The information in this preliminary pricing
supplement is not complete and may be changed. This preliminary pricing supplement is not an offer to sell nor does it seek an offer to
buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion dated August 15,
2024
August , 2024 |
Registration Statement Nos. 333-270004 and 333-270004-01; Rule 424(b)(2) |
JPMorgan Chase Financial Company LLC
Structured Investments
Uncapped Accelerated Barrier Notes Linked to the Nasdaq-100
Futures Excess ReturnTM Index due August 28, 2029
Fully and Unconditionally Guaranteed by JPMorgan Chase
& Co.
| · | The notes are designed for investors who seek an uncapped return of at least 1.83 times any appreciation of the Nasdaq-100
Futures Excess ReturnTM Index at maturity. |
| · | Investors should be willing to forgo interest payments and be willing to lose some or all of their principal amount at maturity. |
| · | The notes are unsecured and unsubordinated obligations of JPMorgan Chase Financial Company LLC, which we refer to as JPMorgan Financial,
the payment on which is fully and unconditionally guaranteed by JPMorgan Chase & Co. Any payment on the notes is subject to the
credit risk of JPMorgan Financial, as issuer of the notes, and the credit risk of JPMorgan Chase & Co., as guarantor of the notes. |
| · | Minimum denominations of $1,000 and integral multiples thereof |
| · | The notes are expected to price on or about August 23, 2024 and are expected to settle on or about August 28, 2024. |
Investing in the notes involves a number of risks. See “Risk
Factors” beginning on page S-2 of the accompanying prospectus supplement, Annex A to the accompanying prospectus addendum, “Risk
Factors” beginning on page PS-11 of the accompanying product supplement and “Selected Risk Considerations” beginning
on page PS-4 of this pricing supplement.
Neither the 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 pricing
supplement or the accompanying product supplement, underlying supplement, prospectus supplement, prospectus and prospectus addendum. Any
representation to the contrary is a criminal offense.
|
Price to Public (1) |
Fees and Commissions (2)(3) |
Proceeds to Issuer |
Per note |
$1,000 |
— |
$1,000 |
Total |
$ |
— |
$ |
(1) See “Supplemental Use of Proceeds” in this
pricing supplement for information about the components of the price to public of the notes.
(2) All sales of the notes will be made to certain
fee-based advisory accounts for which an affiliated or unaffiliated broker-dealer is an investment adviser. These broker-dealers will
forgo any commissions related to these sales. See “Plan of Distribution (Conflicts of Interest)” in the accompanying product
supplement.
(3) J.P. Morgan Securities LLC, which we refer to as
JPMS, may pay a structuring fee of $8.50 per $1,000 principal amount note with respect to some or all of the notes to other affiliated
or unaffiliated dealers. |
If the notes priced today, the estimated value of the notes would be approximately
$970.00 per $1,000 principal amount note. The estimated value of the notes, when the terms of the notes are set, will be provided in the
pricing supplement and will not be less than $950.00 per $1,000 principal amount note. See “The Estimated Value of the Notes”
in this pricing supplement for additional information.
The notes are not bank deposits, are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency and are not obligations of, or guaranteed by, a bank.
Pricing supplement to product supplement no. 4-I dated
April 13, 2023, underlying supplement no. 1-I dated April 13, 2023, the prospectus and prospectus supplement, each dated April 13, 2023,
and the prospectus addendum dated June 3, 2024
Key Terms
Issuer:
JPMorgan Chase Financial Company LLC, a direct, wholly owned finance subsidiary of JPMorgan Chase &
Co.
Guarantor:
JPMorgan Chase & Co.
Index:
The Nasdaq-100 Futures Excess ReturnTM Index (Bloomberg ticker: NDXNQER)
Upside
Leverage Factor: At least 1.83 (to be provided in the pricing supplement)
Barrier Amount: 60.00% of
the Initial Value
Pricing
Date: On or about August 23, 2024
Original
Issue Date (Settlement Date): On or about August 28, 2024
Observation
Date*: August 23, 2029
Maturity
Date*: August 28, 2029
* Subject to postponement in the event of a market disruption
event and as described under “General Terms of Notes — Postponement of a Determination Date — Notes Linked to a Single
Underlying — Notes Linked to a Single Underlying (Other Than a Commodity Index)” and “General Terms of Notes —
Postponement of a Payment Date” in the accompanying product supplement |
Payment at Maturity:
If the Final Value is greater than the Initial Value, your payment
at maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + ($1,000 × Index Return × Upside
Leverage Factor)
If the Final Value is equal to the Initial Value or is less than the
Initial Value but greater than or equal to the Barrier Amount, you will receive the principal amount of your notes at maturity.
If the Final Value is less than the Barrier Amount, your payment at
maturity per $1,000 principal amount note will be calculated as follows:
$1,000 + ($1,000 × Index Return)
If the Final Value is less than the Barrier Amount, you will lose
more than 40.00% of your principal amount at maturity and could lose all of your principal amount at maturity.
Index Return:
(Final Value – Initial Value)
Initial Value
Initial
Value: The closing level of the Index on the Pricing Date
Final
Value: The closing level of the Index on the Observation Date
|
PS-1
| Structured Investments
Uncapped Accelerated Barrier Notes Linked to the Nasdaq-100
Futures Excess ReturnTM Index |
|
Supplemental
Terms of the Notes
The notes are not futures contracts or swaps and
are not regulated under the Commodity Exchange Act of 1936, as amended (the “Commodity Exchange Act”). The notes are
offered pursuant to an exemption from regulation under the Commodity Exchange Act, commonly known as the hybrid instrument exemption,
that is available to securities that have one or more payments indexed to the value, level or rate of one or more commodities, as set
out in section 2(f) of that statute. Accordingly, you are not afforded any protection provided by the Commodity Exchange Act or any regulation
promulgated by the Commodity Futures Trading Commission.
For purposes of the accompanying product supplement,
the Index will be deemed to be an Equity Index, except as provided below, and any references in the accompanying product supplement to
the securities included in an Equity Index (or similar references) should be read to refer to the securities included in the Nasdaq-100®
Index, which is the reference index for the futures contracts included in the Index. Notwithstanding the foregoing, the Index will be
deemed to be a Commodity Index for purposes of the section entitled “The Underlyings — Indices — Discontinuation of
an Index; Alteration of Method of Calculation” in the accompanying product supplement.
