Filed Pursuant to Rule 433
Registration No. 333-202524
May 8, 2017
FREE WRITING PROSPECTUS
(To Prospectus dated March 5, 2015,
Prospectus Supplement dated March 5, 2015 and
ETF Underlying Supplement dated March 5, 2015)
Linked to:
iShares® U.S. Real Estate │ ETF Energy Select Sector SPDR® Fund
| ► | 100% (1x) exposure to any positive return on the relevant Reference Asset, subject to a maximum return |
| ► | Protection from 10% of any losses of the relevant Reference Asset |
| ► | 15 month maturity |
| ► | All payments on the securities are subject to the credit risk of HSBC USA Inc. |
The Buffered Market Participation Securities, (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 the pricing supplement to which this free writing prospectus relates in market-making transactions in any securities after their initial sale. Unless we or our agent informs you otherwise in the confirmation of sale, the pricing supplement to which this free writing prospectus relates is being used in a market-making transaction. See “Supplemental Plan of Distribution (Conflicts of Interest)” on page FWP-17 of this free writing prospectus.
Investment in the securities involves certain risks. You should refer to “Risk Factors” beginning on page FWP-9 of this document, page S-1 of the accompanying prospectus supplement and page S-1 of the accompanying ETF Underlying Supplement.
The Estimated Initial Value of the securities on the Pricing Date is expected to be between $960 and $985 per security, for each of the securities, which will be less than the price to the 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 FWP-5 and “Risk Factors” beginning on page FWP-9 of this document for additional information.
| Price to Public | Underwriting Discount1 | Proceeds to Issuer | |
| Per security / Total linked to the IYR | $1,000/ | ||
| Per security / Total linked to the XLE | $1,000/ |
1HSBC USA Inc. or one of our affiliates may pay varying underwriting discounts of up to 1.275% 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 FWP-17 of this free writing prospectus.
The Securities:
| Are Not FDIC Insured | Are Not Bank Guaranteed | May Lose Value |
This free writing prospectus relates to separate offerings of securities by HSBC USA Inc., each linked to the performance of a different Reference Asset as indicated below.
| Reference Asset | Market Exposure | Ticker | Maximum Cap1 | CUSIP |
| iShares® U.S. Real Estate ETF | Real Estate Sector | IYR | At least 9.00% | 40433U4X1 / US40433U4X19 |
| Energy Select Sector SPDR® Fund | Energy Sector | XLE | At least 11.00% | 40433U4Y9 / US40433U4Y91 |
1 Expected range. The actual Maximum Cap with respect to each offering will be determined on the Pricing Date.
Indicative Terms*
| Principal Amount | $1,000 per security |
| Term | Approximately 15 months |
| Upside Participation Rate | 100% (1x) exposure to any positive Reference Return, subject to the relevant Maximum Cap |
| Buffer Value | With respect to each offering, -10% |
|
Payment at Maturity per Security |
If the relevant Reference Return is greater than zero, you will receive the lesser of: a) $1,000 + ($1,000 × Reference Return × Upside Participation Rate); and b) $1,000 + ($1,000 × Maximum Cap). If the relevant Reference Return is less than or equal to zero but greater than or equal to the Buffer Value: $1,000 (zero return). If the relevant Reference Return is less than the relevant Buffer Value: $1,000 + ($1,000 × (Reference Return + 10%)). For example, if the Reference Return is -30%, you will suffer a 20% loss and receive 80% of the Principal Amount, subject to the credit risk of HSBC. If the Reference Return is less than the Buffer Value, you will lose some or a significant portion (up to 90%) of your investment. |
| Reference Return |
Final Value – Initial Value Initial Value |
| Initial Value | See page FWP-5 |
| Final Value | See page FWP-5 |
| Pricing Date | May 23, 2017 |
| Trade Date | May 23, 2017 |
| Original Issue Date | May 26, 2017 |
| Final Valuation Date | August 22, 2018 |
| Maturity Date | August 27, 2018 |
* As more fully described on page FWP-4
The Securities
Each of the securities are designed for investors who believe the relevant Reference Asset will appreciate over their term. If the Reference Return is below the Buffer Value, then the relevant securities are subject to a 1:1 exposure to any potential decline of the relevant Reference Asset beyond the Buffer Value of -10%.
If the relevant Reference Asset appreciates over the term of the securities, you will realize a return equal to 100% (1.00x) of the Reference Asset appreciation, subject to a Maximum Cap of at least 9.00% (to be determined on the Pricing Date) for the securities linked to the IYR and at least 11.00% (to be determined on the Pricing Date) for the securities linked to the XLE. Should the relevant Reference Asset decline, you will lose 1% of your investment for every 1% decline in the Reference Asset beyond the Buffer Value.
| FWP-2 |
Payoff Example
| The table at right shows the hypothetical payout profile of an investment in the securities reflecting the 100% (1x) Upside Participation Rate and the Buffer Value of -10.00%, and assuming a 9.00% Maximum Cap. The actual Maximum Cap with respect to your securities will be determined on the Pricing Date. |  |
Information About Each Reference Asset
| The IYR seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Real Estate IndexSM. The Dow Jones U.S. Real Estate IndexSM is a float-adjusted market capitalization-weighted real-time index and is designed to provide a broad measure of the performance of the real estate sector of the U.S. securities market. The returns of the IYR may be affected by certain management fees and other expenses, which are detailed in its prospectus. |  | |
 |
The XLE seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the S&P® Energy Select Sector Index. The S&P® Energy Select Sector Index measures the performance of the energy sector of the U.S. equity market. The S&P® Energy Select Sector Index seeks to represent the energy sector of the S&P 500® Index. The S&P® Energy Select Sector Index includes companies in the following industries: oil, gas and consumable fuels, and energy equipment and services. The returns of the XLE may be affected by certain management fees and other expenses, which are detailed in its prospectus. |
The graphs above illustrate the performance of the Reference Assets from January 1, 2008 through April 27, 2017. For further information on each Reference Asset, please see “Information Relating to the Securities Linked to the iShares® U.S. Real Estate ETF” on page FWP-14 or Information Relating to the Securities Linked to the Energy Select Sector SPDR® Fund” on page FWP-16 and “Energy Select Sector SPDR® Fund,” in the ETF Underlying Supplement, as applicable. We have derived all disclosure regarding the Reference Assets from publicly available information. Neither HSBC USA Inc. nor any of its affiliates have undertaken any independent review of, or made any due diligence inquiry with respect to, the publicly available information about the Reference Assets.
| FWP-3 |
| HSBC USA Inc. |  |
Buffered Market Participation Securities
iShares® U.S. Real Estate ETF
Energy Select Sector SPDR® Fund
This free writing prospectus relates to two offerings of Buffered Market Participation Securities. Each of the securities will have the respective terms described in this free writing prospectus 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 ETF Underlying Supplement, the terms described in this free writing prospectus shall control. You should be willing to forgo interest and dividend payments during the term of the securities and, if the relevant Reference Return is less than the Buffer Value, lose up to 90% of your principal.
