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Structured warrants are financial instruments issued by banks and financial institutions, and are listed on the securities market of the SGX. Investors, who are Specified Investment Products (SIP) Qualified, can trade structured warrants from their equity trading account. Structured warrants derive their value from an underlying asset, usually a share or index. Before investing in structured warrants, an investor should have a view on the underlying asset.

Structured warrants are leveraged products, which generally move in greater percentages than price movements in the underlying asset, both positively and negatively. This is a key feature of structured warrants, Gearing.

Call Warrant

Generally increases in value if
the underlying price increases

Put Warrant

Generally increases in value if
the underlying price falls

Key benefits of using structured warrants:

  • potential to benefit from both positive and negative short-term views on the market
  • designated market makers (DMM) for all SGX listed structured warrants. DMMs provide continuous bid and offer prices to enable investors to buy and sell in the market
  • traded on the SGX like a stock – SIP qualified investors can trade structured warrants the same way they would trade stocks in their broker account.

In this example, a call warrant tracking the movements in ABC shares gained 30% for a 2% gain in the underlying ABC shares over the same period. The percentage gain derived from the call warrant is 15x more than the percentage move in ABC shares due to the gearing effect of warrants. Note that gearing works in both ways, and a 2% fall in ABC shares would mean a 30% drop in the price of the call warrant. The above example is hypothetical and used here for illustration purposes only.

  • Structured warrants move in greater percentages than the underlying they track, due to their gearing effect. Therefore, by investing in structured warrants, investors are able to generate leveraged/multiplied returns (both profits and losses)
    • For example, a warrant with an effective gearing of 20x will move, both positively and negatively, approximately 20%, given a 1% move in the underlying
  • This also means that to generate the same amount of returns, the same warrant will require 20x less investment capital compared to the direct share investment
  • While structured warrants provide leverage on the upside, the downside risk for warrant investors is capped at the initial investment as there are no margin calls on structured warrants

The market maker’s bid and offer prices of the warrant are shown alongside a range of given prices of its underlying share or index on the Live Matrix tool.
The prices on the Live Matrix tool are provided on a real time basis for Macquarie warrants and can be accessed by all investors on the Macquarie Warrants website.

With the Live Matrix, investors will be able to determine whether the market maker is providing a tight spread in a particular warrant, and also plan their entry and exit prices in the warrants, making their trading decisions easier.

Expiry date and holding costs:

Warrants which are held beyond a day have a holding cost. For warrants, this cost is known as “time decay” or “theta”, where the value of the warrant reduces with time. This time decay speeds up as the warrant nears its expiry date.

Investors who wish to hold their warrants beyond a day can use the Warrant Calculator on Macquarie Warrants website to estimate how the price of the warrant will be impacted by theta over time, all other things being equal.

Investors may also use the Warrant Calculator to estimate the returns that the warrant may generate according to price movements of the underlying asset by entering their target exit date and exit price of the underlying.
  • Gearing works in both ways, meaning one can gain or lose more in trading warrants than investing directly in the underlying asset.
  • As with all investment products, warrants are subject to price movements in the underlying asset and other prevailing market fluctuations or circumstances. An investor may loss the full amount invested in the warrant.
  • If held overnight, warrants are subjected to holding costs which increases the longer the holding period is. Manage holding costs by using the warrant calculator.
  • Warrants with foreign underlying assets are subject to foreign exchange risk. The warrants trade and settle in SGD, and the value of the warrants will change in response to movements in the FX rate, as well as the underlying asset.

Structured warrants are considered Specified Investment Products (SIP) and you would need to be SIP qualified.

Check with your broker if you are SIP qualified and how to be eligible.

Listed on the SGX, structured warrants are traded like a stock

  1. Click on “Trade warrants here” to log into your stock trading account
  2. Key in the 4-character alphanumeric warrant code to trade

Important notice and disclaimer

This advertisement has not been reviewed by the Monetary Authority of Singapore.

The information provided herein, is produced by Macquarie Capital Securities (Singapore) Pte. Limited (Registration No 198702912C) (“MCSSPL”), holder of a capital markets services licence under the Securities and Futures Act, Chapter 289 of Singapore.

The information is directed and available for general circulation to residents of Singapore only.
Any material provided herein, including any indicative terms are provided for information purposes only and do not constitute an offer, a solicitation of an offer, or any advice or recommendation to conclude any transaction.

Macquarie Bank Limited (ABN 46 008 583 542) (“MBL”) is the Issuer of the Macquarie Warrants (“Warrants”). References to Macquarie include MBL and MCSSPL. Any other parties distributing this product are only doing so as a distributor for MBL. MCSSPL will provide administrative services to MBL. MBL is regulated as an authorised deposit taking institution by the Australian Prudential Regulation Authority. MBL, acting through its Singapore branch is authorised and licensed by the Monetary Authority of Singapore to carry on wholesale banking business in Singapore pursuant to the Banking Act, Chapter 19 of Singapore and therefore is subject to the supervision of the Monetary Authority of Singapore. MCSSPL is not an authorised deposit taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia), and MCSSPL’s obligations do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of MCSSPL. MBL may enter into discount, commission of fee arrangements with brokers, distributors and/or any of it’s affiliates with respect to the primary and secondary markets in the Warrants.

Warrants can be volatile instruments and may be subject to considerable fluctuations in value. The price of Warrants may fall in value as rapidly as it may rise due to, including but not limited to, variations in the frequency and magnitude of the changes in the price of underlying share or index, dividends and interest rate, the time remaining to expiry and the creditworthiness of MBL. Therefore Warrants run the risk of expiring worthless resulting in a total loss of your investment. Where past performance is referred to, it is not indicative of future performance. In preparing the information contained herein, Macquarie did not take into account the investment objective, financial situation and particular needs of the reader. Before making an investment decision on the basis of the information contained herein, you should consult, to the extent necessary, your own independent, competent, legal, financial and other professional advisers, to ensure that any decision you make is suitable for you with regard to your investment needs, objectives and financial circumstances. MBL makes no representation nor can it give any assurance as to the liquidity in the trading of Warrants as MCSSPL, the Designated Market Maker, may be the only person quoting prices in the Warrants. In deciding whether to acquire or continue to hold an investment, you should obtain the base listing document and the relevant supplemental listing document from us and consider its content carefully before making any decision about this financial product. Copies of the listing documents may be obtained from the offices of MCSSPL at 9 Straits View #21-07 Marina One West Tower Singapore 018937 and on www.warrants.com.sg.

Disclosures with respect to the listed companies, if any, mentioned in this document are available at www.macquarie.com/disclosures.