Covered Warrants. Policies & Procedures

Transcription

1 Policies & Procedures

2 TABLE OF CONTENTS Introduction... 3 Covered Warrant Issuance... 3 Publication of Dealing Notice... 4 Market Regulation... 4 Liquidity Provision Committed Principal Obligations... 4 Exceptions to Committed Principal Obligations... 4 Liquidity Provision Market Maker Obligations (Off Book Warrants)... 5 System Failures... 5 Reversal of Erroneous Transactions... 5 Settlement... 5 Corporate Actions... 5 Expiry Values... 6 Line Sold Out... 7 Ratios... 7 Capacity Management... 7 Naming Conventions... 7 Forms... 8 Covered Warrant Trading Form... 8 Indicative Price Form... 8 Expiry Price Form... 8

3 Introduction This document summarises i) the process for being admitted as a new Issuer and issuing on the EUROPEAN MERCANTILE EXCHANGE; ii) operational processes inherent in being an Issuer ; and iii) the obligations of a liquidity provider in market. This document is not a substitute for, and should be read in conjunction with, the Guide to Trading Services and Rules of the EUROPEAN MERCANTILE EXCHANGE. Covered Warrant Issuance Codes When an admitted Issuer with a Programme in place wishes to issue a line of warrants, ISIN codes are required: Issuers Incorporated in SK Request ISIN codes by ing the completed Trading Form (available here [hyperlink]) to EMX at least 48 hours prior to listing. Form will be returned to the Issuer with ISIN codes inserted within 24 hours. Issuers Incorporated Outside of SK Request ISIN from relevant authority in country of incorporation and fill in ISIN field of Trading Form (available here [hyperlink]). Form then needs to be submitted to EMX at least 48 hours prior to listing. Form will be returned to the Issuer with SEDOL codes inserted within 24 hours. Covered Warrant Trading Form & Pricing Supplement/s Submit the completed Covered Warrant Trading Form by to EMX as early as possible. The final version of the trading form must be submitted to the Exchange no later than 2pm on the day prior to listing and admission to trading. Issuers wishing to issue multiple lines will avoid listing delays by submitting this information earlier (see shaded box below). Details on the forms can be found below in the Forms section of this document. Forward the Pricing Supplement/s and an Indicative Price form (available here [hyperlink]) to EMX and also to the relevant contact at EMX by 4pm on the day prior to listing. It is important that the Pricing Supplements are in PDF format with the filename <TIDM>.pdf, where the supplement for TIDM G894 would be G894.pdf. The Issuer Implementation team which handles admission to trading can be contacted with any queries on info@emexchange.com Please note: the Exchange can list up to 100 warrants each day, provided that final documentation is received a minimum of 48 hours prior to listing. The Exchange will make best endeavours to ensure all covered warrants are listed

4 on the requested date, however reserves the right to delay the date of issue, particularly if documentation has been supplied at short notice. Publication of Dealing Notice When admission of the warrant line is approved, a Dealing Notice is distributed to the market by the Exchange at 8am on day of admission. In addition, full reference data details for each warrant line are distributed via the Reference Data Service the business day before admission. Normal trading begins at 8:15am. Market Regulation Liquidity Provision Committed Principal Obligations To ensure effective and efficiently run markets each liquidity provider must fulfil a number of obligations. These are clearly explained in the Guide to Trading Services and the European Mercantile Exchange rules, however for completeness are also outlined below: CP orders must be of a size at least equal to 1 x NMS (currently set at 10,000 for all ); CP is required to maintain a size of 1 x NMS on the order book for both the bid and offer prices during the trading day; Only one CP order may be input per side per CP; CP order must be refreshed within two minutes to at least 1 x NMS where it is executed against in full, deleted or has expired; Where a CP updates the price of any of its CP orders that have fallen below the normal NMS as a result of partial execution, the order must at the same time be refreshed to at least one NMS. Maximum spreads in CP orders are the greater of 10% of the bid price or 1p; Note: There is no requirement to enter CP orders during any intra-day price monitoring automatic execution suspensions or for five minutes thereafter. Exceptions to Committed Principal Obligations These obligations will be enforced by the Exchange subject to the following circumstances: There is no obligation for a CP to maintain CP orders in a security where:

