Exchange-Traded Derivatives Erik Banks Exchange-Traded Derivatives WileyFinanceSeries InvestmentMathematics AndrewAdams,PhilipBooth,DavidBowie,DellaFreeth OptionTheory PeterJames TheSimpleRulesofRisk:RevisitingtheArtofRiskManagement ErikBanks CapitalAssetInvestment:Strategy,TacticsandTools AnthonyF.Herbst BrandAssets TonyTollington SwapsandotherDerivatives RichardFlavell CurrencyStrategy:APractitioner’sGuidetoCurrencyTrading,HedgingandForecasting CallumHenderson TheInvestor’sGuidetoEconomicFundamentals JohnCalverley MeasuringMarketRisk KevinDowd AnIntroductiontoMarketRiskManagement KevinDowd BehaviouralFinance JamesMontier AssetManagement:EquitiesDemystified ShantaAcharya AnIntroductiontoCapitalMarkets:Products,Strategies,Participants AndrewMChisholm HedgeFunds:MythsandLimits Francois-SergeLhabitant SecuritiesOperations:Aguidetotradeandpositionmanagement MichaelSimmons Modeling,MeasuringandHedgingOperationalRisk MarceloCruz MonteCarloMethodsinFinance PeterJa¨ckel BuildingandUsingDynamicInterestRateModels KenKortanekandVladimirMedvedev StructuredEquityDerivatives:TheDefinitiveGuidetoExoticOptionsandStructuredNotes HarryKat AdvancedModellinginFinanceUsingExcelandVBA MaryJacksonandMikeStaunton OperationalRisk:MeasurementandModelling JackKing AdvanceCreditRiskAnalysis:FinancialApproachesandMathematicalModelstoAssess,PriceandManage CreditRisk DidierCossinandHuguesPirotte InterestRateModelling JessicaJamesandNickWebber RiskManagementandAnalysisvol.1:MeasuringandModellingFinancialRisk CarolAlexander(ed) Interest-RateOptionModels:Understanding,AnalysingandUsingModelsforExoticInterest-RateOptions (secondedition) RiccardoRebonato Exchange-Traded Derivatives Erik Banks Copyright(cid:1)C 2003 JohnWiley&SonsLtd,TheAtrium,SouthernGate,Chichester, WestSussexPO198SQ,England Telephone (+44)1243779777 Email(forordersandcustomerserviceenquiries):[email protected] VisitourHomePageonwww.wileyeurope.comorwww.wiley.com AllRightsReserved.Nopartofthispublicationmaybereproduced,storedinaretrievalsystem ortransmittedinanyformorbyanymeans,electronic,mechanical,photocopying,recording, scanningorotherwise,exceptunderthetermsoftheCopyright,DesignsandPatentsAct1988 orunderthetermsofalicenceissuedbytheCopyrightLicensingAgencyLtd,90Tottenham CourtRoad,LondonW1T4LP,UK,withoutthepermissioninwritingofthePublisher. 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Contents Acknowledgements xiii Dedication xv Biography xvii Introduction 1 I.1 Overview 1 I.2 Marketfundamentals 2 I.3 Samplefuturesandoptionsstrategies 15 PARTI THECHANGINGMARKETPLACE 27 1 ForcesofChange 29 1.1 Introduction 29 1.2 Deregulation 30 1.3 Globalization 34 1.4 Product/marketcompetition 36 1.5 Newtechnologies 37 1.6 Disintermediation 43 1.7 Commercialization 45 2 RespondingtoChallenges 49 2.1 Adaptingcorporatestructure 50 2.2 Abandoningopen-outcrytrading 57 2.3 Implementingnewtechnologies 60 2.4 Enhancingmarketaccessandproductchoice 65 2.5 Enhancingclearingandsettlementservices 70 2.6 Regulatoryconsiderations 72 2.7 Institutionalconsiderations 73 vi Contents PARTII THEESTABLISHEDEXCHANGES 79 Europe 81 3 BorsaItaliana(BI) 83 3.1 Background 83 3.2 Corporatestructure 84 3.3 Technologyplatform/infrastructure 84 3.4 Clearing 84 3.5 Productofferings 84 3.6 Regulation 85 3.7 Website 85 4 Eurex 87 4.1 Background 87 4.2 Corporatestructure 88 4.3 Technologyplatform/infrastructure 88 4.4 Clearing 89 4.5 Productofferings 89 4.6 Regulation 90 4.7 Website 90 5 Euronext 91 5.1 Background 91 5.2 Corporatestructure 92 5.3 Technologyplatform/infrastructure 92 5.4 Clearing 92 5.5 Productofferings 93 5.6 Regulation 94 5.7 Website 94 6 InternationalPetroleumExchange(IPE) 95 6.1 Background 95 6.2 Corporatestructure 96 6.3 Technologyplatform/infrastructure 96 6.4 Clearing 96 6.5 Productofferings 97 6.6 Regulation 97 6.7 Website 97 7 LondonInternationalFinancialFuturesExchange(LIFFE) 99 7.1 Background 99 7.2 Corporatestructure 100 7.3 Technologyplatform/infrastructure 100 7.4 Clearing 101 7.5 Productofferings 101 Contents vii 7.6 Regulation 103 7.7 Website 103 8 LondonMetalExchange(LME) 105 8.1 Background 105 8.2 Corporatestructure 106 8.3 Technologyplatform/infrastructure 106 8.4 Clearing 106 8.5 Productofferings 106 8.6 Regulation 107 8.7 Website 107 9 MercadoEspan˜oldeFuturosFinancieros(MEFF) 109 9.1 Background 109 9.2 Corporatestructure 110 9.3 Technologyplatform/infrastructure 110 9.4 Clearing 110 9.5 Productofferings 110 9.6 Regulation 111 9.7 Website 111 10 OM/Stockholmsborsen(OM) 113 10.1 Background 113 10.2 Corporatestructure 114 10.3 Technologyplatform/infrastructure 114 10.4 Clearing 114 10.5 Productofferings 115 10.6 Regulation 116 10.7 Website 116 NorthAmerica 117 11 ChicagoBoardofTrade(CBOT) 119 11.1 Background 119 11.2 Corporatestructure 120 11.3 Technologyplatform/infrastructure 120 11.4 Clearing 121 11.5 Productofferings 121 11.6 Regulation 123 11.7 Website 123 12 ChicagoBoardOptionsExchange(CBOE) 125 12.1 Background 125 12.2 Corporatestructure 126 12.3 Technologyplatform/infrastructure 126 12.4 Clearing 126