The LSE\'s covered warrants exchange is lagging far behind its competitors in continental Europe, with the average number of daily trades failing to hit 150, compared with daily trading volumes in excess of 10,000 in Germany and Italy.
The LSE\'s covered warrants, which launched in October last year, attracted just 2,878 trades last month. Although the volume was a record for the LSE, exceeding its previous high in March this year, the total value of the trades was just £7.8m (€11.4m). So far 448 warrants have been listed on the exchange, meaning that each warrant would have attracted on average a meagre six trades during the month.
Covered warrants are securitised derivatives similar to options and give investors the right, but not the obligation, to buy or sell the underlying assets at a set price and future date.
Goldman Sachs International, JP Morgan, SG and TradingLab have all issued warrants on the exchange.
Germany\'s European Warrant Exchange (Euwax), a special market segment of the Stuttgart Stock Exchange, listing warrants, certificates, reverse convertibles and exchange traded funds, has over 30 issuers and close to 30,000 listed. High-profile covered warrant issuers on the Euwax exchange, such as Deutsche Bank, have declined to join the LSE\'s warrants efforts.
Some critics of the LSE\'s products say that Liffe\'s exchange traded options offer a more competitive alternative for investors, while others point to the lack of derivative culture among UK retail investors. The covered warrant issuers and the LSE have conducted joint and independent educational marketing efforts, however these have as yet failed to reap rewards.
