The question of OneChicago's volumes is a fair one. Single Stock Futures at OneChicago compete directly with the Stock Loan/Borrow (SLB) process at brokerages. The SLB is a non-transparent and extremely profitable part of their business. These brokerages are OneChicago's customers and they do not allow their customers...perhaps some of you....to have access to the product. They defend their profit centers quite well. So in short business is difficult but not dead. Our Open Interest has risen more than 500% in the last six months. We now list for trading more then 1300 individual stock futures and 117 ETF futures. We have added two new market-maker groups with two more expected to begin operations very soon. The explosion of the credit markets the focus on regulation to bring OTC markets onto regulated, centrally cleared and transparent exchanges will bring the SLB process into the light. At that time the true value of SSF and the EFP trade should be realized. Best.
Solution is very simple.... Requires de-fragmentation.... Requires simple electronic tag which does not allow shorts > outstanding float.....eliminates locates.... No uptick rule.... Limit size participation per account.... First come first served.... All price discovery on the exchange.... Done.... Letting a politician make these types of decisions....????? Why not ask Elmer Fudd ?????
Wrong. They aren't supposed to, but they do. Before becoming an apologist for the Industry, think about it. You will be embarrassed. They lend out legended securities. And everybody knows it. I've told officers of several small companies to pull all stock from them. It will come out. And people will pay dearly. You cannot complain about politicians in the fray. We invited them there, like spreading sugar n the picnic blanket.
Get with the times, my friend. If it can't be done without a 1900-page bill, weekend vote and shocking display of non-transparency, it just ain't worth doing.
15c3-3 Will not allow a broker to loan out excess margin equity. They can loan out up to 140% of what is borrowed. The rest is excess margin. So some fully paid securities could be lent out as per SEC regulation permits. I should have cleared it out a little better earlier. So if you have 100K of stock and you buy 10K in stock (Borrowed 10K) now you have a margin debt of 10K and that means 14K on loan max(if they hypothecate to the max permitted which would be 140% of margin loan) The rest is excess margin. 10K of securities you do not technically own since you borrowed (just like when the bank owns the auto until you pay it off) But the twist obviously is they can remove an additional 4K worth of securities to lend out. (These would obviously be fully paid) hypo agreement cannot supersede the SEC maximum, The agreement you sign is just stipulating what happens. NOW if any broker is violating this, they would not pass muster on an audit. If a broker does a payment in lieu of dividend you might receive a differential (usually the differential would reflect the 35% max tax rate) to make up for that PIL being treated as ordinary gain. You would need to check with your broker obviously. When borrowing on margin you do expose yourself to counter party risk if the firm fails and you have a number of shares out on loan. You would need to arrange to pay off your margin debt. Always print and store your records. And commissions are cheap because of stock loan departments. Once you try and make all these rules, then trades would end up costing more. And do not borrow on margin if you do not agree with this.