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Trainee reporter Hu Xin
Report from Beijing
The debate on the mainland warrant market in its infancy has been continuous, especially the dispute on the creation of WISCO warrants.
Recently, an authoritative person said that the exchange violated the rights and interests of the shareholders of WISCO's circulating shares through institutional arrangements, resulting in the reduction of the consideration for the split share structure reform; This institutional arrangement of the Exchange is "illegal", and he threatened to use legal means to take the Exchange and its founder to court for compensation.
"This is what those who do not understand warrants are doing," a person in the legal profession laughed. "It is nonsense to say that they are illegal."
The dispute originated from the issuance of the covered warrants of WISCO.
On November 28, the Notice on Matters Related to the Establishment of WISCO Warrants by Securities Companies (hereinafter referred to as the "Notice") issued by the Shanghai Stock Exchange was officially implemented. Ten qualified intermediaries established 1.127 billion put warrants of WISCO for listing and trading, and two more institutions established 99 million put warrants on the 29th.
The newly issued warrants not only ended the soaring price of WISCO warrants, but also turned down the daily limit. By the 30th day, the warrant had dropped to around 1.11 yuan, more than 40% lower than the highest price of 1.86 yuan.
Compared with the cumulative creation of 1.226 billion units by put warrant institutions, the cumulative creation of 503 million units by nine institutions of call warrants is relatively small, but its lethality should not be underestimated: since the implementation of the Notice on the 28th, the maximum decline of call warrants has still exceeded 20%.
For a while, resentment spread like an infectious disease, and the voice of "illegality" came out. However, investors may have to bury their dissatisfaction this time.
"The creation of WISCO warrants by a third party is legal both in issuance and transaction, and the acts of the exchange and issuer are carried out within the current legal framework," said Zheng Yu, a lawyer of Shanghai Chuangyuan Law Firm.
legitimate
"In fact, Wuhan Iron and Steel Group and Wuhan Iron and Steel Co., Ltd. have nothing to do with the creation of warrants, and there is no basis for prosecuting them," said Zheng Yu.
Previously, there was a view that the share reform warrants were part of the full circulating consideration, and the gains or losses brought by these warrants were exclusive to circulating shareholders. After the formal implementation of the share reform plan, the exercise conditions and total circulation of warrants are also unalterable.
It is on this basis that this view holds that:
First, if the number of warrants issued is approved by the shareholders' meeting, other institutions have no right to change it.
Secondly, the creation of WISCO warrants has changed the total circulation volume and infringed the achievements of the circulation shareholders who should be protected by law in the share reform.
Accordingly, some people in the legal profession said that the right to create warrants was not in the exchanges and brokers, but in the shareholders' meeting. If the creation violates the relevant provisions of the Company Law, the investor can sue the relevant responsible person according to the Company Law.
"This view seems to be well grounded, and it is easy to guide investors." Zheng Yu refutes that "the reasoning premise actually confuses two securities products with fundamentally different attributes, namely, share reform warrants and creation warrants."
The warrants presented by WISCO Group to the shareholders of tradable shares in the share reform plan are the WISCO share reform warrants. The issuer is WISCO Group, and the underlying bonds are the shares held by WISCO Group that are not currently tradable, which are equity warrants; The issuer creating the warrant is a securities firm, and the underlying securities are the tradable shares purchased by the issuer in the secondary market, which are covered certificates.
Although the two warrants are the same in terms of exercise price, term and other exercise conditions, their underlying securities have different legal attributes, issuers and executors, and are two products with different legal meanings.
"Recognizing this point, the logical basis of the above views does not exist," Zheng Yu said.
At the same time, the creation of warrants requires the approval of the General Meeting of Shareholders. There is neither a realistic legal basis nor a legal rationale. There is no similar practice in the world. Instead, the Exchange should formulate corresponding rules. According to the rules, the creation rights belong to the issuer of the creation warrants.
As for the issuance, WISCO Group presents the shareholders of tradable shares as one of the payment methods of consideration, and its procedures and results are in line with the legal norms. The issuance of covered warrants by securities companies in accordance with the provisions of the Exchange is also in line with legal norms.
As for the transaction, WISCO Group's commitment to the consideration of WISCO's share reform is the right to guarantee the execution of warrants, and there is no and impossible commitment to the transaction behavior and transaction price of warrants. As a legal institution, the Exchange has the right to arrange the trading methods of listed varieties.
In this regard, He Pukun, a lawyer from Kyoto Law Firm, agreed that "from the perspective of issuance and transaction, the institutions involved in the transaction did not violate laws and regulations".
