Synthetic Secured Lending Using Single Stock Futures


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.

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An Alternative to Securities Lending:

Basis Point Discussion:

Securities lending is a process that involves both market and counter party risk. Similar to an EFP ("Exchange Future for Physical") transaction, this type of lending utilizes single stock futures (SSF) with some very stark differences. SSFs simplify the lending/borrowing process, significantly enhance the total return, and remove counter party risk. "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..."

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Simplify Securities Lending/Borrowing:

Calculate the savings with Single-Stock Futures:

"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, counter party risk, and the risk of the recall of positions..." "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 security futures market. By utilizing the security 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..."

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Announcements

Date: July 29, 2016 Re: Delaying Listing of Cash Settled Single Stock Futures Effective Date: July 29, 2016

Date: July 12, 2016 Re: An Update on Cash Settled Single Stock Futures Effective Date: August 1, 2016

OneChicago Announces Trading Volume for June 2016 YTD Volume outpacing 2015 by 13% CHICAGO – July 1, 2016 – OneChicago, LLC (OCX), a securities finance exchange, today announced its June 2016 volume of 1,343,750, a decrease of 22% year-over-year. OneChicago is a CFTC and SEC regulated exchange offering Single Stock Futures (SSF), a Delta One product, on approximately 1,800 […]

Date: June 3, 2016 Re: Announcing Cash Settled Single Stock Futures Effective Date: August 1, 2016

Date: June 20, 2016 Re: Independence Day Holiday Trading Hours

Date: June 16, 2016 Re: Introduction of Position Limits File Effective Date: June 16, 2016