Interpretation Investors trading warrants Guide Financial Tips

Category: Money tips Release Date: 2006-08-31

The Shanghai Stock Exchange has issued the "Interim Measures on the Shanghai Stock Exchange Certificate Management", in order to facilitate market participants to better understand and use the "Interim Procedures", the Working Group on the Shanghai Stock Exchange warrants against some of the key provisions and key provisions the interpretation. First, the definition and types of warrants

"Interim Measures" relating to the definition of Warrants Warrants reveal two main features: 1, warrants were characterized by issuers and holders of the contractual relationship between the warrant holders and shareholders whereby the rights of the shareholders the right to enjoy their rights content, there was a clear difference: That is, unless the contract expressly agreed by the holder of the warrants and the warrants underlying the issuance of securities the issuer's internal management and operation did not participate in decision-making power; 2, Warrants Warrants give the holder a right to choose but not an obligation. With the warrant issuer an obligation to the holder the right line based on the agreed delivery of the underlying securities or cash is different from C of E holders can choose according to the market conditions right line or not work right without having to assume responsibility for any breach of contract.

"Interim Measures" covers the different types of warrants product:

A, to issue human standards, can be divided into corporate warrants and covered warrants. Company warrants are issued by the underlying issuers of warrants, such as the underlying issuers (listed company) issued warrants. Covered warrants are issued by the underlying securities such as stocks persons other than the third person (a listed company or securities companies and other financial institutions) issued warrants. Taking into account the actual market development, in addition to address-tradable shares and warrants issued, the "Interim Measures" on securities companies and other financial institutions as issuers of covered warrants qualifications not specified.

B, to the nature of the holder of the rights of the standard can be divided into warrants (to the issuer to purchase the underlying securities) and put warrants (to the issuer to sell the underlying securities).

C, to the right of way line as a standard, agreed upon the holder the right to a specified period for the American-style warrants are exercised, the holder only agreed maturity date in a specific row of the right to belong to European-style warrants.

D, by means of settlement as the standard, can be divided into real coupon payment clearing warrants, and cash-based settlement-based warrants. Real coupon payment settlement in order to shift ownership of the underlying securities is characterized by the issuer to the holder must be the actual delivery or purchase of the underlying securities, while the cash settlement is not the transfer of ownership of the underlying securities cases far as clearing price differentials paid in cash.

As can be seen from the above description, "Interim Measures" fully taken into account in the split share structure reform pilot program warrants various types that may occur, but also for the next stage of development warrants market exchange reserve a space. Baosteel Group in this split share structure reform issued warrants are European-based real coupon payments covered warrants.

Second, issuance and listing of audit

According to "Provisional Measures" sections 6 to 8 of the Ordinance, the issue warrants review by the Exchange completed, and report to the CSRC for the record. The warrants listed on Stock Exchange is responsible for entirely by the audit.

Be noted that the company's stocks or bonds with warrants issue closely related issue, involving the financing behavior, therefore, the company issued warrants to the Exchange, before making the application should first obtain the approval of China Securities Regulatory Commission.

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Third, the conditions of the underlying securities

"Interim Measures" to list the modalities of the variety of stocks and other securities can be used as the underlying securities. In view of warrants market is just starting, "Interim Measures" only for single-stock options as a condition of the underlying securities has made clear that, with respect to the Fund, a basket of stocks for the specific conditions of the underlying securities, the exchange will be based on the need for timely development of the market be clarified and improved.

Warrants product high-yield, high-risk characteristics of the decision of the underlying stock if you do not have a considerable flow of the scale of the underlying stock and warrants the price linkage arising from price fluctuations and manipulation of risk will be very large. Choose the size of large, highly liquid stocks as the underlying stock is trading warrants an important basis for active and stable. In view of this, "Interim Measures" on the eligibility of the underlying stock has strict requirements. Need clear: first, the circulation flow of A shares index. Second, the turnover is based on the calculation of the total market value is based, single-day turnover = (the date of the underlying stock's secondary market turnover / market value) * 100%.

Fourth, market conditions warrant

"Interim Provisions" of Article X of the listing requirements of the warrant made it clear that include:

1, warrant an essential provisions: Warrants category ( "subscribe" or "put"), exercise price, the right of way line ( "Continental" or "American"), during the existence of an exercise date, settlement method (solid coupon payment, or cash settlement), the ratio of the right line.

2, warrants starting point for the calculation of survival time are listed on the specific calculations can be days, months, years, as a unit.

3, warrants issuers must provide the required guarantees of performance.

4, warrant issuer guarantees of performance.

"Interim Measures" provided in this Article XI issued warrants listing, the issuer should provide guarantees of performance. Way of security, there are two, the Issuer may choose.

First, the issuer through the clearing house to open a special account to provide an adequate number of underlying securities or cash, as the performance guarantees. Exchanges will be decided depending on the issuer need to provide the number of performance guarantees, and require the issue of warrants issued in complete performance guarantees. At the same time, the transaction of ownership guaranteed under the market conditions by adjusting the coefficient of performance require additional collateral for the issuer, the security factor is a between a number between 0 and 1. Baosteel Warrants current security factor of 100%.

