OneChicago Offers Derivatives To Counter Europe Short-Selling Ban
18 Agosto 2011 - 3:53PM
Dow Jones News
A small U.S. derivatives exchange on Thursday rolled out
contracts that allow traders to take bearish positions on European
stocks affected by new short-selling restrictions, highlighting the
tough task regulators can face in trying to limit market
activity.
OneChicago LLC developed the contracts in the week since the
tougher short-selling rules were introduced in an effort to limit
market declines, with products linked to exchange-traded funds
composed of stocks listed in France, Spain, Italy and Belgium.
"This is another way to get exposure to those markets without
touching those foreign exchanges," said David Downey, chief
executive of OneChicago. "When we heard about the short-selling
bans in those countries I instructed our staff to go through and
find any ETFs based on those countries' markets that we did not
currently list for trading."
Downey said in an interview that he didn't anticipate a sharp
upswing in volume, but large banks and other financial institutions
with long exposures to the affected European markets would be
potential users.
Ten-year-old OneChicago's core business is trading futures
contracts on individual stocks and exchange-traded funds. The bulk
of its offerings are linked to U.S.-listed securities, but the
platform offers 228 contracts on American Depository Receipts,
which allow traders on U.S. exchanges to buy and sell stock in
foreign companies. Another 21 contracts are on ETFs made up of
nondomestic stocks.
Trading futures on individual securities lets investors position
for the price of a stock or ETF falling, achieving a similar
outcome to short-selling. That practice involves borrowing shares
and selling them to another investor, with the aim of buying them
back more cheaply later when the price has fallen and pocketing the
difference.
France, Spain, Belgium and Italy last week banded together to
restrict short-selling of stocks as pressure mounted on the euro
zone's financial sector. Regulators hoped to stave off a piling-on
of bearish bets that some feared could destabilize banks central to
the region.
While European short-selling bans extend to short positions
achieved through trading of derivatives, short-selling of related
ADRs in the U.S. remains permitted, enabling OneChicago to continue
offering the related futures contracts its market.
The newly listed futures track anticipated movements in French,
Spanish, Italian and Belgian ETFs compiled by MSCI Inc. (MSCI).
OneChicago is jointly owned by Interactive Brokers Group (IBKR),
CBOE Holdings Inc. (CBOE) and CME Group Inc. (CME).
-By Jacob Bunge, Dow Jones Newswires; 312 750 4117;
jacob.bunge@dowjones.com
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