Notwithstanding anything to the contrary in the accompanying
product supplement, if a Determination Date (as defined in the accompanying product supplement) has been postponed to the applicable Final
Disrupted Determination Date (as defined in the accompanying product supplement) and that day is a Disrupted Day (as defined in the accompanying
product supplement), the calculation agent will determine the closing level of the Index for that Determination Date on that Final Disrupted
Determination Date in accordance with the formula for and method of calculating the closing level of the Index last in effect prior to
the commencement of the market disruption event (or prior to the non-trading day), using the official settlement price (or, if trading
in the relevant futures contract has been materially suspended or materially limited, the calculation agent’s good faith estimate
of the applicable settlement price that would have prevailed but for that suspension or limitation) at the close of the principal trading
session on that date of each futures contract most recently composing the Index, as well as any futures contract required to roll any
expiring futures contract in accordance with the method of calculating the Index.
Any values of the Index, and any values derived therefrom,
included in this pricing supplement may be corrected, in the event of manifest error or inconsistency, by amendment of this pricing supplement
and the corresponding terms of the notes. Notwithstanding anything to the contrary in the indenture governing the notes, that amendment
will become effective without consent of the holders of the notes or any other party.
PS-2
| Structured Investments
Uncapped Accelerated Barrier Notes Linked to the Nasdaq-100
Futures Excess ReturnTM Index |
|
Hypothetical Payout Profile
The following table and graph illustrate the hypothetical
total return and payment at maturity on the notes linked to a hypothetical Index. The “total return” as used in this pricing
supplement is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal amount note
to $1,000. The hypothetical total returns and payments set forth below assume the following:
| · | an Initial Value of 100.00; |
| · | an Upside Leverage Factor of 1.83; and |
| · | a Barrier Amount of 60.00 (equal to 60.00% of the hypothetical Initial Value). |
The hypothetical Initial Value of 100.00 has been chosen
for illustrative purposes only and may not represent a likely actual Initial Value. The actual Initial Value will be the closing level
of the Index on the Pricing Date and will be provided in the pricing supplement. For historical data regarding the actual closing levels
of the Index, please see the historical information set forth under “The Index” in this pricing supplement.
Each hypothetical total return or hypothetical payment
at maturity set forth below is for illustrative purposes only and may not be the actual total return or payment at maturity applicable
to a purchaser of the notes. The numbers appearing in the following table and graph have been rounded for ease of analysis.
Final Value |
Index Return |
Total Return on the Notes |
Payment at Maturity |
165.00 |
65.00% |
118.95% |
$2,189.50 |
150.00 |
50.00% |
91.50% |
$1,915.00 |
140.00 |
40.00% |
73.20% |
$1,732.00 |
130.00 |
30.00% |
54.90% |
$1,549.00 |
120.00 |
20.00% |
36.60% |
$1,366.00 |
110.00 |
10.00% |
18.30% |
$1,183.00 |
105.00 |
5.00% |
9.15% |
$1,091.50 |
101.00 |
1.00% |
1.83% |
$1,018.30 |
100.00 |
0.00% |
0.00% |
$1,000.00 |
95.00 |
-5.00% |
0.00% |
$1,000.00 |
90.00 |
-10.00% |
0.00% |
$1,000.00 |
80.00 |
-20.00% |
0.00% |
$1,000.00 |
70.00 |
-30.00% |
0.00% |
$1,000.00 |
60.00 |
-40.00% |
0.00% |
$1,000.00 |
59.99 |
-40.01% |
-40.01% |
$599.90 |
50.00 |
-50.00% |
-50.00% |
$500.00 |
40.00 |
-60.00% |
-60.00% |
$400.00 |
30.00 |
-70.00% |
-70.00% |
$300.00 |
20.00 |
-80.00% |
-80.00% |
$200.00 |
10.00 |
-90.00% |
-90.00% |
$100.00 |
0.00 |
-100.00% |
-100.00% |
$0.00 |
PS-3
| Structured Investments
Uncapped Accelerated Barrier Notes Linked to the Nasdaq-100
Futures Excess ReturnTM Index |
|
The following graph demonstrates the hypothetical payments
at maturity on the notes for a range of Index Returns. There can be no assurance that the performance of the Index will result in the
return of any of your principal amount.
How the Notes Work
Upside Scenario:
If the Final Value is greater than the Initial Value,
investors will receive at maturity the $1,000 principal amount plus a return equal to the Index Return times the Upside
Leverage Factor of at least 1.83.
| · | Assuming a hypothetical Upside Leverage Factor of 1.83, if the closing
level of the Index increases 10.00%, investors will receive at maturity a return equal to 18.30%, or $1,183.00 per $1,000 principal amount
note. |
Par Scenario:
If the Final Value is equal to the Initial Value or is
less than the Initial Value but greater than or equal to the Barrier Amount of 60.00% of the Initial Value, investors will receive at
maturity the principal amount of their notes.
Downside Scenario:
If the Final Value is less than the Barrier Amount of
60.00% of the Initial Value, investors will lose 1% of the principal amount of their notes for every 1% that the Final Value is less than
the Initial Value.
| · | For example, if the closing level of the Index declines 60.00%, investors will lose 60.00% of their principal amount and receive only
$400.00 per $1,000 principal amount note at maturity. |
The hypothetical returns and hypothetical payments
on the notes shown above apply only if you hold the notes for their entire term. These hypotheticals do not reflect the fees or
expenses that would be associated with any sale in the secondary market. If these fees and expenses were included, the hypothetical returns
and hypothetical payments shown above would likely be lower.
Selected
Risk Considerations
An investment in the notes involves significant risks.
These risks are explained in more detail in the “Risk Factors” sections of the accompanying prospectus supplement and product
supplement and in Annex A to the accompanying prospectus addendum.
Risks Relating to the Notes Generally
| · | YOUR INVESTMENT IN THE NOTES MAY RESULT IN A LOSS — |
The notes do not guarantee any return of principal.
If the Final Value is less than the Barrier Amount, you will lose 1% of the principal amount of your notes for every 1% that the Final
Value is less than the Initial Value. Accordingly, under these circumstances, you will lose more than 40.00% of your principal amount
at maturity and could lose all of your principal amount at maturity.
