The AS X has two functionally similar markets for contingent equity contracts - a warrants market principally serving retail investors and an ETO market that may be used by retail and professional traders. Using pricing and volatility comparisons, this study finds that warrants are generally overpriced and are significantly dearer than their ETO equivalents. The paper recommends that short selling be allowed in the warrants market in order to reduce the pricing differentials and end the systematic exploitation of retail warrant investors by warrant issuers