Most importantly, the prospectus of WISCO's share reform and the warrant listing announcement have clearly indicated the market risks brought by third-party creation. "Only when WISCO Group, the shareholder of non tradable shares, increases or decreases the warrants it presents without the consent of the general meeting of shareholders, which constitutes a violation of the original commitment to present warrants, can the shareholders of tradable shares be necessary to seek legal protection.".
Defects?
As the consideration payment for WISCO's share reform, the equity warrants presented to the shareholders of tradable shares, WISCO Call Warrant (580001) and WISCO Put Warrant (580999), were listed for trading on November 23, while the covered warrants, WISCO Call Warrant (580001) and WISCO Put Warrant (580999), created by qualified institutions in accordance with the Notice, were listed for trading on November 29.
"The crux of the problem is the flaw in the trading system." Zhang Changhong of the Wanguo Evaluation told reporters, "The two products with different attributes are traded together, which does not conform to international practice, and its rationality is also questionable."
As a practical example, after the listing of CCB, a total of 13 qualified institutions in Hong Kong issued 24 warrant products, and each warrant product was traded separately.
According to the current rules of the mainland, different varieties are traded on the same platform, and covered warrants increase the market supply, which is bound to cause the price fluctuation of equity warrants presented by WISCO to shareholders of tradable shares. From this perspective, the trading system does affect the price of equity warrants.
However, Zheng Yu, a lawyer, said that the current legal provisions did not prohibit the exchange from placing warrants issued by different issuers on the same trading platform, which was "based on the law, but unreasonable".
Zhang Changhong believes that this transaction arrangement may cause chaos in the warrant market due to the founder's own problems. "When all varieties are traded under one platform, when there is a problem with the founder, even if it does not have any impact on the performance of the warrants, it will also have an impact on market confidence."
He suggested that trading warrants issued by all different issuers separately might be an effective way.
In this regard, Professor Huasheng said that separate trading might solve the temporary problem, but since the conditions of WISCO's equity warrants and covered warrants are the same, the issuance of covered warrants will still pose a certain market impact on the trading of equity warrants, and will also give people a "handle".
He believes that the most effective way is to adopt the internationally accepted practice that equity warrants are not listed for trading. "In Germany, Hong Kong and other developed warrant regions in the world, more than 95% of listed warrants are covered warrants, and the trading volume of equity warrants is very small."
In fact, the defects of the warrant system are not only reflected in the trading system.
First of all, there is no detailed distinction between equity warrants and covered warrants. Article 2 of the Interim Measures for the Administration of Warrants (hereinafter referred to as the "Measures") recognizes the difference between equity warrants and covered warrants, but there is no detailed distinction between equity warrants and covered warrants in terms of issuance, listing, trading and other specific terms.
Secondly, the content of equity warrant rules is less. Most of the provisions of the Measures are provisions on covered warrants. There are few provisions related to equity warrants, and equity warrants are the first ones to "appear". The lack of corresponding specifications has caused disputes on WISCO warrants.
In addition, the warrant system also has flaws in determining the first day price.
improvement
"The lack of overall design of the warrant market and the hasty 'launching' of equity warrants in the consideration plan for share reform have led to the root cause of many problems in the warrant market," said Watson.
Without fully estimating the market "power" of warrants, we hastily introduced equity warrants with a single variety, a fixed issuer and a fixed number of issues, and listed them for trading, which directly led to the speculation of market warrant products and the sharp rise and fall of market prices far away from the warrant value basis.
Furthermore, in order to curb the strong speculative atmosphere in the market, covered warrants that can be created continuously were introduced under the design of an imprecise issuance and trading system, and the two transactions were "kneaded", which led to the chaos of WISCO warrants.
Therefore, Watson believes that we cannot simply solve the problem. We should reflect on previous practices, give policies for the overall development of the warrant market, and stabilize market expectations.
Exchange personnel revealed that the Exchange is actively planning and designing the overall warrant market and will launch corresponding institutional arrangements in due course.
On December 2, Shenzhen Stock Exchange issued the Notice on Matters Related to the Creation of Warrants by Securities Companies.
Researchers believe that the Notice has absorbed the experience and lessons from the development of SSE warrants, and compared with the rules of SSE, it has mainly improved three aspects: limiting the number of initial offerings to avoid a big impact on the market caused by excessive number of initial offerings; The total number of warrants shall be limited to avoid that the number of underlying bonds corresponding to warrants is greater than the number of regular shares. Although the SSE will limit the total amount in specific operations, it has not explicitly stipulated it; The trading day of the newly created warrants will be postponed for one trading day and set to T+2 days before trading, giving the market more time to digest the newly created warrants.
The person said that although the Notice is not perfect, it has improved the original loopholes and inadequacies after all, and there will certainly be improvements in the future. "There is no doubt that the Shanghai Stock Exchange will also improve the existing rules."
(Our reporter Wang Gongbin also contributed to this article.)
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