Single-stock futures

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Single-stock futures (SSF's) are securities that share some of the features of equities and also some of traditional commodity futures contracts. They are traded in various financial markets, including those of the United States, United Kingdom, Spain, India and others.

In the United States, they were disallowed from any exchange listing in the 1980's because the Commodity Futures Trading Commission and the U.S. Securities and Exchange Commission were unable to decide which would have the regulatory authority over these products.

After the Commodity Futures Modernization Act of 2000 became law, the two agencies eventually agreed on a jurisdiction-sharing plan and SSF's began trading on November 8, 2002.

Two new exchanges initially offered security futures products, including single-stock futures, although one of these exchanges has since closed. The remaining market is known as OneChicago because it is a joint venture of three previously-existing Chicago-based exchanges, the Chicago Board Options Exchange, Chicago Mercantile Exchange and the Chicago Board of Trade.

SSFs have yet to gain significant popularity among securities & derivatives traders in the United States. Daily total contract volume [1] averaged approximately 26,000 contracts/day in December 2005. Although 2005 total annual volume did increase 188% over 2004, volumes are still small in comparison to more established derivative contracts. For example, U.S. equity & ETF options trade approximately 6,000,000 contracts/day[2].

Single stock futures values are priced by the market in accordance with a theoretical pricing model based on a formula:

Futures Price = underlying stock price X (1+ annualized interest rate - dividend)