OneChicago

OneChicago, LLC

File:OneChicago.gif
Company type	Public
Industry	Securities Futures
Founded	May 14, 2001
Headquarters	Chicago, IL , USA
Key people	David Downey (CEO), Thomas McCabe (COO), Mark Esposito (Managing Director of Business Development), Kirk P. Smith (Director of Market Regulations)
Website	www.onechicago.com

OneChicago is a fully electronic exchange owned jointly by IB Exchange Group (IB), Chicago Board Options Exchange (CBOE), and CME Group (CME). It is a privately held company and is regulated jointly by the Securities and Exchange Commission and the Commodity Futures Trading Commission. The OneChicago corporate headquarters is located in the Chicago Board of Trade in the heart of Chicagos finacial district. OneChicago offers approximately 1939 Single-stock futures (SSF) names such as IBM, Apple and Google with all trading cleared through Options Clearing Corporation (OCC). OneChicago currently operates the only US based securities futures marketplace.

Trading Volume

It was reported on January 4, 2011 that 637,012 security futures contracts traded at the Exchange in December 2010, up 83% over December 2009. The total 2010 trading volume was 4,971,160; up 67% from 2009.

Electronic platforms and clearing

OneChicago operates two trading platforms for securites futures. The first utilizing the CBOEdirect electronic trading platform and the second OneChicago’s institutional based system for blocks and EFP’s called B.E.T.S. ISV connect to either platform available. Customers can also trade via an API connection to CBOEdirect. All members of the CME Group and CBOE are automatically members of OneChicago. In addition any clearing member of the Options Clearing Corporation who is permissioned for Security Futures can also route orders for execution. Single stock futures and narrow-based indexes may be traded in either a securities account or a futures account. Many investors will be able to trade OneChicago products on their PCs through their existing securities or futures brokerage accounts.

Products

Securities Futures Contracts

The exchange offers 1939 (as of February 2, 2011) security futures, including 1,207 single stock futures, 10 narrow-based indexes, 237 futures on ETFs and 485 OCX.NoDiv. A OneChicago single stock futures contract is an agreement to deliver 100 shares of a specific stock at a designated date in the future, called the expiration date. In most cases, four expiration dates are available for trading OneChicago single stock futures. The traditional futures symbol will consist of the underlying ticker symbol plus “1C”. For instance, the traditional DIA futures will trade as DIA1C.

OCX.NoDiv products are 100 share multiplier futures. The OCX.NoDiv products are available for OCX.BETS, CBOEdirect as well as the OneChicago’s Central Limit Order Book. The OCX.NoDiv symbol will generally consist of the underlying ticker symbol plus “1D”. For instance, DIA OCX.NoDiv futures will trade as DIA1D. OCX.NoDiv products treat ordinary dividends as corporate events by adjusting the previous days’ settlement price by the dividend amount the morning of the expiration date. Applying the long established special dividend adjustment process to the OCX.NoDiv product removes dividend risk. The OCX.NoDiv products trade side by side with the OneChicago’s traditional futures product. The product pricing will differ by approximately the current value of the relevant forecasted dividends. OCX.NoDiv futures produce identical results to stock ownership as the traditional futures regardless of any dividend fluctuations.

Exchange Future for Physical (EFP)

An Exchange Futures for Physical (EFP) is a combination order to sell (buy) an amount of stock and simultaneously buy (sell) a proportionate number of SSFs. An EFP trade allows for the substitution of a long or short stock position for a long or short SSF position on more favorable financing terms. That is because the interest rate built into the price of an SSF and hence its EFP is competitively determined by numerous market participants rather than by a single broker who can set less advantageous margin loan and stock borrow rates. Accordingly EFP’s can be used as a synthetic stock loan transaction as funds can offer their long stock out in return for a SSF that will expire back into long stock at expiration but with returns that are greater than those currently being received for lending the stock to an intermediary and splitting the fees. Hedge funds and other short sellers who are currently short and paying for the privilege would be able to lower their costs of financing this position by executing an EFP at a much more favorable rate without changing their economic position vis-à-vis the stock position. The EFP is priced in interest rates as there is no underlying price risk since the stock and the SSF are equivalents but does involve interest rate risks as the two parties are simply engaging in a loan as they switch positions. Selling the EFP has the opposite positioning as the SSF is sold and the underlying is purchased.

History

OneChicago was created on May 14, 2001, when the CBOE and CME announced they were forming a for-profit joint-venture exchange to trade single-stock (security) futures. Security futures had previously been outlawed in the U.S. until the passage of the Commodity Futures Modernization Act of 2000 (CTMA). Late in the negotiations between the CME and CBOE, the Chicago Board of Tade agreed to participate with a 10% stake in the joint venture. CME and CBOT merged in July 2007, and are now known as CME Group. On March 16, 2006, OneChicago, LLC announced IB Exchange Group (IB), an electronic broker-dealer, had made a significant equity investment in OneChicago.

On November 20, 2009, the CFTC and SEC reached an agreement to allow OneChicago to broaden its listings to U.S. investors. According to the agreement, any security that can underlie an option can now also be pegged to a futures contract. The measure also allows futures to underlie certain debt securities that are not registered with the SEC.

External links

• INTERACTIVE BROKERS TO MAKE SIGNIFICANT EQUITY INVESTMENT IN ONECHICAGO. <http://www.onechicago.com/?p=562.html> OneChicago. Retrieved on January 28, 2011.
• OneChicago Reports December Volume, Up 83% Over December 2009; Year to Date Volume Up 67% http://www.prnewswire.com/news-releases/onechicago-reports-december-volume-up-83-over-december-2009-year-to-date-volume-up-67-112871489.html prnewswire. January 4, 2011. Retrieved on January 28, 2011.
• Product Listing <http://www.onechicago.com/?page_id=756> OneChicago. Retrieved on January 28, 2011.
• OneChicago Board http://www.onechicago.com/?page_id=6.html OneChicago. Retrieved on January 28, 2011.
• SEC and CFTC Issue Joint Orders on Volatility Indexes and Security Futures

<http://www.sec.gov/news/press/2009/2009-252.htm> SEC. Retrived on February 4, 2011.

• Commodity Futures Modernization Act <http://www.cftc.gov/ucm/groups/public/@lrrulesandstatutoryauthority/documents/file/ogchr5660.pdf> CFTC. Retrieved on February 4, 2011.
• http://www.marketswiki.com/mwiki/OneChicago_LLC Marketswiki. Retrieved on January 28, 2011.