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Announcements

Date: October 16, 2014 Re: Mock Trading TODAY, October 16, 2014

Date: October 15, 2014 Re: Mock Trading TOMORROW, October 16, 2014

Date: October 14, 2014 To: Trading Community RE: Audit Trail Reports for OCXdelta1 (memo was previously issued on 8/29/14) **new items in RED

Product News

DATE: October 21, 2014 RE: Equinix Inc (“EQIX/EQIX1D”) Stock Dividend (ELECTION) Ex-Distribution Date: October 23, 2014

DATE: October 21, 2014 RE: Kimberly-Clark Corporation (“KMB/KMB1C/KMB1D”) Stock Distribution Ex-Distribution Date: November 3, 2014

DATE: 10/20/2014 RE: OCX.NoDivRisk® Adjustments The securities listed below will be trading ex-dividend on the Ex-Date noted. Corresponding OCX.NoDivRisk® SSF will be adjusted by the following amounts. Business Date Name Underlying Symbol Underlying ID Futures Symbol Adjustment Amount Ex-Date 2014-10-20 CVS HEALTH CORPORATION COM STK CVS 126650100 CVS1D -0.2750 2014-10-21 2014-10-20 LTC PPTYS INC LTC […]

DATE: 10/17/2014 RE: OCX.NoDivRisk® Adjustments The securities listed below will be trading ex-dividend on the Ex-Date noted. Corresponding OCX.NoDivRisk® SSF will be adjusted by the following amounts. Business Date Name Underlying Symbol Underlying ID Futures Symbol Adjustment Amount Ex-Date 2014-10-17 APACHE CORP APA 037411105 APA1D -0.2500 2014-10-20 2014-10-17 LOWES COMPANIES LOW 548661107 LOW1D -0.2300 2014-10-20 […]

DATE: October 16, 2014 RE: Sears Holdings Corporation (“SHLD/SHLD1C/SHLD1D”) Rights Distribution Date: October 17, 2014

DATE: 10/16/2014 RE: OCX.NoDivRisk® Adjustments The securities listed below will be trading ex-dividend on the Ex-Date noted. Corresponding OCX.NoDivRisk® SSF will be adjusted by the following amounts. Business Date Name Underlying Symbol Underlying ID Futures Symbol Adjustment Amount Ex-Date 2014-10-16 SPDR DOW JONES INDL AVERAGE ET DIA 78467X109 DIA1D -0.1425 2014-10-17 2014-10-16 ABERDEEN ASIA PACIFIC […]

DATE: October 16, 2014 RE: H&Q Life Sciences Investors (“HQL/HQL1D”) Security Name and CUSIP Change Effective Date: October 20, 2014

DATE: October 16, 2014 RE: H&Q Healthcare Investors (“HQH/HQH1D”) Security Name and CUSIP Change Effective Date: October 20, 2014

DATE: 10/15/2014 RE: OCX.NoDivRisk® Adjustments The securities listed below will be trading ex-dividend on the Ex-Date noted. Corresponding OCX.NoDivRisk® SSF will be adjusted by the following amounts. Business Date Name Underlying Symbol Underlying ID Futures Symbol Adjustment Amount Ex-Date 2014-10-15 BARD C R INC BCR 067383109 BCR1D -0.2200 2014-10-16 2014-10-15 CATERPILLAR INC CAT 149123101 CAT1D […]

DATE: October 15, 2014 RE: Compuware Corporation (“CPWR/CPWR1D”) Stock Distribution Ex-Distribution Date: October 16, 2014

DATE: 10/14/2014 RE: OCX.NoDivRisk® Adjustments The securities listed below will be trading ex-dividend on the Ex-Date noted. Corresponding OCX.NoDivRisk® SSF will be adjusted by the following amounts. Business Date Name Underlying Symbol Underlying ID Futures Symbol Adjustment Amount Ex-Date 2014-10-14 ACCENTURE PLC CLS A USD0.00002 ACN G1151C101 ACN1D -1.0200 2014-10-15 2014-10-14 POWERSHARES EXCH TRADED FD […]

DATE: 10/13/2014 RE: OCX.NoDivRisk® Adjustments The securities listed below will be trading ex-dividend on the Ex-Date noted. Corresponding OCX.NoDivRisk® SSF will be adjusted by the following amounts. Business Date Name Underlying Symbol Underlying ID Futures Symbol Adjustment Amount Ex-Date 2014-10-13 AETNA INC NEW COM AET 00817Y108 AET1D -0.2250 2014-10-14 2014-10-13 GOLDCORP INC COM NPVISIN #CA38 […]