PS-4
| Structured Investments
Uncapped Accelerated Barrier Notes Linked to the Nasdaq-100
Futures Excess ReturnTM Index |
|
| · | CREDIT RISKS OF JPMORGAN FINANCIAL AND JPMORGAN CHASE & CO. — |
Investors are dependent on our and JPMorgan
Chase & Co.’s ability to pay all amounts due on the notes. Any actual or potential change in our or JPMorgan Chase & Co.’s
creditworthiness or credit spreads, as determined by the market for taking that credit risk, is likely to adversely affect the value of
the notes. If we and JPMorgan Chase & Co. were to default on our payment obligations, you may not receive any amounts owed to you
under the notes and you could lose your entire investment.
| · | AS A FINANCE SUBSIDIARY, JPMORGAN FINANCIAL HAS NO INDEPENDENT OPERATIONS AND HAS LIMITED ASSETS — |
As a finance subsidiary of JPMorgan Chase &
Co., we have no independent operations beyond the issuance and administration of our securities and the collection of intercompany obligations.
Aside from the initial capital contribution from JPMorgan Chase & Co., substantially all of our assets relate to obligations of JPMorgan
Chase & Co. to make payments under loans made by us to JPMorgan Chase & Co. or under other intercompany agreements. As a result,
we are dependent upon payments from JPMorgan Chase & Co. to meet our obligations under the notes. We are not a key operating subsidiary
of JPMorgan Chase & Co. and in a bankruptcy or resolution of JPMorgan Chase & Co. we are not expected to have sufficient resources
to meet our obligations in respect of the notes as they come due. If JPMorgan Chase & Co. does not make payments to us and we are
unable to make payments on the notes, you may have to seek payment under the related guarantee by JPMorgan Chase & Co., and that guarantee
will rank pari passu with all other unsecured and unsubordinated obligations of JPMorgan Chase & Co. For more information,
see the accompanying prospectus addendum.
| · | THE BENEFIT PROVIDED BY THE BARRIER AMOUNT MAY TERMINATE ON THE OBSERVATION DATE — |
If the Final Value is less than the Barrier
Amount, the benefit provided by the Barrier Amount will terminate and you will be fully exposed to any depreciation of the Index.
| · | THE NOTES DO NOT PAY INTEREST. |
| · | YOU WILL NOT HAVE ANY RIGHTS WITH RESPECT TO THE E-MINI® NASDAQ-100® FUTURES CONTRACTS (THE “UNDERLYING
FUTURES CONTRACTS”) OR THE SECURITIES INCLUDED IN THE INDEX UNDERLYING THE UNDERLYING FUTURES CONTRACTS. |
| · | THE RISK OF THE CLOSING LEVEL OF THE INDEX FALLING BELOW THE BARRIER AMOUNT IS GREATER IF THE LEVEL OF THE INDEX IS VOLATILE. |
The notes will not be listed on any securities
exchange. Accordingly, the price at which you may be able to trade your notes is likely to depend on the price, if any, at which JPMS
is willing to buy the notes. You may not be able to sell your notes. The notes are not designed to be short-term trading instruments.
Accordingly, you should be able and willing to hold your notes to maturity.
| · | THE FINAL TERMS AND VALUATION OF THE NOTES WILL BE PROVIDED IN THE PRICING SUPPLEMENT — |
You should consider your potential investment
in the notes based on the minimums for the estimated value of the notes and the Upside Leverage Factor.
Risks Relating to Conflicts of Interest
We and our affiliates play a variety of roles
in connection with the notes. In performing these duties, our and JPMorgan Chase & Co.’s economic interests are potentially
adverse to your interests as an investor in the notes. It is possible that hedging or trading activities of ours or our affiliates in
connection with the notes could result in substantial returns for us or our affiliates while the value of the notes declines. Please refer
to “Risk Factors — Risks Relating to Conflicts of Interest” in the accompanying product supplement.
Risks Relating to the Estimated Value and Secondary
Market Prices of the Notes
| · | THE ESTIMATED VALUE OF THE NOTES WILL BE LOWER THAN THE ORIGINAL ISSUE PRICE (PRICE TO PUBLIC) OF THE NOTES — |
The estimated value of the notes is only an
estimate determined by reference to several factors. The original issue price of the notes will exceed the estimated value of the notes
because costs associated with structuring and hedging the notes are included in the original issue price of the notes. These costs include
the structuring fee, if any, the projected profits, if any, that our affiliates expect to realize for assuming risks inherent in hedging
our obligations under the notes and the estimated cost of hedging our obligations under the notes. See “The Estimated Value of the
Notes” in this pricing supplement.
PS-5
| Structured Investments
Uncapped Accelerated Barrier Notes Linked to the Nasdaq-100
Futures Excess ReturnTM Index |
|
| · | THE ESTIMATED VALUE OF THE NOTES DOES NOT REPRESENT FUTURE VALUES OF THE NOTES AND MAY DIFFER FROM OTHERS’ ESTIMATES —
|
See “The Estimated Value of the Notes”
in this pricing supplement.
| · | THE ESTIMATED VALUE OF THE NOTES IS DERIVED BY REFERENCE TO AN INTERNAL FUNDING RATE — |
The internal funding rate used in the determination
of the estimated value of the notes may differ from the market-implied funding rate for vanilla fixed income instruments of a similar
maturity issued by JPMorgan Chase & Co. or its affiliates. Any difference may be based on, among other things, our and our affiliates’
view of the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes
in comparison to those costs for the conventional fixed income instruments of JPMorgan Chase & Co. This internal funding rate is based
on certain market inputs and assumptions, which may prove to be incorrect, and is intended to approximate the prevailing market replacement
funding rate for the notes. The use of an internal funding rate and any potential changes to that rate may have an adverse effect on the
terms of the notes and any secondary market prices of the notes. See “The Estimated Value of the Notes” in this pricing supplement.
| · | THE VALUE OF THE NOTES AS PUBLISHED BY JPMS (AND WHICH MAY BE REFLECTED ON CUSTOMER ACCOUNT STATEMENTS) MAY BE HIGHER THAN THE
THEN-CURRENT ESTIMATED VALUE OF THE NOTES FOR A LIMITED TIME PERIOD — |
We generally expect that some of the costs included
in the original issue price of the notes will be partially paid back to you in connection with any repurchases of your notes by JPMS in
an amount that will decline to zero over an initial predetermined period. See “Secondary Market Prices of the Notes” in this
pricing supplement for additional information relating to this initial period. Accordingly, the estimated value of your notes during this
initial period may be lower than the value of the notes as published by JPMS (and which may be shown on your customer account statements).
