Macquarie buys Merrill's Australian instalment warrants business

Australia's Macquarie Bank has purchased the instalment warrants business of Merrill Lynch following the restructuring of the US bank's Australian operations.

Instalment warrants effectively allow an investor the right to buy an underlying share through several 'instalments'. The issue price is usually around 20-50% of the underlying share, and gives the investor the right to receive dividends during the life of the warrant. At maturity, investors can either pay the remaining value and obtain the shares, or let the warrant expire.

Macquarie will take responsibility for market making, provision of loan facilities and risk management of existing Merrill Lynch instalments warrants. "We will provide Merrill Lynch clients with the same high level of service Macquarie Instalments clients enjoy," said Mark Small, division director in Macquarie's warrant business.

The warrants market continues to grow in Australia, with the Australian Stock Exchange (ASX) figures indicating the total value of warrants traded will exceed A$3 billion ($1.6 billion) in calendar year 2002. "We expect the value of Macquarie warrant product traded on the ASX this tear to be 40% higher than last year," added Small.