After the stock reforms in 2005, China's equity warrants market became the second-largest in terms of trading value after Germany and surpassed Hong Kong in 2006. The growth of the warrants market in China has been constrained by the gradual expiration of reform-related warrants, excessive speculation, and lack of understanding of the warrants market by its participants. The mechanism for creating special warrants designed as a transition to the development of covered warrants has been under hot debate. A more refined regulatory framework and a stronger institutional investor base are needed and are prerequisites for a well-functioning warrants market.