Cover warrant rules due to be published shortly

The State Securities Commission (SSC) will soon complete and issue guidelines for trading covered warrants and the new product will be available next year. - Photo cafef.vn

Covered warrants allow holders to buy or sell a specific amount of equities, currency or other financial instruments, usually from or to a bank or a similar financial institution, at a specific price and time.

The development of covered warrants is the first step to prepare investors and derivatives market for more complicated products, including options, he said, adding that securities companies have improved their finance and risk management during the past few years to provide customers with high-value and reliable products and services.

Vietnamese investors are afraid of making big investments, so covered warrants would be suitable for investors who are not adventurous and have modest incomes, thus attracting more investors, Son said.

There are now two types of covered warrants, he added. The US covered warrant allows holders to trade before and during the due date, while Europe's covered warrant only allows holders to trade during the due date.

If Viet Nam satisfies the requirements of the trading systems, those two types of covered warrant may be traded, but the Europe-style product is still preferred to the US-style, he said.

The trading of covered warrants will boost trading liquidity on the stock market as holders can trade a specific amount of underlying assets, including equity, with securities firms at a specific price on or before a specific date, said Tran Thi Anh Dao, Vice Director General of HCM Stock Exchange (HOSE).

HOSE has developed a guideline for the market and investors, and the southern agency has also developed a training programme for securities firms, she said.

The SSC should remove the regulation requiring securities firms to report and publish warrant trading activities within 24 hours that could have big impact on shareholders' rights, because those activities should be announced by public companies, Sai Gon Securities Inc's representative said.

If public companies do not bring their trading activities to the public, securities firms will not publish the information about the trades as it could violate the code of information security, and securities firms will also not publish information already announced by public companies, he said.

Covered warrants should be traded within the trading day to increase the market's trading liquidity and draw more investors, suggested Trinh Hoai Giang, vice director general of HCM City Securities Corp.

The price margin of the warrant could be much higher than that of other underlying assets, and the price step should be smaller than that in the trading of shares and ETF notes as the face value of warrants is smaller than that of shares, he said.