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Our reporter Fang Yuan
Report from Beijing
After the storm of Baosteel warrants, the recently listed WISCO call and put warrants continued the myth of "undefeated warrants". After the listing, the market was stunned by the continuous increase and limit of warrants.
On November 28, the reporter learned that the SSE has formed an idea for the overall development of the warrant market after it launched the creation of warrants this week, and the development of the warrant market will be included in the unified plan.
According to the relevant department of the Exchange, the specific idea is that the "continuous creation" of warrants will be given a six-month trial and improvement period; On this basis, it is planned to launch covered warrants before the second quarter of next year.
6 months to improve "creation"
It is understood that due to the needs of the market, Shanghai Stock Exchange will increase the supply of warrants to a certain extent, and the proposed two ways are: first, to create existing warrants; Second, newly issued covered warrants. The insiders said that this arrangement of the Exchange actually clarified the "two-step" plan for the development of warrants.
"The Exchange has formulated some overall principles for the development of warrants, which are the comprehensive care for the development of warrant market," said the relevant person of the new product development team of SSE.
According to this person, on the one hand, we should learn from the international general model and combine it with China's specific market environment; On the other hand, according to the different nature and characteristics of equity warrants and covered warrants, different management models should be adopted for their issuance and listing. At the same time, when using warrants as a tool to solve the split share structure problem, we mainly consider covered call warrants, and take put warrants as a supplement to the scheme according to the actual situation of the company.
It is understood that another aspect of the Exchange's improvement on the creation of warrants is to observe and evaluate the creation business of innovative pilot securities companies.
It is reported that in the next six months, the Exchange will also develop a number of warrant creation businesses, and the selection of the main securities companies will be a process of "decreasing and increasing". In this stage, due to illegal operations or inability to control market risks, some of the 10 innovative pilot brokers will be eliminated, and non innovative pilot brokers may also enter the warrant creation business.
Relevant people from the Membership Department of Shenzhen Stock Exchange also told reporters that Shenzhen Stock Exchange will also launch the creation mechanism as soon as possible to adapt to the development of the warrant market. As for the choice of creating securities companies, SZSE said that in addition to having the economic strength to bear the market settlement ability, it must also require rationality and strong risk management ability.
Be cautious about "covered warrants"
The reporter learned in the interview that the two exchanges will prudently launch covered warrants before the second quarter of 2006. "It is believed that this time span will provide ample preparation for all parties in the market," said the SSE official.
It is understood that covered warrants have not been launched as quickly as previously thought in the industry, mainly because this business has high requirements on the business capability of securities companies. The covered warrants require the securities firms to have considerable design capability, trading experience and risk control level. In addition, covered warrants will further test the cooperation and integrity of all parties in the market.
As for the risk management of covered warrants, some experts in the industry said that if the practice of other markets is followed, the practice of issuing high interest notes or the simultaneous issuance of call warrants and put warrants can be adopted. However, a securities trader said that it was almost impossible to eliminate the risk with the current domestic technical means alone.
Generally speaking, the direct income of covered warrant issuer includes the issuance income of warrants and the spread income of buying and selling warrants in the process of market making. However, the relevant laws and regulations of the Exchange do not explicitly give securities dealers the qualification of market makers.
Relevant securities traders said that the time for securities traders to issue covered warrant products was not yet ripe, and it was a rational choice for the Exchange to put this business in next year.
According to the analysis of relevant personnel of GF Securities, the warrant issuer must provide performance guarantee. Although the performance guarantee clauses fully protect the interests of warrant investors, the issuer of warrants will bear more risks. If the stock price falls, the securities firm shall bear the loss of the stock price fall. In particular, for securities firms that issue covered put warrants, when the stock price falls, they must pay cash spreads or physical underlying securities to warrant investors on the basis of performance bonds. In theory, the decline of stock prices is unpredictable, so the securities companies have to bear more risks when issuing covered put warrants.
The relevant person of SSE said that the Exchange has made institutional design and preparation for the introduction of covered warrants in several aspects.
Among them, the positioning of the underlying stocks of covered warrants is to select market leading stocks with large scale and strong liquidity as the underlying stocks to stabilize the market and promote transactions.
At the same time, on the current basis, further clarify the access qualification conditions of covered warrant issuers. Because one of the main risk sources in the warrant market is the issuer's credit and its ability to manage risk, the issuer of covered warrants should be required to be a securities firm with good asset credit and good risk management ability.
According to the relevant person of SSE, the focus of the Exchange's supervision on the issuance of covered warrants will be to strictly review the financial conditions and integrity of the issuer's performance ability in advance, as well as to continuously monitor the issuer's post risk bearing status.
In addition, in the system design of covered warrants, the Exchange will also reasonably draw on the experience of overseas mature warrant markets (such as Hong Kong market) to design and add new varieties in a timely manner to adapt to market development and investors' needs.
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