Equity Derivatives (Options & Futures) Proposal & Questionnaire

Transcription

1 A Guide Equity Derivatives (Options & Futures) Proposal & Questionnaire Expiry Date Policy May 2014

2 Introduction ASX is continually trying to improve the equity Exchange Traded Option (ETO) market to create a better and more efficient trading experience for end users. ASX has recently made changes to the ETO crossing rule procedures and market maker obligations in order to help facilitate this. ASX has received a request from a number of derivatives trading participants to align the expiry date of single stock and Index (XJO) options. ASX has liaised with a small number of ETO users to seek targeted feedback on this proposal, receiving general support for such a change as it would simplify hedging strategies across a range of products. ASX is now seeking broader feedback from all equity derivatives options and futures users to gauge their views on aligning single stock and index (XJO) option expiry dates. The simplest way to achieve an alignment between single stock and Index options would be to move the single stock expiry date to align with the existing expiry date for Index options (and equity index futures). This would involve least disruption for the market. In contrast, if any alignment was affected by moving the XJO expiry date it would also require moving the expiry dates for all equity index futures (i.e. SPI, sector and VIX) and would also require a change to the timing around the quarterly index rebalancing. If, following feedback, there was clear support for shifting the single stock option expiry date, any change would only apply to new contract dates listed following the commencement date of the new arrangements. They would have no impact on currently listed products. If, however, there was also significant support for the alternative of making more substantive change to the expiry dates for all equity option and futures products, ASX would propose to conduct a more formal consultation process before making a final decision. Proposal ASX proposes to change the single stock ETO expiry date to align with the existing index ETO and futures expiry date. ASX believes this is the most suitable solution, with the least impact on the overall market and ensures Australia s approach is consistent with international practice. ASX does not propose changing the methodology around the underlying basis/timing used for determining auto exercise and settlement of either the single stock (EOD Closing Price of underlying) or Index option contracts (OPIC). Background Information ASX s current equity single stock and Index expiry arrangements: Single Stock Options: In general the Expiry Date is the Thursday before the last business Friday for the given month. If the Friday is a non-trading day then the expiry date is moved to the Wednesday. Index Options and Futures: In general the Expiry Date is the third Thursday, providing it is a trading day, for the given month. If the Thursday is a non-trading day then the expiry date is moved to the Wednesday. International Approaches: USA (Option Clearing Corporation) Single Stock and Index ETO expiry occurs on the third Friday of each month. April 2014 Equity Derivatives Questionnaire Page 2 of 5

3 Europe (Eurex, Liffe/TOMs, IDEM) Single Stock and Index ETO expiry occurs on the third Friday of each month. Asia Hong Kong (HKE): Single Stock and Index ETO expiry occurs on the second last trading day of each month. Japan (OSE): Single Stock and Index ETO expiry occurs on the second Friday of each month. India (NSE): Single Stock and Index ETO expiry occurs on the last Thursday of each month. Questions. 1. Do you support a change to ASX s current expiry date policy to allow for the alignment of single stock and index ETO expiries? If ASX were to align the expiry date of single stock and index (XJO) option expiry dates, would your preferred approach be to: 2. Change the single stock expiry date to align with the current Index expiry date policy as proposed by ASX? (Note: this will mean no change to equity index futures expiry arrangements) If you support this option what lead-times would be required before such a change was introduced? 3. Change both the index expiry date and single stock expiry date policy? For example, to the 3rd Friday of the month. (Note: this will involve a change to all equity index futures expiry dates) If you support this option what lead-times would be required before such a change was introduced? April 2014 Equity Derivatives Questionnaire Page 3 of 5

4 4. Also align the expiry timing between the single stock and index (XJO) option contracts? (Not currently proposed) Please keep in mind that the only change that could practically be made to achieve this would be to align the single stock ETO expiry with the existing index (XJO) expiry. That is, to base settlement off the opening price of the underlying for the given expiry day. If you support this option what lead-times would be required before such a change was introduced? Comments: (Please reasons) Further Information For further details or questions relating to any of the information contained above, please contact Gregory Pill, Manager, Equity Derivatives on or greg.pill@asx.com.au. Responses Respondents will have until COB Friday 13 June 2014 in which to submit answers to the above questions. Please send response to: Mail: Gregory Pill, Manager - Equity Derivatives ASX Limited 20 Bridge Street NSW greg.pill@asx.com.au. April 2014 Equity Derivatives Questionnaire Page 4 of 5

5 April 2014 Equity Derivatives Questionnaire Page 5 of 5