ASX Group will allow investors to trade equity options for any date from April 30.
“Investment managers can trade an equity option with any expiry date and electable strike price,” says David Stocken, senior manager for institutional sales at the ASX. “There are no International Swaps and Derivatives Association requirements.”
About 25 per cent of Australian option volume flow are from institutional investors, according to Stocken. He says about 75 per cent are from individual investors.
Australia set up its options market in 1976. It was the first such market outside North America.
The new ASX product is called OTC Equity Clear.
Philip Gocke, managing director of the non-profit Options Industry Council, says in 2000 about 60 per cent of total option volume in the U.S. were from individual investors. About 40 per cent came from institutional investors.
In 2012 about 60 per cent of option volume in the U.S. is institutional and about 40 per cent are from individual investors.
“Retail embraced options early,” says Gocke. “They added liquidity causing institutional investors to look at it as a product.”
Stocken says it will “take a great period of time” of time for Australian institutional investors to embrace options in the same way as their American counterparts have done.
Still, there are former market makers and boutique fund operators who are embracing products such as yield protection and buy-write, he says.