, if any, at any time. The Estimated Initial Value was calculated on the Pricing Date. See “Risk Factors — The Estimated Initial Value of the securities, which was determined by us on the Pricing Date, is less than the price to public and may differ from the market value of the securities in the secondary market, if any.” |
| CUSIP/ISIN: | 40432XRZ6/US40432XRZ68 |
| PS-2 |
GENERAL
This pricing supplement relates to a single offering of securities linked to the Reference Asset. The purchaser of a security will acquire a senior unsecured debt security of HSBC USA Inc. Although the offering of securities relates to the Reference Asset, you should not construe that fact as a recommendation as to the merits of acquiring an investment linked to the Reference Asset or any component security included in the Reference Asset or as to the suitability of an investment in the securities.
You should read this document together with the prospectus dated March 22, 2012, the prospectus supplement dated March 22, 2012 and the ETF Underlying Supplement dated March 22, 2012. If the terms of the securities offered hereby are inconsistent with those described in the accompanying prospectus supplement, prospectus, or ETF Underlying Supplement, the terms described in this pricing supplement shall control. You should carefully consider, among other things, the matters set forth in “Risk Factors” beginning on page PS-5 of this pricing supplement, page S-3 of the prospectus supplement and page S-2 of the ETF Underlying Supplement, as the securities involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisors before you invest in the securities. As used herein, references to the “Issuer”, “HSBC”, “we”, “us” and “our” are to HSBC USA Inc.
HSBC has filed a registration statement (including a prospectus, a prospectus supplement and ETF underlying supplement) with the SEC for the offering to which this pricing supplement relates. Before you invest, you should read the prospectus, prospectus supplement and the ETF Underlying Supplement in that registration statement and other documents HSBC has filed with the SEC for more complete information about HSBC and this offering. You may get these documents for free by visiting EDGAR on the SEC’s web site at www.sec.gov. Alternatively, HSBC Securities (USA) Inc. or any dealer participating in this offering will arrange to send you the prospectus, prospectus supplement and ETF Underlying Supplement if you request them by calling toll-free 1-866-811-8049.
You may also obtain:
| } | The Prospectus Supplement at: http://www.sec.gov/Archives/edgar/data/83246/000104746912003151/a2208335z424b2.htm |
| } | The Prospectus at: http://www.sec.gov/Archives/edgar/data/83246/000104746912003148/a2208395z424b2.htm |
| } | The ETF Underlying Supplement at: www.sec.gov/Archives/edgar/data/83246/000114420412016689/v306692_424b2.htm |
| PS-3 |
PAYMENT AT MATURITY
On the Maturity Date, for each security you hold, we will pay you the Final Settlement Value, which is an amount in cash, as described below:
If the Reference Return is greater than or equal to zero, you will receive a cash payment on the Maturity Date, per $1,000 Principal Amount, equal to the lesser of:
(a) $1,000 + ($1,000 × Reference Return x Upside Participation Rate); and
(b) $1,000 + ($1,000 × Maximum Cap).
If the Reference Return is less than zero, you will receive a cash payment on the Maturity Date, per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 × Reference Return).
Under these circumstances, you will lose 1% of the Principal Amount for each percentage point that the Reference Return is negative. For example, if the Reference Return is -30%, you will suffer a 30% loss and receive 70% of the Principal Amount, subject to the credit risk of HSBC. You should be aware that if the Reference Return is less than zero, you will lose up to 100% of your investment.
Interest
The securities will not pay interest.
Business Day
A “business day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions are authorized or required by law or regulation to close in the City of New York.
Payment When Offices or Settlement Systems Are Closed
If any payment is due on the securities on a day that would otherwise be a “business day” but is a day on which the office of a paying agent or a settlement system is closed, we will make the payment on the next business day when that paying agent or system is open. Any such payment will be deemed to have been made on the original due date, and no additional payment will be made on account of the delay.
Calculation Agent
We or one of our affiliates will act as calculation agent with respect to the securities.
Reference Issuer
iShares, Inc. is the reference issuer.
