Single Stock Futures (SSFs) are an economic substitute for stock and Exchange-Traded Fund (ETF) ownership. OneChicago, an electronic exchange, lists over 2,000 Single Stock Futures contracts. Trades are centrally cleared and settled by The Options Clearing Corp. (The OCC). OneChicago is regulated by both the Commodities Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). The OCC provides an AAA/AA+ rated clearing platform.
A primary benefit of the Single Stock Futures market is that the underlying economics – cost of carry, dividend amount and cost of borrow for hard-to-borrows – are priced at transparent market rates. The OCC guarantee allows a diverse mix of investors to transact with each other in the market place without regard for creditworthiness. Investors can access the market directly through agents, such as Light Horse MS, without the need for cumbersome OTC documentation or specific operational requirements.
Single Stock Futures contracts…
- are the equivalent to 100 shares of equity or ETF per contract.
- offer quarterly expirations and, similar to equity option contracts, the first two “near” months expirations.
- are guaranteed by the AAA/AA+ rated OCC.
- deliver the underlying equity at expiration (“physical delivery”).
- may not be exercised prior to expiration.
- maintain the market exposure of equity ownership.
- can be unwound freely in the open market.
The risks associated with Single Stock Futures can be found here.