This free writing prospectus relates to multiple offerings of securities, each linked to the performance of a specific index fund (index fund, a “Reference Asset”). Each of the securities will have the Maximum Cap indicated in the table below. The performance of each of the securities does not depend on the performance of the other security. The purchaser of a security will acquire a senior unsecured debt security of HSBC USA Inc. linked to the relevant Reference Asset, as described below.
| Issuer: | HSBC USA Inc. |
| Principal Amount: | $1,000 per security |
| Reference Asset: | The relevant underlying index fund, as indicated below |
| Reference Asset | Ticker | Upside Participation Rate |
Maximum Cap1 | CUSIP/ISIN |
| iShares® U.S. Real Estate ETF (“IYR”) | IYR | 100% | At least 9.00% | 40433U4X1 / US40433U4X19 |
| Energy Select Sector SPDR® Fund (“XLE”) | XLE | 100% | At least 11.00% | 40433U4Y9 / US40433U4Y91 |
1 Expected with respect to each offering of securities. The actual Maximum Cap for each offering of securities will be determined on the Pricing Date.
| Trade Date: | May 23, 2017 |
| Pricing Date: | May 23, 2017 |
| Original Issue Date: | May 26, 2017 |
| Final Valuation Date: | August 22, 2018 subject to adjustment as described under “Additional Terms of the Notes—Valuation Dates” in the relevant accompanying Underlying Supplement. |
| Maturity Date: | 3 business days after the Final Valuation Date, and expected to be August 27, 2018. 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 relevant accompanying Underlying Supplement. |
| Payment at Maturity: | On the Maturity Date, for each security, we will pay you the Final Settlement Value. |
The following key terms relate to the offerings of securities:
| Reference Return: |
With respect to each Reference Asset, the quotient, expressed as a percentage, calculated as follows: Final Value – Initial Value Initial Value |
| Final Settlement Value: |
If the relevant Reference Return is greater than 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 × Upside Participation Rate); and (b) $1,000 + ($1,000 × Maximum Cap). If the relevant Reference Return is less than or equal to zero but greater than or equal to the Buffer Value, you will receive $1,000 per $1,000 Principal Amount (zero return). If the relevant Reference Return is less than the Buffer Value, you will receive a cash payment on the Maturity Date, per $1,000 Principal Amount, calculated as follows: $1,000 + ($1,000 × (Reference Return + 10%)). Under these circumstances, you will lose 1% of the Principal Amount of your securities for each percentage point that the Reference Return is below the Buffer Value. For example, if the Reference Return is -30%, you will suffer a 20% loss and receive 80% of the Principal Amount, subject to the credit risk of HSBC. If the Reference Return is less than the Buffer Value, you will lose some or a significant portion (up to 90%) of your investment. |
| Buffer Value: | With respect to each offering, -10% |
| Initial Value: | The Official Closing Value of the relevant Reference Asset on the Pricing Date. |
| Final Value: | The Official Closing Value of the relevant Reference Asset on the Final Valuation Date, adjusted by the calculation agent as described under “Additional Terms of the Notes—Antidilution and Reorganization Adjustments” in the accompanying ETF Underlying Supplement. |
| FWP-4 |
| Official Closing Value: | The closing price of the Reference Asset on any scheduled trading day as determined by the calculation agent based upon the price displayed on the relevant Bloomberg Professional® service page (with respect to the XLE, “XLE UP <EQUITY>” and with respect to the IYR, “IYR UP <EQUITY>”), or, for each Reference Asset, any successor page on the Bloomberg Professional® service or any successor service, as applicable. |
| 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 will be 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 will be calculated on the Pricing Date and will be set forth in the pricing supplement to which this free writing prospectus relates. See “Risk Factors — The Estimated Initial Value of the securities, which will be determined by us on the Pricing Date, will be less than the price to public and may differ from the market value of the securities in the secondary market, if any.” |
The Trade Date, the Pricing Date and the other dates set forth above are subject to change, and will be set forth in the final pricing supplement relating to the securities.
| FWP-5 |
GENERAL
This free writing prospectus relates to separate offerings of securities, each linked to a different Reference Asset. The purchaser of a security will acquire a senior unsecured debt security of HSBC USA Inc. linked to a single Reference Asset. We reserve the right to withdraw, cancel or modify any offering and to reject orders in whole or in part. Although each offering of securities relates to a Reference Asset, you should not construe that fact as a recommendation as to the merits of acquiring an investment linked to such Reference Asset or any component security included in such Reference Asset or as to the suitability of an investment in the securities.
You should read this document together with the prospectus dated March 5, 2015, the prospectus supplement dated March 5, 2015 and the ETF Underlying Supplement dated March 5, 2015. 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 free writing prospectus shall control. You should carefully consider, among other things, the matters set forth in “Risk Factors” beginning on page FWP-8 of this free writing prospectus, page S-1 of the prospectus supplement and page S-1 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 free writing prospectus relates. Before you invest, you should read the prospectus, prospectus supplement and ETF Underlying Supplement in that registration statement and other documents HSBC has filed with the SEC for more complete information about HSBC and these offerings. 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 these offerings 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/83246/000114420415014311/v403645_424b2.htm
The prospectus at: http://www.sec.gov/Archives/edgar/data/83246/000119312515078931/d884345d424b3.htm
The ETF Underlying Supplement at: http://www.sec.gov/Archives/edgar/data/83246/000114420415014329/v403640_424b2.htm
We are using this free writing prospectus to solicit from you an offer to purchase the securities. You may revoke your offer to purchase the securities at any time prior to the time at which we accept your offer by notifying HSBC Securities (USA) Inc. We reserve the right to change the terms of, or reject any offer to purchase, the securities prior to their issuance. In the event of any material changes to the terms of the securities, we will notify you.
| FWP-6 |
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 relevant Reference Return is greater than 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 × Upside Participation Rate); and
(b) $1,000 + ($1,000 × Maximum Cap).
