Covered Warrants

Covered Warrants on the London Stock Exchange

In October 2002, the LSE launched a market in covered warrants. Its first year was a resounding success, with 823 new issues and trading volume of GBP97 million.

A covered warrant is essentially an option. Unlike the traditional "corporate" warrant, which is issued by the underlying company, a financial institution issues the covered warrant.

Goldman, Sachs, and JP Morgan, are notable players in this market.

Covered warrants are sometimes referred to as securitised derivatives.

Whereas the typical corporate warrants gives the holder the right to buy shares directly from the company (like a call option), the covered warrant comes in may forms:

• some (put warrants) carry the right to sell rather than to buy,
• some are based on foreign exchange or commodities rather than on stock, and,
• some have complicated exercise terms.

http://www.klse.com.my/website/bm/market_information/market_statistics/equities/downloads/call_warrants.pdf