Warrants: 3 Challenges That Issuers Are Facing – and 1 Solution That Helps the Spanish Market to Overcome Them


Warrants: 3 Challenges That Issuers Are Facing – and 1 Solution That Helps the Spanish Market to Overcome Them

Warrants are popular, yet the issuance process is saddled with all sorts of problems. Find out why issuers are still struggling nowadays and how the Spanish market has found a way to simplify the workflow tremendously.

Warrants Are Easy to Buy but Complicated to Issue

Warrants are by far the most popular leveraged product. This has a lot to do with how simply they are constructed: investors acquire the right to buy or sell an underlying asset, at a pre-determined price and volume, at a certain point in time. They can profit from either rising or falling underlying prices.  However, the issuance process continues to be anything but simple. Let’s have a look at the biggest challenges warrant issuers are facing right now:

1. Manual Intervention Dominates the Listing Process of Warrants

The admission to trading of warrants requires huge amounts of paperwork to be provided by various parties. Similarly, the process by which corporate actions are submitted to cover the entire lifecycle of instruments is constrained by a lack of automation. The absence of digitalization means listings often take longer than they should.

2. Distribution of Reference Data for Warrants Is Fragmented

One of the most serious impediments in the warrant issuance lifecycle is that the onward distribution of reference data by issuers to market participants (i.e., stock exchanges, data vendors, central securities depositories, etc.) is largely manual and intermediated. Oftentimes, issuers supply information to downstream market users in unstructured formats such as PDF and Word via email. This data is often keyed in manually into different systems by the end data recipients. Ultimately, this disjointedness makes it very difficult to interact directly with new clients and data consumers.

3. Costs and Risks Related to Warrant Issuance Prevent Growth

Excessive manual intervention in the listing process fuels inefficiencies which in turn breeds unnecessary costs at a time when macro conditions are increasingly tough. In addition to costs, market participants can face the threat of high error rates, which can result in significant liability and reputational risks. Such limitations will make it harder for the industry to enjoy future growth.

What is CONNEXOR?

CONNEXOR® by SIX is a unique reference data platform that seamlessly connects data sources such as issuers of financial products with data recipients such as exchanges, banks, central securities depositories, data vendors, and even the media. Through automation and straight through processing, CONNEXOR enables the efficient management of financial products, e.g., the fulfillment of regulatory obligations, along their full lifecycle – including corporate actions.

The collection directly at source and the maintenance of product data are centralized and standardized, simplifying the overall workflow and reducing the number of interfaces. Thanks to CONNEXOR, listed structured products, for instance, can already be traded the day after the data has been submitted by their issuer.

Since its inception, CONNEXOR has enjoyed spectacular growth, supporting 53 product manufacturers in the issuance of roughly 1.15 million new products in 2021 alone – across five asset classes in more than 10 markets.

Spanish Market to Overcome Challenges of Warrant Issuance

With BME utilizing CONNEXOR, the reference data platform of SIX, market participants in Spain will benefit from digitalization of the listing process, enabling a much-improved time to market, reduced paperwork for the admission to trading of warrants, automation when covering corporate actions during the life-cycle of the instruments, and easier direct interactions with new clients and data consumers.

CONNEXOR will help ensure that  reference data being sent to BME Exchange and Iberclear is identical and standardized. It will improve data streams by simplifying workflows, minimizing the number of interfaces, and reducing costs for issuers. “CONNEXOR  is a tried and tested product that has a long and successful track record of supporting the management of structured products and other asset classes. Its application in the Spanish warrant market will facilitate enormous advantages for the wider industry and will help drive its expansion,” says David de Bustamante, Derivates Market Director BME.

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