Filed Pursuant to Rule 433
Registration No. 333-202524
October 16, 2017
FREE WRITING PROSPECTUS
(To Prospectus dated March 5, 2015,
Prospectus Supplement dated March 5, 2015 and
Equity Index Underlying Supplement dated March 5, 2015)
HSBC USA Inc.
Autocallable Barrier Notes
with Contingent Return
| 4 | Autocallable Barrier Notes with Contingent Return Linked to the Least Performing of the S&P 500® Index and the Russell 2000® Index |
| 4 | 15-month term |
| 4 | Quarterly contingent coupon payments at a rate of approximately 1.575% (or at least 6.30% per annum) (to be determined on the pricing date), payable in equal installments if the closing level of each underlying on the applicable coupon observation date is greater than or equal to 75% of its initial level |
| 4 | Automatically callable quarterly on or after October 29, 2018 at the principal amount plus the applicable contingent coupon if the closing level of each underlying is at or above its initial level |
| 4 | If the Notes are not called and a Trigger Event occurs, full exposure to declines in the least performing reference asset if its return is less than -25% |
| 4 | All payments on the Notes are subject to the credit risk of HSBC USA Inc. |
The Autocallable Barrier Notes with Contingent Return (each a “Note” and collectively the “Notes”) offered hereunder will not be listed on any U.S. securities exchange or automated quotation system.
Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of the Notes or passed upon the accuracy or the adequacy of this document, the accompanying prospectus, prospectus supplement or Equity Index 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 Notes. HSBC Securities (USA) Inc. will purchase the Notes from us for distribution to other registered broker-dealers or will offer the Notes directly to investors. 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 Notes 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-16 of this free writing prospectus.
Investment in the Notes involves certain risks. You should refer to “Risk Factors” beginning on page FWP-8 of this document, page S-1 of the accompanying prospectus supplement and page S-2 of the accompanying Equity Index Underlying Supplement.
The Estimated Initial Value of the Notes on the Pricing Date is expected to be between $970 and $1,000 per Note, which may be less than the price to public. The market value of the Notes at any time will reflect many factors and cannot be predicted with accuracy. See “Estimated Initial Value” on page FWP-4 and “Risk Factors” beginning on page FWP-8 of this document for additional information.
| Price to Public | Underwriting Discount1 | Proceeds to Issuer | |
| Per Note | $1,000 | ||
| Total |
1HSBC USA Inc. or one of our affiliates may pay varying underwriting discounts of up to 0.35% and referral fees of up to 0.75% per $1,000 Principal Amount of Notes in connection with the distribution of the Notes to other registered broker-dealers. In no case will the sum of the underwriting discounts and referral fees exceed 1.10% per $1,000 Principal Amount. See “Supplemental Plan of Distribution (Conflicts of Interest)” on page FWP-15 of this free writing prospectus.
The Notes:
| Are Not FDIC Insured | Are Not Bank Guaranteed | May Lose Value |
HSBC USA Inc.
15-Month Autocallable Barrier Notes with Contingent Return
Linked to the Least Performing of the S&P 500® Index and Russell 2000® Index
Indicative Terms*
| Principal Amount | $1,000 per Note |
| Term | Approximately 15 months |
| Reference Asset | The S&P 500® Index (“SPX”) and the Russell 2000® Index (“RTY”) (each an “Underlying” and together the “Underlyings”). |
| Call Feature | The Notes will be automatically called if the Official Closing Level of each Underlying is at or above its Initial Level on any Call Observation Date on or after October 29, 2018.* In such a case, you will receive a cash payment, per $1,000 Principal Amount, equal to the Principal Amount, plus the applicable Contingent Coupon on the corresponding Call Payment Date.* |
| Contingent Coupon Rate | At least 6.30% per annum, which equals approximately 1.575% per quarter (to be determined on the Pricing Date) payable in equal installments |
| Contingent Coupon |
If the Official Closing Level of each Underlying is greater than or equal to its Coupon Trigger on the relevant Coupon Observation Date: we will pay you the Contingent Coupon. If the Official Closing Level of either Underlying is less than its Coupon Trigger on the relevant Coupon Observation Date: the Contingent Coupon applicable to such Coupon Observation Date will not be payable.* |
| Coupon Trigger and Barrier Level | For each Underlying, 75% of its Initial Level |
| Payment at Maturity per Note |
Unless the Notes are automatically called, for each $1,000 Principal Amount of Notes, you will receive a payment on the Maturity Date calculated as follows, plus the final coupon payment (if applicable): n If a Trigger Event does not occur, 100% of the Principal Amount. n If a Trigger Event occurs and the Final Return of the Least Performing Underlying is positive or zero, an amount equal to 100% of the Principal Amount. n If a Trigger Event occurs and the Final Return of the Least Performing Underlying is negative, an amount equal to (i) 100% of the Principal Amount multiplied by (ii) the sum of one plus the Final Return of the Least Performing Underlying. |
| Trigger Event | A Trigger Event occurs if the Official Closing Level of either Underlying is below the Barrier Level on any scheduled trading day during the Observation Period.* |
| Final Return |
For each Underlying: Final Level – Initial Level Initial Level |
| Least Performing Underlying | The Underlying with the lowest Final Return. |
| Trade Date and Pricing Date | October 27, 2017 |
| Original Issue Date | November 1, 2017 |
| Final Valuation Date† | January 29, 2019 |
| Maturity Date† | February 1, 2019 |
| CUSIP/ISIN | 40435FJN8 / US40435FJN87 |
* See page FWP-4 for Observation Period, Call Observation Dates, Call Payment Dates and Coupon Payment Dates.
The Notes
The Notes may be suitable for investors who believe the level of each Underlying will remain above its Trigger Level and who seek fixed-rate contingent quarterly coupon payments (potentially higher than the yield on traditional conventional debt securities with a similar term and issued by issuers with a credit rating similar to ours) as long as the Notes are not automatically called.
If the Notes are not automatically called and if a Trigger Event does not occur during the Observation Period, you will receive the Principal Amount at maturity plus the final coupon payment.
