Single Stock Futures
The SSF Market as a Traders’
Service Centre
The perceived benefits of SSFs
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More efficient than stock trading
More cost-effective than stock trading
Fewer impediments to trading (e.g. short selling)
Simpler clearing arrangements
Better leverage than stock and option trading
…..but are these the real benefits?
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Barriers to success
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The underlying market may already be efficient
enough
Liquidity concerns
Inertia
Vested interests oppose change
SSF competitive advantage, if realized, can be
challenged by its competitors
But today, the SSF exchanges have one serious
advantage over the cash markets….
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New Infrastructure means New
Opportunities
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All electronic
A natural STP environment
Fast execution
T+1 is already here
Strategies execution already a proven feature of
derivatives trading systems
…the ISE precedent
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A trader-oriented marketplace
Innovation: there is a solid tradition of
innovation at derivatives exchanges in the
U.S., less of a tradition in the securities
markets.
The new exchanges can capitalize on that
tradition and create a Center for Trading
Services
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Trading Services
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Support for strategies
Support for customer/market maker interaction
Support for on-the-fly basket or strategy
creation
Support for ever more sophisticated front
office interfaces
…OTC flexibility without OTC opaqueness
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Strategies
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Combination orders to support spreads,
pairs, baskets, “others”
Executed on a FOK basis or using implied-in
or –out for added liquidity
Eliminate legging risk
…the exchange is the enabler, nobody else can deliver
this
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Customer meets Market Maker
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Quote Request functionality
User specific trading strategies
Auto-quote capability – extended to a set of
symbols rather than just one at a time
…achieved by the exchange working hand in
hand with participants
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Strategy Creation
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The customer’s “product launch”
The FLEX model is a precedent
The success of ETFs indicates that demand exists
for multi-symbol exposure – but this goes beyond
ETF territory
…will require the co-operation of exchanges,
regulators and market participants
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Role of Front Office Tools
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Technology has created this opportunity and
will continue to be the key factor in innovation
Front office tools essential in linking the endcustomer to the marketplace
… but the exchanges should lead the way
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A New Standard for Trading
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Focal point for portfolio and strategy trading
Targeted at the whole spectrum: hedge funds,
institutions,…even retail
OTC levels of flexibility – but accessible to all
…but who will make the first move? The SSF
exchanges are not the only entities that can bring
this about. They are just better positioned than
anyone else.
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Other Possible Innovations
?
The infrastructure is there. All it needs is the will to use it.
Alberta Market Solutions 2003