OneChicago marks OCX.NoDivRisk's birthday
30 October 2012 Chicago
Image: Shutterstock
OneChicago has celebrated the second-year anniversary of its exchange-traded equity finance product, OCX.NoDivRisk.
OCX.NoDivRisk allows traders to hold equity exposure without dividend variation risk. Since its launch in Q4 2010, the product has grown to 59 percent of the exchange future for physical (EFP) volume, 44 percent of the block volume and 46 percent of the open interest.
David Downey, CEO of OneChicago, said: “The dividend risk is removed as we adjust the OCX.NoDivRisk contract’s prior night’s settlement on the morning of ex-date by the then known actual dividend amount. This adjustment is done without any pay/collect cycle between the long and short parties. Removing the dividend risk allows market participants to trade without worry of how dividend changes could affect their holdings.”
OCX.NoDivRisk can help firms to address upcoming regulations such as the US Dodd-Frank Act and Basel III.
An EFP transaction using the OCX.NoDivRisk contract is a pure interest rate trade that is equivalent to an OTC equity swap such as an equity repo or stock lending transaction, which are “the very transactions that Dodd-Frank envisions moving to exchanges and clearinghouses”, said OneChicago in a statement.
“Firms looking to trade on better financing and leverage terms with an upgrade of their counterparty exposure to a AA+ entity, the OCC, and those entities that will soon to be affected by pending Basel III capital constraints will find the products attractive.”
OCX.NoDivRisk allows traders to hold equity exposure without dividend variation risk. Since its launch in Q4 2010, the product has grown to 59 percent of the exchange future for physical (EFP) volume, 44 percent of the block volume and 46 percent of the open interest.
David Downey, CEO of OneChicago, said: “The dividend risk is removed as we adjust the OCX.NoDivRisk contract’s prior night’s settlement on the morning of ex-date by the then known actual dividend amount. This adjustment is done without any pay/collect cycle between the long and short parties. Removing the dividend risk allows market participants to trade without worry of how dividend changes could affect their holdings.”
OCX.NoDivRisk can help firms to address upcoming regulations such as the US Dodd-Frank Act and Basel III.
An EFP transaction using the OCX.NoDivRisk contract is a pure interest rate trade that is equivalent to an OTC equity swap such as an equity repo or stock lending transaction, which are “the very transactions that Dodd-Frank envisions moving to exchanges and clearinghouses”, said OneChicago in a statement.
“Firms looking to trade on better financing and leverage terms with an upgrade of their counterparty exposure to a AA+ entity, the OCC, and those entities that will soon to be affected by pending Basel III capital constraints will find the products attractive.”
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