Unless the Notes are called prior to maturity, so long as the Official Closing Level of each and every Underlying on each Coupon Observation Date is at or above its Coupon Trigger, you will receive the quarterly Contingent Coupon on the applicable Coupon Payment Date.
If the Notes are not automatically called and if a Trigger Event occurs with respect to either Underlying in the Reference Asset during the Observation Period, you may lose some or all of your Principal Amount. In that case, even with any coupon payments made prior to maturity, your return on the Notes may be negative.
If the Notes are not automatically called and the Final Level of the Least Performing Underlying is less than its Barrier Level, you will lose 1% of your principal for every 1% decline in value of the Least Performing Underlying.
| The offering period for the Notes is through October 27, 2017 |
| FWP-2 |
| HSBC USA Inc. |  |
| 15-Month Autocallable Barrier Notes with Contingent Return |
This free writing prospectus relates to a single offering of Autocallable Barrier Notes with Contingent Return. The offering will have the terms described in this free writing prospectus and the accompanying prospectus supplement, prospectus and Equity Index Underlying Supplement. If the terms of the Notes offered hereby are inconsistent with those described in the accompanying prospectus supplement, prospectus or Equity Index Underlying Supplement, the terms described in this free writing prospectus shall control.
This free writing prospectus relates to an offering of Notes linked to the least performing of two indices. The purchaser of a Note will acquire a senior unsecured debt security of HSBC USA Inc. as described below. The following key terms relate to the offering of Notes:
| Issuer: | HSBC USA Inc. |
| Principal Amount: | $1,000 per Note |
| Reference Asset: | The S&P 500® Index (“SPX”) and the Russell 2000® Index (“RTY”) (each, an “Underlying” and together, the “Underlyings”) |
| Trade Date: | October 27, 2017 |
| Pricing Date: | October 27, 2017 |
| Original Issue Date: | November 1, 2017 |
| Final Valuation Date: | January 29, 2019, subject to adjustment as described under “Additional Terms of the Notes―Valuation Dates” in the accompanying Equity Index Underlying Supplement. |
| Maturity Date: | 3 business days after the Final Valuation Date, expected to be February 1, 2019. 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 Equity Index Underlying Supplement. |
| Call Feature: | We will automatically call the Notes if the Official Closing Level of each Underlying is at or above its Initial Level on any Call Observation Date on or after October 29, 2018. If the Notes are automatically called, you will receive the Principal Amount plus the applicable Contingent Coupon on the corresponding Call Payment Date. |
| Contingent Coupon Rate: | At least 6.30% per annum, which equals approximately 1.575% per quarter (to be determined on the Pricing Date) payable in equal installments. |
| Contingent Coupon: |
If the Official Closing Level of each Underlying is greater than or equal to its Coupon Trigger on the relevant Coupon Observation Date, you will receive the Contingent Coupon on the applicable Coupon Payment Date.
If the Official Closing Level of either Underlying is less than its Coupon Trigger on the relevant Coupon Observation Date, the Contingent Coupon applicable to such Coupon Observation Date will not be payable.
You may not receive any Contingent Coupons over the term of the Notes. |
| Coupon Trigger: | For each Underlying, 75% of its Initial Level |
| Barrier Level: | For each Underlying, 75% of its Initial Level. |
| Payment at Maturity: | Unless the Notes are automatically called, on the Maturity Date, for each $1,000 Principal Amount of Notes, we will pay you the Final Settlement Value. |
| Final Settlement Value: |
4 If a Trigger Event does not occur, 100% of the Principal Amount plus the final coupon.
4 If a Trigger Event occurs and the Final Return of the Least Performing Underlying is positive or zero, 100% of the Principal Amount plus the final coupon.
4 If a Trigger Event occurs and the Final Return of the Least Performing Underlying is negative, 100% of the Principal Amount multiplied by the sum of one plus the Final Return of the Least Performing Underlying plus the final coupon if applicable. In such a case, you may lose up to 100% of your Principal Amount regardless of the performance of the other Underlying. |
| FWP-3 |
| Trigger Event: | A Trigger Event occurs if the Official Closing Level of either Underlying is below its Trigger Level on any trading day during the Observation Period. |
| Trigger Level: | For each Underlying, 75% of the Initial Level of such Underlying. |
| Least Performing Underlying: |
The Underlying with the lowest Final Return. |
| Observation Period: | The period from but excluding the Trade Date to and including the Final Valuation Date, subject to adjustment as described under “Additional Terms of the Notes―Observation Periods” in the accompanying Equity Index Underlying Supplement. |
| Coupon Observation / Payment Dates: |
The Coupon Observation and Payment Dates are subject to postponement as described under “Additional Terms of the Notes―Observation Periods” and “Additional Terms of the Notes―Coupon Payment Dates, Call Payment Dates and Maturity Date” respectively, in the accompanying Equity Index Underlying Supplement. |
| Coupon Observation Dates |
Coupon Payment Dates |
| January 29, 2018 | February 1, 2018 |
| April 26, 2018 | May 1, 2018 |
| July 27, 2018 | August 1, 2018 |
| October 29, 2018 | November 1, 2018** |
| January 29, 2019 | February 1, 2019** |
| * These Coupon Observation Dates are also Call Observation Dates | |
| ** These Coupon Payment Dates are also Call Payment Dates | |
| Call Observation Dates: | The Coupon Observation Dates on or after October 29, 2018 and ending on January 29, 2019 |
| Call Payment Dates: | The relevant Coupon Payment Dates on or after November 1, 2018 and ending on February 1, 2019 |
| Final Return: |
With respect to each Underlying, the quotient, expressed as a percentage, calculated as follows:
Final Level – Initial Level Initial Level |
| Initial Level: | With respect to each Underlying, its Official Closing Level on the Pricing Date. |
| Final Level: | With respect to each Underlying, its Official Closing Level on the Final Valuation Date. |
| Official Closing Level: | With respect to each Underlying, the Official Closing Level on any trading day will be determined by the calculation agent based upon the closing level of such index, displayed on the following pages on the Bloomberg Professional® service: for the SPX, page “SPX <INDEX>” and for the RTY, page “RTY <INDEX>” or, for each Underlying, if the closing level is not so displayed, any successor page on the Bloomberg Professional® service or any successor service, as applicable. |
| CUSIP/ISIN: | 40435FJN8 / US40435FJN87 |
| Form of Notes: | Book-Entry |
| Listing: | The Notes will not be listed on any U.S. securities exchange or quotation system. |
| Estimated Initial Value: | The Estimated Initial Value of the Notes may be less than the price you pay to purchase the Notes. The Estimated Initial Value does not represent a minimum price at which we or any of our affiliates would be willing to purchase your Notes 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 Notes, which will be determined by us on the Pricing Date, may be less than the price to public and may differ from the market value of the Notes 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 Notes.