| PS-4 |
INVESTOR SUITABILITY
The securities may be suitable for you if:
| } | You seek an investment with an enhanced return linked to the potential positive performance of the Reference Asset and you believe the price of the Reference Asset will increase over the term of the securities. |
| } | You are willing to invest in the securities based on the Maximum Cap, which may limit your return at maturity. |
| } | You are willing to make an investment that is exposed to the negative Reference Return on a 1-to-1 basis for each percentage point that the Reference Return is less than zero. |
| } | You are willing to accept the risk and return profile of the securities versus a conventional debt security with a comparable maturity issued by HSBC or another issuer with a similar credit rating. |
| } | You are willing to forego dividends or other distributions paid to holders of the stocks held by the Reference Asset. |
| } | You do not seek current income from your investment. |
| } | You do not seek an investment for which there is an active secondary market. |
| } | You are willing to hold the securities to maturity. |
| } | You are comfortable with the creditworthiness of HSBC, as Issuer of the securities. |
The securities may not be suitable for you if:
| } | You believe the Reference Return will be negative on the Final Valuation Date or that the Reference Return will not be sufficiently positive to provide you with your desired return. |
| } | You are unwilling to invest in the securities based on the Maximum Cap, which may limit your return at maturity. |
| } | You are unwilling to make an investment that is exposed to the negative Reference Return on a 1-to-1 basis for each percentage point that the Reference Return is less than zero. |
| } | You seek an investment that provides full return of principal. |
| } | You prefer the lower risk, and therefore accept the potentially lower returns, of conventional debt securities with comparable maturities issued by HSBC or another issuer with a similar credit rating. |
| } | You prefer to receive the dividends or other distributions paid on the stocks held by the Reference Asset. |
| } | You seek current income from your investment. |
| } | You seek an investment for which there will be an active secondary market. |
| } | You are unable or unwilling to hold the securities to maturity. |
| } | You are not willing or are unable to assume the credit risk associated with HSBC, as Issuer of the securities. |
RISK FACTORS
We urge you to read the section “Risk Factors” beginning on page S-3 in the accompanying prospectus supplement and page S-2 of the ETF Underlying Supplement. Investing in the securities is not equivalent to investing directly in the Reference Asset or any of the stocks held by the Reference Asset. You should understand the risks of investing in the securities and should reach an investment decision only after careful consideration, with your advisors, of the suitability of the securities in light of your particular financial circumstances and the information set forth in this pricing supplement and the accompanying prospectus supplement, prospectus and ETF Underlying Supplement.
In addition to the risks discussed below, you should review “Risk Factors” in the accompanying prospectus supplement and ETF Underlying Supplement including the explanation of risks relating to the securities described in the following sections:
| } | “— Risks Relating to All Note Issuances” in the prospectus supplement; and |
| } | “— General Risks Related to Index Funds” in the ETF Underlying Supplement. |
You will be subject to significant risks not associated with conventional fixed-rate or floating-rate debt securities.
Your investment in the securities may result in a loss.
The securities do not guarantee any return of principal. You will be exposed to the decline in the Final Price from the Initial Price. Accordingly, if the Reference Return is less than 0%, your Payment at Maturity will be less than the Principal Amount. You will lose up to 100% of your investment at maturity if the Reference Return is negative.
The appreciation on the securities is limited by the Maximum Cap.
You will not participate in any appreciation in the value of the Reference Asset (as multiplied by the Upside Participation Rate) beyond the Maximum Cap of 50%. You will not receive a return on the securities greater than the Maximum Cap.
Credit risk of HSBC USA Inc.
The securities are senior unsecured debt obligations of the Issuer, HSBC, and are not, either directly or indirectly, an obligation of any third party. As further described in the accompanying prospectus supplement and prospectus, the securities will rank on par with all of the other unsecured and unsubordinated debt obligations of HSBC, except such obligations as may be preferred by operation of law. Any payment to be made on the securities, including any return of principal at maturity, depends on the ability of HSBC to satisfy its obligations as they come due. As a result, the actual and perceived creditworthiness of HSBC may affect the market value of the securities and, in the event HSBC were to default on its obligations, you may not receive the amounts owed to you under the terms of the securities.
| PS-5 |
The securities will not bear interest.
As a holder of the securities, you will not receive interest payments.
Owning the securities is not the same as owning the Reference Asset or the stocks held by the Reference Asset.
The return on your securities may not reflect the return you would realize if you actually owned the Reference Asset or stocks held by the Reference Asset. As a holder of the securities, you will not have voting rights or rights to receive dividends or other distributions or other rights that holders of the Reference Asset or the stocks held by the Reference Asset would have.
Changes that affect the Reference Asset or the Underlying Index may affect the price of the Reference Asset and the market value of the securities and the amount you will receive at maturity.
The policies of the reference issuer or FTSE Group (the “Index Sponsor”), the index sponsor of the FTSE China 25 Index (the “Underlying Index”), concerning additions, deletions and substitutions of the constituents comprising the Reference Asset or the Underlying Index, as applicable, and the manner in which the reference issuer or the Index Sponsor takes account of certain changes affecting those constituents included in the Reference Asset or the Underlying Index may affect the price of the Reference Asset. The policies of the reference issuer or the Index Sponsor with respect to the calculation of the Reference Asset or the Underlying Index, as applicable, could also affect the price of the Reference Asset. The reference issuer or the Index Sponsor may discontinue or suspend calculation or dissemination of the Reference Asset or the Underlying Index, as applicable. Any such actions could affect the price of the Reference Asset and the value of the securities.
