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NYSE Euronext develops European warrants and certificates market

NYSE Euronext has introduced new features to its European warrants and certificates market which aim to improve its transparency and efficiency.

The new features integrate the price discovery mechanism specific to this market segment. They aim to offer greater transparency, ensuring investors always trade at a price in line with market conditions.

The price of warrants and certificates is derived from different market parameters including the value of the underlying asset. The issuer provides permanent liquidity by continuously proposing a bid and an offer for minimum size. One of the key new features is that no transaction may occur outside the price boundaries set by the issuer.

Before order execution, a mechanism ensures issuer prices are always updated to reflect market conditions, in particular taking into consideration the last changes in the underlying asset price.

Alicia Suminski, product manager for warrants and certificates, NYSE Euronext (pictured), says: 'The new features of our European warrants and certificates market represent real assets for investors as they ensure that all transactions are executed within a price range that is permanently secured by the issuer himself. The new features reinforce the key role played by issuers as experts on their listed products.'

Jean-Luc Jancel, spokesman, Association Française des Produits Dérivés de Bourse (French Association of Securitized Listed Derivatives), adds: 'These positive changes, recently introduced into the warrants and certificates market, will increase the transparency of the products and improve price formation. They are completely aligned with the Code of Good Practice that governs the members of the Association of Derivatives Issuers, and they also protect investors from the risks related to trading.'

The sector has experienced solid expansion over the last four years with the number of listed products increasing by 153 per cent since January 2005, and the number of trades increasing by 112 per cent percent since January 2005. 

Regulatory approval of the new features was granted by the Euronext regulators for a preliminary pilot phase. During this period, both the current and the new features will coexist on the trading platform.

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