| FWP-4 |
GENERAL
This free writing prospectus relates to the offering of Notes identified on the cover page. The purchaser of a Note will acquire a senior unsecured debt security of HSBC USA Inc. We reserve the right to withdraw, cancel or modify this offering and to reject orders in whole or in part. Although the offering of Notes relates to the Underlyings, you should not construe that fact as a recommendation as to the merits of acquiring an investment linked to either Underlying or any component security included in any Underlying or as to the suitability of an investment in the Notes.
You should read this document together with the prospectus dated March 5, 2015, the prospectus supplement dated March 5, 2015 and the Equity Index Underlying Supplement dated March 5, 2015. If the terms of the Notes offered hereby are inconsistent with those described in the accompanying prospectus supplement, prospectus or Equity Index 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, beginning on page S-1 of the prospectus supplement and beginning on page S-2 of the Equity Index Underlying Supplement, as the Notes 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 Notes. 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, prospectus supplement and Equity Index 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 Equity Index 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 Equity Index Underlying Supplement if you request them by calling toll-free 1-866-811-8049.
You may also obtain:
| 4 | The Equity Index Underlying Supplement at: http://www.sec.gov/Archives/edgar/data/83246/000114420415014327/v403626_424b2.htm |
| 4 | The prospectus supplement at: http://www.sec.gov/Archives/edgar/data/83246/000114420415014311/v403645_424b2.htm |
| 4 | The prospectus at: http://www.sec.gov/Archives/edgar/data/83246/000119312515078931/d884345d424b3.htm |
We are using this free writing prospectus to solicit from you an offer to purchase the Notes. You may revoke your offer to purchase the Notes 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 Notes prior to their issuance. In the event of any material changes to the terms of the Notes, we will notify you.
| FWP-5 |
PAYMENT ON THE NOTES
Call Feature
The Notes will be automatically called if the Official Closing Value of each and every Underlying is at or above its Initial Value on any Call Observation Date. If the Notes are automatically called, investors will receive a cash payment, per $1,000 Principal Amount of Notes, equal to the Principal Amount, plus the applicable Contingent Coupon.
Contingent Coupon
We will pay a quarterly Contingent Coupon payment on a Coupon Payment Date if the Official Closing Level of each Underlying on the applicable Coupon Observation Date is equal to or greater than its Coupon Trigger. Otherwise, no coupon will be paid on such Coupon Payment Date. For information regarding the record dates applicable to the Contingent Coupons payable on the Notes, please see the section entitled “Recipients of Interest Payments” beginning on page S-12 in the accompanying prospectus supplement. The Contingent Coupon Rate is at least 6.30% per annum (approximately $15.75 per $1,000 in Principal Amount per quarter, if payable, payable in equal installments), to be determined on the Pricing Date.
Maturity
Unless the Notes are automatically called, on the Maturity Date and for each $1,000 Principal Amount of Notes, you will receive a cash payment equal to the final coupon payment (if applicable) plus the Final Settlement Value determined as follows:
| 4 | If a Trigger Event does not occur, 100% of the Principal Amount. |
| 4 | If a Trigger Event occurs and the Final Return of the Least Performing Underlying is positive or zero, 100% of the Principal Amount. |
| 4 | If a Trigger Event occurs and the Final Return of the Least Performing Underlying is negative, 100% of the Principal Amount multiplied by the sum of one plus the Final Return of the Least Performing Underlying, which will result in a Final Settlement Value less than the Principal Amount. |
Observation Period
The period from but excluding the Trade Date to and including the Final Valuation Date, subject to adjustment as described under “Additional Terms of the Notes―Observation Periods” in the accompanying Equity Index Underlying Supplement.
Calculation Agent
We or one of our affiliates will act as calculation agent with respect to the Notes.
Reference Sponsors
With respect to the SPX, S&P Dow Jones Indices LLC, a division of S&P Global, is the reference sponsor. With respect to the RTY, FTSE Russell is the reference sponsor.