If the relevant Reference Return is less than or equal to zero but greater than or equal to the Buffer Value, you will receive $1,000 per $1,000 Principal Amount (zero return).
If the relevant Reference Return is less than the Buffer Value, you will receive a cash payment on the Maturity Date, per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 × (Reference Return + 10%)).
Under these circumstances, you will lose 1% of the Principal Amount of your securities for each percentage point that the Reference Return is below the Buffer Value. For example, if the Reference Return is -30%, you will suffer a 20% loss and receive 80% of the Principal Amount, subject to the credit risk of HSBC. You should be aware that if the relevant Reference Return is less than the Buffer Value, you will lose some or a significant portion (up to 90%) of your investment.
Interest
The securities will not pay interest.
Calculation Agent
We or one of our affiliates will act as calculation agent with respect to the securities.
Reference Issuers
With respect to securities linked to the XLE, Select Sector SPDR Trust is the reference issuer. With respect to securities linked to the IYR, iShares, Inc. (“iShares”) is the reference issuer.
| FWP-7 |
INVESTOR SUITABILITY
|
The securities may be suitable for you if:
4 You seek an investment with an enhanced return linked to the potential positive performance of the relevant Reference Asset and you believe the value of such Reference Asset will increase over the term of the securities.
4 You are willing to invest in the securities based on the Maximum Cap indicated herein with respect to that security offering, which may limit your return at maturity. The actual Maximum Cap for each offering of securities will be determined on the Pricing Date.
4 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 relevant Reference Return is less than -10%.
4 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.
4 You are willing to forgo dividends or other distributions paid to holders of the relevant Reference Asset or on the stocks held by the relevant Reference Asset.
4 You do not seek current income from your investment.
4 You do not seek an investment for which there is an active secondary market.
4 You are willing to hold the securities to maturity.
4 You are comfortable with the creditworthiness of HSBC, as Issuer of the securities. |
The securities may not be suitable for you if:
4 You believe the relevant Reference Return will be negative on the Final Valuation Date or that the relevant Reference Return will not be sufficiently positive to provide you with your desired return.
4 You are unwilling to invest in the securities based on the Maximum Cap indicated herein with respect to that security offering, which may limit your return at maturity. The actual Maximum Cap for each offering of securities will be determined on the Pricing Date.
4 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 relevant Reference Return is less than -10%.
4 You seek an investment that provides full return of principal.
4 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.
4 You prefer to receive the dividends or other distributions paid to holders of the relevant Reference Asset or on the stocks held by the relevant Reference Asset.
4 You seek current income from your investment.
4 You seek an investment for which there will be an active secondary market.
4 You are unable or unwilling to hold the securities to maturity.
4 You are not willing or are unable to assume the credit risk associated with HSBC, as Issuer of the securities. |
| FWP-8 |
RISK FACTORS
We urge you to read the section “Risk Factors” beginning on page S-1 in the accompanying prospectus supplement and on page S-1 of the accompanying ETF Underlying Supplement. Investing in the securities is not equivalent to investing directly in the Reference Asset or any of the stocks included in the relevant underlying index. 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 free writing prospectus and the accompanying, prospectus, prospectus supplement 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:
| 4 | “— Risks Relating to All Note Issuances” in the prospectus supplement; and |
| 4 | “— 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.
You will be exposed to the decline in the Final Value from the Initial Value beyond the Buffer Value of -10%. Accordingly, if the relevant Reference Return is less than -10%, your Payment at Maturity will be less than the Principal Amount of your securities. You will lose up to 90% of your investment at maturity if the relevant Reference Return is less than the Buffer Value.
The appreciation on the securities is limited by the relevant Maximum Cap.
You will not participate in any appreciation in the value of the relevant Reference Asset (as multiplied by the Upside Participation Rate) beyond the relevant Maximum Cap. The Maximum Cap (to be determined on the Pricing Date) will be at least 9.00% with respect to the securities linked to the IYR and at least 11.00% with respect to the securities linked to the XLE. You will not receive a return on the securities greater than the relevant 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.
The securities will not bear interest.
As a holder of the securities, you will not receive interest payments.
The performance and market value of the relevant Reference Asset during periods of market volatility may not correlate with the performance of its Underlying Index as well as its net asset value per share.
During periods of market volatility, securities underlying a Reference Asset may be unavailable in the secondary market, market participants may be unable to calculate accurately the net asset value per share of that Reference Asset and the liquidity of that Reference Asset may be adversely affected. This kind of market volatility may also disrupt the ability of market participants to create and redeem shares of the applicable Reference Asset. Further, market volatility may adversely affect, sometimes materially, the prices at which market participants are willing to buy and sell shares of the relevant Reference Asset. As a result, under these circumstances, the market value of shares of a Reference Asset may vary substantially from its net asset value per share. For all of the foregoing reasons, the performance of ae Reference Asset may not correlate with the performance of its Underlying Index as well as its net asset value per share, which could materially and adversely affect the value of the securities in the secondary market and/or reduce your payment at maturity.
| FWP-9 |
Changes that affect the relevant Reference Asset will affect the market value of the securities and the amount you will receive at maturity.
