Single-stick trading takes Chicago

OneChicago, an electronic exchange created in 2002 by the Chicago Board of Trade, Chicago Mercantile Exchange, and Chicago Board Options Exchange, is bringing the practice of trading in single-stock futures into its own.

It has reported that its business has seen an 81 percent jump over last year at the same time. In the beginning, OneChicago was not fulfilling its creator’s expectations but its chief executive says that traders are now finding ways of making use of the practice of trading single-stock futures in ways that had not been thought of when the exchange opened.

It is starting to be a popular alternative to using stocks to hedge options trade, because trading single-stock futures lets traders avoid some risks inherent in buying cash stocks on margin. Additionally, institutional traders are making use of single-stock futures in block trading. Single-stock futures are agreements to deliver shares of a specific stock on a particular future date, called the expiration date.

Trade is usually on a 20 percent margin. OneChicago deals in 175 single-stock futures products. Companies that can be traded in the single-stock futures market include eBay, IBM, and Philip Morris. Single-stock trading has been done in Europe for years, but it has only been allowed in the United States since
2000.

Story link: Single-stick trading takes Chicago