| FWP-6 |
INVESTOR SUITABILITY
The Notes may be suitable for you if:
| 4 | You believe that the Official Closing Level of each of the Underlyings will not be below its Trigger Level on any trading day during the Observation Period. |
| 4 | You are willing to accept that the quarterly Contingent Coupon is payable only if the Official Closing Level of each Underlying is greater than or equal to its Coupon Trigger on the applicable Coupon Observation Date. |
| 4 | You do not seek an investment that provides an opportunity to participate in the appreciation of either Underlying. |
| 4 | You are willing to make an investment that is exposed to the potential downside performance of the Least Performing Underlying on a 1-to-1 basis if the Final Return of the Least Performing Underlying is less than -25%. |
| 4 | You are willing to hold Notes that will be automatically called on any Call Observation Date on which the Official Closing Level of each Underlying is at or above its Initial Level, or you are otherwise willing to hold the Notes to maturity. |
| 4 | You do not seek an investment for which there will be an active secondary market. |
| 4 | You are willing to forgo dividends or other distributions paid to holders of the stocks included in the Underlyings. |
| 4 | You are willing to accept the risk and return profile of the Notes versus a conventional debt security with a comparable maturity issued by HSBC or another issuer with a similar credit rating. |
| 4 | You are comfortable with the creditworthiness of HSBC, as Issuer of the Notes. |
The Notes may not be suitable for you if:
| 4 | You believe that the Official Closing Level of one or both of the Underlyings will be below its Trigger Level on any trading day during the Observation Period. |
| 4 | You believe the Contingent Coupons will not provide you with your desired return. |
| 4 | You seek an investment that provides an opportunity to participate in the appreciation of either Underlying. |
| 4 | You are unwilling to make an investment that is exposed to the potential downside performance of the Least Performing Underlying on a 1-to-1 basis if the Final Return of the Least Performing Underlying is less than -25%. |
| 4 | You are unable or unwilling to hold Notes that will be automatically called on any Call Observation Date on which the Official Closing Level of each Underlying is at or above its Initial Level, or you are otherwise unable or unwilling to hold the Notes to maturity. |
| 4 | You prefer to receive guaranteed periodic interest payments on the Notes. |
| 4 | You seek an investment for which there will be an active secondary market. |
| 4 | You are not willing to forgo dividends or other distributions paid to holders of the stocks included in the Underlyings. |
| 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 are not willing or are unable to assume the credit risk associated with HSBC, as Issuer of the Notes. |
| FWP-7 |
RISK FACTORS
We urge you to read the section “Risk Factors” beginning on page S-1 in the accompanying prospectus supplement and beginning on page S-2 of the accompanying Equity Index Underlying Supplement. Investing in the Notes is not equivalent to investing directly in any of the stocks included in either Underlying. You should understand the risks of investing in the Notes and should reach an investment decision only after careful consideration, with your advisors, of the suitability of the Notes in light of your particular financial circumstances and the information set forth in this free writing prospectus and the accompanying prospectus, prospectus supplement and Equity Index Underlying Supplement.
In addition to the risks discussed below, you should review “Risk Factors” in the accompanying prospectus supplement and Equity Index Underlying Supplement including the explanation of risks relating to the Notes described in the following sections:
| 4 | “—Risks Relating to All Note Issuances” in the prospectus supplement; and |
| 4 | “—General Risks Related to Indices” in the Equity Index Underlying Supplement. |
You will be subject to significant risks not associated with conventional fixed-rate or floating-rate debt securities.
The Notes do not guarantee return of principal and you may lose all of your Principal Amount.
The Notes do not guarantee any return of principal. The Notes differ from ordinary debt securities in that we will not pay you 100% of the Principal Amount of your Notes if the Notes are not automatically called and the Final Level of the Least Performing Underlying is less than its Barrier Level. In this case, the Payment at Maturity you will be entitled to receive will be less than the Principal Amount of the Notes and you will lose 1% for each 1% that the Final Return of the Least Performing Underlying is less than its Initial Level. You may lose up to 100% of your investment at maturity.
You may not receive any Contingent Coupons.
We will not necessarily make periodic coupon payments on the Notes. If the Official Closing Price of either Underlying on a Coupon Observation Date is less than its Coupon Trigger, we will not pay you the Contingent Coupon applicable to that Coupon Observation Date. If on each of the Coupon Observation Dates, the Official Closing Price of either Underlying is less than its Coupon Trigger, we will not pay you any Contingent Coupons during the term of, and you will not receive a positive return on, the Notes. Generally, this non-payment of the Contingent Coupon coincides with a period of greater risk of principal loss on the Notes.
Your return on the Notes is limited to the principal amount plus the Contingent Coupon, if any, regardless of any appreciation in the level of either Underlying.
If the Notes are called, for each $1,000 in principal amount, you will receive $1,000 at maturity plus the Contingent Coupon, regardless of any appreciation in the level of either Underlying, which may be significant. Accordingly, an investment in the Notes may have a lower return than an investment in the stocks represented by an Underlying during the term of the Notes.
The Notes are subject to the credit risk of HSBC USA Inc.
The Notes 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 Notes 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 Notes, including any Contingent Coupons and any return of principal at maturity or upon early redemption, as applicable, 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 Notes 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 Notes.
Changes that affect the Underlyings may affect the market value of the Notes and the amount you will receive at maturity.
The policies of the reference sponsor of each Underlying concerning additions, deletions and substitutions of the constituents included in that Underlying and the manner in which the reference sponsor takes account of certain changes affecting those constituents may affect the level of that Underlying. The policies of the reference sponsor with respect to the calculation of the relevant Underlying could also affect the level of that Underlying. The reference sponsor may discontinue or suspend calculation or dissemination of the relevant Underlying. Any such actions could affect the value of the Notes and their return.
If the Notes are not called and a Trigger Event occurs with respect to any Underlying, your return will be based on the Final Return of the Least Performing Underlying.
The performance of either of the Underlyings may cause a Trigger Event to occur. If a Trigger Event occurs and the Notes are not automatically called, your return will be based on the Final Return of the Least Performing Underlying without regard to the performance of the other Underlying or which Underlying caused the Trigger Event to occur. As a result, you could lose all or some of your initial investment if the Final Return of the Least Performing Underlying is negative and a Trigger Event occurs, even if there is an increase in the level of the other Underlying. This could be the case even if the other Underlying caused the Trigger Event to occur or the other Underlying increased by an amount greater than the decrease in the Least Performing Underlying.
| FWP-8 |
Since the Notes are linked to the performance of more than one Underlying, you will be fully exposed to the risk of fluctuations in the level of each Underlying.
Since the Notes are linked to the performance of more than one Underlying, the Notes will be linked to the individual performance of each Underlying. Because the Notes are not linked to a weighted basket, in which the risk is mitigated and diversified among all of the components of a basket, you will be exposed to the risk of fluctuations in the level of each Underlying. For example, in the case of notes linked to a weighted basket, the return would depend on the weighted aggregate performance of the basket components reflected as the basket return. Thus, the depreciation of any basket component could be mitigated by the appreciation of another basket component, as scaled by the weightings of such basket components. However, in the case of these Notes, the individual performance of each of the Underlyings would not be combined to calculate your return and the depreciation of either Underlying would not be mitigated by the appreciation of the other Underlying. Instead, your return would depend on the Least Performing Underlying.
The Notes may be automatically called prior to the Maturity Date.
