The real impetus behind US single stock futures was the more favorable blended capital gains tax treatment.
OneChicago Closing.....
- Thread starter mskl
- Start date
All instruments that are not popular. Single stock futures: Unless someone can enlighten me otherwise I do not see any necessities for them. Futures, likes all other derivatives, serves two purposes, hedging and speculation. For hedging, futures I find is better suited for instruments that have either time-specific delivery obligations such as agriculture or energy commodities and/or can be subject to and impacted gravely by large unpredictable price movements such as financial products like interest rates and currency rates. Stocks display neither of these characteristics so it's superfluous to come up with a derivative product like the futures for stocks in the first place for hedging when that purpose is already well served by options. For speculations, futures is an overkill again when that purpose is also covered quite adequately by options. Especially for thinly traded stocks when there is barely any volume for its options, why would there be volume for its futures? Of course there's gonna be very low demand for it especially when they didn't even do any effective marketing to shove it down investors' throat.
For the rest like ishares MSCI turkey/spain/italy/singapore/korea, global ftse greece 20 etc etc etc, well they are global instruments that cover exotic countries (pun intended). They are always going to be an acquired taste and would never attract large volumes from the mass.
So low demand products + inadequate marketing = closing down
Yeah but these indicators carry very little cost and are offered really as an add-on. Many times they are just tiny variations of the real ones but with these products that are bona fide, they carry a significant amount of cost in terms of manpower, research, regulatory overseeing and etc. so its demand and economic feasibility should've really been better studied instead of just putting them out there in the hopes that it would "catch on" especially when you are dedicating an entire exchange for them. Sometimes they just never "catch on".
Futures Gains = 18.75% US Federal Income Tax Rate
Equity Gains = 37% US Federal Income Tax Rate
Equity Gains = 37% US Federal Income Tax Rate
Improved Financing with Single Stock Futures
https://www.elitetrader.com/et/threads/improved-financing-with-single-stock-futures.117676/
https://www.elitetrader.com/et/threads/improved-financing-with-single-stock-futures.117676/
Ok this would be more attractive for the institutional investors but they don't use exchanges, they go through their brokers so this exchange is more for us retail traders. But if they want to convince us retail traders to trade SSF and in turn use this exchange more often taking advantage of the more favourable capital gains tax treatment, they should've done lot more marketing advertising the advantage of using futures instead of stocks for speculations or hedging. I might be ignorant but I shouldn't be hearing about this now when this exchange is closing and I am sure I am not the only one.
How or I should say where are the SSF's going to be traded now?
There was actually a lot of interest for this when OneChicago introduced the product here. The beneficial interest rate certainly was a selling point in addition to the preferential tax treatment on capital gains but 1) this would not be attractive to investors who do not use margin and 2) SSF is very limited in nature i.e. it's only on SINGLE stock so all of the ETF's which is what large amount of investors trade are excluded and 3) Even for traders who use margin, the stock yield enhancement program offered by IB just further killed the attractiveness of trading SSF especially with its wide spread and 4) the fact that it's futures and not covered by the SIPF unless it's traded through a stock account but then if it's traded through a stock account it's subject to PDT rules. That just reduced its appeal even less.
What a shame. It is a good concept but it should really have advertised more in addition to just posting on forums. They should've offered direct seats on this exchange and marketed it directly to individual investors/traders to entice investors/traders to trade directly on the exchange bypassing the brokers considering that this product is in many ways in direct competition with the brokers' margin lending business so the brokers wouldn't be that enthusiastic in informing us retail investors about it and they obviously weren't. It's no wonder I have never heard about it from any of the brokers that I trade with. Getting everybody trading it would've been the only way to reduce the bid/ask spread to make it worthwhile for those investors/traders who trade on margin and are profitable enough to take advantage of the preferential capital gains tax treatment offered by the futures feature of the product foregoing the protection offered by the SIPF. And plus they should've expanded the futures on ETF's. Any stock-like ETF's that have options on them should be allowed to have SSF's on them.
Once again, what a shame. A product that had some good ideas that could've revolutionized retail trading but didn't develop well enough to achieve it.
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How much leverage u r getting 3x or 4x in stocks ...in futures easily 10x inbuilt leverage that to for free..
also no shorting shares locate hedache and its fees...
very good for traders
the reason it did not take off becuase very bad for brokers they will loose huge business ...
even SSF from other countries exchanges have very poor volume.
it is simply an obsolete outdated product.