Important rule amendment for clients trading in warrants

Recently market participants were reminded of an imminent amendment to ASX Market Rule 7.1.2 which will provide relief from having to enter into a Warrant Client Agreement before entering into a Market Transaction to sell Warrants.  Therefore if your client has purchased a warrant through the primary market or via a PDS then they will no longer be required to enter into a Warrant client agreement with a broker to sell that warrant.

ASX Market Rule 7.1.2 currently requires that before entering into a Market Transaction to trade Warrants (and in addition to the requirements in Market Rule 7.1.1), the Market Participant must, where the client is a Retail Client, enter into a Client Agreement which sets out the terms of their relationship in relation to the relevant Market Transactions. The upcoming amendment will provide specific relief for Warrant sell orders.

In detail, the purpose of the amendment is to relieve a Market Participant from the obligation to enter into a written Client Agreement where the client is a Retail Client who is selling a Warrant.  A purpose of this Rule is to ensure that a Retail Client is made aware of certain risks associated with dealing in Warrants.  Some of these risks are set out in the ASX Warrant Client Agreement Form and others are expanded upon in the Explanatory Booklet which is issued by ASX and that is required to be given to the client pursuant to Term 1 of the ASX Warrant Client Agreement Form at ASX Market Rule Procedure Appendix 7.1.2-3.  However a Warrant Holder who is selling a Warrant already owns the risk associated with the Warrant and would have received information about the risks either from a Product Disclosure Statement, when purchasing the Warrant in the primary market, or from the Warrant Client Agreement Form and Explanatory Booklet, if the Warrant was purchased in the secondary market.  Accordingly, the amendment deletes a superfluous requirement.

Please note that the requirement to enter into a Warrant Client Agreement before entering into a Market Transaction to buy Warrants remains unchanged.