The UK catching up
If covered warrants are such a grand idea, able to produce fabulous returns, why have they not been available before now? The answer is that they have – outside the UK.
British regulators have been very slow to catch on and catch up, and whilst institutional investors have been able to invest in covered warrants in London for years, private investors have endured the frustration of seeing the concept developed fully in a wide range of other markets, led by the major bourses of Europe.
Spectacular growth internationally
The growth of international covered warrant markets has been astonishing.
According to the International Warrant Institute
the total number of warrants issued globally at 30th June 2001 was just under 48,000, compared with 36,000 six months earlier. By the end of 2001 this number had risen again to 53,608.
This frenetic pace of issuance has been driven partly by burgeoning demand from investors, and partly by the need for issuers to continually realign their product range in order to adapt it to the changing levels of underlying stocks and markets.
The most warrants, by far, have been issued in Germany, with over 24,000 issues at present, with Italy growing strongly in second place, boasting nearly 6000 warrants now.
The largest issuers globally have been Citibank, Unicredito-TradingLab, Société Générale, Goldman Sachs, UBS, BNP Paribas, Commerzbank, Credit Lyonnais, Dresdner Bank, and Lehman Brothers.
And as far as the choice is concerned, any investor wanting warrant exposure to, say, Nokia, has a wide selection of warrants from which to choose. The Institute’s data found no fewer than 649 warrants available on Nokia – or more than five times the total number of equity warrants currently in issue on all companies on the UK listed market.
More up to date figures show that in the month of May 2002, £1bn of covered warrants were traded in Switzerland alone, followed by Italy and Hong Kong. Germany came in fourth by volume, followed by France, Australia, South Africa, Spain, Finland, and Portugal. Overall some £4bn of warrants were traded globally during the month, which is consistent with other data showing that £52bn of covered warrants were traded in 2001.
International range of covered warrants
Countries with covered warrant markets -
Why not the US?
So far the largest economy and the largest equity market in the world has not had a mention. The reasons no covered warrants market has developed there are -
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