The policies of the reference sponsor of an underlying index or reference issuer of the relevant Reference Asset concerning additions, deletions and substitutions of the constituents included in such underlying index or Reference Asset and the manner in which the reference sponsor or reference issuer takes account of certain changes affecting those constituents included in such underlying index or Reference Asset may affect the value of such Reference Asset. The policies of the reference sponsor or reference issuer with respect to the calculation of the relevant underlying index or Reference Asset could also affect the value of such Reference Asset. The reference sponsor or reference issuer may discontinue or suspend calculation or dissemination of its relevant underlying index or Reference Asset. Any such actions could affect 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 will be determined by us on the Pricing Date, will be 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 will be calculated by us on the Pricing Date and will be less than the price to public. The Estimated Initial Value will reflect our internal funding rate, which is the borrowing rate we pay to issue market-linked securities, as well as the mid-market value of the embedded derivatives in the securities. This internal funding 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 internal funding 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 prices 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 will determine 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 value 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.
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 6 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.
| FWP-10 |
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 value of relevant Reference Asset at any time other than on the Final Valuation Date.
The Final Value will be based on the Official Closing Value of the Reference Asset on the Final Valuation Date, subject to postponement for non-trading days and certain market disruption events. Even if the value of the Reference Asset increases prior to the Final Valuation Date but then decreases on the Final Valuation Date to a value that is less than the Initial Value, 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 value of the Reference Asset prior to such decrease. Although the actual value 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 Value, the Payment at Maturity will be based solely on the Official Closing Value 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.
Securities linked to the IYR are subject to risks associated with an investment in a concentrated industry.
The securities held by the IYR are issued by companies that are in the real estate industry. Therefore, an investment in the securities may carry risks similar to a concentrated securities investment in a single industry. Consequently, the value of the securities may be subject to greater volatility and be more adversely affected by a single economic, environmental, political or regulatory occurrence affecting this industry than an investment linked to a more broadly diversified group of issuers.
Securities linked to the IYR are subject to risks associated with the real estate industry.
Most of the securities, if not all, held by the IYR are issued by companies involved directly or indirectly in the real estate industry. The value of real estate and, consequently, companies involved in the real estate industry may be affected by many complex factors that interrelate with each other in complex and unpredictable ways. Such factors may include, but are not limited to, general economic and political conditions, liquidity in the real estate market, rising or falling interest rates, governmental actions and the ability of borrowers to obtain financing for real estate development or to repay their loans. Any negative developments in any such factor may negatively affect the prices of securities held by the IYR and, consequently, may adversely affect the price of the IYR and the value of the securities.
Risks associated with the energy sector.
The XLE invests in companies that develop and produce crude oil and natural gas and provide drilling and other energy resources production and distribution related services. Stock prices for these types of companies are affected by supply and demand both for their specific product or service and for energy products and services in general. The price of oil and gas, exploration and production spending, government regulation, world events and economic conditions will likewise affect the performance of these companies. The stock prices of oil service companies could be subject to wide fluctuations in response to a variety of factors, including the ability of the OPEC to set and maintain production levels and pricing, the level of production in non-OPEC countries, the demand for oil and gas, which is negatively impacted by economic downturns, the policies of various governments regarding exploration and development of oil and gas reserves, advances in exploration and development technology and the political environment of oil-producing regions. Correspondingly, securities of companies in the energy field are subject to swift price and supply fluctuations caused by events relating to international politics, energy conservation, the success of exploration projects, and tax and other governmental regulatory policies. Weak demand for the companies’ products or services or for energy products and services in general, as well as negative developments in these other areas, would adversely impact the performance of the XLE.
| FWP-11 |
Risks associated with concentration of investment in a particular sector.
The equity securities held by the XLE are issued by companies that are in the following industries: oil, gas and consumable fuels and energy equipment and services. Consequently, the value of the securities may be subject to greater volatility and be more adversely affected by a single economic, environmental, political or regulatory occurrence affecting such industries than an investment linked to a more broadly diversified group of issuers. Stock prices for these types of companies are affected by supply and demand both for their specific product or service and for energy products and services in general.
| FWP-12 |
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 value of the relevant Reference Asset relative to its Initial Value. We cannot predict the Final Value of the relevant 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 relevant Reference Asset to which your securities are linked or the return on your securities. With respect to the 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 assume the following:
| Principal Amount: | $1,000 |
| Upside Participation Rate: | 100% |
| Buffer Value: | -10% |
| Hypothetical Maximum Cap: | 9.00% (The actual Maximum Cap for each offering of securities will be determined on the Pricing Date and with respect to the securities linked to the XLE will be at least 11.00%, and with respect to the securities linked to the IYR will be at least 9.00%,). |
| Hypothetical Reference Return |
Hypothetical Payment at Maturity |
Hypothetical Return on the Securities |
| 100.00% | $1,090.00 | 9.00% |
| 80.00% | $1,090.00 | 9.00% |
| 60.00% | $1,090.00 | 9.00% |
| 40.00% | $1,090.00 | 9.00% |
| 20.00% | $1,090.00 | 9.00% |
| 15.00% | $1,090.00 | 9.00% |
| 9.00% | $1,090.00 | 9.00% |
| 5.00% | $1,050.00 | 5.00% |
| 2.00% | $1,020.00 | 2.00% |
| 1.00% | $1,010.00 | 1.00% |
| 0.00% | $1,000.00 | 0.00% |
| -1.00% | $1,000.00 | 0.00% |
| -2.00% | $1,000.00 | 0.00% |
| -5.00% | $1,000.00 | 0.00% |
| -10.00% | $1,000.00 | 0.00% |
| -15.00% | $950.00 | -5.00% |
| -20.00% | $900.00 | -10.00% |
| -30.00% | $800.00 | -20.00% |
| -40.00% | $700.00 | -30.00% |
| -60.00% | $500.00 | -50.00% |
| -80.00% | $300.00 | -70.00% |
| -100.00% | $100.00 | -90.00% |
| FWP-13 |
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 relevant Reference Return is 2.00%.
| Reference Return: | 2.00% |
| Final Settlement Value: | $1,020.00 |
Because the relevant Reference Return is positive, and such Reference Return multiplied by the Upside Participation Rate is less than the hypothetical Maximum Cap, the Final Settlement Value would be $1,020.00 per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 × Reference Return × Upside Participation Rate)
= $1,000 + ($1,000 × 2.00% × 100%)
= $1,020.00
Example 1 shows that you will receive the return of your principal investment plus a return equal to the relevant Reference Return multiplied by 100% when such Reference Return is positive and equal to or less than the relevant Maximum Cap.