The securities are not insured or guaranteed by any governmental agency of the United States or any other jurisdiction.
The securities are not deposit liabilities or other obligations of a bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency or program of the United States or any other jurisdiction. An investment in the securities is subject to the credit risk of HSBC, and in the event that HSBC is unable to pay its obligations as they become due, you may not receive the full Payment at Maturity of the securities.
The Estimated Initial Value of the securities, which was determined by us on the Pricing Date, is less than the price to public and may differ from the market value of the securities in the secondary market, if any.
The Estimated Initial Value of the securities was calculated by us on the Pricing Date and is less than the price to public. The Estimated Initial Value reflects the implied borrowing rate we use to issue market-linked securities, as well as the mid-market value of the embedded derivatives in the securities. The implied borrowing rate is typically lower than the rate we would use when we issue conventional fixed or floating rate debt securities. As a result of the difference between our implied borrowing rate and the rate we would use when we issue conventional fixed or floating rate debt securities, the Estimated Initial Value of the securities may be lower if it were based on the levels at which our fixed or floating rate debt securities trade in the secondary market. In addition, if we were to use the rate we use for our conventional fixed or floating rate debt issuances, we would expect the economic terms of the securities to be more favorable to you. We determined the value of the embedded derivatives in the securities by reference to our or our affiliates’ internal pricing models. These pricing models consider certain assumptions and variables, which can include volatility and interest rates. Different pricing models and assumptions could provide valuations for the securities that are different from our Estimated Initial Value. These pricing models rely in part on certain forecasts about future events, which may prove to be incorrect. The Estimated Initial Value does not represent a minimum price at which we or any of our affiliates would be willing to purchase your securities in the secondary market (if any exists) at any time.
The price of your securities in the secondary market, if any, immediately after the Pricing Date will be less than the price to public.
The price to public takes into account certain costs. These costs, which will be used or retained by us or one of our affiliates, include the underwriting discount, our affiliates’ projected hedging profits (which may or may not be realized) for assuming risks inherent in hedging our obligations under the securities and the costs associated with structuring and hedging our obligations under the securities. If you were to sell your securities in the secondary market, if any, the price you would receive for your securities may be less than the price you paid for them because secondary market prices will not take into account these costs. The price of your securities in the secondary market, if any, at any time after issuance will vary based on many factors, including the price of the Reference Asset and changes in market conditions, and cannot be predicted with accuracy. The securities are not designed to be short-term trading instruments, and you should, therefore, be able and willing to hold the securities to maturity. Any sale of the securities prior to maturity could result in a loss to you.
If we were to repurchase your securities immediately after the Original Issue Date, the price you receive may be higher than the Estimated Initial Value of the securities.
| PS-6 |
Assuming that all relevant factors remain constant after the Original Issue Date, the price at which HSBC Securities (USA) Inc. may initially buy or sell the securities in the secondary market, if any, and the value that we may initially use for customer account statements, if we provide any customer account statements at all, may exceed the Estimated Initial Value on the Pricing Date for a temporary period expected to be approximately four months after the Original Issue Date. This temporary price difference may exist because, in our discretion, we may elect to effectively reimburse to investors a portion of the estimated cost of hedging our obligations under the securities and other costs in connection with the securities that we will no longer expect to incur over the term of the securities. We will make such discretionary election and determine this temporary reimbursement period on the basis of a number of factors, including the tenor of the securities and any agreement we may have with the distributors of the securities. The amount of our estimated costs which we effectively reimburse to investors in this way may not be allocated ratably throughout the reimbursement period, and we may discontinue such reimbursement at any time or revise the duration of the reimbursement period after the Original Issue Date of the securities based on changes in market conditions and other factors that cannot be predicted.
The securities lack liquidity.
The securities will not be listed on any securities exchange. HSBC Securities (USA) Inc. is not required to offer to purchase the securities in the secondary market, if any exists. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the securities easily. Because other dealers are not likely to make a secondary market for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which HSBC Securities (USA) Inc. is willing to buy the securities.
Potential conflicts of interest may exist.
HSBC and its affiliates play a variety of roles in connection with the issuance of the securities, including acting as calculation agent and hedging our obligations under the securities. In performing these duties, the economic interests of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the securities. We will not have any obligation to consider your interests as a holder of the securities in taking any action that might affect the value of your securities.
The amount payable on the securities is not linked to the price of Reference Asset at any time other than on the Final Valuation Date.