| · | SECONDARY MARKET PRICES OF THE NOTES WILL LIKELY BE LOWER THAN THE ORIGINAL ISSUE PRICE OF THE NOTES — |
Any secondary market prices of the notes will
likely be lower than the original issue price of the notes because, among other things, secondary market prices take into account our
internal secondary market funding rates for structured debt issuances and, also, because secondary market prices (a) exclude the structuring
fee, if any, and (b) may exclude projected hedging profits, if any, and estimated hedging costs that are included in the original issue
price of the notes. As a result, the price, if any, at which JPMS will be willing to buy the notes from you in secondary market transactions,
if at all, is likely to be lower than the original issue price. Any sale by you prior to the Maturity Date could result in a substantial
loss to you.
| · | SECONDARY MARKET PRICES OF THE NOTES WILL BE IMPACTED BY MANY ECONOMIC AND MARKET FACTORS — |
The secondary market price of the notes during
their term will be impacted by a number of economic and market factors, which may either offset or magnify each other, aside from the
structuring fee, if any, projected hedging profits, if any, estimated hedging costs and the level of the Index. Additionally, independent
pricing vendors and/or third party broker-dealers may publish a price for the notes, which may also be reflected on customer account statements.
This price may be different (higher or lower) than the price of the notes, if any, at which JPMS may be willing to purchase your notes
in the secondary market. See “Risk Factors — Risks Relating to the Estimated Value and Secondary Market Prices of the Notes
— Secondary market prices of the notes will be impacted by many economic and market factors” in the accompanying product supplement.
Risks Relating to the Index
| · | AN INVESTMENT IN THE NOTES WILL BE SUBJECT TO RISKS ASSOCIATED WITH NON-U.S.
SECURITIES — |
Some of the equity securities included in the
Nasdaq-100 Index®, the index underlying the Underlying Futures Contracts, have been issued by non-U.S. companies.
Investments in securities linked to the value of such non-U.S. equity securities involve risks associated with the home countries of the
issuers of those non-U.S. equity securities. The prices of securities issued by non-U.S. companies may be affected by political, economic,
financial and social factors in the home countries of those issuers, or global regions, including changes in government, economic and
fiscal policies and currency exchange laws.
| · | THE INDEX IS SUBJECT TO SIGNIFICANT RISKS ASSOCIATED WITH THE UNDERLYING
FUTURES CONTRACTS — |
The Index
tracks the excess return of the Underlying Futures Contracts. The price of an Underlying Futures Contract depends not only on the level
of the underlying index referenced by the Underlying Futures Contract, but also on a range of other factors, including but not limited
to the performance and volatility of the U.S. stock market, corporate earnings reports, geopolitical events, governmental and regulatory
policies and the policies of the Chicago Mercantile Exchange (the “Exchange”) on which the Underlying Futures Contracts trade.
In addition, the futures markets are subject to temporary distortions or other disruptions due to various factors, including the lack
of liquidity in the markets, the participation of speculators and government regulation and
PS-6
| Structured Investments
Uncapped Accelerated Barrier Notes Linked to the Nasdaq-100
Futures Excess ReturnTM Index |
|
intervention. These factors and others can cause the prices of
the Underlying Futures Contracts to be volatile and could adversely affect the level of the Index and any payments on, and the value of,
your notes.
| · | SUSPENSION OR DISRUPTIONS OF MARKET TRADING IN THE UNDERLYING FUTURES CONTRACTS
MAY ADVERSELY AFFECT THE VALUE OF YOUR NOTES — |
Futures
markets are subject to temporary distortions or other disruptions due to various factors, including lack of liquidity, the participation
of speculators, and government regulation and intervention. In addition, futures exchanges generally have regulations that limit the amount
of the Underlying Futures Contract price fluctuations that may occur in a single day. These limits are generally referred to as “daily
price fluctuation limits” and the maximum or minimum price of a contract on any given day as a result of those limits is referred
to as a “limit price.” Once the limit price has been reached in a particular contract, no trades may be made at a price beyond
the limit, or trading may be limited for a set period of time. Limit prices have the effect of precluding trading in a particular contract
or forcing the liquidation of contracts at potentially disadvantageous times or prices. These circumstances could delay the calculation
of the level of the Index and could adversely affect the level of the Index and any payments on, and the value of, your notes.
| · | THE PERFORMANCE OF THE INDEX WILL DIFFER FROM THE PERFORMANCE OF THE INDEX
UNDERLYING THE UNDERLYING FUTURES CONTRACTS — |
A variety
of factors can lead to a disparity between the performance of a futures contract on an equity index and the performance of that equity
index, including the expected dividend yields of the equity securities included in that equity index, an implicit financing cost associated
with futures contracts and policies of the exchange on which the futures contracts are traded, such as margin requirements. Thus, a decline
in expected dividends yields or an increase in margin requirements may adversely affect the performance of the Index. In addition, the
implicit financing cost will negatively affect the performance of the Index, with a greater negative effect when market interest rates
are higher. During periods of high market interest rates, the Index is likely to underperform the equity index underlying the Underlying
Futures Contracts, perhaps significantly.
| · | NEGATIVE ROLL RETURNS ASSOCIATED WITH THE UNDERLYING FUTURES CONTRACTS MAY
ADVERSELY AFFECT THE LEVEL OF THE INDEX AND THE VALUE OF THE NOTES — |
The Index
tracks the excess return of the Underlying Futures Contracts. Unlike common equity securities, futures contracts, by their terms, have
stated expirations. As the exchange-traded Underlying Futures Contracts approach expiration, they are replaced by contracts of the same
series that have a later expiration. For example, an Underlying Futures Contract notionally purchased and held in June may specify a September
expiration date. As time passes, the contract expiring in September is replaced by a contract for delivery in December. This is accomplished
by notionally selling the September contract and notionally purchasing the December contract. This process is referred to as “rolling.”