Example 2: The relevant Reference Return is 20.00%.
| Reference Return: | 20.00% |
| Final Settlement Value: | $1,090.00 |
Because the relevant Reference Return is positive, and such Reference Return multiplied by the Upside Participation Rate is greater than the hypothetical Maximum Cap, the Final Settlement Value would be $1,090.00 per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 × Maximum Cap)
= $1,000 + ($1,000 × 9.00%)
= $1,090.00
Example 2 shows that you will receive the return of your principal investment plus a return equal to the Maximum Cap when the relevant Reference Return is positive and such Reference Return multiplied by 100% exceeds the relevant Maximum Cap.
Example 3: The relevant Reference Return is -5.00%.
| Reference Return: | -5.00% |
| Final Settlement Value: | $1,000.00 |
Because the relevant Reference Return is less than zero but greater than the Buffer Value of -10%, the Final Settlement Value would be $1,000.00 per $1,000 Principal Amount (a zero return).
Example 3 shows that you will receive the return of your principal investment where the value of the relevant Reference Asset declines by no more than 10% over the term of the securities.
Example 4: The relevant Reference Return is -30.00%.
| Reference Return: | -30.00% |
| Final Settlement Value: | $800.00 |
Because the relevant Reference Return is less than the Buffer Value of -10%, the Final Settlement Value would be $800.00 per $1,000 Principal Amount, calculated as follows:
$1,000 + ($1,000 × (Reference Return + 10%))
= $1,000 + ($1,000 × (-30.00% + 10%))
= $800.00
Example 4 shows that you are exposed on a 1-to-1 basis to declines in the value of the Reference Asset beyond the Buffer Value of -10%. You will lose some or a significant portion (up to 90%) of your investment.
| FWP-14 |
INFORMATION RELATING TO THE SECURITIES LINKED TO THE ISHARES® U.S. Real Estate ETF
The disclosure relating to the IYR contained below relates only to the offering of securities linked to the IYR.
Description of the IYR
HSBC has derived all information relating to the IYR, including, without limitation, its make-up, performance, method of calculation and changes in its components, from publicly available sources. That information reflects the policies of, and is subject to change by iShares, a registered investment company. We have not independently verified the accuracy or completeness of the information derived from these public sources.
iShares consists of numerous separate investment portfolios (the “iShares Funds”), including the IYR. The IYR seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Real Estate IndexSM (the “underlying index”). The IYR typically earns income dividends from securities included in the underlying index. These amounts, net of expenses and taxes (if applicable), are passed along to the IYR’s shareholders as “ordinary income.” In addition, the IYR realizes capital gains or losses whenever it sells securities. However, because the securities are linked only to the share price of the underlying shares, you will not be entitled to receive income, dividend, or capital gain distributions from the IYR or any equivalent payments. The returns of the IYR may be affected by certain management fees and other expenses, which are detailed in its prospectus.
Information provided to or filed with the SEC by iShares under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 can be located at the SEC’s facilities or through the SEC’s Website by reference to SEC file numbers 333-92935 and 811-09729, respectively. We have not independently verified the accuracy or completeness of the information or reports prepared by iShares.
The shares of the IYR trade on the NYSE Arca under the symbol “IYR”.
“iShares®” and BlackRock® are registered trademarks of BlackRock®, Inc. and its affiliates (“BlackRock®”). BlackRock® has licensed certain trademarks and trade names of BlackRock® for our use. The securities are not sponsored, endorsed, sold, or promoted by BlackRock®, or by any of the iShares® Funds. Neither BlackRock® nor the iShares® Funds make any representations or warranties to the owners of the securities or any member of the public regarding the advisability of investing in the securities. Neither BlackRock® nor the iShares® Funds shall have any obligation or liability in connection with the registration, operation, marketing, trading, or sale of the Notes or in connection with our use of information about the iShares® Funds.
The Dow Jones U.S. Real Estate IndexSM
We have derived all information contained in this free writing prospectus regarding the underlying index, including, without limitation, its make-up, method of calculation and changes in its components, from publicly available information, including Bloomberg Financial Markets. The information reflects the policies of, and is subject to change by S&P Dow Jones Indices LLC. S&P Dow Jones Indices LLC has no obligation to continue to publish, and may discontinue publication of, the underlying index.
The underlying index is a float-adjusted market capitalization-weighted real-time index that provides a broad measure of the performance of the real estate sector of the U.S. securities market. Component companies consist of REITs, and other companies that invest directly or indirectly in real estate through development, management, or ownership, including property agencies. Because the index is comprised primarily of REITs, the prices of the component stocks reflect changes in lease rates, vacancies, property development and other transactions. The underlying index was first calculated on February 14, 2000. The underlying index is calculated on a price return and total return basis. The level of the index was set to 100 on the base date of December 31, 1991.
The underlying index is a subset of the Dow Jones U.S. Index, a broad-based measure of the U.S. stock market, which aims to measure the performance of 95% of U.S. stocks by float-adjusted market capitalization and is calculated on a price return basis. The index universe is defined as all stocks traded on the major U.S. stock exchanges, minus any non-common issues and illiquid stocks. The Dow Jones U.S. Index is part of the Dow Jones Global Indices®, which is a benchmark family of indices that currently follows stocks from 46 countries.
Index Composition and Maintenance
Defining the Investable Universe: The underlying index component candidates must trade on a major U.S. stock exchange and must be common shares or other securities that have the characteristics of common equities. All classes of common shares, both fully and partially paid, are eligible. Fixed-dividend shares and securities such as convertible notes, warrants, rights, mutual funds, unit investment trusts, closed-end fund shares, and shares in limited partnerships are not eligible. Temporary issues arising from corporate actions, such as “when-issued shares,” are considered on a case-by-case basis when necessary to maintain continuity in a company’s index membership. REITs, listed property trusts (LPTs), and similar real-property-owning pass-through structures taxed as REITs by their domiciles are also eligible. If a company has more than one class of shares, only one class of shares will be included. Securities that have had more than ten non-trading days during the past quarter are excluded.
