Actual Operation of Warrant Trading (Part 4)

In this post, I’ll discuss a rather simple topic on the “Actual Operation of Warrant Trading”. This post will focus on the continuous quote of warrant trading. In Singapore, market makers provide liquidity to the market under a continuous quote system.

There are however under some circumstances that market makers will not be able to provide any quotation. The following is a list of such situations.

1. When the warrant is suspended from trading for any reason, including, without limitation, as a result of its underlying being suspended from trading;
2. In the event of the occurrence of a market disruption event, including, without limitation, any suspension of or limitation imposed on trading (including but not limited to unforeseen circumstances such as by reason of movements in price exceeding limits permitted by the SGX-ST or any act of god, war, riot, public disorder, explosion, terrorism or otherwise ) in a stock, or any warrant, option contract or futures contract relating to the stock;
3. When the issuer and/or the guarantor hold(s) less than 5% of the total issue size of the warrant (in which event, quotes will be for bid price only), that is, when the guarantor and its group of companies hold, in their proprietary position, less than 5% of the total issue size of the warrant, which, for the avoidance of doubt, shall exclude any unit of the warrant held by the guarantor and/or its groups of companies in a fiduciary or agency capacity;
4. During the period of five business days immediately prior to the expiry date of the warrant;
5. If the stock market experiences exceptional price movement and volatility, that is to say, during fast market; and
6. Where the market maker faces technical problems affecting the ability of the market maker to provide bid and offer quotations.

The most commonly seen situation is case 4 when the warrant is not tradable any more. I hope this post will give a rough idea to investors to the different situations why there are times when warrants do not have any quotes. In the next “Actual Operation of Warrant Trading” posting, I’ll be discussing about the calculation of warrant settlement price for both equities and index.