The Final Price will be based on the Official Closing Price of the Reference Asset on the Final Valuation Date, subject to postponement for non-trading days and certain market disruption events. Even if the price of the Reference Asset appreciates prior to the Final Valuation Date but then decreases on the Final Valuation Date to a price that is less than the Initial Price, the Payment at Maturity will be less, and may be significantly less, than it would have been had the Payment at Maturity been linked to the price of the Reference Asset prior to such decrease. Although the actual price of the Reference Asset on the stated Maturity Date or at other times during the term of the securities may be higher than the Final Price, the Payment at Maturity will be based solely on the Official Closing Price of the Reference Asset on the Final Valuation Date.
Uncertain tax treatment.
For a discussion of the U.S. federal income tax consequences of your investment in a security, please see the discussion under “U.S. Federal Income Tax Considerations” herein and the discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement.
Risks associated with non-U.S. companies.
The value of the FXI depends upon the stocks of Chinese, and thus involve risks associated with the home countries of those non-U.S. companies. The prices of these non-U.S. stocks may be affected by political, economic, financial and social factors in China, including changes in that country’s government, economic and fiscal policies, currency exchange laws or other laws or restrictions, which could affect the value of the securities. These foreign securities may have less liquidity and could be more volatile than many of the securities traded in U.S. or other securities markets. Direct or indirect government intervention to stabilize the relevant foreign securities markets, as well as cross shareholdings in foreign companies, may affect trading levels or prices and volumes in those markets. The other special risks associated with foreign securities may include, but are not limited to: less liquidity and smaller market capitalizations; less rigorous regulation of securities markets; different accounting and disclosure standards; governmental interference; currency fluctuations; higher inflation; and social, economic and political uncertainties. These factors may adversely affect the performance of the FXI and, as a result, the value of the relevant securities.
Risks associated with emerging markets.
An investment in the securities linked to the FXI will involve risks not generally associated with investments which have no emerging market component. In particular, many emerging nations are undergoing rapid change, involving the restructuring of economic, political, financial and legal systems. Regulatory and tax environments may be subject to change without review or appeal. Many emerging markets suffer from underdevelopment of capital markets and tax regulation. The risk of expropriation and nationalization remains a
| PS-7 |
threat. Guarding against such risks is made more difficult by low levels of corporate disclosure and unreliability of economic and financial data.
The securities will not be adjusted for changes in exchange rates.
Although the equity securities that are held by the FXI are traded in Hong Kong dollars, and your securities are denominated in U.S. dollars, the amount payable on your securities at maturity, if any, will not be adjusted for changes in the exchange rates between the U.S. dollar and the Hong Kong dollar. Changes in exchange rates, however, may also reflect changes in the Chinese and Hong Kong economies that in turn may affect the value of the FXI, and therefore your securities. The amount we pay in respect of your securities on the maturity date, if any, will be determined solely in accordance with the procedures described in this pricing supplement.
| PS-8 |
ILLUSTRATIVE EXAMPLES
The following table and examples are provided for illustrative purposes only and are hypothetical. They do not purport to be representative of every possible scenario concerning increases or decreases in the price of the Reference Asset relative to its Initial Price. We cannot predict the Final Price of the Reference Asset. The assumptions we have made in connection with the illustrations set forth below may not reflect actual events. You should not take this illustration or these examples as an indication or assurance of the expected performance of the Reference Asset or the return on your securities. The Final Settlement Value may be less than the amount that you would have received from a conventional debt security with the same stated maturity, including those issued by HSBC. The numbers appearing in the table below and following examples have been rounded for ease of analysis.
The table below illustrates the Payment at Maturity on a $1,000 investment in the securities for a hypothetical range of Reference Returns from -100% to +100%. The following results are based solely on the assumptions outlined below. The “Hypothetical Return on the Securities” as used below is the number, expressed as a percentage, that results from comparing the Payment at Maturity per $1,000 Principal Amount to $1,000. The potential returns described here assume that your securities are held to maturity. You should consider carefully whether the securities are suitable to your investment goals. The following table and examples are based on the following terms:
| } | Principal Amount: | $1,000 |
| } | Upside Participation Rate: | 200% |
| } | Maximum Cap: | 50% |
| Hypothetical Reference Return |
Hypothetical Payment at Maturity |
Hypothetical Return on the Securities |
| 100.00% | $1,500.00 | 50.00% |
| 80.00% | $1,500.00 | 50.00% |
| 60.00% | $1,500.00 | 50.00% |
| 40.00% | $1,500.00 | 50.00% |
| 30.00% | $1,500.00 | 50.00% |
| 25.00% | $1,500.00 | 50.00% |
| 20.00% | $1,400.00 | 40.00% |
| 15.00% | $1,300.00 | 30.00% |
| 10.00% | $1,200.00 | 20.00% |
| 5.00% | $1,100.00 | 10.00% |
| 2.00% | $1,040.00 | 4.00% |
| 1.00% | $1,020.00 | 2.00% |
| 0.00% | $1,000.00 | 0.00% |
| -1.00% | $990.00 | -1.00% |
| -2.00% | $980.00 | -2.00% |
| -5.00% | $950.00 | -5.00% |
| -10.00% | $900.00 | -10.00% |
| -15.00% | $850.00 | -15.00% |
| -20.00% | $800.00 | -20.00% |
| -30.00% | $700.00 | -30.00% |
| -40.00% | $600.00 | -40.00% |
| -60.00% | $400.00 | -60.00% |
| -80.00% | $200.00 | -80.00% |
| -100.00% | $0.00 | -100.00% |
| PS-9 |
The following examples indicate how the Final Settlement Value would be calculated with respect to a hypothetical $1,000 investment in the securities.
