HKEx: Amendments To Chapter 15a Of The Main Board Listing Rules - Derivative Warrants

The Exchange has amended Chapter 15A of the Main Board Listing Rules, which deals with the listing of derivative warrants. These amendments:

• ease some of the restrictions in the placing guidelines for derivative warrants set out in Appendix 6A of the Listing Rules;
• introduce a requirement for warrant issuers to provide liquidity for derivative warrants that they have listed on the Exchange; and
• simplify the contents of listing documents - particularly where warrants are issued over securities listed on the Exchange.

The rule changes apply in respect of derivative warrants launched on or after 10 December 2001 and on or before 30 June 2002 and in respect of any Further Issue of such derivative warrants.

The new requirements are available on the web site of Hong Kong Exchanges and Clearing Limited at http://www.hkex.com.hk.

The Exchange has amended Chapter 15A of the Main Board Listing Rules. The principal changes to the rules are set out below:

Placing Guideline

• Issuers will no longer be required to place at least 85% of a derivative warrant issue to a minimum number of placees.
• There will be no specified number of placees or limit on the percentage of a warrant issue that an issuer may retain when a warrant issue is launched.

Liquidity Requirement

• Issuers will be required to appoint a Liquidity Provider to provide liquidity for derivative warrants that they have issued. The Liquidity Provider must be an Exchange Participant, but need not be a member of the issuer's group.
• Liquidity may be provided by continuous quotes or by way of quote request. The method must be described in the listing document for a warrant issue.

Other Changes

• The contents of listing documents will be simplified by removing the requirement to disclose detailed information on a company underlying a warrant issue if that company is listed on the Exchange; removing the requirement to disclose details of other warrant issues issued by an issuer; and removing the requirement to disclose details of an issuer's dealings in the shares of a company underlying a warrant issue.
• A number of existing restrictions on Further Issues of derivative warrants will be lifted.
• The current prohibition on issuing derivative warrants when an issuer has published a research report on the underlying security will be removed.
• Issuers will be required to disclose, on a daily basis, details of their dealings in the warrants they have listed. They will also be required to disclose details of dealings in warrants in the period before they are listed.

These changes address some of the issues which were raised in a consultation paper on the Listing Rules relating to derivative warrants published by Hong Kong Exchanges & Clearing Limited in May 2001. The rule changes apply in respect of derivative warrants launched on or after 10 December 2001 and on or before 30 June 2002 and in respect of any Further Issue of such derivative warrants. During this period the Exchange will evaluate the operation of these rules and the derivative warrant market generally. The Exchange will also formulate rule changes to support the further development of the derivative warrant market. Those proposals will reflect the experience gained from the operation of the above rules and will also address issues that were included in the earlier consultation paper but which have not been addressed in the changes set out above.

The new requirements are available on the web site of Hong Kong Exchanges and Clearing Limited at http://www.hkex.com.hk