Excluding other considerations, if prices are higher in the distant delivery months than in the nearer delivery months, the notional purchase
of the December contract would take place at a price that is higher than the price of the September contract, thereby creating a negative
“roll return.” Negative roll returns adversely affect the returns of the Underlying Futures Contracts and, therefore, the
level of the Index and any payments on, and the value of, the notes. Because of the potential effects of negative roll returns, it is
possible for the level of the Index to decrease significantly over time, even when the levels of the underlying index referenced by the
Underlying Futures Contracts are stable or increasing.
| · | HYPOTHETICAL BACK-TESTED DATA RELATING TO THE INDEX DO NOT REPRESENT ACTUAL
HISTORICAL DATA AND ARE SUBJECT TO INHERENT LIMITATIONS — |
The hypothetical back-tested performance of
the Index set forth under “The Index” in this pricing supplement is purely theoretical and does not represent the actual historical
performance of the Index and has not been verified by an independent third party. Hypothetical back-tested performance measures have inherent
limitations. Alternative modelling techniques might produce significantly different results and may prove to be more appropriate. Past
performance, and especially hypothetical back-tested performance, is not indicative of future results. This type of information has inherent
limitations and you should carefully consider these limitations before placing reliance on such information. Hypothetical back-tested
performance is derived by means of the retroactive application of a back-tested model that has been designed with the benefit of hindsight.
| o | THE INDEX COMPRISES NOTIONAL ASSETS AND LIABILITIES. THERE IS NO ACTUAL PORTFOLIO OF ASSETS TO WHICH ANY PERSON IS ENTITLED OR IN
WHICH ANY PERSON HAS ANY OWNERSHIP INTEREST. |
| o | THE INDEX, WHICH WAS ESTABLISHED ON APRIL 1, 2024, HAS LIMITED OPERATING HISTORY AND MAY PERFORM IN UNANTICIPATED WAYS. |
PS-7
| Structured Investments
Uncapped Accelerated Barrier Notes Linked to the Nasdaq-100
Futures Excess ReturnTM Index |
|
The Index
The Index measures the performance of the nearest maturing
quarterly Underlying Futures Contracts trading on the Chicago Mercantile Exchange (the “Exchange”). The Underlying Futures
Contracts are U.S. dollar-denominated futures contracts based on the Nasdaq-100 Index®. The Nasdaq-100 Index®
is a modified market capitalization-weighted index of 100 of the largest non-financial securities listed on The Nasdaq Stock Market based
on market capitalization. For additional information about the Nasdaq-100 Index®, see “Equity Index Descriptions
— The Nasdaq-100 Index®” in the accompanying underlying supplement. For additional information about the Index
and the Underlying Futures Contracts, see Annex A in this pricing supplement.
Hypothetical Back-Tested Data and Historical
Information
The following graph sets forth the hypothetical back-tested
performance of the Index based on the weekly hypothetical back-tested closing levels of the Index from January 4, 2019 through March 28,
2024 and the historical performance of the Index based on the weekly historical closing levels of the Index from April 5, 2024 through
August 9, 2024. The Index was established on April 1, 2024, as represented by the vertical line in the following graph. All data to the
left of that vertical line reflect hypothetical back-tested performance of the Index. All data to the right of that vertical line reflect
actual historical performance of the Index. The closing level of the Index on August 13, 2024 was 542.8608. We obtained the closing levels
above and below from the Bloomberg Professional® service (“Bloomberg”), without independent verification.
The data for
the hypothetical back-tested performance of the Index set forth below are purely theoretical and do not represent the actual historical
performance of the Index. See “Selected Risk Considerations — Risks Relating to the Index — Hypothetical Back-Tested
Data Relating to the Index Do Not Represent Actual Historical Data and Are Subject to Inherent Limitations” above.
The hypothetical back-tested and historical closing
levels of the Index should not be taken as an indication of future performance, and no assurance can be given as to the closing level
of the Index on the Pricing Date or the Observation Date. There can be no assurance that the performance of the Index will result in the
return of any of your principal amount.
The hypothetical back-tested closing levels
of the Index have inherent limitations and have not been verified by an independent third party. These hypothetical back-tested closing
levels are determined by means of a retroactive application of a back-tested model designed with the benefit of hindsight. Hypothetical
back-tested results are neither an indicator nor a guarantee of future returns. No representation is made that an investment in the notes
will or is likely to achieve returns similar to those shown. Alternative modeling techniques or assumptions would produce different hypothetical
back-tested closing levels of the Index that might prove to be more appropriate and that might differ significantly from the hypothetical
back-tested closing levels of the Index set forth above.
Tax Treatment
You should
review carefully the section entitled “Material U.S. Federal Income Tax Consequences” in the accompanying product supplement
no. 4-I. The following discussion, when read in combination with that section, constitutes the full opinion of our special tax counsel,
Davis Polk & Wardwell LLP, regarding the material U.S. federal income tax consequences of owning and disposing of notes.
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Based on current
market conditions, in the opinion of our special tax counsel it is reasonable to treat the notes as “open transactions” that
are not debt instruments for U.S. federal income tax purposes, as more fully described in “Material U.S. Federal Income Tax Consequences
— Tax Consequences to U.S. Holders — Notes Treated as Open Transactions That Are Not Debt Instruments” in the accompanying
product supplement. Assuming this treatment is respected, the gain or loss on your notes should be treated as long-term capital gain or
loss if you hold your notes for more than a year, whether or not you are an initial purchaser of notes at the issue price. However, the
IRS or a court may not respect this treatment, in which case the timing and character of any income or loss on the notes could be materially
and adversely affected. In addition, in 2007 Treasury and the IRS released a notice requesting comments on the U.S. federal income tax
treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether to require investors
in these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including
the character of income or loss with respect to these instruments; the relevance of factors such as the nature of the underlying property
to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors
should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership”
regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose a notional interest
charge. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance
promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the notes,
possibly with retroactive effect. You should consult your tax adviser regarding the U.S. federal income tax consequences of an investment
in the notes, including possible alternative treatments and the issues presented by this notice.
Section 871(m)
of the Code and Treasury regulations promulgated thereunder (“Section 871(m)”) generally impose a 30% withholding tax (unless
an income tax treaty applies) on dividend equivalents paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments
linked to U.S. equities or indices that include U.S. equities. Section 871(m) provides certain exceptions to this withholding regime,
including for instruments linked to certain broad-based indices that meet requirements set forth in the applicable Treasury regulations.
Additionally, a recent IRS notice excludes from the scope of Section 871(m) instruments issued prior to January 1, 2027 that do not have
a delta of one with respect to underlying securities that could pay U.S.-source dividends for U.S. federal income tax purposes (each an
“Underlying Security”). Based on certain determinations made by us, we expect that Section 871(m) will not apply to the notes
with regard to Non-U.S. Holders. Our determination is not binding on the IRS, and the IRS may disagree with this determination. Section
871(m) is complex and its application may depend on your particular circumstances, including whether you enter into other transactions
with respect to an Underlying Security. If necessary, further information regarding the potential application of Section 871(m) will be
provided in the pricing supplement for the notes. You should consult your tax adviser regarding the potential application of Section 871(m)
to the notes.
