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Encyclopedia > Single stock futures

Single-stock futures (SSF's) are securities that share some of the features of equities and also some of traditional commodity futures contracts. They are traded in various financial markets, including those of the United States, United Kingdom, Spain, India and others. Securities are tradeable interests representing financial value. ... Ownership equity, commonly known simply as equity, also risk or liable capital, is a financial term for the difference between a companys assets and liabilities -- that is, the value that accrues to the owners (sole proprieter, partners, or shareholders). ... A futures contract is a form of forward contract, a contract to buy or sell an asset of any kind at a pre-agreed future point in time, that has been standardised for a wide range of uses. ...


In the United States, they were disallowed from any exchange listing in the 1980's because the Commodity Futures Trading Commission and the U.S. Securities and Exchange Commission were unable to decide which would have the regulatory authority over these products. The Commodity Futures Trading Commission (CFTC) is an independent agency of the United States Government, created by Congress in 1974. ... The U.S. Securities and Exchange Commission, commonly referred to as the SEC, is the United States governing body which has primary responsibility for overseeing the regulation of the securities industry. ...


After the Commodity Futures Modernization Act of 2000 became law, the two agencies eventually agreed on a jurisdiction-sharing plan and SSF's began trading on November 8, 2002. The Commodity Futures Modernization Act of 2000 or CFMA, was passed and signed by President William Jefferson Clinton in December 2000 in large part to allow for the creation of U.S. exchanges for the listing of a new sort of derivative security, the single-stock future. ...


Two new exchanges initially offered security futures products, including single-stock futures, although one of these exchanges has since closed. The remaining market is known as OneChicago because it is a joint venture of three previously-existing Chicago-based exchanges, the Chicago Board Options Exchange, Chicago Mercantile Exchange and the Chicago Board of Trade. Chicago (officially named the City of Chicago) is the third largest city in the United States (after New York City and Los Angeles), with an official population of 2,896,016, as of the 2000 census. ... The Chicago Board Options Exchange (CBOE) is the worlds largest options exchange with an annual trade of over 15 billion shares of stock options in some 1200 companies. ... President George W. Bush at the CME (March 6, 2001). ... The Chicago Board of Trade (CBOT) NYSE: BOT, established in 1848, is the worlds oldest futures and options exchange. ...


SSFs have yet to gain significant popularity among securities & derivatives traders in the United States. Daily total contract volume [1] averaged approximately 26,000 contracts/day in December 2005. Although 2005 total annual volume did increase 188% over 2004, volumes are still small in comparison to more established derivative contracts. For example, U.S. equity & ETF options trade approximately 6,000,000 contracts/day[2]. In finance, a derivative security is a contract that specifies the rights and obligations between the issuer of the security and the holder to receive or deliver future cash flows (or exchange of other securities or assets) based on some future event. ... To meet Wikipedias quality standards, this article or section may require cleanup. ... In finance, an option is a contract whereby the contract buyer has a right to exercise a feature of the contract (the option) at future date (the exercise date), and the writer (seller) has the obligation to honour the specified feature of the contract. ...


 
 

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