Example 1: The Reference Return is 2.00%.
| Reference Return: | 2.00% |
| Final Settlement Value: | $1,040.00 |
Because the Reference Return is positive, and the Reference Return multiplied by the Upside Participation Rate is less than the Maximum Cap, the Final Settlement Value would be $1,040.00 per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 × Reference Return × Upside Participation Rate)
= $1,000 + ($1,000 × 2.00% × 200%)
= $1,040.00
Example 1 shows that you will receive the return of your principal investment plus a return equal to the Reference Return multiplied by the Upside Participation Rate when the Reference Return is positive and, as multiplied by the Upside Participation Rate, equal to or less than the Maximum Cap.
Example 2: The Reference Return is 30.00%.
| Reference Return: | 30.00% |
| Final Settlement Value: | $1,500.00 |
Because the Reference Return is positive, and the Reference Return multiplied by the Upside Participation Rate is greater than the Maximum Cap, the Final Settlement Value would be $1,500.00 per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 × Maximum Cap)
= $1,000 + ($1,000 × 50.00%)
= $1,500.00
Example 2 shows that you will receive the return of your principal investment plus a return equal to the Maximum Cap when the Reference Return is positive and the Reference Return multiplied by the Upside Participation Rate exceeds the Maximum Cap.
Example 3: The Reference Return is -30.00%.
| Reference Return: | -30.00% | |
| Final Settlement Value:. | $700.00 | |
Because the Reference Return is negative, the Final Settlement Value would be $700.00 per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 × Reference Return)
= $1,000 + ($1,000 × -30.00%)
= $700.00
Example 3 shows that you are exposed on a 1-to-1 basis to declines in the price of the Reference Asset below zero. YOU MAY LOSE UP TO 100% OF THE PRINCIPAL AMOUNT OF YOUR SECURITIES.
| PS-10 |
Information Relating to the Reference Asset
|
Description of the FXI
The iShares® FTSE China Large-Cap ETF seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of 25 of the largest and most liquid Chinese companies that publicly trade on the Hong Kong Stock Exchange and are available to international investors, as measured by the FTSE China 25 Index.
For more information about the FXI, see “The iShares® FTSE China 25 Index Fund” beginning on page S-36 of the accompanying ETF Underlying Supplement. |
Historical Performance of the FXI
The following graph sets forth the historical performance of the FXI based on the daily historical closing prices from January 1, 2008 through January 17, 2014. The closing price for the FXI on January 17, 2014 was $35.80. We obtained the closing prices below from the Bloomberg Professional® service. We have not undertaken any independent review of, or made any due diligence inquiry with respect to, the information obtained from the Bloomberg Professional® service.
|
The historical prices of the FXI should not be taken as an indication of future performance, and no assurance can be given as to the Official Closing Price of the FXI on the Final Valuation Date.
