Comparative Study On The Warrant Regulation Between Mainland And Hongkong

As a basic derivative,“warrant” has been adored by and familiar to the minorityinvestors since developed, and plays of great importance role on Hong Kong cashmarket. After being released in mainland China, warrant is subject to notoriety. Dueto the lack of regulations, China’s Securities Regulatory Commission ceased thetransaction of warrant in June,1996. In August2005, warrant went back to thesecurity market of mainland China, with the effect of regulations in transaction ofsecurities in Shanghai and Shenzhen. At the end of the first year the volume oftransaction outweighed that in Hong Kong, soaring to the first place in the world.Nevertheless, complaints about the disorder in the market by the minority investorsarise. In the case of CZ JTP1, the amount of money involved was up to thousands ofbillion, following which was constant criticism regarding insider dealing, obsoletepublication of information disclosure and the shortage of regulatory measures, whichdirectly led to institutional investors’ manipulating the warrant that had been designedfor the minority investors. Legal investigations of insider trading, informationdisclosure and so forth resulted in increasingly serious chaos of the warrant market ofmainland China. Although China’s Securities Regulatory Commission did not takeactions to cease the release of warrant products, transaction of warrants hardly couldbe seen on the markets of Shanghai and Shenzhen. Compared with mainland China,warrants thrive on Hong Kong market, owing to the strict supervision system of Hong Kong, which was mainly devised by such regulatory bodies as SFC, HKEx and so on.Meanwhile, Hong Kong has a relatively complete mechanism of informationdisclosure, which ensures justice, openness and fairness at utmost, and which in somedegree effectively protects the rights of the minority investors. This article aims tofind the deficiencies of warrant regulatory system of mainland China and givesuggestions for its long-term development through the comparison between HongKong and mainland China in terms of regulatory bodies, laws and regulations, andinformation disclosure etc. In addition, further suggestions are given based on theconclusion of the comparison in order to make this derivative plays its proper functionon security market.