Compared with the snowy weather, the warrant investors who have nearly lost all their money are filled with a deeper chill. After seven warrant investors went to Beijing to talk with the CSRC on January 15, five shareholders of China Southern Airlines put warrants came to Shanghai on January 30 to have an interview with relevant persons of the Shanghai Stock Exchange（ See our report yesterday for relevant news )。
Since the listing on June 21 last year, the price of put warrants of China Southern Airlines has soared and plummeted in a wide range from 0.3 yuan/share to 2.603 yuan/share. With the continuous creation of securities companies, the retail investors of water related warrants have suffered huge losses. Although the report shows that the effect of warrant investment on behalf of this trip is not obvious, it is enough to cause the industry to re-examine the warrant creation system.
Seen from the statement made by the relevant personnel of SSE this time, the starting point of the function of creating warrants granted by SSE to securities companies is to calm the excessive speculation of capital market on warrants, that is, to increase the supply of warrants through human effort and achieve the supply balance of warrant investment. Although this statement sounds quite reasonable, it cannot help the scrutiny of legal principles and the torture of realistic economic interests.
In mature markets, warrants are derivative financial products that lock the purchase and sale price and enable investors to avoid risks. However, the warrants in the A-share market are completely different from them. Warrants in the A-share market are the product of the split share structure reform, the means of consideration paid by the holders of non tradable shares to the holders of tradable shares in order to obtain the tradable rights, rather than financial derivatives in a simple sense. It is precisely because of this special attribute of Chinese warrant products that, from a legal sense, the level and quantity of warrant exercise prices should be determined in the company's share trading reform, and once determined by the shareholders' meeting, they should not be infringed by external forces. Unfortunately, the current stock exchange's warrant creation system makes the securities companies become the "third party" between the holders of tradable shares and non tradable shares. Securities companies can artificially increase the supply of warrants to make their market prices fall, and the ultimate infringement is the consideration rights and interests of shareholders of tradable shares.
What's worse, the warrant creation system in the name of curbing speculation has completely deviated from the original intention of the design in reality and has become the source of the system for securities dealers to seize huge profits. According to statistics, in 2007, 26 securities companies created and cancelled 15 warrants 781 times, realizing profits of about 26.3 billion yuan. As for the put warrants of China Southern Airlines, as of January 25, 2008, the securities companies had earned a book profit of about 20.1 billion yuan in the creation of the warrants, which does not include the handling fees charged in the warrant transactions. However, in sharp contrast to the profits made by securities companies, nearly 70% of warrant investors lost money in 2007. Among the five right holders of the SSE, the one with the least capital also lost more than 300000 yuan.
Moreover, in the view of the Exchange, the so-called "restraining speculation" function of the warrant creation system is also questionable. From the previous trend of CMB warrants to potash fertilizer warrants, we can see a worrying market rule: at the beginning of the listing of warrants, the price is often heavily speculated continuously because there is no broker to create; Then, with the securities companies having the right to create, they began to create wantonly, and the warrant price went down from the peak all the way; Finally, when the warrant trading entered the "doomsday round" stage, the securities dealers eager to put their pockets in order began to buy back, cancel and create, reducing the supply of warrants, and the warrant price thus appeared "doomsday madness". However, the act of securities companies canceling repurchase at the last moment has become the subject of speculation in the market for warrants, because the main force in the market can continuously push up the price, forcing securities companies to make full efforts to repurchase in order to maintain windfall profits, and ultimately making securities companies create systems instead become a driving force to boost prices.
The above shortcomings show that compared with the strong voice of institutions such as exchanges and securities companies, the majority of retail investors obviously lack the necessary way to express their interests. It is helpless for warrant investors' representatives to directly talk to the management department. This interest difference between institutional investors and retail investors has created a serious interest grouping tendency in the domestic securities market. It is also doubtful whether the warrant creation system conforms to the "three fair principles".
It can be seen that there are serious system loopholes in the existing warrant creation system, and it is urgent to improve the system. The most important point is that we should refer to the relevant provisions of the Hong Kong derivative warrant system to trade the warrant categories created by different institutions. Different issuers should issue warrants with different terms according to their own expectations, and the risks arising from the formulation of terms should be borne by them. In addition, the management department should strengthen the information transparency in the process of warrant creation, timely publish the number of warrants not issued by the creator and the number of warrants repurchased in the market and other relevant information, and design channels for ordinary investors to appeal.
Only scientific system design can make the risks and benefits of market participants relatively equal. The design omission of the existing warrant creation system is difficult to protect the interests of retail investors. As a controversial trading system, the relevant management departments should reflect deeply on it, seek opinions from all parties in the market as soon as possible, and make significant improvements to the trading system, instead of ignoring the voice of market queries in the name of "curbing speculation".
□ Yushan (Shanghai Financial Commentator)
Related reports:
Person from the CSRC: the warrant business of the SSE is not under the jurisdiction of the CSRC
China Southern Airlines Warrants: The Myth of Sharp Profits of Securities Firms in 2007
26 securities companies created 16.6 billion warrants and made 26.3 billion yuan
Retail investors claim that the system created by Shanghai Stock Exchange is illegal and requires to freeze funds of securities dealers
The lawyer wrote to the State Council to request the cancellation of the establishment
Shareholders protest against the SSE's permission for securities firms to create warrants
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