| Quarter Begin | Quarter End | Quarterly High | Quarterly Low | Quarterly Close |
| 1/2/2008 | 3/31/2008 | $60.02 | $39.95 | $45.05 |
| 4/1/2008 | 6/30/2008 | $54.99 | $43.00 | $43.83 |
| 7/1/2008 | 9/30/2008 | $47.74 | $30.45 | $34.47 |
| 10/1/2008 | 12/31/2008 | $34.58 | $19.35 | $29.18 |
| 1/2/2009 | 3/31/2009 | $32.19 | $22.70 | $28.52 |
| 4/1/2009 | 6/30/2009 | $40.76 | $28.27 | $38.37 |
| 7/1/2009 | 9/30/2009 | $44.16 | $35.73 | $40.94 |
| 10/1/2009 | 12/31/2009 | $46.66 | $39.09 | $42.27 |
| 1/4/2010 | 3/31/2010 | $44.57 | $36.65 | $42.10 |
| 4/1/2010 | 6/30/2010 | $44.60 | $36.25 | $39.13 |
| 7/1/2010 | 9/30/2010 | $43.03 | $38.60 | $42.82 |
| 10/1/2010 | 12/31/2010 | $47.99 | $41.92 | $43.09 |
| 1/3/2011 | 3/31/2011 | $45.00 | $40.80 | $44.96 |
| 4/1/2011 | 6/30/2011 | $46.40 | $40.35 | $42.95 |
| 7/1/2011 | 9/30/2011 | $43.40 | $30.82 | $30.83 |
| 10/3/2011 | 12/30/2011 | $39.01 | $28.61 | $34.87 |
| 1/3/2012 | 3/30/2012 | $40.74 | $34.99 | $36.63 |
| 4/2/2012 | 6/29/2012 | $38.58 | $31.63 | $33.67 |
| 7/2/2012 | 9/28/2012 | $35.68 | $31.81 | $34.61 |
| 10/1/2012 | 12/31/2012 | $40.48 | $34.71 | $40.48 |
| 1/2/2013 | 3/29/2013 | $41.96 | $35.95 | $36.90 |
| 4/1/2013 | 6/28/2013 | $38.66 | $31.36 | $32.52 |
| 7/1/2013 | 9/30/2013 | $39.23 | $31.44 | $37.08 |
| 10/1/2013 | 12/31/2013 | $40.32 | $36.10 | $38.35 |
| 1/1/2014* | 1/17/2014* | $38.37 | $35.58 | $35.80 |
This pricing supplement includes information for the first calendar quarter of 2014 from January 1, 2014 through January 17, 2014. Accordingly, the “Quarterly High,” “Quarterly Low” and “Quarterly Close” data indicated are for this shortened period only and do not reflect complete data for the first calendar quarter of 2014.
| PS-11 |
EVENTS OF DEFAULT AND ACCELERATION
If the securities have become immediately due and payable following an Event of Default (as defined in the accompanying prospectus) with respect to the securities, the calculation agent will determine the accelerated payment due and payable at maturity in the same general manner as described in “Payment at Maturity” in this pricing supplement. In that case, the scheduled trading day immediately preceding the date of acceleration will be used as the Final Valuation Date for purposes of determining the Reference Return, and the accelerated maturity date will be three business days after the accelerated Final Valuation Date. If a Market Disruption Event exists with respect to the Reference Asset on that scheduled trading day, then the accelerated Final Valuation Date for the Reference Asset will be postponed for up to five scheduled trading days (in the same manner used for postponing the originally scheduled Final Valuation Date). The accelerated maturity date will also be postponed by an equal number of business days.
If the securities have become immediately due and payable following an Event of Default, you will not be entitled to any additional payments with respect to the securities. For more information, see “Description of Debt Securities — Senior Debt Securities — Events of Default” in the accompanying prospectus.
SUPPLEMENTAL PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)
We have appointed HSBC Securities (USA) Inc., an affiliate of HSBC, as the agent for the sale of the securities. Pursuant to the terms of a distribution agreement, HSBC Securities (USA) Inc. will purchase the securities from HSBC at the price to public less the underwriting discount set forth on the cover page of this pricing supplement, for distribution to other registered broker-dealers, or will offer the securities directly to investors. HSBC Securities (USA) Inc. will offer the securities at the price to public set forth on the cover page of this pricing supplement. HSBC USA Inc. or one of our affiliates may pay varying underwriting discounts of up to 1.75% per $1,000 Principal Amount in connection with the distribution of the securities to other registered broker-dealers.
An affiliate of HSBC has paid or may pay in the future an amount to broker-dealers in connection with the costs of the continuing implementation of systems to support the securities.
In addition, HSBC Securities (USA) Inc. or another of its affiliates or agents may use this pricing supplement in market-making transactions after the initial sale of the securities, but is under no obligation to do so and may discontinue any market-making activities at any time without notice.
See “Supplemental Plan of Distribution (Conflicts of Interest)” on page S-49 in the prospectus supplement.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
There is no direct legal authority as to the proper tax treatment of the securities, and therefore significant aspects of the tax treatment of the securities are uncertain as to both the timing and character of any inclusion in income in respect of the securities. Under one approach, a security should be treated as a pre-paid executory contract with respect to the Reference Asset. We intend to treat the securities consistent with this approach. Pursuant to the terms of the securities, you agree to treat the securities under this approach for all U.S. federal income tax purposes. Subject to the limitations described therein, and based on certain factual representations received from us, in the opinion of our special U.S. tax counsel, Morrison & Foerster LLP, it is reasonable to treat a security as a pre-paid executory contract with respect to the Reference Asset. Pursuant to this approach and subject to the discussion below regarding “constructive ownership transactions,” we do not intend to report any income or gain with respect to the securities prior to their maturity or an earlier sale or exchange and we intend to treat any gain or loss upon maturity or an earlier sale or exchange as long-term capital gain or loss, provided that you have held the security for more than one year at such time for U.S. federal income tax purposes.
