#26-106 Adjustment to warrants with SEB as underlying due to extraordinary dividend

A recalculation will be effective from 25 March; market participants should contact the issuer for detailed information and review the attached file. Listing inquiries to [e-mail]; notice issued by Nordic Growth Market NGM AB, an authorized exchange operating in Sweden, Norway, Denmark and Finland and a wholly-owned subsidiary of Boerse Stuttgart.

Analysis

A scheduled index/derivative recalculation in a thin, exchange-focused venue creates a predictable burst of hedging and reweighting flows that compress liquidity in the smallest-cap names. Issuers and market makers will need to trade delta on short notice; in names with low free float this can move prices several percent intra-day and push bid/ask spreads up 2–5x for 48–72 hours, converting implied volatility into realized volatility for anyone present at the window.

Primary beneficiaries are well-capitalized liquidity providers and issuers who can front-run or pre-hedge; the main losers are passive holders of small, NGM-style listings and retail investors forced to unwind positions into thinning markets. A secondary effect is cross-market FX and funding pressure — dealers may sell SEK coverage to hedge funding realized from hedges, creating transient currency moves and increasing cross-asset slippage for multi-market hedges.

Key risks: operational or communication failures by issuers that leave hedges mismatched, widening unwinds into a multi-day liquidity spiral; a concurrent macro shock (risk-off move or SEK shock) would flip a liquidity squeeze into a disorderly unwind where tail losses exceed premiums collected. The window for these mechanics is short — days to a few weeks — after which flows normalize and dispersion-convergence trades revert.

Key Decisions for Investors

• Buy short-dated straddles (1–2 week expiry) on a concentrated basket of NGM-listed small-cap certificates or ETPs starting 3 business days before the recalculation window; limit premium outlay to 0.5–1.0% of portfolio AUM, target 2–3x payback if realized vol > implied vol, max loss = premium.
• Pair trade: short a constructed basket of illiquid NGM small-caps vs long liquid Swedish large-cap ETF (beta-hedged) for 1–4 week horizon; size to target 2–4% expected relative return from rebalancing outflows, stop-loss at 3% absolute on the pair to protect against systemic risk.
• Provide selective liquidity: sell near-term OTM puts or covered calls on deep-liquid Swedish blue-chips in the 3–10 day window to collect elevated premia (target 3–6% annualized over the short leg), but size small vs capital to limit tail gamma exposure—predefine a hard stop if underlying gaps >8%.
• Risk-mitigation: reduce net exposure to bespoke NGM-listed structured products and increase cash or ultra-short SEK funding ahead of the event; if unwilling to cut positions, buy cheap out-of-the-money gap protection (1–2% notional) to cap operational tail losses over the next 2 weeks.