DATE: October 13, 2014 RE: BANCO SANTANDER Brasil SA (“BSBR/BSBR1C/BSBR1D”) Exchange Offer Expiration Date: 10/30/14

DATE: October 13, 2014 RE: Occidental Petroleum Corp. (“OXY/OXY1C/OXY1D”) Stock Distribution Ex-Distribution Date: December 1, 2014

DATE: 10/09/2014 RE: OCX.NoDivRisk® Adjustments The securities listed below will be trading ex-dividend on the Ex-Date noted. Corresponding OCX.NoDivRisk® SSF will be adjusted by the following amounts. Business Date Name Underlying Symbol Underlying ID Futures Symbol Adjustment Amount Ex-Date 2014-10-09 ABBVIE INC COM USD0.01 ABBV 00287Y109 ABBV1D -0.4200 2014-10-10 2014-10-09 ABBOTT LABORATORIES ABT 002824100 ABT1D […]

DATE: 10/08/2014 RE: OCX.NoDivRisk® Adjustments The securities listed below will be trading ex-dividend on the Ex-Date noted. Corresponding OCX.NoDivRisk® SSF will be adjusted by the following amounts. Business Date Name Underlying Symbol Underlying ID Futures Symbol Adjustment Amount Ex-Date 2014-10-08 CONOCOPHILLIPS COP 20825C104 COP1D -0.7300 2014-10-09 2014-10-08 HANCOCK JOHN PFD INCOME FD SH HPI 41013W108 […]

EFP’s

Single Stock Futures (SSF) at OneChicago, are a tool used to improve financing of equity positions. Utilizing our Exchange Future for Physical (EFP) transaction allows customers holding long stock or short stock to transfer into an equivalent delta position at a competitive, market derived interest rate built into the SSF. In addition it can be used to put idle cash to work by both buying a stock while simultaneously selling the SSF. The resulting position is perfectly hedged as the two legs will move in lock step with each other as expiration approaches and with the passage of time the premium built into the SSF decays as yield into the customer’s account.



Generating Alpha – Short Positions


Symbol Contract Future Bid Stock Last Dividend Premium # of Days Implied Annualized Premium
PEP1D 2014-12 93.5300 93.4500 OCX.NoDivRisk $0.08 61 0.51%
SBUX1D 2015-03 74.6100 74.4800 OCX.NoDivRisk $0.13 152 0.41%
AAPL1D 2015-03 102.2400 102.0700 OCX.NoDivRisk $0.17 152 0.39%
LUK1D 2015-03 22.9300 22.9000 OCX.NoDivRisk $0.03 152 0.31%
AXP1D 2015-03 85.1700 85.0600 OCX.NoDivRisk $0.11 152 0.31%
DOW1D 2015-03 48.4900 48.4300 OCX.NoDivRisk $0.06 152 0.29%
BRKB1D 2015-03 138.5700 138.4100 OCX.NoDivRisk $0.16 152 0.27%
GILD1D 2015-03 104.5000 104.3800 OCX.NoDivRisk $0.12 152 0.27%
MA1D 2015-03 73.6100 73.5300 OCX.NoDivRisk $0.08 152 0.26%
XOM1D 2014-12 92.4300 92.3900 OCX.NoDivRisk $0.04 61 0.26%

The above SSF are currently bid above the last stock tick. Meaning you can sell the future, hold to expiration and get the short stock at a premium to the current cash price. All prices above were last updated at 11:00:01 EST on 2014-10-21, and will have fresh updates throughout the trading day.

If you are currently short the stock, you can sell the exchange for physical (EFP), thus converting your short stock position to short futures, capturing the premium and eliminating your short interest charges. Learn more about EFPs at EFP education.