Despite the foregoing, U.S. holders (as defined
under “U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement) should be aware that the
Internal Revenue Code of 1986, as amended (the “Code”), contains a provision, Section 1260 of the Code, which sets
forth rules which are applicable to what it refers to as “constructive ownership transactions.” Due to the manner
in which it is drafted, the precise applicability of Section 1260 of the Code to any particular transaction is often uncertain.
In general, a “constructive ownership transaction” includes a contract under which an investor will receive payment
equal to or credit for the future value of any equity interest in a regulated investment company (such as shares of the FXI (the
“Underlying Shares”)). Under the “constructive ownership” rules, if an investment in the securities is
treated as a “constructive ownership transaction,” any long-term capital gain recognized by a U.S. holder in respect
of a security will be recharacterized as ordinary income to the extent such gain exceeds the amount of “net underlying long-term
capital gain” (as defined in Section 1260 of the Code) of the U.S. holder determined as
| PS-12 |
if the U.S. holder had acquired the Underlying Shares on the original issue date of the security at fair market value and sold them at fair market value on the Maturity Date (if the security was held until the Maturity Date) or on the date of sale or exchange of the security (if the security was sold or exchanged prior to the Maturity Date) (the “Excess Gain”). In addition, an interest charge will also apply to any deemed underpayment of tax in respect of any Excess Gain to the extent such gain would have resulted in gross income inclusion for the U.S. holder in taxable years prior to the taxable year of the sale, exchange or maturity of the security (assuming such income accrued at a constant rate equal to the applicable federal rate as of the date of sale, exchange or maturity of the security).
Although the matter is not clear, there exists a risk that an investment in the securities will be treated as a “constructive ownership transaction.” If such treatment applies, it is not entirely clear to what extent any long-term capital gain recognized by a U.S. holder in respect of the securities will be recharacterized as ordinary income. It is possible, for example, that the amount of the Excess Gain (if any) that would be recharacterized as ordinary income in respect of each security linked to the FXI will equal the excess of (i) any long-term capital gain recognized by the U.S. holder in respect of such a security over (ii) the “net underlying long-term capital gain” such U.S. holder would have had if such U.S. holder had acquired a number of the Underlying Shares at fair market value on the original issue date of such security for an amount equal to the “issue price” of the security and, upon the date of sale, exchange or maturity of the security, sold such Underlying Shares at fair market value (which would reflect the percentage increase in the value of the Underlying Shares over the term of the security). Accordingly, U.S. holders should consult their tax advisors regarding the potential application of the “constructive ownership” rules.
We will not attempt to ascertain whether any of the entities whose stock is included in, or owned by, the Reference Asset, as the case may be, would be treated as a passive foreign investment company (“PFIC”) or United States real property holding corporation (“USRPHC”), both as defined for U.S. federal income tax purposes. If one or more of the entities whose stock is included in, or owned by, the Reference Asset, as the case may be, were so treated, certain adverse U.S. federal income tax consequences might apply. You should refer to information filed with the SEC and other authorities by the entities whose stock is included in, or owned by, the Reference Asset, as the case may be, and consult your tax advisor regarding the possible consequences to you if one or more of the entities whose stock is included in, or owned by, the Reference Asset, as the case may be, is or becomes a PFIC or a USRPHC.
Withholding and reporting requirements under the legislation enacted on March 18, 2010 (as discussed beginning on page S-48 of the prospectus supplement) will generally apply to payments made after June 30, 2014. However, this withholding tax will not be imposed on payments pursuant to obligations outstanding on July 1, 2014. Additionally, withholding due to any payment being treated as a “dividend equivalent” (as discussed beginning on page S-47 of the prospectus supplement) will begin no earlier than January 1, 2016. Holders are urged to consult with their own tax advisors regarding the possible implications of this recently enacted legislation on their investment in the securities.
For a discussion of the U.S. federal income tax consequences of your investment in a security, please see the discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement.
