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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Product News

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Announcements

Date: September 21, 2016 Re: Maintenance to CH1 (350 E. Cermak) Effective Date: September 21, 2016 OneChicago, LLC (“OneChicago”) is issuing this Notice to Members (“NTM”) 2016-27 to inform market participants that OneChicago will be performing updates and routine maintenance on our disaster recovery and user acceptance testing networks located at CH1 (350 E. Cermak) on Friday, […]

OneChicago Announces Trading Volume for August 2016 Year-to-Date Volume up 2 Percent CHICAGO – September 1, 2016 – OneChicago, LLC (OCX), a securities finance exchange, today announced its August 2016 volume of 1,025,240, a decrease of 21% 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: September 19, 2016 Re: Decommissioning of Corporate Action Distribution File from OneChicago FTP Site Effective Date: October 3, 2016 OneChicago, LLC (“OneChicago”) is issuing this Notice to Members (“NTM”) 2016-26 to inform market participants that as of October 3, 2016, OneChicago will stop publishing the Corporate Actions Distributions File on the OneChicago FTP site.  The following link, ftp://ftp.onechicago.com/misc/, […]

Date: September 19, 2016 Re: Maintenance to CH1 (350 E. Cermak) Effective Date: September 23, 2016 OneChicago, LLC (“OneChicago”) is issuing this Notice to Members (“NTM”) 2016-25 to inform market participants that OneChicago will be performing updates and routine maintenance on our disaster recovery and user acceptance testing networks located at CH1 (350 E. Cermak) on Friday, […]

Date: September 13, 2016 Re: Decommissioning of IDBBGlobal Value from FTP Product Listings File Effective Date: October 7, 2016 OneChicago, LLC (“OneChicago”) is issuing this Notice to Members (“NTM”) 2016-24 to inform market participants that OneChicago will stop populating the IDBBGlobal value on the OneChicago FTP site starting October 7, 2016. *         […]

Date: August 31, 2016 Re: Notice of CH1 Data Center Maintenance Effective Date: August 31, 2016 OneChicago, LLC will be performing maintenance at 350 E. Cermak (CH1 Data Center), which provides services for OneChicago Disaster Recovery (DR) and User Acceptance Testing (UAT). This maintenance will take place today, August 31st, 2016, between 16:00 CT and […]