The Estimated
Value of the Notes
The estimated value of the notes set forth on the
cover of this pricing supplement is equal to the sum of the values of the following hypothetical components: (1) a fixed-income debt component
with the same maturity as the notes, valued using the internal funding rate described below, and (2) the derivative or derivatives underlying
the economic terms of the notes. The estimated value of the notes does not represent a minimum price at which JPMS would be willing to
buy your notes in any secondary market (if any exists) at any time. The internal funding rate used in the determination of the estimated
value of the notes may differ from the market-implied funding rate for vanilla fixed income instruments of a similar maturity issued by
JPMorgan Chase & Co. or its affiliates. Any difference may be based on, among other things, our and our affiliates’ view of
the funding value of the notes as well as the higher issuance, operational and ongoing liability management costs of the notes in comparison
to those costs for the conventional fixed income instruments of JPMorgan Chase & Co. This internal funding rate is based on certain
market inputs and assumptions, which may prove to be incorrect, and is intended to approximate the prevailing market replacement funding
rate for the notes. The use of an internal funding rate and any potential changes to that rate may have an adverse effect on the terms
of the notes and any secondary market prices of the notes. For additional information, see “Selected Risk Considerations —
Risks Relating to the Estimated Value and Secondary Market Prices of the Notes — The Estimated Value of the Notes Is Derived by
Reference to an Internal Funding Rate” in this pricing supplement.
The value of the derivative or derivatives underlying
the economic terms of the notes is derived from internal pricing models of our affiliates. These models are dependent on inputs such as
the traded market prices of comparable derivative instruments and on various other inputs, some of which are market-observable, and which
can include volatility, dividend rates, interest rates and other factors, as well as assumptions about future market events and/or environments.
Accordingly, the estimated value of the notes is determined when the terms of the notes are set based on market conditions and other relevant
factors and assumptions existing at that time.
The estimated value of the notes does not represent
future values of the notes and may differ from others’ estimates. Different pricing models and assumptions could provide valuations
for the notes that are greater than or less than the estimated value of the notes. In
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addition, market conditions and other relevant factors in the future
may change, and any assumptions may prove to be incorrect. On future dates, the value of the notes could change significantly based on,
among other things, changes in market conditions, our or JPMorgan Chase & Co.’s creditworthiness, interest rate movements and
other relevant factors, which may impact the price, if any, at which JPMS would be willing to buy notes from you in secondary market transactions.
The estimated value of the notes will be lower than
the original issue price of the notes because costs associated with structuring and hedging the notes are included in the original issue
price of the notes. These costs include the structuring fee, if any, paid to other affiliated or unaffiliated dealers, the projected profits,
if any, that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes and the estimated
cost of hedging our obligations under the notes. Because hedging our obligations entails risk and may be influenced by market forces beyond
our control, this hedging may result in a profit that is more or less than expected, or it may result in a loss. A portion of the profits,
if any, realized in hedging our obligations under the notes may be allowed to other affiliated or unaffiliated dealers, and we or one
or more of our affiliates will retain any remaining hedging profits. See “Selected Risk Considerations — Risks Relating to
the Estimated Value and Secondary Market Prices of the Notes — The Estimated Value of the Notes Will Be Lower Than the Original
Issue Price (Price to Public) of the Notes” in this pricing supplement.
Secondary
Market Prices of the Notes
For information about factors that will impact any
secondary market prices of the notes, see “Risk Factors — Risks Relating to the Estimated Value and Secondary Market Prices
of the Notes — Secondary market prices of the notes will be impacted by many economic and market factors” in the accompanying
product supplement. In addition, we generally expect that some of the costs included in the original issue price of the notes will be
partially paid back to you in connection with any repurchases of your notes by JPMS in an amount that will decline to zero over an initial
predetermined period. These costs can include projected hedging profits, if any, and, in some circumstances, estimated hedging costs and
our internal secondary market funding rates for structured debt issuances. This initial predetermined time period is intended to be the
shorter of six months and one-half of the stated term of the notes. The length of any such initial period reflects the structure of the
notes, whether our affiliates expect to earn a profit in connection with our hedging activities, the estimated costs of hedging the notes
and when these costs are incurred, as determined by our affiliates. See “Selected Risk Considerations — Risks Relating to
the Estimated Value and Secondary Market Prices of the Notes — The Value of the Notes as Published by JPMS (and Which May Be Reflected
on Customer Account Statements) May Be Higher Than the Then-Current Estimated Value of the Notes for a Limited Time Period” in this
pricing supplement.
Supplemental
Use of Proceeds
The notes are offered to meet investor demand for products
that reflect the risk-return profile and market exposure provided by the notes. See “Hypothetical Payout Profile” and “How
the Notes Work” in this pricing supplement for an illustration of the risk-return profile of the notes and “The Index”
in this pricing supplement for a description of the market exposure provided by the notes.
The original issue price of the notes is equal to the
estimated value of the notes plus the structuring fee, if any, paid to other affiliated or unaffiliated dealers, plus (minus) the projected
profits (losses) that our affiliates expect to realize for assuming risks inherent in hedging our obligations under the notes, plus the
estimated cost of hedging our obligations under the notes.
Supplemental
Plan of Distribution
All sales of
the notes will be made to certain fee-based advisory accounts for which an affiliated or unaffiliated broker-dealer is an investment adviser.
These broker-dealers will forgo any commissions related to these sales. See “Plan of Distribution (Conflicts of Interest)”
in the accompanying product supplement.
JPMS may pay
a structuring fee of $8.50 per $1,000 principal amount note with respect to some or all of the notes to other affiliated or unaffiliated
dealers.
Additional
Terms Specific to the Notes
You may revoke your offer to purchase the notes at
any time prior to the time at which we accept such offer by notifying the applicable agent. 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 changes to the terms of the notes, we will notify
you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes, in which
case we may reject your offer to purchase.
You should read this pricing supplement together with
the accompanying prospectus, as supplemented by the accompanying prospectus supplement relating to our Series A medium-term notes of which
these notes are a part, the accompanying prospectus addendum and the more detailed information contained in the accompanying product supplement
and the accompanying underlying supplement. This pricing supplement, together with the documents listed below, contains the terms of the
notes and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or
indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, fact sheets, brochures or other
educational materials of
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ours. You should carefully consider, among other things, the matters
set forth in the “Risk Factors” sections of the accompanying prospectus supplement and the accompanying product supplement
and in Annex A to the accompanying prospectus addendum, as the notes involve risks not associated with conventional debt securities. We
urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.