Stock Selection: The index universe is sorted by float-adjusted market capitalization and the stocks in the top 95% are selected as components of the index, excluding stocks that fall within the bottom 1% of the universe according to their free-float market capitalization and within the bottom .01% of the universe according to their turnover. To be included in the index, the issuer of each component security must be classified in the Real Estate Supersector, as defined by the proprietary classification system used by S&P Dow Jones Indices.
| FWP-15 |
Review Process: The index is reconstituted annually in September. All index components are reviewed to determine their eligibility, and the float factor for each component is reviewed and updated as needed. Changes are implemented at the opening of trading on the Monday following the third Friday of September.
The index is also reviewed on a quarterly basis. Shares outstanding totals for component stocks are updated during each quarterly review. Changes in shares outstanding of less than 5% are accumulated and made quarterly in March, June, September and December. These changes, as well as any weight adjustments, are implemented at the opening of trading on the Monday following the third Friday of the quarterly update month. If the number of outstanding shares for an index component changes by more than 5% due to a corporate action, the shares total will be adjusted. The timing of the adjustment will depend on the type of event that causes the change. If the impact of corporate actions during the period between quarterly share updates changes the number of a company’s shares outstanding by 5% or more, and that change causes a company’s float factor to change by 5% or more, then the company’s float factor will be updated at the same time as the share change. If a component no longer meets the eligibility requirements, it will be removed from the index. Whenever possible, any such change will be announced at least two business days prior to its implementation.
In addition to the scheduled quarterly reviews, the index is reviewed on an ongoing basis. Changes in the underlying index’s composition and related weight adjustments are necessary whenever there are extraordinary events such as delistings, bankruptcies, mergers, or takeovers involving index components. In these cases, each event will be taken into account as soon as it is effective. Whenever possible, the changes in the underlying index components will be announced at least two business days prior to their implementation date.
Historical Performance
| The following table sets forth the quarterly high and low closing prices, as well as end-of-quarter closing prices, on the relevant exchange, of this Reference Asset for each quarter in the period from January 2, 2008 through April 27, 2017. We obtained the data in this table from the Bloomberg Professional® service, without independent verification by us. All historical prices are denominated in US dollars and rounded to the nearest penny. | The graph below illustrates the daily performance of this Reference Asset from January 2, 2008 through April 27, 2017 based on information from the Bloomberg Professional® service. Historical prices and past performance of the Reference Asset is not indicative of its future performance. | ||||
| Quarter Ending | Quarter High ($) |
Quarter Low ($) |
Quarter Close ($) |
 | |
| March 31, 2008 | 68.22 | 59.02 | 65.10 | ||
| June 30, 2008 | 71.65 | 60.95 | 60.95 | ||
| September 30, 2008 | 67.20 | 56.34 | 61.95 | ||
| December 31, 2008 | 61.95 | 25.40 | 37.23 | ||
| March 31, 2009 | 37.26 | 22.21 | 25.46 | ||
| June 30, 2009 | 35.55 | 25.30 | 32.34 | ||
| September 30, 2009 | 45.04 | 29.88 | 42.66 | ||
| December 31, 2009 | 47.44 | 39.63 | 45.92 | ||
| March 31, 2010 | 50.83 | 42.45 | 49.78 | ||
| June 30, 2010 | 54.66 | 46.95 | 47.21 | ||
| September 30, 2010 | 55.21 | 45.32 | 52.88 | ||
| December 31, 2010 | 57.62 | 52.71 | 55.96 | ||
| March 31, 2011 | 60.58 | 55.59 | 59.40 | ||
| June 30, 2011 | 62.80 | 58.17 | 60.30 | ||
| September 30, 2011 | 62.92 | 49.14 | 50.57 | ||
| December 31, 2011 | 58.00 | 48.19 | 56.79 | ||
| March 31, 2012 | 62.57 | 56.52 | 62.29 | ||
| June 30, 2012 | 64.47 | 59.25 | 63.97 | ||
| September 30, 2012 | 67.80 | 63.97 | 64.39 | ||
| December 31, 2012 | 65.42 | 61.15 | 64.72 | ||
| March 30, 2013 | 69.48 | 64.72 | 69.48 | ||
| June 30, 2013 | 75.54 | 63.55 | 66.39 | ||
| September 30, 2013 | 69.42 | 60.92 | 63.76 | ||
| December 31, 2013 | 68.18 | 62.01 | 63.09 | ||
| March 31, 2014 | 69.24 | 62.98 | 67.67 | ||
| June 30, 2014 | 72.90 | 67.52 | 71.79 | ||
| September 30, 2014 | 74.82 | 68.88 | 69.20 | ||
| December 31, 2014 | 79.01 | 69.14 | 76.84 | ||
| March 31, 2015 | 83.14 | 76.42 | 79.32 | ||
| June 30, 2015 | 80.64 | 71.30 | 71.30 | ||
| September 30, 2015 | 76.58 | 68.69 | 70.95 | ||
| December 31, 2015 | 77.03 | 70.95 | 75.11 | ||
| March 31, 2016 | 77.86 | 66.28 | 77.86 | ||
| June 30, 2016 | 82.30 | 75.83 | 82.30 | ||
| September 30, 2016 | 85.69 | 78.83 | 80.64 | ||
| December 31, 2016 | 80.64 | 72.87 | 76.94 | ||
| March 31, 2017 | 80.73 | 76.13 | 78.49 | ||
| April 27, 2017.* | 80.98 | 78.49 | 79.67 | ||
* This document includes, for the second calendar quarter of 2017, data for the period from April 1, 2017 through April 27, 2017. Accordingly, the “Quarter High,” “Quarter Low” and “Quarter Close” data indicated are for this shortened period only and do not reflect complete data for the second calendar quarter of 2017.
| FWP-16 |
INFORMATION RELATING TO THE SECURITIES LINKED TO Energy Select Sector SPDR® Fund
The disclosure relating to the XLE contained below relates only to the offering of securities linked to the XLE.