If the Notes are automatically called early, the holding period could be as little as 12 months. There is no guarantee that you would be able to reinvest the proceeds from an investment in the Notes at a comparable return for a similar level of risk in the event the Notes are automatically called prior to the Maturity Date.
The Notes are not insured or guaranteed by any governmental agency of the United States or any other jurisdiction.
The Notes 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 Notes 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 payments due on the Notes.
The Estimated Initial Value of the Notes, which will be determined by us on the Pricing Date, may be less than the price to public and may differ from the market value of the Notes in the secondary market, if any.
The Estimated Initial Value of the Notes will be calculated by us on the Pricing Date and may 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 Notes. 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 Notes 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 Notes to be more favorable to you. We will determine the value of the embedded derivatives in the Notes 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 Notes 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 Notes in the secondary market (if any exists) at any time.
The price of your Notes in the secondary market, if any, immediately after the Pricing Date may 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 Notes and the costs associated with structuring and hedging our obligations under the Notes. If you were to sell your Notes in the secondary market, if any, the price you would receive for your Notes 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 Notes in the secondary market, if any, at any time after issuance will vary based on many factors, including the levels of the Underlyings and changes in market conditions, and cannot be predicted with accuracy. The Notes are not designed to be short-term trading instruments, and you should, therefore, be able and willing to hold the Notes to maturity. Any sale of the Notes prior to maturity could result in a loss to you.
If we were to repurchase your Notes immediately after the Original Issue Date, the price you receive may be higher than the Estimated Initial Value of the Notes.
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 Notes 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 12 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 Notes and other costs in connection with the Notes that we will no longer expect to incur over the term of the Notes. 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 Notes and any agreement we may have with the distributors of the Notes. 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
| FWP-9 |
reimbursement at any time or revise the duration of the reimbursement period after the Original Issue Date of the Notes based on changes in market conditions and other factors that cannot be predicted.
The Notes lack liquidity.
The Notes will not be listed on any securities exchange. HSBC Securities (USA) Inc. is not required to offer to purchase the Notes 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 Notes easily. Because other dealers are not likely to make a secondary market for the Notes, the price at which you may be able to trade your Notes is likely to depend on the price, if any, at which HSBC Securities (USA) Inc. is willing to buy the Notes.
Potential conflicts of interest may exist.
HSBC and its affiliates play a variety of roles in connection with the issuance of the Notes, including acting as calculation agent and hedging our obligations under the Notes. 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 Notes. We will not have any obligation to consider your interests as a holder of the Notes in taking any action that might affect the value of your Notes.
The Notes are subject to small-capitalization risk.
The RTY tracks companies that are considered small-capitalization companies. These companies often have greater stock price volatility, lower trading volume and less liquidity than large-capitalization companies and therefore the level of the RTY may be more volatile than an investment in stocks issued by large-capitalization companies. Stock prices of small-capitalization companies may also be more vulnerable than those of large-capitalization companies to adverse business and economic developments, and the stocks of small-capitalization companies may be thinly traded, making it difficult for the RTY to track them. In addition, small-capitalization companies are often less stable financially than large-capitalization companies and may depend on a small number of key personnel, making them more vulnerable to loss of personnel. Small-capitalization companies are often subject to less analyst coverage and may be in early, and less predictable, periods of their corporate existences. These companies tend to have smaller revenues, less diverse product lines, smaller shares of their product or service markets, fewer financial resources and competitive strengths than large-capitalization companies and are more susceptible to adverse developments related to their products.
Uncertain tax treatment.
For a discussion of the U.S. federal income tax consequences of your investment in a Note, 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.
| FWP-10 |
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 level of either Underlying relative to its Initial Level. We cannot predict the Official Closing Level of either Underlying on any Coupon Observation Date or the Final Valuation Date. 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 Underlyings or return on the Notes.
The table and examples below illustrate how the Final Settlement Value on a $1,000 investment in the Notes for a hypothetical range of Final Returns of the Least Performing Underlying from -100% to +100%. The following results are based solely on the assumptions outlined below. The “Hypothetical Return on the Notes” as used below is the number, expressed as a percentage, that results from comparing the Final Settlement Value per $1,000 Principal Amount to $1,000. The potential returns described here assume that the Notes have not been automatically called prior to maturity and that the Contingent Coupon is payable on every Coupon Payment Date. You should consider carefully whether the Notes are suitable to your investment goals. If the Official Closing Level of each Underlying on every Coupon Observation Date is greater than or equal to its Coupon Trigger and the Notes are not automatically called, the Contingent Coupons payable over the term of the Notes would total $78.75 per $1,000 Principal Amount (assuming a Contingent Coupon Rate of 6.30% per annum). The numbers appearing in the following table and examples have been rounded for ease of analysis. The following table and examples assume the following:
| 4 | Principal Amount: | $1,000 |
| 4 | Hypothetical Coupon Trigger: | 1,500 with respect to the SPX and 825 with respect to the RTY (each of which is 75% of its Hypothetical Initial Level) |
| 4 | Hypothetical Barrier Level: | 1,500 with respect to the SPX and 825 with respect to the RTY (each of which is 75% of its Hypothetical Initial Level) |
| 4 | Hypothetical Contingent Coupon Rate: | 6.30% per annum (1.575% for each quarter) |
| 4 | Hypothetical Initial Levels: | 2,000 with respect to the SPX and 1,100 with respect to the RTY |
The actual Initial Level, Coupon Trigger and Barrier Level of each Underlying, and Contingent Coupon Rate will be determined on the Pricing Date.