You may access these documents on the SEC website at
www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
Our Central Index Key, or CIK, on the SEC website is
1665650, and JPMorgan Chase & Co.’s CIK is 19617. As used in this pricing supplement, “we,” “us” and
“our” refer to JPMorgan Financial.
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Annex
A
The Nasdaq-100 Futures Excess ReturnTM
Index
All information contained in this pricing supplement
regarding the Nasdaq-100 Futures Excess ReturnTM Index (the “NDX Futures Index”), including, without limitation,
its make-up, method of calculation and changes in its components, has been derived from publicly available information, without independent
verification. This information reflects the policies of, and is subject to change by, Nasdaq, Inc. (“Nasdaq”). The NDX Futures
Index is calculated, maintained and published by Nasdaq. Nasdaq has no obligation to continue to publish, and may discontinue the publication
of, the NDX Futures Index.
The NDX Futures Index is reported by Bloomberg L.P.
under the ticker symbol “NDXNQER.”
The Base Value of the NDX Futures Index was set equal
to 100.00 on September 30, 1999, the “Index Base Date.” The NDX Futures Index has been calculated on a live basis since April
1, 2024, the “Index Live Date.”
The NDX Futures Index measures the performance of
the nearest maturing quarterly E-mini® Nasdaq-100® futures contracts (Symbol: NQ) (the “Underlying
Futures Contracts”) trading on the Chicago Mercantile Exchange (the “Exchange”). The Underlying Futures Contracts are
U.S. dollar-denominated futures contracts based on the Nasdaq-100 Index®. For additional information about the Nasdaq-100
Index®, see “Equity Index Descriptions — The Nasdaq-100 Index®” in the accompanying underlying
supplement. The NDX Futures Index is calculated real-time from the price change of the Underlying Futures Contracts. The NDX Futures Index
is an “excess return” index that is based on price levels of the Underlying Futures Contracts as well as the discount or premium
obtained by “rolling” hypothetical positions in the Underlying Futures Contracts as they approach delivery. The NDX Futures
Index does not reflect interest earned on hypothetical, fully collateralized contract positions.
Index Rolling
As each Underlying Futures Contract approaches maturity,
it is replaced by the next maturing Underlying Futures Contract in a process referred to as “rolling.” The rolling of the
NDX Futures Index occurs quarterly over a three-day rolling period (the “roll period”) every March, June, September and December,
effective after the close of trading on the fifth, fourth and third business days (each, a “roll day”) preceding the last
trading date of the maturing Underlying Futures Contract. The number of units over the roll period will change equally each day as illustrated
below, provided that there is no Index Market Disruption Event (as described under “— Index Market Disruption Events”
below) on a roll day (a “Roll Day Disruption”).
Roll Period Day |
Proportion of Current Contract |
Proportion of Next Contract |
Day 1 |
2/3 |
1/3 |
Day 2 |
1/3 |
2/3 |
Day 3 |
0 |
1 |
On any scheduled roll day during the roll period,
the occurrence of any Index Market Disruption Event below will result in a Roll Day Disruption and an adjustment to the roll period such
that no changes to the units of the current or next contract will occur until such time as the Roll Day Disruption is no longer occurring.
After the Roll Day Disruption ends, on the next day during the Roll Period, the unit proportions between the current contract and the
next contract will “catch up” to where they would have been in the absence of a disruption, as illustrated below.
Roll Period Day |
Proportion of Current Contract |
Proportion of Next Contract |
Day 1* |
1 |
0 |
Day 2** |
1/3 |
2/3 |
Day 3 |
0 |
1 |
*Disruption occurs on Day 1 of the Roll Period; no
changes are made to the proportion of the units of the current contract and the next contract.
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**Day 2’s proportions are identical to where
they would have been in the absence of a disruption on Day 1 of the Roll Period.
Index Market Disruption Events
Each of the below described events is an “Index
Market Disruption Event” for the purposes of this description.
| · | Trading Disruption: Any unscheduled closure of the Exchange; a material suspension, limitation or disruption of trading on
the Exchange; a failure of the Exchange to publish the relevant price, level, value or other information; a halt in trading, such as a
circuit breaker or other exchange-imposed halt; or any other event that materially affects the ability of market participants to trade,
effect transactions in, maintain or unwind positions in that futures contract. |
| · | Exchange Disruption: Any exchange related event that disrupts or impairs the ability of market participants to effect transactions
or obtain market values or price discovery of a component used directly or indirectly in the NDX Futures Index. |
| · | Price Failure: Any event that impairs or prevents the ability of Nasdaq to obtain a relevant price, level, rate, value or any
other information from an exchange or other source necessary, on a timely basis and in a manner acceptable to Nasdaq, in order to perform
the calculation of the NDX Futures Index. |
| · | Inaccurate Data: The price or value of a component that has been calculated by reference to data that, in the determination
of the Nasdaq, is inaccurate, incomplete and/or does not adequately reflect the true market price or value of such component. |
| · | Force Majeure: Any event or circumstance (including, without limitation, a systems failure, natural or man-made disaster, act
of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance, or restrictions due to emergency
powers enforced by federal, state or local government agencies), that is beyond the reasonable control of Nasdaq and that Nasdaq determines,
in its sole discretion, affects the NDX Futures Index, a component of the NDX Futures Index, any input data required to calculate the
Index, or that prevents the ability of Nasdaq to calculate the NDX Futures Index. |
| · | General Moratorium: Nasdaq observes on any day that there has been a declaration of a general moratorium in respect of banking
activities in any relevant jurisdiction. |
Index Calculations
The closing level of the NDX Futures Index on any
trading day reflects the change in the daily contract price of the Underlying Futures Contract since the immediately preceding Index Calculation
Day (defined as each weekday that is not a scheduled holiday according to Nasdaq’s publicly available index holiday schedule). Additionally,
on each roll day during the quarterly roll period, the closing level of the NDX Futures Index reflects the proportional change from the
daily contract price of the maturing Underlying Futures Contract on the immediately preceding trading day to the daily contract price
of the next maturing Underlying Futures Contract on that roll day.
