The Securities and Exchange Commission has formally introduced structured warrants as a new financial product in the Philippine market. At the agency’s en banc meeting on July 23, SEC director Ela R. Xavier-Padilla announced the approval of a memorandum circular setting out the rules and regulations for the registration and trading of structured warrants.
A structured warrant gives its holders the right, but not the obligation, to buy or sell an underlying financial instrument at an agreed price before a set expiry date. There are two main types available: call warrants and put warrants. Call warrants allow investors purchase the underlying asset at a fixed price, with gains coming if the asset’s market value rises. Put warrants work the opposite way, allowing holders to sell at a predetermined rate and earn profits if the asset’s price falls.
Only qualified entities will be allowed to issue these instruments, including licensed broker-dealers, licensed investment houses, and foreign firms properly authorized to operate in the Philippines. Any issuer or its guarantor must also hold at least 400 million pesos in unimpaired paid-up capital to ensure sufficient financial standing.
Eligible assets that can be linked to these warrants cover a wide range of instruments, such as individual stocks listed on local or overseas exchanges, both domestic and international market indices, exchange-traded funds, listed debt securities, and groups of equities or bonds from here or abroad. The SEC said other assets or reference values may be added to the list as needed in the future.