Summary of the Examples
| Trigger Event Does Not Occur1 | Trigger Event Occurs2 | |||||||
| Least Performing Underlying’s Final Return |
Hypothetical Total Coupon Paid Over the Term of the Notes3 |
Hypothetical Final Settlement Value |
Hypothetical Total Payment on the Notes |
Hypothetical Total Return on the Notes |
Hypothetical Total Coupon Paid Over the Term of the Notes3 |
Hypothetical Final Settlement Value |
Hypothetical Total Payment on the Notes |
Hypothetical Total Return on Notes |
| 100.00% | $78.75 | $1,000 | $1,078.75 | 7.875% | $78.75 | $1,000 | $1,078.75 | 7.875% |
| 90.00% | $78.75 | $1,000 | $1,078.75 | 7.875% | $78.75 | $1,000 | $1,078.75 | 7.875% |
| 80.00% | $78.75 | $1,000 | $1,078.75 | 7.875% | $78.75 | $1,000 | $1,078.75 | 7.875% |
| 70.00% | $78.75 | $1,000 | $1,078.75 | 7.875% | $78.75 | $1,000 | $1,078.75 | 7.875% |
| 60.00% | $78.75 | $1,000 | $1,078.75 | 7.875% | $78.75 | $1,000 | $1,078.75 | 7.875% |
| 50.00% | $78.75 | $1,000 | $1,078.75 | 7.875% | $78.75 | $1,000 | $1,078.75 | 7.875% |
| 40.00% | $78.75 | $1,000 | $1,078.75 | 7.875% | $78.75 | $1,000 | $1,078.75 | 7.875% |
| 30.00% | $78.75 | $1,000 | $1,078.75 | 7.875% | $78.75 | $1,000 | $1,078.75 | 7.875% |
| 20.00% | $78.75 | $1,000 | $1,078.75 | 7.875% | $78.75 | $1,000 | $1,078.75 | 7.875% |
| 10.00% | $78.75 | $1,000 | $1,078.75 | 7.875% | $78.75 | $1,000 | $1,078.75 | 7.875% |
| 0.00% | $78.75 | $1,000 | $1,078.75 | 7.875% | $78.75 | $1,000 | $1,078.75 | 7.875% |
| -10.00% | $78.75 | $1,000 | $1,078.75 | 7.875% | $78.75 | $900 | $978.75 | -2.125% |
| -20.00% | $78.75 | $1,000 | $1,078.75 | 7.875% | $78.75 | $800 | $878.75 | -12.121% |
| -25.00% | $78.75 | $1,000 | $1,078.75 | 7.875% | $78.75 | $750 | $828.75 | -17.125% |
| -30.00% | N/A | N/A | N/A | N/A | $63.00 | $700 | $763 | -23.700% |
| -40.00% | N/A | N/A | N/A | N/A | $63.00 | $600 | $663 | -33.700% |
| -50.00% | N/A | N/A | N/A | N/A | $63.00 | $500 | $563 | -43.700% |
| -60.00% | N/A | N/A | N/A | N/A | $63.00 | $400 | $463 | -53.700% |
| -70.00% | N/A | N/A | N/A | N/A | $63.00 | $300 | $363 | -63.700% |
| -80.00% | N/A | N/A | N/A | N/A | $63.00 | $200 | $263 | -73.700% |
| -90.00% | N/A | N/A | N/A | N/A | $63.00 | $100 | $163 | -83.700% |
| -100.00% | N/A | N/A | N/A | N/A | $63.00 | $0 | $63 | -93.700% |
1 The Official Closing Level of each Underlying never falls below its respective Trigger Level on any trading day during the Observation Period.
2 The Official Closing Level of either Underlying falls below its Trigger Level on any trading day during the Observation Period.
3 Assuming the Contingent Coupon Rate is 6.30%, the Notes have been held to maturity, and the Underlying has not fallen below 75% of the Initial Level on a Coupon Observation date, the hypothetical total amount of the coupons paid on the Notes as of the Maturity Date will equal $78.75, with hypothetical coupon payments of $15.75 made on each Coupon Payment Date.
| FWP-11 |
The examples provided herein are for illustration purposes only. The actual Final Settlement Value, if any, will depend on whether the Notes are automatically called and if a Trigger Event occurs and, if so, the Final Return of the Least Performing Underlying. You should not take these examples as an indication of potential payments. It is not possible to predict whether the Notes will be automatically called and if a Trigger Event will occur and, if so, whether and to what extent the Final Return of the Least Performing Underlying will be less than zero.
Example 1: The Notes are not automatically called and the Official Closing Level of at least one Underlying falls below its Trigger Level during the Observation Period, therefore a Trigger Event occurs. Additionally, the Final Return of the Least Performing Underlying is less than zero.
| Underlying | Initial Level | Lowest Official Closing Level During the Observation Period |
Final Level | |||
| SPX | 2,000.00 | 1,300.00 (65% of Initial Level) | 1,300.00 (65% of Initial Level) | |||
| RTY | 1,100.00 | 605.00 (55% of Initial Level) | 660.00 (60% of Initial Level) |
Since each of the Official Closing Levels of SPX and RTY are below their respective Trigger Levels during the Observation Period, a Trigger Event occurs. RTY is the Least Performing Underlying.
Therefore, the Final Return of the Least Performing Underlying =
Final Level of
RTY – Initial Level of RTY
Initial Level of RTY
= (660.00 – 1,100.00) / 1,100.00= -40.00%
Final Settlement Value = Principal Amount of the Notes × (1 + Final Return of the Least Performing Underlying)
= $1,000 × (1 + -40%) = 600.00
Therefore, the total payment on the Notes is $600.00 in addition to any contingent coupons paid out over the term of the Notes.
Example 2: The Notes are not automatically called and a Trigger Event occurs, even though the Least Performing Underlying is not below its Trigger Level on the Final Valuation Date. Additionally, the Final Return of the Least Performing Underlying is less than zero.
| Underlying | Initial Level | Lowest Official Closing Level During the Observation Period |
Final Level | |||
| SPX | 2,000.00 | 1,700.00 (85% of Initial Level) | 1,760.00 (88% of Initial Level) | |||
| RTY | 1,100.00 | 605.00 (55% of Initial Level) | 1,045.00 (95% of Initial Level) |
Since the Official Closing Level of RTY is below its Trigger Level during the Observation Period, a Trigger Event occurs. SPX is the Least Performing Underlying, even though its Official Closing Level never falls below its Trigger Level.