Description of XLE
The XLE seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the S&P® Energy Select Sector Index. The S&P® Energy Select Sector Index measures the performance of the energy sector of the U.S. equity market. The S&P® Energy Select Sector Index seeks to represent the energy sector of the S&P 500® Index. The S&P® Energy Select Sector Index includes companies in the following industries: oil, gas and consumable fuels, and energy equipment and services.
For more information about the XLE, see “Energy Select Sector SPDR® Fund” beginning on page S-8 of the accompanying ETF Underlying Supplement.
Historical Performance
| The following table sets forth the quarterly high and low closing prices, as well as end-of-quarter closing prices, on the relevant exchange, of this Reference Asset for each quarter in the period from January 2, 2008 through April 27, 2017. We obtained the data in this table from the Bloomberg Professional® service, without independent verification by us. All historical prices are denominated in US dollars and rounded to the nearest penny. | The graph below illustrates the daily performance of the Reference Asset from January 2, 2008 through April 27, 2017 based on information from the Bloomberg Professional® service. Past performance of this Reference Asset is not indicative of its future performance. | ||||
| Quarter Ending |  | ||||
| March 31, 2008 | 80.40 | 67.27 | 73.80 | ||
| June 30, 2008 | 90.25 | 73.80 | 88.36 | ||
| September 30, 2008 | 88.97 | 61.65 | 63.77 | ||
| December 31, 2008 | 63.77 | 40.00 | 47.84 | ||
| March 31, 2009 | 51.95 | 38.12 | 42.46 | ||
| June 30, 2009 | 53.95 | 42.46 | 48.07 | ||
| September 30, 2009 | 55.89 | 44.52 | 53.92 | ||
| December 31, 2009 | 59.76 | 51.97 | 57.01 | ||
| March 31, 2010 | 60.30 | 53.74 | 57.52 | ||
| June 30, 2010 | 62.07 | 49.68 | 49.68 | ||
| September 30, 2010 | 56.31 | 49.38 | 56.06 | ||
| December 31, 2010 | 68.25 | 56.06 | 68.25 | ||
| March 31, 2011 | 80.01 | 67.78 | 79.81 | ||
| June 30, 2011 | 80.44 | 70.99 | 75.35 | ||
| September 30, 2011 | 79.79 | 58.59 | 58.59 | ||
| December 31, 2011 | 73.04 | 56.55 | 69.13 | ||
| March 31, 2012 | 76.29 | 69.13 | 71.73 | ||
| June 30, 2012 | 72.42 | 62.00 | 66.37 | ||
| September 30, 2012 | 76.57 | 64.96 | 73.48 | ||
| December 31, 2012 | 74.94 | 68.59 | 71.44 | ||
| March 30, 2013 | 79.99 | 71.44 | 79.32 | ||
| June 30, 2013 | 83.28 | 74.09 | 78.36 | ||
| September 30, 2013 | 85.30 | 78.36 | 82.88 | ||
| December 31, 2013 | 88.51 | 81.87 | 88.51 | ||
| March 31, 2014 | 89.06 | 81.89 | 89.06 | ||
| June 30, 2014 | 101.29 | 88.45 | 100.10 | ||
| September 30, 2014 | 100.58 | 90.62 | 90.62 | ||
| December 31, 2014 | 90.62 | 73.36 | 79.16 | ||
| March 31, 2015 | 82.29 | 72.86 | 77.58 | ||
| June 30, 2015 | 82.94 | 74.64 | 75.16 | ||
| September 30, 2015 | 75.16 | 59.22 | 61.20 | ||
| December 31, 2015 | 71.40 | 58.78 | 60.55 | ||
| March 31, 2016 | 63.75 | 51.80 | 61.92 | ||
| June 30, 2016 | 69.50 | 60.18 | 68.24 | ||
| September 30, 2016 | 71.80 | 65.27 | 70.61 | ||
| December 31, 2016 | 77.83 | 67.77 | 75.32 | ||
| March 31, 2017 | 76.17 | 68.24 | 69.90 | ||
| April 27, 2017.* | 70.90 | 67.79 | 67.79 | ||
* This document includes, for the second calendar quarter of 2017, data for the period from April 1, 2017 through April 7, 2017. Accordingly, the “Quarter High,” “Quarter Low” and “Quarter Close” data indicated are for this shortened period only and do not reflect complete data for the second calendar quarter of 2017.
| FWP-17 |
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 free writing prospectus. 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 the pricing supplement to which this free writing prospectus relates, for distribution to other registered broker-dealers, or will offer the securities directly to investors. HSBC Securities (USA) Inc. proposes to offer the securities at the price to public set forth on the cover page of this free writing prospectus. HSBC USA Inc. or one of our affiliates may pay varying underwriting discounts of up to 1.275% 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 the pricing supplement to which this free writing prospectus relates in market-making transactions after the initial sale of the securities, but is under no obligation to make a market in the securities and may discontinue any market-making activities at any time without notice.
See “Supplemental Plan of Distribution (Conflicts of Interest)” on page S-59 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 relevant 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 relevant 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 relevant Reference Asset (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) (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). Furthermore, unless otherwise established by clear and convincing evidence, the “net underlying long-term capital gain” is treated as zero.
| FWP-18 |
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 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 relevant Reference Asset 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 shares of the relevant Reference Asset at fair market value (which would reflect the percentage increase in the value of those shares over the term of the security). Accordingly, it is possible that all or a portion of any gain on the sale or settlement of the security after one year could be treated as “Excess Gain” from a “constructive ownership transaction,” which gain would be recharacterized as ordinary income, and subject to an interest charge. U.S. holders should consult their tax advisors regarding the potential application of the “constructive ownership” rules.
We will not attempt to ascertain whether the relevant Reference Asset or any of the entities whose stock is owned by the relevant Reference Asset 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 the relevant Reference Asset or one or more of the entities whose stock is owned by the relevant Reference Asset 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 relevant Reference Asset or the entities whose stock is owned by the relevant Reference Asset and consult your tax advisor regarding the possible consequences to you if the relevant Reference Asset or one or more of the entities whose stock is owned by the relevant Reference Asset is or becomes a PFIC or a USRPHC.