Disclaimer

SEE MORE …



Generating Alpha – Long Positions


Symbol Contract Future Ask Stock Last Dividend Discount # of Days Implied Annualized Discount
WTW1D 2014-11 25.6000 26.3900 OCX.NoDivRisk $0.79 33 37.12%
WTW1D 2014-12 25.1900 26.3900 OCX.NoDivRisk $1.20 61 30.50%
WTW1D 2015-03 23.7600 26.3900 OCX.NoDivRisk $2.63 152 26.83%
GDP1D 2014-11 10.6900 10.8600 OCX.NoDivRisk $0.17 33 17.12%
GDP1D 2014-12 10.5900 10.8600 OCX.NoDivRisk $0.27 61 14.71%
RMTI1D 2015-03 9.5900 10.0500 OCX.NoDivRisk $0.46 152 10.88%
RMTI1D 2015-06 9.3900 10.0500 OCX.NoDivRisk $0.66 243 9.77%
GDP1D 2015-03 10.4200 10.8600 OCX.NoDivRisk $0.44 152 9.62%
GDP1D 2015-06 10.2900 10.8600 OCX.NoDivRisk $0.57 243 7.80%
DDD1D 2015-03 42.6000 43.9700 OCX.NoDivRisk $1.37 152 7.39%

The above SSFs are currently offered below the last stock tick. Meaning that you can buy the future, hold to expiration and get the stock at a discount to the current cash price. All prices above were last updated at 11:00:01 EST on 2014-10-21, and will have fresh updates throughout the trading day.

If you are currently long the stock, you can buy the exchange for physical (EFP), thus converting your long stock position to long futures, capturing the discount. More information on EPF can be found here

Disclaimer

SEE MORE …



Synthetic Secured Lending Using Single Stock Futures EFPs

The structure of the single stock futures (SSF) market makes it as ideally suited for borrowing and lending money at the AA+ credit rating of the Options Clearing Corporation as European-exercise index options on the S&P 500 (SPX). The reason is simple: Just as trades in European-exercise options cannot be exercised until the expiration date, neither can trades in SSFs.

In addition, as long and short positions in SSFs deliver into long and short positions, respectively, in the underlying stock or exchange-traded fund, there is no basis risk. The future will be priced at the stock plus the interest rate cost of carry minus the future value of the expected dividend. As expiration approaches, the future’s price converges to the stock’s price and then delivers into the stock itself.

View PDF



Use Futures To Go Short

http://theocc.com/clearing/clearing-infomemos/infomemos1.jspThe following is an abridged version of a column that appeared on RealMoney.com on July 22, 2008.

The entire sturm und drang about naked short selling last week might have been interesting had it not been so unnecessary. Single stock futures (SSFs) can and have been used to do the exact same trade since November 2002. Advocates on both sides of the debate are arguing about the best way to escape a room whose door is and has been open.
Using Single Stock Futures
Let’s distinguish between short-selling and naked short-selling. The former involves locating a stock, borrowing the shares and selling them; the latter skips the location of the stock and borrowing same. As option market makers in particular have emphasized in recent days, their ability to engage in naked short-selling until such time as shares can be located and borrowed is vital to their ability to function in today’s electronic markets. Both market makers and normal short-sellers have a vital role to play in markets. (more…)


OneChicago is an Equity Finance Exchange offering security futures products

  1. Securities futures allow participants to carry equity positions at more favorable financing rates due to the embedded interest rate component.
  2. The OCX.NoDivRisk exchange for physical (“EFP”) is equivalent to a stock loan transaction. More information on EFPs can be found here.
  3. The EFP is the economic equivalent of an equity swap or equity repo in a central counterparty, exchange traded, transparent environment. More information on EFPs can be found here.


Single Stock Futures

Single-stock futures are securities that share some of the features of Equities and also some of traditional commodity. There are interest rate benefits that cannot be found with other products.

Theoretical Pricing Models

OCX.Original Products

F = S ∙ (1 + r) – Div

Where F is the single-stock futures contract price, S is the underlying stock price, r is the annualized interest rate which may be negative due to hard to borrow pressure, and Div is the expected dividend.

Another valuation of single stock futures can be found through the following:

F = [S – PV (Div)] ∙ er∙(T-t)

Where F is single stock futures contract price, S is the underlying stock price, PV(Div) is the present value of any dividends entitled to the holder of the underlying between T and t, r is the interest rate which may be negative due to hard to borrow pressure, and e is the base of the natural log.


OCX.NoDivRisk Products

F = S ∙ (1 + r)

Where F is the single-stock futures contract price, S is the underlying stock price, r is the annualized interest rate which may be negative due to hard to borrow pressure.

Another valuation of single stock futures can be found through the following:

F = S ∙ er∙(T-t)

Where F is single stock futures contract price, S is the price of the underlying (the stock price), T-t is the days to expiration, r is the interest rate which may be negative due to hard to borrow pressure, and e is the base of the natural log.

