Improved Financing with Single Stock Futures

No you are not missing anything. There are days with very little volume trading. The reason is two-fold. First very few people understand that Single Stock Futures are an alternative to buying and selling stock on margin as they are not exposed to it at all. Secondly, brokerage firms make their money by extending credit to buyers and paying below market rates to sellers for credit balances. They do NOT make money by charging $9.95/trade. Accordingly the brokerages are not inclined to introduce a product that benefits the customers by offering trading on superior financing terms. They simply don't offer it.

But that does not mean there is not any liquidity. We have a number of market making firms who make continuous two-sided markets in the majority of our products. These are the same market makers who make markets in the stock, futures and options markets. Trading at OneChicago is done using the CBOEDirect matching engine. Any broker who offers access to the CBOE has access to the OneChicago market as well. In addition any firm with access to the CME's Globex system also has the ability to access OneChicago's markets.

I have heard customers say that the market in the underlying is tighter than the SSF market so it must be a better trade. Not True. That is why we developed our Calculator so that investors can compare the two worlds - stocks and SSF- and see what the better trade would be. All trading is an interest rate game. Accordingly if the interest rate implied in the buying the SSF offer is lower than the stock offer the investor is better off buying the SSF instead. The same economic position at a net lower cost.

It's that simple.

It's your interest and your future. Don't give it away to your broker without investigating the alternatives
 
Quote from OneChicago:

SSF contracts are futures. I don't believe they are covered under the Pattern Day Trading rules but you should confirm with your broker.
More...
IB States on Their Pattern Day Trading Page...
http://www.interactivebrokers.ca/en/trading/marginRequirements/patternDayTraders.php?ib_entity=ca

A Day Trade: any trade pair wherein a position in a security (stock, single-stock future (SSF), bond or stock option) is increased ("opened") <br>and thereafter decreased ("closed") within the same trading session.

so no joy here with these... unlike with futures...

You would think that One Chicago and others promoting these SSF products would have fought harder with whatever Agency that rules on the PDT instruments <br>to make sure they were NOT included under the PDT rule to INCREASE their liquidity from day to day...


<img src="http://www.enflow.com/p.gif">
 
IB clears SSFs in a securities account. This offers substantial benefits to hedgers and customers with Portfolio Margining accounts. Customers who hedge equity positions (options included) with index futures could replace the index futures with futures on either the DIA, QQQQ, IWM or SPY ETFs and get substantial margin benefits as security futures are allowed in PM accounts while futures on indexes are not.

On the other hand the PDT rules seem to apply. If you trade SSFs in a futures account then the PDT rules may be more ambiguous.

But let me be very clear. SSF are a financing tool. They offer benefits to long term investors that margin accounts do not.

Everyone should be aware that the ability to scalp intraday may not be available. SSFs should be used by those who want to lower their costs of financing equity positions.
 
Quote from OneChicago:

No you are not missing anything. There are days with very little volume trading. The reason is two-fold. First very few people understand that Single Stock Futures are an alternative to buying and selling stock on margin as they are not exposed to it at all. Secondly, brokerage firms make their money by extending credit to buyers and paying below market rates to sellers for credit balances. They do NOT make money by charging $9.95/trade. Accordingly the brokerages are not inclined to introduce a product that benefits the customers by offering trading on superior financing terms. They simply don't offer it.

But that does not mean there is not any liquidity. We have a number of market making firms who make continuous two-sided markets in the majority of our products. These are the same market makers who make markets in the stock, futures and options markets. Trading at OneChicago is done using the CBOEDirect matching engine. Any broker who offers access to the CBOE has access to the OneChicago market as well. In addition any firm with access to the CME's Globex system also has the ability to access OneChicago's markets.

I have heard customers say that the market in the underlying is tighter than the SSF market so it must be a better trade. Not True. That is why we developed our Calculator so that investors can compare the two worlds - stocks and SSF- and see what the better trade would be. All trading is an interest rate game. Accordingly if the interest rate implied in the buying the SSF offer is lower than the stock offer the investor is better off buying the SSF instead. The same economic position at a net lower cost.

It's that simple.

It's your interest and your future. Don't give it away to your broker without investigating the alternatives
More...

First welcome to ET. Hopefully this will pay off in exposure for you. What is the situation with membership with your exchange. How many members are there, can you post a link to seat rates etc.
 
First to 'One'. The following spreads were from EOD on the 15th of this month. I got them from the OneChicago calculator on our website www.onechicago.com.

GE 11cents
PFE 6cents
C 7 cents
T 8 cents
WFC 8 cents
JNJ 9 cents
VZ 9 cents
DUK 7 cents
KFT 10 cents
SLE 6 cents
SE 11 cents

Second to 'Kinggyppo':
We don't have seats. Any member of the CME or the CBOE is automatically a member of OneChicago. We have a very flat transaction fee schedule. All participants pay the same fee per side.....14 cents. Market makers, firms and customers. Now the brokerage can ....and will... charge more but from our perspective it is very democratic.
 
Ouch!

Are these spreads representative of the market in your experience? If so, the arguements for differences in interest earnings and costs while valid, would apply to relatively longer term swing trades, depending of course on the specific rates offered by the trader's broker. Thanks for your posts; I'll consider ssf's for longer term positions.
 
Again please look at the calculator. While the spreads are wider then the stock they often represent a lower interest rate then the bid/offer of the underlying stock while taking into account all the costs and income from the two worlds.

In addition there are deviations from fair values in some of our stocks....the hard to borrow names....where the SSF is actually offered LOWER than the bid on the stock. This has to do with the rebate rates charged by the Prime Brokers for shorting the SHO list stocks. You will notice on the calculator that the 'Short Interest Rate' box actually allows you to input negative values up to -30%. If you run the calculator for the SHO stocks you will see that the futures are offered under parity.

Accordingly you can buy the stock...effectively....for a much lower price out to future than you can buy it today.

Just to repeat....Trading is an interest rate game as all components of trading can be thought of as a return on asset or a cost to use that asset. These variables are expressed at the end of the day as an interest rate.

I agree the spreads 'look' wider but that does not mean that the markets represent a worse trade.
 
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