Macquarie's recently launched Live Matrix, a new tool with a direct feed from Macquarie's market making system that allows investors to see where the bid and offer prices will be at various price levels in the underlying stock or index in real time is expected to improve warrant trading in Singapore, according to Barnaby Matthews (pictured), head of equity derivatives products for Macquarie in Asia.
"The Live Matrix shows investors exactly where the market makers bid and offer prices will be throughout the trading day," said Matthews. "It significantly increases transparency in the market and makes warrants easier to trade."
Macquarie is among the leading warrant issuers in Asia, with a presence in four warrant markets across the region, including Hong Kong, Thailand, Malaysia and Singapore. "We only deal in listed products, namely structured warrants. We have seen a big increase in traded volumes over the past year as compared to previous," said Matthews. "We expect this to continue with the introduction of the live matrix to the Singapore market."
"The Live Matrix will improve transparency in warrant trading in Singapore like never before," said Matthews. "Now, warrant investors can simply click into the warrant on our website, and there will be a table to show them where our quotes are, given the corresponding prices in the underlying at that point in time."
According to Matthews, end investors will now be able to determine whether the market maker is providing a tight spread in a particular warrant, making trading decisions easier.
"We have launched the Live Matrix in both Thailand and Malaysia where we believe it had a positive effect in those markets, due to the increased transparency and ease of use," said Matthews. "It is by far one of the most visited pages on our website in each of those respective warrant markets. Investors use the tool on a daily basis as a trading guide. We believe it will quickly become very popular with Singapore warrant investors."
The Live Matrix is one of the many new features Macquarie is introducing as part of their new Singapore website launch. Other new features include animated warrant videos to help investors understand the basics of warrants in a quick and fun way, and a newly revamped newsletter keeping investors up to date with the latest market buzz every morning. In January, the bank launched its warrant business in Taiwan.
The Singapore warrant market has seen a large jump in traded value over the past year, with daily turnover increasing 90% from 2016 to average S$58.4m (US$44.26m) per day in 2017. According to Matthews, the Singapore warrant market is dominated by index warrants.
Matthews expects further growth in the structure warrants market, as the live matrix opens up the market to new investors. "We are committed to the development of warrant markets across the region," he said. "We are always looking for opportunities in markets where we see potential."
According to Matthews, the biggest challenge facing the listed warrants markets at the moment is the High Frequency Traders (HFT). "Algorithmic traders take advantage of the obligations of market makers and utilise their speed advantage to make profit. In doing so they incur a significant cost on warrant issuers and reduce the efficiency of the market," said matthews.
According to SRP data, a total of 221 structured warrants worth S$214m were issued in Singapore in 2017 (Macquarie Group - 167 structured products). As compared to 2016, net sales of warrants went up 375.6%, from S$45m to S$214m.
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