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Covered Warrants I

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13. Information on warrant terms

Once you have found the warrant you would like to buy, you need to find it and to check it is the right one. Given the possibility that warrant issuance could extend to thousands if the market proves popular, a simple three or four-letter ticker symbol like those used for shares and equity warrants will not suffice.

The LSE is proposing a standard format for short names for covered warrants, encapsulating key information in a concise and standardised way. There will be six elements to the data, in this order:

  1. Underlying instrument identifier
  2. Issuer identifier
  3. Contract type (call or put)
  4. Expiry style (American or European)
  5. Sub-type (for exotic warrants)
  6. Issue identifier for series of warrants

Examples

A Vodafone European-style call warrant issued by ABCD bank which was the second in a series with different exercise prices might have the code VOD_ABCD_CE_B.

An American-style put, barrier, covered warrant on the FTSE 100 Index, issued by WXYZ bank for the first time, might be named F100_WXYZ_PAB_A.

These might seem long-winded compared to ordinary equity codes, but of course this extra information is both important and necessary.

Covered warrants also require further data. Another five variables will also be disseminated with each warrant in the long name, namely:

  1. Exercise price
  2. Ratio (number of covered warrants to underlying)
  3. Expiry date
  4. Further information about expiry - which price will be used at expiry (close, last, VWAP etc)
  5. Expiry settlement type (cash or stock)

Note: The last trading day is not always the same as the expiry date. This does vary between markets – on Euronext, for example, warrants listed in Paris and Brussels may stop trading six days before the expiry date, whilst it is three days in Portugal, and in Amsterdam warrants are usually traded right up to the expiry date.

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