Items | Covered warrants | Stocks | Futures |
Type of market | Cash market | Cash market | Derivatives |
Issuer | Securities companies | Corporates | The Stock Exchange |
Life time | 3 – 24 months | Until the corporate is bankrupt or delisted | Current Month / Next Month / 02 last months of the 02 nearest quarters |
Type of trade | Price of CW | Price of Stock | The index points (currently the VN30 Index) |
Foreign ownership limit | No | Yes | No |
Maximum loss | Price of the CW and fees (if any) | Price of the stock and fees (if any) | No limit |
Transfer of asset | Between the securities company and the investor | Between investors | Between investors |
Trading fee | Circular 102/2021/TT - BTC | Circular 102/2021/TT - BTC | Circular 102/2021/TT - BTC |
Settlement time |
| T+2 |
|
Trading Bands | Affected by the listed stock price |
| +/- 7% |
Item | Covered Warrant (CW) | Corporate Warrant |
Issuer | Securities companies | Corporates |
Purpose |
| Increasing Charter Capital
|
Collateral | Various (ETF, stocks, etc.) | Stocks |
Scope | Rights to trade listed stocks | Right to buy additional issuance |
After right execution | Total outstanding shares unchanged | Total outstanding share increase |
No. Price of Covered Warrant on the market will not be adjusted when there is a corporate action (dividends, additional issuance, etc.). However, the execution price and the conversion ratio of CW will be adjusted. The method and information disclosure when adjusting the CW will be stated in the Issuer’s prospectus.
Example: Unit: VND
Time | June 25 | June 26 VNM pay cash dividends (VND 3,000/ share) |
Price of VNM | 129,500 | 126,500 |
VNM Price of VNM CW | 4,500 | 4,500 |
Execution price | 118,000 | 118,000 x (126,500 / 129,500) = 115,263 |
Conversion Ratio | 2:1 | 2 x (126,500 /129,500) = 1.954 New Ratio 1.954:1 |
Similar to listed stocks, CW will be suspended in the following cases:
When trading CW listed on the Stock exchange, investors can use their securities trading account.
No. According to regulations from the State Securities Commission (SSC) and the Ho Chi Minh Stock Exchange (HSX), investors are not allowed to use margin to trade CWs.
Same principle as the listed stocks, investors are not allowed to short-sell. Investors must own the CW (buy the CW) before they can sell.
When a CW right is executed, the payment will be made within 05 business days since the maturity date.
In the case the investor does not request to execute the CW right when the status is ITM (Profit), the Issuer still has to make payment to the investor.
No. The Issuer is not allowed to trade CWs that are issued by it.
Yes. Insiders and related parties of the Issuer are allowed to trade its CWs. However, they need to disclose the information at least 03 business days prior to the trade.
No. Investors who own the CWs have no right over the stock that is used as collateral.
Only securities companies that meet the criteria regarding profitability, owner’s equity stated in the Decree No. 60/2015/ND-CP can issue CWs.
In addition, the Issuer can only offer CWs within the limit stated by the SSC. Specifically:
CW is a contract between the investor and the securities company that issues CW, in which the Issuer has the obligation to pay the profits (if any) to the investor. In order to ensure the rights of the investor and the Issuer’s ability to make the payment, Circular 107/2016/TT-BTC stated:
With the main purpose is of providing liquidity for the market, the market maker will constantly trade on the market, and it must trade in the following cases:
The time for the market maker to perform its duties is during the continuous matching session (except for the first 05 minutes) with the following conditions:
- Market Makers are exempted from its duties in the following cases: