THE Securities and Exchange Commission (SEC) has opened the Philippine capital market to structured warrants, introducing a new investment product that will allow investors to gain exposure to equities, indices, exchange-traded funds and other eligible underlying assets.
Memorandum Circular 27, Series of 2026, issued on Sept. 23, set the rules governing the registration and trading of structured warrants in the country.
A structured warrant is a financial product issued by a third-party financial institution that gives its holder the right, but not the obligation, to buy or sell an underlying financial instrument at a predetermined price on or before a specified expiry date.
It may also provide for a cash settlement based on the price or level of the underlying financial instrument.
SEC Chairman Francis Lim said the new rules were intended to deepen and modernize the country’s capital market while giving investors additional tools for risk management, hedging and portfolio diversification.
“The issuance of these rules marks a major milestone in our ongoing efforts to deepen and modernize the Philippine capital market,” he said.
“By introducing structured warrants, we are providing investors with a sophisticated tool for risk management, hedging, and portfolio diversification, bringing our market architecture at par with our Asean peers.” Only licensed broker-dealers and licensed investment houses incorporated in the Philippines, as well as foreign corporations duly licensed to operate in the country, may issue structured warrants.
An issuer or its guarantor must maintain a minimum unimpaired paid-up capital of P400 million for as long as any structured warrants remain outstanding.
The SEC allowed structured warrants to be linked to a range of underlying financial instruments, including individual equities listed on Philippine or foreign stock exchanges, securities indices and exchange-traded funds.
Eligible underlying assets may also include debt securities listed on Philippine or foreign exchanges, baskets of listed equities or debt securities, as well as other assets or reference values that may be prescribed by the SEC.
The underlying instruments must be listed on an exchange in good standing and meet liquidity, market capitalization, trading volume and other requirements imposed by the relevant exchange.
For physically settled structured warrants linked to locally listed or quoted securities, the total issue size, together with all physically settled structured warrants already issued and outstanding, cannot exceed 50 percent of the total issued shares of the underlying corporation, excluding treasury shares.
The rules also set a minimum issue size of P20 million for structured warrants.
Before they can be sold or distributed to the public, structured warrants must first be registered with the SEC in accordance with Republic Act 8799, or the Securities Regulation Code.
Issuers are required to submit a registration statement and prospectus containing material information about the warrants, including their terms and conditions.
Trading and listing will remain subject to both SEC regulations and the applicable rules of the exchange where the structured warrants will be listed.
No exchange may approve the listing of structured warrants unless the products have been duly registered with the SEC.
The rules also limit the maximum tenor of structured warrants to three years from the date of issuance, unless the SEC allows a longer period.
If warrants are fully exercised before their expiry or maturity, the issuer must notify the SEC and the relevant exchange as soon as practicable to facilitate their delisting.
An issuer may likewise seek to withdraw the listing before expiry or maturity if the warrants are entirely held by the issuer or its appointed market maker and none are held by the public.
The new rules form part of the SEC’s broader efforts to expand the range of investment products available in the Philippine capital market and develop its market infrastructure.