5 There is a public holiday on an exchange or registered organisation on which the underlying security has a principal listing; A trading halt is ordered or declared in the relevant underlying security by an exchange or registered organisation on which the underlying security has a principal listing; The covered warrant is valued at less than the minimum tick size for covered warrants (code J ); An intra-day auction has been triggered in the covered warrant (and for five minutes following the end of the intra-day auction); It is the day of expiry for that particular covered warrant. Liquidity Provision Market Maker Obligations (Off Book Warrants) Where a covered warrant is not traded on the order book, the liquidity provider is a market maker, who is obliged to fulfil a number of requirements as detailed in the European Mercantile Exchange rules. System Failures Where a Committed Principal experiences system failures and wishes to delete orders, market supervision should be advised immediately. Where a Committed Principal removes its orders due to a system failure, it may not subsequently enter Committed Principal orders that same day without the prior consent of the Exchange. Reversal of Erroneous Transactions At the request of a member firm, the Exchange may reverse a transaction on the covered warrant order book where prevailing market conditions indicate that the transaction is erroneous. The Exchange will consider reversal of such a transaction where both parties to the transaction are unable to agree to use the contra facility and specific criteria are met as per the European Mercantile Exchange rules. Settlement The Issuer s location dictates where settlement occurs. Corporate Actions The procedure to be followed in the event of a corporate action in the underlying is to be outlined in the warrant prospectus. It is the responsibility of the Issuer to notify the Exchange of any changes to be made to their warrants in light of a Corporate Action as follows:

6 Submit the Trading Form to EMX detailing the affected warrants with required changes clearly highlighted; Submit a covering detailing the corporate action which has occurred to the underlying and the precise impact on the warrant; and Submit a regulatory announcement to notify the market of changes in the warrants. A notice will then be published by the Exchange highlighting the changes to the market. Expiry Values Issuers are required to notify the Exchange of the expiry values of warrants within three business days of expiry by ing the Expiry Value Form (available on the website [hyperlink]) to EMX. This data will then be reflected in the Corporate Diary within 24 hours and will remain there indefinitely.

7 Line Sold Out In cases where the issued quantity of a particular line has sold out, the Issuer should notify the Exchange. From the point where the remaining stock to be issued falls below 1 x NMS, the Issuer is only obliged to maintain a bid price. As covered warrants are sold back to the Issuer such that the Issuer holding rises above 1 x NMS, Issuer obligations revert to normal. There is no requirement for an Issuer to re-issue sold out lines of warrants, although there is an expectation that this would normally occur in practice. Ratios It is assumed, unless there is a specific reason for divergence to be discussed with the Exchange in advance, that issuers will adopt the market standard ratio where one already exists in relation to an underlying asset to avoid any unnecessary confusion. Bearing this in mind, when issuing a covered warrant on a new underlying, it is for the Issuer to determine the most appropriate ratio, taking particular account of the price of the underlying. Capacity Management In order to maintain a fair and equitable market, liquidity providers are required to adhere to a limited number of order messages (entry and delete) per second and per day. This will be constantly monitored by the Exchange and is subject to review at the discretion of the Exchange. Naming Conventions Short and long names are derived electronically from the information entered on the Trading Form and requires no further user input.

8 Forms Covered Warrant Trading Form This form is used to communicate information required for entry into the Trading System to the Exchange. Indicative Price Form The indicative price is used as a reference price for market supervision and must be submitted by 4pm on the day prior to listing using the specific form which can be found on the website [hyperlink]. There are three self-explanatory fields: TIDM, Trading Currency and Indicative Price. Expiry Price Form The expiry price form is used to advise the market (via the Exchange) of the final expiry price of the Covered Warrant and should be submitted within three business days of expiry by ing the Expiry Value Form (available on the website [hyperlink]) to EMX. This data will then be reflected in the Corporate Diary.

9 London Stock Exchange Policies & Procedures