ASX Ltd. is seeking to interest more Australian fund managers in its new equity option initiatives.
“We’ve had the biggest overhaul in the market for the last 10 to 15 years,” says David Stocken, senior manager, institutional sales for the ASX.
“We’ve started a heavy duty awareness campaign with the buy side,” he says.
The exchange has had about 30 meetings with fund managers in Melbourne and Sydney to talk about their new option initiatives. The ASX estimates that 25 percent of its options contract volume is institutional. About 75 percent are by individual investors.
Next year the ASX will list many more strike prices into their equity options market. This will enable fund managers, Stocken hopes, to use options to hedge their portfolios.
In 2012 the exchange will also offer a clearing service allowing for anonymous trade reports into equity options with flexible strike prices and flexible expiry dates.
This clearing service will not require any International Swaps and Derivatives Association documentation. Stocken says these equity options will clear, settle and cross margin in the same way as other ASX equity options.
This year the ASX has decreased the option contract size to 100 shares per contract to move closer to a global standard. This makes the contract more accessible to retail and institutional investors, says Stocken.
ASX has also raised the market makers quoting obligations so market makers have to answer all quote requests out to a one year expiry date. This, Stocken says, enhances price discovery.
Single stock options daily trading volumes have increased since July 1 to 651,000 contracts. XJO contracts, based on the ASX/S&P 200 Index, have risen to 52,900 a day during the same period.
The ASX has signed an agreement with the Options Industry Council of the U.S. to share research.