Therefore, the Final Return of the Least Performing Underlying =
Final Level of
SPX – Initial Level of SPX
Initial Level of SPX
= (1,760.00 – 2,000.00) / 2,000.00= -12.00%
Final Settlement Value = Principal Amount of the Notes × (1 + Final Return of the Least Performing Underlying)
= $1,000 × (1 + -12%) = $880.00
Therefore, the total payment on the Notes is $880.00 in addition to any contingent coupons paid out over the term of the Notes.
| FWP-12 |
Example 3: The Notes are not automatically called and a Trigger Event does not occur.
| Underlying | Initial Level | Lowest Official Closing Level During the Observation Period |
Final Level | |||
| SPX | 2,000.00 | 1,700.00 (85% of Initial Level) | 1,800.00 (90% of Initial Level) | |||
| RTY | 1,100.00 | 990.00 (90% of Initial Level) | 990.00 (90% of Initial Level) |
Since the Official Closing Level of each Underlying was not below its Trigger Level during the Observation Period, a Trigger Event does not occur.
Therefore, the Final Settlement Value equals $1,000.
Therefore, the total payment on the Notes is $1,000.00 in addition to any contingent coupons paid out over the term of the Notes.
Example 4: The Notes are automatically called on the first Call Observation Date.
| Underlying | Initial Level | Official
Closing Level on the first Call Observation Date | ||
| SPX | 2,000.00 | 2,100.00 | ||
| RTY | 1,100.00 | 1,210.00 |
Since the Official Closing Level of both Underlyings was at or above their respective Initial Levels, the Notes were automatically called and you are no longer entitled to receive any Final Settlement Value. Therefore, on the corresponding Call Payment Date you would receive your $1,000 Principal Amount of Notes plus the coupon payment of $63 owed to you on that date. As a result, on the first Call Payment Date, you would be entitled to receive a total payment of $1,063. Once the Notes are automatically called, they will no longer remain outstanding and there will not be any further coupon payments on the Notes.
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INFORMATION RELATING TO THE UNDERLYINGS
|
Description of the SPX
The SPX is a capitalization-weighted index of 500 U.S. stocks. It is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The top 5 industry groups by market capitalization as of September 29, 2017 were: Information Technology, Financials, Health Care, Consumer Discretionary and Industrials.
For more information about the SPX, see “The S&P 500Ò Index” beginning on page S-44 of the accompanying Equity Index Underlying Supplement. |
Historical Performance of the SPX
The following graph sets forth the historical performance of the SPX based on the daily historical closing levels from January 1, 2008 through October 13, 2017. We obtained the closing levels 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 levels of the SPX should not be taken as an indication of future performance, and no assurance can be given as to the Official Closing Level of the SPX on any Coupon Observation Date or the Final Valuation Date. |
|
Description of the RTY
The RTY is designed to track the performance of the small capitalization segment of the United States equity market. All 2,000 stocks are traded on the New York Stock Exchange or NASDAQ, and the RTY consists of the smallest 2,000 companies included in the Russell 3000® Index. The Russell 3000® Index is composed of the 3,000 largest United States companies as determined by market capitalization and represents approximately 98% of the United States equity market.
The top 5 industry groups by market capitalization as of September 30, 2017 were: Financial Services, Health Care, Producer Durables, Technology and Consumer Discretionary.
For more information about the RTY, see “The Russell 2000Ò Index” beginning on page S-36 of the accompanying Equity Index Underlying Supplement. |
Historical Performance of the RTY
The following graph sets forth the historical performance of the RTY based on the daily historical closing levels from January 1, 2008 through October 13, 2017. We obtained the closing levels 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 levels of the RTY should not be taken as an indication of future performance, and no assurance can be given as to the Official Closing Level of the RTY on any Coupon Observation Date or the Final Valuation Date. |
| FWP-14 |
EVENTS OF DEFAULT AND ACCELERATION
If the Notes have become immediately due and payable following an Event of Default (as defined in the accompanying prospectus) with respect to the Notes, the calculation agent will determine the accelerated payment due and payable in the same general manner as described in this free writing prospectus except that in such a case, the scheduled trading day immediately preceding the date of acceleration will be used as the final Coupon Observation Date and the Final Valuation Date. If a market disruption event exists with respect to an Underlying on that scheduled trading day, then the accelerated Final Valuation Date 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 following the postponed accelerated Final Valuation Date. For the avoidance of doubt, if no market disruption event exists with respect to an Underlying on the scheduled trading day preceding the date of acceleration, the determination of such Underlying’s Final Level will be made on such date, irrespective of the existence of a market disruption event with respect to the other Underlying occurring on such date.
If the Notes have become immediately due and payable following an Event of Default, you will not be entitled to any additional payments with respect to the Notes. 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 Notes. Pursuant to the terms of a distribution agreement, HSBC Securities (USA) Inc. will purchase the Notes 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 Notes directly to investors. HSBC Securities (USA) Inc. proposes to offer the Notes 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 0.35% and referral fees of up to 0.75% per $1,000 Principal Amount of Notes in connection with the distribution of the Notes to other registered broker-dealers. In no case will the sum of the underwriting discounts and referral fees exceed 1.10% per $1,000 Principal Amount.
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 Notes.
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 Notes, but is under no obligation to make a market in the Notes and may discontinue any market-making activities at any time without notice.
We expect that delivery of the Notes will be made against payment for the Notes on or about the Original Issue Date set forth on the inside cover page of this document, which is more than two business days following the Trade Date. Under Rule 15c6-1 under the Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in two business days, unless the parties to that trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes more than two business days prior to the Original Issue Date will be required to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement, and should consult their own advisors.