Click Here to learn more about how to price an EFP.



OneChicago Articles

About OneChicago:
OneChicago is an all-electronic exchange for trading Single Stock Futures (SSFs). Founded in 2002, we provide liquidity, anonymity, and market price transparency for equity alternative products. Contracts are cleared through the AA+-rated Options Clearing Corporation and regulated by both the SEC and CFTC. We also offer, OCX.BETS®, the only off-exchange electronic matching system for Block and EFPS transactions.
Click to View OneChicago Fact Sheet

Refinance—-it is that simple
If you were paying 8% on a home mortgage, what would you do? You would refinance it, of course.
If you were paying 8% on an equity margin loan, what would you do? You would refinance it, of course.

Today, many people have margin loans outstanding with their brokers at high interest rates. Those margin loans are financing their portfolio. Single stock futures can be used to provide the same stock exposure at a lower cost—in essence—refinancing your stock portfolio at a lower rate.

As a Delta One product, single stock futures have the same profit/loss profile as the underlying stock. They are priced at the stock plus interest. Generally, that interest rate today is around 50 to 75 basis points (½ to ¾ of 1%). That is significantly less than the 8% margin loan. For a $100,000 portfolio, a margin loan of $50,000 at 8% will cost you $4,000 a year in interest. That same $100,000 portfolio established in single stock futures at 75 basis points over the stock price would cost you $750 to carry for a year. OneChicago exchange fees would add an additional $385 for a grand total of $1,135–A savings of $6,865 each year. And where I come from, that is serious money.

Single Stock Futures- An Alternative to Securities Lending:
Securities lending is a process that involves both market and counterparty risk. Securities lending is similar to an EFP transaction utilizing single stock futures (SSF) with some very stark differences that simplifies the procss, significantly enhances the total return, and removes counterparty risk from the process.
Click to View PDF

Basis Point Discussion:
When an investor buys an asset, they expect the return to be commensurate to a certain level of risk. Too often the investor is disregarding the opportunity cost of receiving a risk-free rate of return as well. Single stock futures lower this opportunity cost by enabling an investor to finance an equity position more efficiently, thus improving the risk-reward ratio of their investment.
Click to View Basis Point Discussion PDF

EFPs Using Single Stock Futures:
OneChicago has brought the financing of equity positions onto an exchange traded format through an Exchange Future for Physical (EFP) transaction. An EFP is the simultaneous selling of a stock and buying of a Single Stock Future (SSF) for a long equity position or buying of a stock and selling of a SSF for a short equity position. SSF have an interest rate built into their price that is determined by a true competitive marketplace. Like repos and reverse repos in the debt markets, EFPs provide a cheap and efficient financing vehicle.
Click to View PDF

How futures can simplify securities lending/borrowing:
Single stock futures provide significant cost advantages and flexibility for both the lenders and borrowers of stock by enabling them to exchange positions without many of the restrictions and intermediaries that exist with existing programs. As a result, the lenders and borrowers are able to reduce revenue sharing agreements, fees, counterparty risk, and the risk of the recall of positions.
Click to View PDF

Calculate the savings with Single-Stock Futures:
When looking to raise capital, single stock futures provide efficiency, transparency, and anonymity to the financing process. In the bond world, investors have the repo market. In the equity world, investors have the securities futures market. By utilizing the securities futures market, investors have the ability to utilize their equity positions as collateral for short-term loans at rates that are competitively determined by the marketplace.
Click to View PDF



The OCC Financial Guarantee

As world financial markets progress, expand and link into a global marketplace and as counterparty credit risk multiplies and becomes more complex, OCC’s guarantee function continues to protect clearing members and their customers. OCC has received an ‘AA+’ credit rating from Standard & Poor’s (S&P) because of its ability to fulfill obligations as the counterparty for exchange-traded derivatives.

OCC stands behind every cleared trade that has been executed on the markets and exchanges it serves, in addition to stock loan transactions executed through the Stock Loan program. OCC assures performance to selling (lending) and purchasing (borrowing) clearing members, eliminating counterparty risk. OCC in effect becomes the buyer (borrower) to every clearing member representing a seller (lender) and the seller (lender) to every clearing member representing a buyer (borrower). The substitution of OCC as counterparty is achieved through a legally binding novation process that has withstood the test of time. This process supports fungibility for the contracts OCC clears and facilitates a liquid secondary market.



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