The daily contract price of an Underlying Futures
Contract will be the settlement price reported by the Exchange. If an Index Market Disruption Event occurs (as defined under “—
Index Rolling — Index Market Disruption Events” above) or is occurring on an Index Calculation Day that Nasdaq determines
materially affects the NDX Futures Index, Nasdaq may:
| · | Delay the calculation of the Index and halt the dissemination of the value of the NDX Futures Index and /or other information relating
to the NDX Futures Index until such time, which may be a subsequent Index Calculation Day, that Nasdaq determines that such Index Market
Disruption Event is no longer occurring. |
| · | Determine a good faith estimate of any affected or missing input data required to calculate the NDX Futures Index or the value of
the NDX Futures Index for such Index Calculation Day or time for such Index Calculation Day. |
Index Corrections and Recalculations
Nasdaq reserves the right to recalculate an index
at its discretion in the event that settlement prices are amended or upon the occurrence of a missed index methodology event (deviation
from what is stated in the methodology document).
License Agreement
The notes are not sponsored, endorsed, sold or promoted
by Nasdaq or its affiliates (Nasdaq, with its affiliates, are referred to as the “Corporations”). The Corporations have not
passed on the legality or suitability of, or the accuracy or adequacy of descriptions and disclosures relating to, the notes. The Corporations
make no representation or warranty, express or implied to the owners of the notes or any member of the public regarding the advisability
of investing in securities generally or in the notes particularly, or the ability of the NDX Futures Index to track general stock market
performance. The Corporations’ only relationship to J.P. Morgan Financial and J.P. Morgan Chase & Co. (the “Licensee”)
is in the licensing of the Nasdaq®, the Nasdaq-100 Index® and certain trade names of the Corporations and
the use of the NDX Futures Index, which is determined, composed and calculated by Nasdaq without regard to the
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Licensee or the notes. Nasdaq has no obligation to take the needs
of the Licensee or the owners of the notes into consideration in determining, composing or calculating the NDX Futures Index. The Corporations
are not responsible for and have not participated in the determination of the timing of, prices at, or quantities of the notes to be issued
or in the determination or calculation of the equation by which the notes are to be converted into cash. The Corporations have no liability
in connection with the administration, marketing or trading of the notes.
The Corporations
do not guarantee the accuracy and/or uninterrupted calculation of the ndx futures index or any data included therein. The Corporations
make no warranty, express or implied, as to results to be obtained by the Licensee, owners of the NOTES, or any other person or entity
from the use of the ndx futures index or any data included therein. The Corporations make no express or implied warranties, and expressly
disclaim all warranties of merchantability or fitness for a particular purpose or use with respect to the ndx futures index or any data
included therein. Without limiting any of the foregoing, in no event shall the Corporations have any liability for any lost profits or
special, incidental, punitive, indirect, or consequential damages, even if notified of the possibility of such damages.
Background on Futures Contracts
Overview of Futures Markets
Futures contracts are contracts that legally obligate
the holder to buy or sell an asset at a predetermined delivery price during a specified future time period. Futures contracts are traded
on regulated futures exchanges, in the over-the-counter market and on various types of physical and electronic trading facilities and
markets. An exchange-traded futures contract provides for the purchase and sale of a specified type and quantity of an underlying asset
or financial instrument during a stated delivery month for a fixed price. A futures contract provides for a specified settlement month
in which the cash settlement is made or in which the underlying asset or financial instrument is to be delivered by the seller (whose
position is therefore described as “short”) and acquired by the purchaser (whose position is therefore described as “long”).
No purchase price is paid or received on the purchase
or sale of a futures contract. Instead, an amount of cash or cash equivalents must be deposited with the broker as “initial margin.”
This amount varies based on the requirements imposed by the exchange clearing houses, but it may be lower than 5% of the notional value
of the contract. This margin deposit provides collateral for the obligations of the parties to the futures contract.
By depositing margin, which may vary in form depending
on the exchange, with the clearing house or broker involved, a market participant may be able to earn interest on its margin funds, thereby
increasing the total return that it may realize from an investment in futures contracts.
In the United States, futures contracts are traded
on designated contract markets. At any time prior to the expiration of a futures contract, a trader may elect to close out its position
by taking an opposite position on the exchange on which the trader obtained the position, subject to the availability of a liquid secondary
market. This operates to terminate the position and fix the trader’s profit or loss. Futures contracts are cleared through the facilities
of a centralized clearing house and a brokerage firm, referred to as a “futures commission merchant,” which is a member of
the clearing house.
Unlike common equity securities, futures contracts,
by their terms, have stated expirations. At a specific point in time prior to expiration, trading in a futures contract for the current
delivery month will cease. As a result, a market participant wishing to maintain its exposure to a futures contract on a particular asset
or financial instrument with the nearest expiration must close out its position in the expiring contract and establish a new position
in the contract for the next delivery month, a process referred to as “rolling.” For example, a market participant with a
long position in a futures contract expiring in November who wishes to maintain a position in the nearest delivery month will, as the
November contract nears expiration, sell the November contract, which serves to close out the existing long position, and buy a futures
contract expiring in December. This will “roll” the November position into a December position, and, when the November contract
expires, the market participant will still have a long position in the nearest delivery month.
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Futures exchanges and clearing houses in the United
States are subject to regulation by the Commodity Futures Trading Commission (the “CFTC”). Exchanges may adopt rules and take
other actions that affect trading, including imposing speculative position limits, maximum price fluctuations and trading halts and suspensions
and requiring liquidation of contracts in certain circumstances. Futures markets outside the United States are generally subject to regulation
by foreign regulatory authorities comparable to the CFTC. The structure and nature of trading on non-U.S. exchanges, however, may differ
from the above description.
Underlying Futures Contracts
E-mini® Nasdaq-100®
futures contracts are U.S. dollar-denominated futures contracts, based on the Nasdaq-100 Index®, traded on the Exchange,
representing a contract unit of $20.00 multiplied by the index level of the Nasdaq-100 Index®, measured in cents
per index point. From April 10, 1996, the E-mini® Nasdaq-100® futures contracts have traded on
the Exchange.
E-mini® Nasdaq-100® futures
contracts listed for six consecutive quarters for each March, June, September and December and four additional December contract months
are available for trading. Trading of the E-mini® Nasdaq-100® futures contracts will terminate
at 9:30 A.M. Eastern time on the third Friday of the contract month.
The daily settlement prices of the E-mini® Nasdaq-100® futures
contracts are based on trading activity in the relevant contract (and in the case of a lead month also being the expiry month, together
with trading activity on lead month-second month spread contracts) on the Exchange during a specified settlement period. The final settlement
price of E-mini® Nasdaq-100® futures contracts is determined through the “end of month fair
value procedure,” which fixes a price based on trading activity on the Exchange in the E-mini® Nasdaq-100® futures
contracts between 2:59:30 P.M. and 3:00:00 P.M. Central time on the last business day of each month.
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