Single stock futures in the United States were launched in 2001, but are often forgotten since their big splash introduction twelve years ago on two exchanges.
Quietly, however, single stock futures have been growing nicely at OneChicago, the sole marketplace for the instrument. Through the first nine months of 2013, its volumes are up 49 percent, with 6.96 million contracts traded, topping total volumes posted in all of 2012.
This market has also caught the eye of UBS and Tom Regazzi, managing director at the firm’s Global Synthetic Equity department. He spoke with JLN editor-in-chief Jim Kharouf about how UBS uses single stock futures and the potential for the product going forward.
Regazzi, who is responsible for risk management pricing, execution and strategy for his group, focuses on equity futures, forwards, swaps and notes in the Americas. In his role pertaining to single stock futures, Regazzi’s group provides liquidity to underlying markets, largely in the form of block trades. In short, UBS serves as a sort of quasi-dark pool for single stock futures. UBS then combines these products with other trading services, and offers competitive financing rates for securities.
Regazzi believes single stock futures is becoming an alternative to the traditional financial tools, especially as a block traded instrument. With interest rates so low, Regazzi also says that the product can provide better yields for investors looking for alternative ways to achieve returns.
He says single stock futures will continue to evolve in the next several years with more liquidity and less need for block trading. With more regulation in the OTC space, Regazzi sees more opportunities for exchange listed products out there, as well as for OTC products that will also have to be centrally cleared through traditional clearinghouses.