Warrants trading and settlement
You may be able to subscribe for a warrant under a disclosure document before it is traded on the sharemarket. This is called the primary market.
The length of time of the primary issue (called the offer period) will be specified in the disclosure document. It is often between three and twelve months. It is also common for the offer period to remain open after secondary trading of the warrant series on ASX Trade has begun.
Once the warrant series has been quoted on ASX Trade, you can buy and sell warrants in the same way you buy and sell ordinary shares.
Warrants are settled in the same manner as ordinary shares. Following a warrant transaction, details are sent to CHESS to effect settlement. This means that you must be either issuer sponsored or broker sponsored.
The settlement period for warrants is the same settlement period that applies to shares (T+3).
ASX Market Rules require each warrant series to have an adequate and reasonable spread of holders. This requirement is intended to ensure there is a liquid market for warrants.
In most cases the warrant issuer satisfies this requirement by providing an undertaking to ASX that it will maintain continuous markets during the life of the warrant. At the time of writing only two warrant series have been quoted without the undertaking on the basis that they have demonstrated a sufficient spread of holders. This means that apart from circumstances outlined later, there generally should be a price quoted at which you as a warrant holder will be able to sell at during normal trading hours.
Exercising your warrant
The disclosure document will explain how to exercise your warrant. The issuer is required to notify holders between 20 and 30 business days prior to expiry.
Assessed Value Payments
If you hold deliverable warrants but do not exercise them before expiry you may be entitled to a cash payment, often called an ‘assessed value payment’ (AVP).
If the warrant has an intrinsic value on expiry, issuers are generally required to pay you a cash payment of at least 90% of the intrinsic value of the warrant.
For more information on the trading and settlement of warrants, refer to the ASX explanatory booklet Understanding Trading and Investment Warrants (PDF 879KB).