Under current law, while the matter is not entirely clear, individual non-U.S. holders, and entities whose property is potentially includible in those individuals’ gross estates for U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual has retained certain interests or powers), should note that, absent an applicable treaty benefit, the securities are likely to be treated as U.S. situs property, subject to U.S. federal estate tax. These individuals and entities should consult their own tax advisors regarding the U.S. federal estate tax consequences of investing in the securities.
A “dividend equivalent” payment is treated as a dividend from sources within the United States and such payments generally would be subject to a 30% U.S. withholding tax if paid to a non-U.S. holder. Under U.S. Treasury Department regulations, payments (including deemed payments) with respect to equity-linked instruments (“ELIs”) that are “specified ELIs” may be treated as dividend equivalents if such specified ELIs reference an interest in an “underlying security,” which is generally any interest in an entity taxable as a corporation for U.S. federal income tax purposes if a payment with respect to such interest could give rise to a U.S. source dividend. However, U.S. Treasury regulations provide that withholding on dividend equivalent payments will not apply to specified ELIs that are not delta-one instruments and that are issued before January 1, 2018. Based on the Issuer’s determination that the securities are not “delta-one” instruments, non-U.S. holders should not be subject to withholding on dividend equivalent payments, if any, under the securities. However, it is possible that the securities could be treated as deemed reissued for U.S. federal income tax purposes upon the occurrence of certain events affecting the relevant Reference Asset or the securities, and following such occurrence the securities could be treated as subject to withholding on dividend equivalent payments. Non-U.S. holders that enter, or have entered, into other transactions in respect of the relevant Reference Asset or the securities should consult their tax advisors as to the application of the dividend equivalent withholding tax in the context of the securities and their other transactions. If any payments are treated as dividend equivalents subject to withholding, we (or the applicable paying agent) would be entitled to withhold taxes without being required to pay any additional amounts with respect to amounts so withheld.
Additionally, the IRS has announced that withholding under the Foreign Account Tax Compliance Act (as discussed in the accompanying prospectus supplement) on payments of gross proceeds from a sale, exchange, redemption or other disposition of the securities will only apply to dispositions after December 31, 2018.
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.
| FWP-19 |
| TABLE OF CONTENTS |
You should only rely on the information contained in this free writing prospectus, the accompanying ETF Underlying Supplement, free writing prospectus 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 free writing prospectus, the accompanying ETF Underlying Supplement, free writing prospectus and prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. This free writing prospectus, the accompanying ETF Underlying Supplement, free writing prospectus 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 free writing prospectus, the accompanying ETF Underlying Supplement, free writing prospectus and prospectus is correct on any date after their respective dates.
HSBC USA Inc.
$ Buffered Market Participation
$ Buffered Market Participation
May 8, 2017
FREE WRITING PROSPECTUS
| |
| Free Writing Prospectus | ||
| General | FWP-6 | |
| Payment at Maturity | FWP-7 | |
| Investor Suitability | FWP-8 | |
| Risk Factors | FWP-10 | |
| Illustrative Examples | FWP-11 | |
| Information Relating to the Securities Linked to the | ||
| iShares® U.S. Real EstateETF | FWP-15 | |
| Information Relating to the Securities Linked to the | ||
| Energy Select Sector SPDR® Fund | FWP-17 | |
| Events of Default and Acceleration | FWP-18 | |
| Supplemental Plan of Distribution (Conflicts of Interest) | FWP-18 | |
| U.S. Federal Income Tax Considerations | FWP-18 | |
| ETF Underlying Supplement | ||
| Risk Factors | S-1 | |
| Reference Sponsors and Index Funds | S-7 | |
| The Energy Select Sector SPDR® Fund | S-8 | |
| The Financial Select Sector SPDR® Fund | S-10 | |
| The Health Care Select Sector SPDR® Fund | S-12 | |
| The iShares® China Large-Cap ETF | S-14 | |
| The iShares® Latin America 40 ETF | S-17 | |
| The iShares® MSCI Brazil Capped ETF | S-19 | |
| The iShares® MSCI EAFE ETF | S-21 | |
| The iShares® MSCI Emerging Markets ETF | S-23 | |
| The iShares® MSCI Mexico Capped ETF | S-25 | |
| The iShares® Transportation Average ETF | S-27 | |
| The iShares® U.S. Real Estate ETF | S-28 | |
| The Market Vectors® Gold Miners ETF | S-29 | |
| The PowerShares QQQ TrustSM, Series 1 | S-31 | |
| The SPDR® Dow Jones Industrial AverageSM ETF Trust | S-34 | |
| The SPDR® S&P 500® ETF Trust | S-36 | |
| The Vanguard® FTSE Emerging Markets ETF | S-39 | |
| The WisdomTree® Japan Hedged Equity Fund | S-42 | |
| Additional Terms of the Notes | S-44 | |
| Prospectus Supplement | ||
| Risk Factors | S-1 | |
| Pricing Supplement | S-8 | |
| Description of Notes | S-10 | |
| Use of Proceeds and Hedging | S-33 | |
| Certain ERISA Considerations | S-34 | |
| U.S. Federal Income Tax Considerations | S-37 | |
| Supplemental Plan of Distribution (Conflicts of Interest) | S-59 | |
| Prospectus | ||
| About this Prospectus | 1 | |
| Risk Factors | 2 | |
| Where You Can Find More Information | 3 | |
| Special Note Regarding Forward-Looking Statements | 4 | |
| HSBC USA Inc. | 6 | |
| Use of Proceeds | 7 | |
| Description of Debt Securities | 8 | |
| Description of Preferred Stock | 19 | |
| Description of Warrants | 25 | |
| Description of Purchase Contracts | 29 | |
| Description of Units | 32 | |
| Book-Entry Procedures | 35 | |
| Limitations on Issuances in Bearer Form | 40 | |
| U.S. Federal Income Tax Considerations Relating to Debt Securities | 40 | |
| Plan of Distribution (Conflicts of Interest) | 49 | |
| Notice to Canadian Investors | 52 | |
| Notice to EEA Investors | 53 | |
| Notice to UK Investors | 54 | |
| UK Financial Promotion | 54 | |
| Certain ERISA Matters | 55 | |
| Legal Opinions | 57 | |
| Experts | 58 | |
| FWP-20 |