SSF and EFP Quote Page Updates

O

OneChicago

OneChicago has made some enhancements that I would like to bring to your attention.

We have released an enhanced version of our SSF comparison calculator which allows greater interaction with the relevant trading variables and displays all contract months in a table format. In addition the results are all graphed with the graphs changing dynamically as the user adjusts the variable sliders to represent individual rates. One thing to remember that most of the variables are expressed in Basis Points which is 1/100 of a percent. As an example 1.27% is equal to 127 basis points.

We have added a Quote page where users can select indiviual symbols and 'slightly' delayed quotes for all contract months will be displayed. A link to the calculator is provided which will open up displaying the symbol you have displayed.

In addition we have posted a page that displays a number of EFP quotes being made on OneChicago's inter-dealer system. This page updates dynamically throughout the day and displays Bid/offer and size as well as the implied interest rate of each quote. Of interest is the 'raw' priced bid/ask is displayed out to four decimals. This resolution is very important as the EFP transaction involves identical delta postions of the stock and the SSF and therefore the trade does not have any market risk. Instead the transaction is an interest rate trade and hence the need to describe in basis points. In effect it is a REPO screen.

We have had very positive feedback from these developments and hope that it aids each of you in your trading and investing.

Best
 
David,
is all the fed easing having an impact at One?I've stopped using EFPs after the rates became so low. This could be a sign that the fed policy is working as people are forced to go out and take risk
 
The Fed Easing has been a doubled edged sword. Higher rates mean higher costs to borrow which makes SSF much more attactive. With rates on the low side the benefits are still there but to lesser degree.

Nonetheless the use of SSF...especially from the short side...is still attractive if only the brokerage firms would allow the customers to access the product.

Interestingly the Prime Brokerage business has changed and the PBs are moving many 'marginable' customers off their books as they no longer have the balance sheets they used to have. These customers still have demand for leverage and financing and they can get it on better terms via the SSF.

In addition the concept of Counterparty exposure has brought our OCC clearing component much more attention as the parties to a transaction are disintermediated post trade and OCC becomes buyer to every seller and vice versa.

There is also a very big issue that runs below the surface and that is Stock/Loan which is the process by which stock is available for customers looking to take a short position.

A crucial component of Stock/Loan is the Beneficial Owner community which is made up generally by Pension and Endowment funds. These BOs have pulled back from the process as they have realized losses on the collateral reinvestment pools. Accordingly the rewards did not justify the risks. Using the EFP process they can achieve much higher rates of return without taking on counterparty risk......in fact everyone who is long stock can participate in this trade and improve performance of their portfolio. This process has long been an opaque part of the market place dominated by the very large players at the expense of the capital markets. Using the EFP each customer can participate and in the HTB names it can be significant. Just look at our home page at some of the SSF which are trading at discounts to the cash. This phenomenon is because of the costs of stock loan and instead of ceding your long stock to your brokerage so they can earn the spread customers can buy the EFP and exchange the long stock for a discounted SSF allowing them to have the same delta exposure and freeing up capital to be invested in other instruments and thus getting increased returns for the same economic exposure.

Best.
 
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