See “Supplemental Plan of Distribution (Conflicts of Interest)” on page S-59 in the prospectus supplement.
| FWP-15 |
U.S. FEDERAL INCOME TAX CONSIDERATIONS
There is no direct legal authority as to the proper tax treatment of the Notes, and therefore significant aspects of the tax treatment of the Notes are uncertain as to both the timing and character of any inclusion in income in respect of the Notes. Under one approach, a Note should be treated as a contingent income-bearing pre-paid executory contract with respect to the Underlyings. We intend to treat the Notes consistent with this approach. Pursuant to the terms of the Notes, you agree to treat the Notes 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 Note as a contingent income-bearing pre-paid executory contract with respect to the Underlyings. Because there are no statutory provisions, regulations, published rulings or judicial decisions addressing the characterization for U.S. federal income tax purposes of securities with terms that are substantially the same as those of the Notes, other characterizations and treatments are possible and the timing and character of income in respect of the Notes might differ from the treatment described herein. For example, the Notes could be treated as debt instruments that are “contingent payment debt instruments” for U.S. federal income tax purposes subject to the treatment described under the heading “U.S. Federal Income Tax Considerations — Tax Treatment of U.S. Holders — U.S. Federal Income Tax Treatment of the Notes as Indebtedness for U.S. Federal Income Tax Purposes — Contingent Notes” in the accompanying prospectus supplement.
We will not attempt to ascertain whether any of the entities whose stock is included in the Underlyings 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 the Underlyings 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 the Underlyings and consult your tax advisor regarding the possible consequences to you if one or more of the entities whose stock is included in the Underlyings is or becomes a PFIC or a USRPHC.
U.S. Holders. Please see the discussion under the heading “U.S. Federal Income Tax Considerations — Tax Treatment of U.S. Holders — Certain Notes Treated as a Put Option and a Deposit or an Executory Contract — Certain Notes Treated as Executory Contracts” in the accompanying prospectus supplement for further discussion of U.S. federal income tax considerations applicable to U.S. holders (as defined in the accompanying prospectus supplement). Pursuant to the approach discussed above, we intend to treat any gain or loss upon maturity or an earlier sale, exchange or call as capital gain or loss in an amount equal to the difference between the amount you receive at such time (other than with respect to a Contingent Coupon) and your tax basis in the Note. Any such gain or loss will be long-term capital gain or loss if you have held the Note for more than one year at such time for U.S. federal income tax purposes. Your tax basis in a Note generally will equal your cost of the Note. In addition, the tax treatment of the Contingent Coupons is unclear. Although the tax treatment of the Contingent Coupons is unclear, we intend to treat any Contingent Coupon, including on the Maturity Date, as ordinary income includible in income by you at the time it accrues or is received in accordance with your normal method of accounting for U.S. federal income tax purposes.
Non-U.S. Holders. Please see the discussion under the heading “U.S. Federal Income Tax Considerations—Tax Treatment of Non-U.S. Holders” in the accompanying prospectus supplement for further discussion of U.S. federal income tax considerations applicable to non-U.S. holders (as defined in the accompanying prospectus supplement). Because the U.S. federal income tax treatment (including the applicability of withholding) of the Contingent Coupons is uncertain, the entire amount of the Contingent Coupons will be subject to U.S. federal income tax withholding at a 30% rate (or at a lower rate under an applicable income tax treaty). We will not pay any additional amounts in respect of such withholding.
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, Internal Revenue Service guidance provides 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, 2019. Based on the Issuer’s determination that the Notes are not “delta-one” instruments, non-U.S. holders should not be subject to withholding on dividend equivalent payments, if any, under the Notes. However, it is possible that the Notes could be treated as deemed reissued for U.S. federal income tax purposes upon the occurrence of certain events affecting an Underlying or the Notes, and following such occurrence the Notes 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 an Underlying or the Notes should consult their tax advisors as to the application of the dividend equivalent withholding tax in the context of the Notes 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.
| FWP-16 |
Foreign Account Tax Compliance Act. The Internal Revenue Service 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 Notes 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 Note, please see the discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement.
PROSPECTIVE PURCHASERS OF NOTES SHOULD CONSULT THEIR TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL, AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES.
| FWP-17 |
| TABLE OF CONTENTS |
You should only rely on the information contained in this free writing prospectus, the accompanying Equity Index 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 free writing prospectus, the accompanying Equity Index Underlying Supplement, prospectus supplement and prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. This free writing prospectus, the accompanying Equity Index Underlying Supplement, prospectus supplement and prospectus are not an offer to sell these Notes, and these documents are not soliciting an offer to buy these Notes, 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 Equity Index Underlying Supplement, prospectus supplement and prospectus is correct on any date after their respective dates.
HSBC USA Inc.
$ Autocallable Barrier Notes with Contingent Return
October 16, 2017
FREE WRITING PROSPECTUS
| ||
| Free Writing Prospectus | |||
| General | FWP-5 | ||
| Payment on the Notes | FWP-6 | ||
| Investor Suitability | FWP-7 | ||
| Risk Factors | FWP-8 | ||
| Illustrative Examples | FWP-11 | ||
| Information Relating to the Underlyings | FWP-14 | ||
| Events of Default and Acceleration | FWP-15 | ||
| Supplemental Plan of Distribution (Conflicts of Interest) | FWP-15 | ||
| U.S. Federal Income Tax Considerations | FWP-16 | ||
| Equity Index Underlying Supplement | |||
| Disclaimer | S-1 | ||
| Risk Factors | S-2 | ||
| The DAX® Index | S-7 | ||
| The Dow Jones Industrial AverageSM | S-9 | ||
| The EURO STOXX 50® Index | S-11 | ||
| The FTSE® 100 Index | S-13 | ||
| The Hang Seng® Index | S-14 | ||
| The Hang Seng China Enterprises Index | S-16 | ||
| The KOSPI 200 Index | S-19 | ||
| The MSCI Indices | S-22 | ||
| The NASDAQ 100 Index® | S-26 | ||
| The Nikkei 225 Index | S-30 | ||
| The PHLX Housing SectorSM Index | S-32 | ||
| The Russell 2000® Index | S-36 | ||
| The S&P 100® Index | S-40 | ||
| The S&P 500® Index | S-44 | ||
| The S&P 500® Low Volatility Index | S-47 | ||
| The S&P BRIC 40 Index | S-50 | ||
| The S&P MidCap 400® Index | S-52 | ||
| The TOPIX® Index | S-55 | ||
| Additional Terms of the Notes | S-57 | ||
| 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 |