VALIDITY OF THE SECURITIES
In the opinion of Morrison & Foerster LLP, as counsel to the Issuer, when the securities offered by this pricing supplement have been executed and delivered by the Issuer and authenticated by the trustee pursuant to the Senior Indenture referred to in the prospectus supplement dated March 22, 2012, and issued and paid for as contemplated herein, such securities will be valid, binding and enforceable obligations of the Issuer, entitled to the benefits of the Senior Indenture, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith). This opinion is given as of the date hereof and is limited to the laws of the State of New York, the Maryland General Corporation Law (including the statutory provisions, all applicable provisions of the Maryland Constitution and the reported judicial decisions interpreting the foregoing) and the federal laws of the United States of America. This opinion is subject to customary assumptions about the trustee’s authorization, execution and delivery of the Senior Indenture and the genuineness of signatures and to such counsel’s reliance on the Issuer and other sources as to certain factual matters, all as stated in the legal opinion dated July 27, 2012, which has been filed as Exhibit 5.1 to the Issuer’s Current Report on Form 8-K dated July 27, 2012.
| PS-13 |
| TABLE OF CONTENTS |
You should only rely on the information contained in this pricing supplement, any accompanying underlying supplement, prospectus supplement and prospectus. We have not authorized anyone to provide you with information or to make any representation to you that is not contained in this pricing supplement, any accompanying underlying supplement, prospectus supplement and prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. This pricing supplement, any accompanying underlying supplement, prospectus supplement and prospectus are not an offer to sell these securities, and these documents are not soliciting an offer to buy these securities, in any jurisdiction where the offer or sale is not permitted. You should not, under any circumstances, assume that the information in this pricing supplement, any accompanying underlying supplement, prospectus supplement and prospectus is correct on any date after their respective dates.
HSBC USA Inc.
$4,950,000
Accelerated Market FTSE China Large-Cap ETF
January 17, 2014
PRICING SUPPLEMENT | |
| Pricing Supplement | ||
| General | PS-3 | |
| Payment at Maturity | PS-4 | |
| Investor Suitability | PS-5 | |
| Risk Factors | PS-5 | |
| Illustrative Examples | PS-9 | |
| Information Relating to the Reference Asset | PS-11 | |
| Events of Default and Acceleration | PS-12 | |
| Supplemental Plan of Distribution (Conflicts of Interest) | PS-12 | |
| U.S. Federal Income Tax Considerations | PS-12 | |
| Validity of the Securities | PS-13 | |
| ETF Underlying Supplement | ||
| Risk Factors | S-2 | |
| Reference Sponsors | S-8 | |
| The SPDR® Dow Jones Industrial AverageSM ETF Trust | S-8 | |
| The POWERSHARES QQQ TRUSTSM, SERIES 1 | S-11 | |
| The iShares® MSCI Mexico Investable Market Index Fund | S-15 | |
| The iShares® MSCI Brazil Index Fund | S-18 | |
| The iShares® MSCI Emerging Markets Index Fund | S-21 | |
| The iShares® MSCI EAFE Index Fund | S-24 | |
| The SPDR S&P 500 ETF Trust | S-26 | |
| The Market Vectors Gold Miners ETF | S-30 | |
| The iShares® Dow Jones U.S. Real Estate Index Fund | S-33 | |
| The iShares® FTSE China 25 Index Fund | S-36 | |
| The iShares® S&P Latin America 40 Index Fund | S-39 | |
| The Financial Select Sector SPDR® Fund | S-42 | |
| The iShares® Dow Jones Transportation Average Index Fund | S-45 | |
| The Energy Select SPDR® Fund | S-47 | |
| The Health Care Select SPDR® Fund | S-50 | |
| Other Components | S-52 | |
| Additional Terms of the Notes | S-52 | |
| Prospectus Supplement | ||
| Risk Factors | S-3 | |
| Risks Relating to Our Business | S-3 | |
| Risks Relating to All Note Issuances | S-3 | |
| Pricing Supplement | S-7 | |
| Description of Notes | S-8 | |
| Use of Proceeds and Hedging | S-30 | |
| Certain ERISA Considerations | S-30 | |
| U.S. Federal Income Tax Considerations | S-32 | |
| Supplemental Plan of Distribution (Conflicts of Interest) | S-49 | |
| Prospectus | ||
| About this Prospectus | 1 | |
| Risk Factors | 1 | |
| Where You Can Find More Information | 1 | |
| Special Note Regarding Forward-Looking Statements | 2 | |
| HSBC USA Inc. | 3 | |
| Use of Proceeds | 3 | |
| Description of Debt Securities | 3 | |
| Description of Preferred Stock | 15 | |
| Description of Warrants | 21 | |
| Description of Purchase Contracts | 25 | |
| Description of Units | 28 | |
| Book-Entry Procedures | 30 | |
| Limitations on Issuances in Bearer Form | 35 | |
| U.S. Federal Income Tax Considerations Relating to Debt Securities | 35 | |
| Plan of Distribution (Conflicts of Interest) | 51 | |
| Notice to Canadian Investors | 53 | |
| Notice to EEA Investors | 58 | |
| Certain ERISA Matters | 59 | |
| Legal Opinions | 60 | |
| Experts | 60 |