SSF story of interest

J

josbarr

Financial Times; Jul 02, 2002

Trading in single stock futures in the US is expected to move a step closer to reality today, when one of two key regulators studying the instruments is expected to approve their use.
The development will be welcomed by futures exchanges in Europe and the US as a way of helping them at a time when demand for risk-management and hedging products is growing fast. Single stock futures - which allow traders to buy and sell futures on specific stocks - have been banned in the US for the past 20 years.But two years ago, Congress gave the US Commodity Futures Trading Commission and the Securities and Exchange Commission clearance to come up with a regulatory framework that would allow them to be reintroduced. A CFTC official said the agency had now cleared two remaining issues which trading margins would be allowed and issues related to consumer protection - and that the SEC was expected to follow with its approvalshortly. "We've both had a lot of distractions the last few months, so hopefully they [the SEC] will be able to act with dispatch on this so that the activity can commence," said one CFTC official. A handful of exchanges around the world have been approved to trade single stock futures,
although there is some concern in the industry over whether sufficient demand exists for the products to justify such numbers.
OneChicago, a joint venture between Chicago's three futures and options exchanges, is close to finalising the technical platform on which its single stock futures will trade. Officials say they could go "live" with single stock futures trading in a matter of weeks once SEC approval is
granted. At launch, OneChicago will offer 75-80 contracts on US listed stocks such as IBM and Cisco, as well as contracts on European shares listed as American Depository Receipts in the US. However it is expected to face stiff competition from a similar joint venture between Nasdaq and
Liffe, the London-based exchange.
 
I have also heard they may come out in a few weeks, but on
the other hand, I have heard, "don't expect them to be launched
any time soon." You can learn about Single Stock Futures
at Advanced Futures website: www.advancedfutures.com
 
Originally posted by chasinfla
I can't wait. And, oh, am I going to weep for the specialists....
More...

LOL...too funny chas...

anyway, what about the goddam uptick rule??? if SSF's come out they will be closely arbed against the underlying. so and so hedge fund with $1billion could theoretically have an effect by shorting the shit out of less liquid stocks - and if there will be 80 stocks trading SSF's whenever they start - there will certainly be stocks in that group whose daily volume is less than 5million, with more to follow in the future. i would think that something doing less than 5mil/day would be vulnerable to massive shorting of its SSF. so maybe we'll get some volatility back after all...

but if say NVDA SSF gets shorted by a big seller and starts to drop - with the downtick rule working on the stock, how could there be a close arb between NVDA common and NVDA SSF??? the SSF would drop more easily than the stock...? would a big seller in this case have to be shorting both the SSF and the stock at the same time in proportional amounts to avoid a backlash??

somebody please explain to me how the SEC plans to avoid pile-ons when SSF's come out.

why the hell would I trade MSFT when I could use it's SSF??? commish will be less, no DT rule, etc...

...and why would the naz back SSF's when they cost less to trade, and thus reap less of a profit for nasd??? stocks are really expensive to swap vs. futures.

will spreads get wider and MM's finally start making money again with the lack of traders pennying the stock if we all move to SSF's??

the whole "SSF's will get day traders away from stocks" is meaningless since they'll be arbed against each other by the powers that be...so whatever happens in the SSF market would be paralleled in the underlying stock.

AAARGGH!!! This whole SSF thing makes no friggin' sense to me. It's like an exchange being publicly traded - WHAT is the POINT??

also - i hope the SSF contract is a cash contract like the S&P. that'll keep the SEC out of it...
 
you think too much bung-o-rama.:D

being a Chicago product I'm guessing it's a CFTC thing, and I don't think they believe in uptick rules and all that fancy-schmancy public appeasement. I hope not, anyway.

what bothers me is this 'Lead Market Maker' (LMM) schtick. Is this what you get when you cross a market-maker with a specialist?

1. Liquid markets from day one: OneChicago employs a market maker system using a number of Lead Market Makers (LMMs). These LMMs have been selected based on their ability and commitment to make continuous two-sided markets. The benefits that LMMs provide to investors include tighter spreads and the ability to promptly execute orders placed with their brokers.

OneChicago LMMs include globally recognized investment firms and market-making professionals who have demonstrated the experience and financial capacity to meet their contractual obligations to OneChicago. In addition, other market makers will be actively trading along with LMMs to ensure the liquidity that investors value.
More...
<a href="http://www.onechicago.com/020000_about/oc_020000.html">Souce.</a>

OK, it's fully electronic, so as long as those LMM's stay away, it ought to be the best thing in a long time.
 
I did'nt think that far about the SSF and shorting. Can anyone explain to me who is going to get on the other side of the arb when some big fund shorts the SSF?

My speculation is that only the prop firm traders will be there since they would have the bullets to enable them to sell the stock, buy the SSF and pocket the difference. I would surmise the action would not be too unlike pair trading closely correlated stocks such as Viacom a and B wherein the discrepancy is fleeting much like most arb markets.
 
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