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WFE Focus February 2011
New products

CBOE Holdings plans to list S&P 500 Index options on C2
CBOE Holdings plans to list on C2, the company’s new alternative exchange, an electronically-traded version of its flagship S&P 500 Index option, called SPXpm. SPXpm will be identical in structure to CBOE’s traditional SPX index option product, except it will have “p.m.” settlement. The company intends to broaden its customer reach by providing this “point-and-click,” “p.m.” settled version of its most actively traded index product. As proposed, SPXpm will enable customers to trade SPX options with a settlement convention found in the OTC market, without having to sacrifice the benefits and safeguards of exchange trading and clearing.

CBOE relaunches credit binary options contracts
On 8 March 2011, the Chicago Board Options Exchange began trading newly-designed Credit Event Binary Options (CEBOs) contracts. These contracts allow investors to express an opinion on whether a company will experience a “credit event” (bankruptcy). Due to inverse correlations between credit and equity markets, CEBO contracts can be used as a hedging tool for individual stocks. The contracts also provide the advantages of price transparency available through a regulated exchange, currently unavailable on OTC credit default swaps markets. A CEBO contract has just two possible outcomes, a payout of a fixed amount if a credit event occurs or nothing if a credit event does not occur.

CBOE and CFE to trade futures and options on CBOE gold ETF volatility index
CBOE Holdings plans to launch futures and options on the CBOE Gold ETF volatility index. Pending regulatory approval, CBOE Futures Exchange will begin trading on 25 March 2011 and CBOE will introduce options a few weeks later.

Johannesburg Stock Exchange launches “Any Day Expiry” currency contracts
On 2 March 2011, the Johannesburg Stock Exchange launched a new initiative on the foreign currency contracts, the “Any Day Expiry”. These new currency derivative contracts broaden the exchange’s existing range of currency futures and options contracts and allow investors the flexibility to pick the expiry date of the contract. The introduction of this new currency product is in response to the wholesale market looking to hedge their currency risk with increased precision.

Korea Exchange lists first currency ETF
The KOSEF USD futures ETF, the first currency ETF listed on the Korea Exchange started trading on 24 February 2011. It tracks the price of nearest month contract of USD futures and rolls over every month. It is expected that the new product would allow investors to participate in the USD currency market at low risk and low cost.

London Stock Exchange Group lists South Africa ETF
The London Stock Exchange Group listed a new MSCI South Africa Exchange ETF issued by HSBC Global Asset Management to its main market. The new issue brings the total number of London-listed ETFs based on emerging market indices to 75.

Luxembourg Stock Exchange lists contingent convertible bond
On 24 February 2011, the Luxembourg Stock Exchange admitted to trading the first contingent convertible bond. Known as CoCo bonds, such issues are used by banks as a method of being compliant with Basel III rules in order to meet capital requirements. CoCo bonds are convertible into shares when a bank’s regulatory capital falls below a certain limit.

NYSE Euronext’s NYSE Liffe US launches interest rate futures
NYSE Liffe US, the US futures exchange of NYSE Euronext, began trading Eurodollar futures on 21 March 2011, and will launch 2-year, 5-year and 10-year US Treasury futures along with US bond and ultra bond futures products on 28 March 2011, subject to regulatory filings. These launch dates coincide with the launch of New York Portfolio Clearing, the innovative new clearing joint venture with the Depository Trust & Clearing Corporation, through which these new products will be cleared.

RTS launches trading in futures on federal loan bonds basket
On 17 February 2011, FORTS, the RTS options and futures market, started trading in futures contracts on a basket of federal loan bonds. They will allow market participants to manage efficiently a portfolio of debt instruments and hedge interest rate risks in the long segment of the yield curve. This new instrument will provide an opportunity to make profits on both rising and falling markets (using the opportunity to sell short) as well as to form strategies based on changes of interest rates structure.

Singapore Exchange and London Metal Exchange launch metals futures
On 15 February 2011, the Singapore Exchange and the London Metal Exchange launched LME-SGX copper, aluminum and zinc futures to provide retail investors in Asia and beyond easy access to global metals markets. The new futures contracts have already attracted strong interest with three market makers and 20 active traders signed up to the initiative.

Thailand Futures Exchange will launch silver futures and extend trading hours for silver and gold futures
The Thailand Futures Exchange, part of the Stock Exchange of Thailand, will begin trading silver futures and extend trading hours for gold and silver futures until 22:30, both starting in June 2011. The extension of trading hours responds to investors’ demand for longer trading to match with trading in the US market.

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