London Stock Exchange Derivatives Market launches FTSE 100 weekly options
- First time weekly contracts available on the UK’s benchmark index
- FTSE Russell to establish the settlement price for contracts based on newly launched London Stock Exchange intra-day auction
- SIG Susquehanna, first market maker providing liquidity on screen
- LCH to act as the clearing house, providing margin efficiencies for investors in FTSE futures, monthly and weekly options
London Stock Exchange Derivatives Market (LSEDM), the derivatives market of the London Stock Exchange, today announces the launch of weekly options based on the FTSE 100 Index from 31 May 2016. This product introduction complements LSEDM product offering on the FTSE 100 Index.
The new contracts are the first of its kind of the UK listed derivatives market. The contracts will expire each Friday of the month - except the third Friday, when monthly contracts expire. Weekly options offer investors and traders different characteristics than standard monthly maturity options including:
- More precise hedging and trading;
- Possibility to capture sudden volatility changes;
- Improved value to hedge short term decline without the cost of longer dated protection
Utilising the new London Stock Exchange plc intra-day auction at 12:00, FTSE Russell, the global index provider, will calculate the official uncross price of the FTSE 100 after the auction. LSEDM will use this value to determine the exercise settlement price of the contracts.
The liquidity will be provided initially by SIG Susquehanna, one of the largest market making firms in Europe and worldwide, who will provide continuous two-way prices on the order book.
LCH Ltd will act as the clearing house for the contracts, providing margin efficiencies for investors in FTSE 100 futures, monthly and weekly options through margining offsets for these cleared derivatives within EquityClear.
Nicolas Bertrand, Head of London Stock Exchange Equity and Derivatives Markets:
“LSEDM was created to bring true innovation and cost efficiency to the UK equity derivatives market. We believe the unique characteristics of weekly options on the FTSE 100 will appeal to a wide swathe of UK investors. This launch represents a true collaborative approach across London Stock Exchange Group, reflecting our Open Access philosophy.”
Massimo Butti, Head of London Stock Exchange Derivatives Market Business Development:
“This product introduction meets the strong demand for an instrument that allows investors to take advantage of market events and hedge short term risk in their portfolios with more precision. It complements our current offering of standard monthly maturities options and futures on the FTSE 100 Index”
Cathal Hardiman, Options Sales Trader, Susquehanna International Securities:
“As well as providing more precise hedging, weekly options afford investors more direct exposure to events and we tend to see index weekly volumes jump around large macro events. At SIG Susquehanna we are excited about the launch of FTSE weeklies on the LSE and we plan to aid their development as a product by publishing two-way prices on exchange during market hours. We will also be providing block size prices and up to date market information about the trading in these products to institutional clients directly via our sales desk.”
Gareth Ryan, Managing Director, IUR Capital:
“I am pleased that LSEDM will be offering weekly options on the FTSE 100 Index. This product adds further flexibility to our capacity to carry out options strategies and enhances the range of opportunities that we can offer to our investors.”
London Stock Exchange Derivatives Markets, launched in 2013, offers member firms new and innovative products, alongside a leading international marketplace for Russian Depositary Receipts, Index and Dividend derivatives. It also operates a linked order book model with Oslo Børs to offer Primary market Norwegian liquidity as well as trading of futures and options on the FTSE 100 Index and other UK stocks. In 2015, Turkish equity index derivatives products on the BIST 30 Index, Turkey's leading index, were also made availble to trade.
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Notes to editors:
About London Stock Exchange Group:
London Stock Exchange Group (LSE.L) is an international markets infrastructure business. Its diversified global business focuses on capital formation, intellectual property and risk and balance sheet management. LSEG operates an open access model, offering choice and partnership to customers across all of its businesses. The Group can trace its history back to 1698.
The Group operates a broad range of international equity, ETF, bond and derivatives markets, including London Stock Exchange; Borsa Italiana; MTS (Europe's leading fixed income market); and Turquoise (a pan-European equities MTF). Through its platforms, LSEG offers market participants, including retail investors, institutions and SMEs unrivalled access to Europe’s capital markets. The Group also plays a vital economic and social role, enabling companies to access funds for growth and development.
Through FTSE Russell, the Group is a global leader in financial indexing, benchmarking and analytic services with approximately $10 trillion benchmarked to its indexes. The Group also provides customers with an extensive range of real time and reference data products, including SEDOL, UnaVista, and RNS.
Post trade and risk management services are a significant part of the Group’s business operations. In addition to majority ownership of LCH, a multi-asset global CCP operator, LSEG owns CC&G, the Italian clearing house; Monte Titoli, a leading European custody and settlement business; and globeSettle, the Group’s CSD based in Luxembourg.
LSEG is a leading developer and operator of high performance technology solutions, including trading, market surveillance and post trade systems for over 40 organisations and exchanges, including the Group’s own markets. Additional services include network connectivity, hosting and quality assurance testing. MillenniumIT, GATElab and Exactpro are among the Group’s technology companies.
Headquartered in the United Kingdom, with significant operations in North America, Italy, France and Sri Lanka, the Group employs approximately 5,500 people.
Further information on London Stock Exchange Group can be found at www.lseg.com