AEX : 1 cent tick size and return of AEX Light

62 comments / July 17, 2013

It has been discussed for ages, but finally the 1 cent tick size will arrive in the AEX index options. Starting September 2nd, the options below the 5 euro threshold will be quoted with cents – instead of the current 5 cent ticks increments. While this is common practice in all AEX single stock options, it’s another ballgame in the index.

The market in the index is usually quoted with a very tight bid-ask spread in terms of implied volatility. Quoting with 1 cent increments won’t change that, but the systems will probably be flooded by quote updates – and Euronext Liffe’s track record in keeping the market open is terrible. We’ll see.

The return of AEX Light

Ages ago we’ve had the AEX Light options. These options shared the same specifications with the regular index options, but had a smaller multiplier. You needed to buy more to earn the same money. Nobody every traded them. Per September 2013 Euronext Liffe will relaunch mini options and mini futures on the AEX and the CAC.

Can’t imagine anyone waiting for this. If you can’t afford to buy or sell just one index option, you’d better stay out of the market anyway. Trading mini options would be burning your money on transaction fees.

Source on mini options and futures : Euronext notice (pdf)

Cosmetic changes

Smaller tick increments and ~~light~~ mini options : cosmetic changes won’t make a difference when the transaction fees remain at the current high levels for retail investors. Anyway, the times (and spreads) of the good old future pit won’t come back.

Update July 19

Euronext decided to postpone the introduction of the 1 cent tick size increment. Reason is feedback from members. The original plan was to skip automatic checking of combination orders against implied market prices, to avoid slowing down the trading system. Maybe in 2014.

Options on Gemalto

10 comments / July 15, 2013

While the introduction of options on Twentsche Kabel is still in progress, Euronext announced to introduce a new class of options, on Gemalto. And they are in a hurry. Trading will commence on July 25th, and market makers can apply until July 18th.

Gemalto is the opposite of Twentsche Kabel. Don’t know much about this French firm, apart from the strange fact it’s part of the AEX index. Ticker code on Euronext will be GMT. TOM will probably use another ticker code. Speaking of which – when will TOM take the initiative to introduce new options instead of playing copy cat? Time to grow up.

For TOM, I suggest options on Pharming. Instead of a multiplier of 100, take 1000 or even 10000 stocks as underlying. Start with low fees for retail investors and team up with some market makers to be assured of a liquid market. One more bit of advice, when using twitter : try to be a little faster. I should start a consultancy firm.

Source on Gemalto Options : Euronext notice

Free comments are back

33 comments / July 15, 2013

A few months ago, the possibility to comment freely and anonymously on posts was suddenly cut off. I received demand letters from certain lawyers for a certain trading firm, and decided to stay on the safe side. While checking my rights with my own lawyers.

Not surprising, comments disappeared almost altogether when registering was required. Too much hassle. Although one of the few registered comments was pretty funny. But fair enough, free commenting is back again – it wasn’t a software glitch. Just missed the comments.

Of course, no IP addresses have been handed over to any lawyer. Privacy of visitors and commenters is safe. Old posts will be closed for comments after 30 days. Cheers.

Options on Twentsche Kabelfabriek (TKH)

2 comments / July 9, 2013

The day after losing the court case against new rival TOM, Euronext announces to introduce options on TKH Group. That’s short for Twentsche Kabelfabriek Holding. Company founded in 1930, producing cables and still based in Haaksbergen in the countryside. Have to admit it, sounds like a charming stock.

Options with code TKG will commence trading on August 6, with three spots for primary market makers. My guess would be All Options, Caerus and Scrocca. TOM will probably open option trading on the firm after a week or two. Probably a different code, I guess TKH.

Just checked, there are three stocks left in the AMX index without options. Real estate stocks Eurocommercial Properties and Vastned may get options soon. The third one is Pharming – but with a stock trading at 14 cent that’s a whole other story.

Source, Euronext announcement

TOM beats Euronext in court

1 comment / July 8, 2013

Confusing times. Both TOM and NYSE Euronext claim victory after the court ruling on the AEX Index options today (Euronext, TOM). However, it’s not rocket science. The court has clearly decided in favor of The Order Machine, TOM.

Euronext bites the dust

The old exchange lost 30% of their market share to TOM in the AEX index options. Especially in the liquid daily AEX options the contender TOM has captured a large market share. Court ruled this is perfectly fine, as long as the ticker code is adjusted.

TOM is using the ticker code AEX for AEX options. They have to make up a new term for these options. In the product description they are still allowed to refer to the AEX Index. Four weeks to coin a new ticker code. ABC, INDX, 020X : it doesn’t matter what they will use, anything goes. Every trader will confirm, ticker code is completely irrelevant for trading.

The Germans

There are more consequences. The German rival exchange Eurex could add the AEX options to their product list (yes, with another different ticker code). Or the options on the French index, the CAC. TOM and Euronext could try to grab some of the massive volume in the Eurex index options on the DAX, Eurostoxx 50 or the SMI. Attracting flow and market makers providing liquidity will be crucial.

The transaction fees for option trading are still outrageous for retail investors, especially in the low priced out of the money options. Time to cut the fees, we have competition.

Link to court ruling : here (nl). Hat tip to Das Kapital (nl).

Amsterdamtrader