There are two modes of warrant settlement: cash settlement and physical settlement. The settlement method of circulating warrants in China's securities market is mainly physical settlement, and only China Southern Airlines JTP1 (warrant code 580989) uses cash settlement.
The cash settlement warrant exercise does not involve the delivery and receipt of the underlying securities, and the issuer shall pay the difference between the exercise price and the settlement price of the underlying securities and the exercise fees to the exerciser. The settlement price of the underlying securities is the average daily closing price of the underlying securities ten trading days before the exercise date. According to Article 39 of the Interim Measures of the Shanghai Stock Exchange for the Administration of Warrants, "if the warrants are exercised by cash settlement and the warrants are in the money at the expiration of the exercise period, the issuer will automatically pay the cash spread to the holders who have not exercised the warrants within three working days of the expiration of the exercise period", that is, the in the money warrants will automatically exercise, while the out of the money warrants by cash settlement will not exercise, Therefore, it fundamentally avoids the wrong exercise of out of price warrants.
The delivery and receipt of underlying securities will occur when the physical settlement warrants are exercised. When the warrant is exercised, it is required that there is enough cash in the account of the exerciser. After the successful exercise, the cash and warrant will be deducted from the account, and the investor will obtain the corresponding amount of subject matter shares , the shares obtained through exercise can be traded on the next trading day; When the put warrants are exercised, the exerciser's account is required to have a corresponding number of underlying stocks. After the successful exercise, the underlying stocks and warrants will be deducted from the account, and investors will receive cash calculated according to the exercise price and exercise quantity. The physical settlement warrants require investors to declare the exercise, so the in price warrants should be actively declared for exercise, and the out of price warrants should not be wrongly exercised.
The following explains the exercise process of physical settlement warrants with MaSteel CWB1 as an example. Masteel CWB1 is a stock warrant, which adopts the physical settlement method. The latest exercise price is 3.33 yuan/share, and the exercise ratio is 1:1. If 1000 pieces of Maanshan Iron and Steel CWB1 are exercised, there must be at least 3330 yuan (1000 * 3.33) of cash in the investor's account, otherwise the exercise fails and the exercise order is invalid. After the successful exercise, the warrants and cash will be deducted from the account, and the investors will receive 1000 underlying shares on the next day of exercise. The first exercise period of Maanshan Iron and Steel CWB1 was from November 15 to November 28, 2007. If investors choose to exercise, they must ensure that there is sufficient cash in their accounts for exercise.
Compared with the physical settlement warrants that have expired before, Magang CWB1 has two exercise periods. The warrants that have not been exercised after the exercise period have another opportunity to exercise one year later, rather than being immediately cancelled. Therefore, investors holding warrants still have some options to decide whether to exercise this time. ( citic securities )
Sina statement: The content of this article is purely the author's personal view, only for investors' reference, and does not constitute investment advice. Investors operate accordingly at their own risk.
