Futures Deal Gives Investors New Options

May 15, 2001 (PLANSPONSOR.com) - Institutional investors could begin trading in single-stock futures before Labor Day, through a joint venture of the Chicago Mercantile Exchange and the Chicago Board Options Exchange (CBOE) to offer electronic trading of single-stock futures.

The yet to be named joint venture will be a for-profit company, with its own management and will be separately organized as a regulated exchange. 

The Merc, the largest American futures exchange, and the CBOE, the world’s largest options exchange, will each own 45%.  The Chicago Board of Trade has also agreed to participate with a 10% stake, according to the Associated Press.

Future Obligation

A future obligates the holder to buy or sell the stock at a specified future date and price, which differs from an option, which gives the holder the right – but not the obligation – to buy or sell at a designated date and price. 

Last December federal legislation was passed lifting a long-standing ban on the trading of futures on individual stocks.  US markets currently trade in stocks, stock options and futures on broad-based stock-index options, but not individual stocks. 

Individual-stock futures already are traded on some international markets. Single-stock trading for retail investors could be available by the end of the year.

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