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Jim:
I agree there will be similar regulatory requirements for single stock
futures and stocks. It won't be 10% margin, but rather 50% as set by the SEC
or Fed. But the hedge margin short the futures, long the stock will be much
smaller, IMHO.
I agree that the tax treatment of stocks and futures will need to be leveled
and that may take some time.
However, being a futures guy, I think there could be some structural
advantages that the single stock futures may bring which could give them an
initial edge. For example, there was a call in securities side for a central
single order book to ensure best execution practices. Futures would offer
that via electronic trading. There would be no uptick rule in the futures.
Futures and stocks can be margined in the same account. Increased
transparency and no designated specialists or payment for order flow will
also help the futures, IMHO.
I think Washington understands that the futures industry is under siege from
foreign competition and they want to do something to help keep these markets
on U.S. shores. Thus, the momentum behind allowing single stock futures.
Single stock futures virtually exist today. Sell a call and buy a put of the
same month and strike price on an individual stock issue and you have a
virtual short futures contract. The introduction of single stock futures
will only increase efficiency and reduce costs for something that already
exists and create new opportunities to lay off risk, spread markets and
arbitrage instruments and its derivatives. I think they have a chance to be
very popular.
Regards,
John J. Lothian
Disclosure: Futures trading involves financial risk, lots of it!
Disclosure: John J. Lothian is the President of the Electronic Trading
Division of The Price Futures Group, Inc., an Introducing Broker.
In a message dated 07/06/2000 11:44:27 PM Central Daylight Time,
tagteam@xxxxxxxxxxxxx writes:
<< Sure. Further, why would anyone want to daytrade stocks via
shops like All-Tech with their 50% margin requirements and
$20-25 per ticket charges when they can trade futures on the
same stocks? Plus, why trade equity options with their
similarly high commission structure and margin requirements?
Single stock futures with a $10/RT commission rate, 10%
initial margin, and 60/40 tax treatment?!? Too good to be
true......
....and maybe it is because those whose respective ox would
be gored are already crying foul. The CBOE, for one, has
already noted, most vociferously, that the playing field is
already manifestly unfair and removing the Shad-Johnson
prohibition on single stock futures would only make matters
worse. Hence, the plea for regulating single stock futures
under "proper securities laws protections". Translation =
same margin requirements, fees, and tax treatment for single
stock futures as for options and stocks. That's one huge
bucket of cold water, IMHO.
The point is, while I think single stock futures would be
great, I believe the regulatory scheme that will eventually
evolve might severely limit the growth potential.
Best regards,
Jim >>
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