To the underlying securities or cash to provide security, the issuer should the obligation to ensure the underlying securities or cash collateral did not exist, judicial freezing or other rights of defects.

Secondly, to provide by this recognized institutions such as commercial banks as performing an irrevocable joint and several liability of the guarantor.

5, information disclosure

Disclosure of information mainly includes two aspects: one, warrant issuers to disclose information under the relevant provisions of the obligation to fulfill the various bulletins issued. In addition to the "Interim Procedures" specified in the instructions issued warrants listing announcement book, the termination notice should public notice and the termination of listing, the exchange of information disclosure will also guide the content and format of the form according to market needs, combined with the split share structure reform request, to urge the issuer the right to issue timely price adjustments, such as lines, and other information to clarify the rumors on the market to enhance market transparency, to fully safeguard the interests of investors. 2, the exchange released the day before the opening, the number of each warrant may be in circulation, the number of holders of warrants may be in circulation to meet or exceed the number of holders of 5% of the list.

6, warrants trading

Warrants trading and the stock is very similar to the trading hours, trading mechanism (competitive bidding), etc. are all the same stock. The difference is:

1, the smallest unit of declared value: the smallest unit of change in stock price 0.01 yuan different, the smallest change in unit price of warrants is 0.001 yuan. This is because the warrant's price may be low, such as price outside the card, the price of warrants may only be a few cents, when the smallest change in price if the unit is 0.01 yuan becomes too large, because even the smallest unit of change in the price of from a fluctuation point of view, are likely to form the price volatility.

2, warrant the price of Price Limits: At present, the stock rose 10 percent decline in the proportion taken by the restrictions, warrants up the price decline is a decline in inflation, rather than the percentage limit. This is because the warrant price is mainly decided by the price of the underlying stock, and warrants the price of the underlying stock price is often only a small proportion of the underlying stock price changes in the prices of warrants may result in large-scale changes in so that a predetermined percentage decline of any restrictions up less suitable. For example, T on the closing price of warrants is 1 yuan, the underlying stock's closing price of 10 yuan. T +1 day, the underlying stock daily limit to 11 yuan. Other factors inconvenience, warrant price should increase 1 yuan, or 100%. Click the "measures" in the formula, the warrant's limit-price 1 + (11-10) × 125% = 2.25 yuan, or limit-when the underlying stock, warrants have not yet daily limit.

7 to prohibit issuers and the underlying Warrants

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Issuers trading warrants

"Interim Measures," which stipulated the sale of their warrant issuer may not issue warrants, the underlying issuers may not correspond to the sale of the underlying securities warrants. As the warrants are highly leveraged nature of the product, small changes in the underlying stock will lead to large fluctuations in the price of warrants. If allowed to issue warrants and the underlying issuers trading warrants, then the warrants issuers and the underlying issuers in some way affect the underlying stock price, it may lead to sharp fluctuations in the price of warrants to gain illicit proceeds, to the general investment those losses.

8, warrants the termination of trading

"Interim Procedures," Article XIV provides that "the survival warrant before the expiration of five trading days, warrants the termination of trading, but can be OK right." Here the first five trading days, including maturity date, that is due on day T, warrants from the T-4 began terminate the transaction.

9, warrants exercisable at

"Interim Measures" line of the right to do one of the main provisions of the "day to buy the warrants, the day may be the right line. The day the subject line of the right to obtain securities, shall not be sold that day." This provision is designed to maintain the warrant price and the interaction between the underlying stock, making the price warrants determined mainly by the characteristics of the underlying stock to be reflected more effectively. Of course, the more ideal situation is to allow the date of the subject line of the right to obtain securities can be sold the same day. But took into account factors such as risk control, the provision now made.

10, warrant is exercisable for the settlement

The right line settlement, the "Interim Measures" for cash and securities settlement have made the required payment methods. In the cash settlement, the settlement price for the underlying securities issuers and holders of warrants are very important, for the "Interim Procedures" provides that "the underlying securities clearing price for the 10 trading days before the right line of the underlying securities, the average daily closing price a few. " Such a large extent avoided the possibility of settlement prices were being manipulated. In addition, from the perspective of the protection of investors, "Interim Measures" allow the automatic payment of cash settlement and securities payment for the right of way agents, and made corresponding provisions.

11, warrant transactions, the cost of power lines

Warrants of China's securities market is another innovative products. In order to encourage the development of this product, where the cost of this to consider giving some concessions, its transactions, the right line of the development cost of the basic reference in this by the exchange-traded fund standards, such as warrants commissions do not exceed 0.3% of transaction amount , line right to the registration transfer of shares by face value of the company to pay a transfer fee of 0.05% of the shares.

12, warrants the creation of a mechanism

Warrant price depends largely on the underlying stock price and its volatility, its price should not be completely controlled by the supply and demand relations. Rising demand in the market, it should be there is some mechanism that allows the timely supply of warrants to be increased in order to stabilize the price spikes. Outside the mature markets are invariably warrants the use of such a "continuous sale" mechanism. To this end, the "Interim Procedures" 29th Article: Eligible institutions may create warrants, warrants to increase the supply of the secondary market to prevent price spikes which warrants a reasonable price from the area. (Reporter: Zhang Wei)

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