OneChicago unveils OCX.NoDivRisk
04 May 2011 Chicago
Image: Shutterstock
OneChicago, LLC, has renamed one of its security futures products to OCX.NoDivRisk from OCX.NoDiv. The exchange believes the new identifier for the product suite, which removes dividend risk, better reflects its value to investors.
The OCX.NoDivRisk product suite, launched in Q4 2010, addresses customer’s concerns regarding dividend risk when trading security futures. Traditional security futures, like other equity derivatives, requires end users to forecast dividends in determining the desired trade prices. Any dividend forecast errors impact the ultimate profitability of the trade.
The OCX.NoDivRisk product suite removes the dividend risk from the security futures by treating all distributions as corporate events and adjusting the product on ex-date by the amount of the dividend.
“OCX.NoDivRisk is the first exchange-traded equity derivative without embedded dividend risk. The No Dividend Risk aspect makes the OCX.NoDivRisk product suite a pure financing transaction,” said David Downey, CEO of OneChicago. “OTC equity derivative participants can use the OCX.NoDivRisk Exchange for Physical (EFP) transactions today to obtain similar results achieved through equity financing tools, such as equity swaps and equity repo transactions, in an exchange traded, central counterparty environment, rather than waiting for swap execution facilities (SEFs) to launch. This strategy is consistent with Dodd-Frank’s intent of moving OTC transactions to exchanges.”
The OCX.NoDivRisk product suite, launched in Q4 2010, addresses customer’s concerns regarding dividend risk when trading security futures. Traditional security futures, like other equity derivatives, requires end users to forecast dividends in determining the desired trade prices. Any dividend forecast errors impact the ultimate profitability of the trade.
The OCX.NoDivRisk product suite removes the dividend risk from the security futures by treating all distributions as corporate events and adjusting the product on ex-date by the amount of the dividend.
“OCX.NoDivRisk is the first exchange-traded equity derivative without embedded dividend risk. The No Dividend Risk aspect makes the OCX.NoDivRisk product suite a pure financing transaction,” said David Downey, CEO of OneChicago. “OTC equity derivative participants can use the OCX.NoDivRisk Exchange for Physical (EFP) transactions today to obtain similar results achieved through equity financing tools, such as equity swaps and equity repo transactions, in an exchange traded, central counterparty environment, rather than waiting for swap execution facilities (SEFs) to launch. This strategy is consistent with Dodd-Frank’s intent of moving OTC transactions to exchanges.”
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