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Background
The government is seeking ways to strengthen the competitiveness of securities companies by expanding the scope of their business (including relaxation of the requirements for securities firms to deal with derivatives) and to ensure the balanced growth of the financial industry.
* Measures for Deregulation of the Securities Industry: the Ministry of Finance and Economy (December 2004)
As part of such efforts, equity linked warrants (ELW) have been designated as a marketable security under the Securities Exchange Act, and securities firms will henceforth be allowed to issue ELWs.
* The Equity Linked Warrant is a security accompanied by the right to receive stocks or money which is linked to the price of a certain stock or the movements of a stock index, for which payment will be made in accordance with the method previously agreed upon.
The exchange plans to open the new market for ELWs in order to operate in tandem with the government policy and offer more investment opportunities to investors.
Expected Effects
- Securities firms will be able to expand their business scope and create new sources of revenue.
- Investors will acquire new investment instruments
- The exchange will be able to diversify its income portfolio and enhance its status as a composite securities exchange.
The opening of the ELW market will help improve the competitiveness of securities firms and create new sources of revenue while offering new investment options to investors.
Industry Trends
Preparatory works are underway to sell ELWs to the public in line with the market opening.
Market Outlook
- Securities firms are expected to actively participate in the market since it is a so-called ‘blue ocean domain’ currently open only to securities companies.
- The introduction of liquidity providers will likely boost trading from the initial stage of the market operation.
- The trading system will be developed by the third quarter.
- Market opening: after November (the exact time for market opening will be determined in consideration of the development of the system and products by securities firms)
- The plan to open the ELW market will be widely advertised through the media.
- Promotion campaigns targeting institutions and individuals will include investment strategy seminars and promotional materials such as brochures and other publications.
