Shanghai Stock Exchange, Tentative Measures for Administration of Warrants

Issued: July 18 2005
Effective: as of date of issue
Interpreting authority: Shanghai Stock Exchange
Applicability: The term 'warrants' refers to negotiable securities issued by the subject issuer of securities or another third party (hereinafter, the Issuer) and whereby it is agreed that the holder shall, within a specified period or on a specific expiry date, have the right to purchase or sell the subject securities from or to the Issuer at the agreed price, or collect the settlement difference by way of cash settlement (Article 2). These Measures shall apply to warrants issued, listed, traded and exercised on the Shanghai Stock Exchange (hereinafter, the Stock Exchange). Matters not provided in these Measures shall be governed by other relevant provisions of the Stock Exchange (Article 3).

Main contents: For applications for listing of warrants on the Stock Exchange whose subject security is a stock, the subject stock shall comply with the following conditions on the date of application: (1) capitalization of tradable shares shall be no less than Rmb3 billion for the most recent 20 trading days; (2) accumulated rate of turnover of shares traded shall be 25% or above for the most recent 60 trading days; (3) share capital of tradable shares shall be no less than 300 million units; and (4) other conditions specified by the Stock Exchange. Where the subject security is another type of security, the requirements thereof shall be provided separately by the Stock Exchange (Article 9). For applications for listing of warrants on the Stock Exchange, the following conditions shall be complied with: (1) such major elements as the type, exercise price, term, exercise date, method of settlement for the exercise, and conversion ratio of the warrant have been agreed upon; (2) the number of units applied for listing is no less than 50 million; (3) the number of investors holding 1,000 units or more is no less than 100; (4) the maturity from its launch date is more than six months and less than 24 months; (5) the Issuer has provided a performance bond in compliance with Article 11 of these Measures; and (6) other conditions as specified by the Stock Exchange (Article 10). For warrants issued by a third party other than the issuer of the subject security and listed on the Stock Exchange, the Issuer shall provide a performance bond in accordance with one of the following provisions: (1) provide and maintain sufficient amount of the subject security or cash through a designated account as a performance bond; and (2) arrange an institution approved by the Stock Exchange to be the irrevocable guarantor that bears joint and several liability for the performance of obligations. The Issuer shall guarantee that the subject security or cash used to secure the performance bond in accordance with provisions is not subject to pledges, judicial freezing or other defects in rights (Article 11). Trading of a warrant shall stop five days before maturity, but the warrant may still be exercised (Article 14). As for trading of warrants, securities companies approved by the Stock Exchange as its members may buy and sell warrants for their own account or as agents for clients (Article 18). The reported amount per transaction may not exceed 1 million units and the reported minimum unit of price fluctuation shall be Rmb0.001. The reported purchase amount of warrants shall be in integral multiples of a board lot of 100 units (Article 20). Warrants may be bought and sold within the same day (Article 21). A warrant Issuer may not buy or sell its own issued warrants, and the subject security issuer may not buy or sell the corresponding warrant thereof (Article 25). When the trading of the subject security is suspended, the trading of the corresponding warrant shall also be suspended (Article 28). For warrants that have already been listed on the Stock Exchange, qualified institutions may launch the same type of warrants (Article 29). Instructions for the exercise of warrants shall be effective within the same day and revocable on the same day (Article 32). Warrants purchased may be exercised on the same day. The subject security obtained from exercise of a warrant may not be sold on the same day (Article 33).
Related legislation: PRC Securities Law (Amended), Oct 27 2005, CLP 2006 No.1 p.31