Discussion in 'Options' started by minorearth, Dec 6, 2011.
Is this true?
Trade N225U through the Singapore Exchange (SGX). More info and products listed here:
I traded SGXNKM (NIKKEI 225 MINI) a few years ago at about $1.00 USD per tick.
I really appreciate it. I'm attempting to find the most liquid options for the Nikkei and Topix. I found options available for SGXNK and N225. N225 won't allow me permission, and SGXNKM and N225M, show up as having no options.
This is something I've been trying to get my arms around for months. I've spoken to my attorneys, and several levels of folks at IB... no one really has a very good understanding of the issues.
Basically, this is a regulatory issue. Here's my foggy understanding:
Foreign securities must be registered with the SEC before they can be traded by US customers. Now, foreign *futures* contracts have a special channel, as they in theory are regulated by the CFTC... and so, foreign exchanges can request a simple "no-action" letter from the CFTC. As long as the CFTC believes the foreign exchange has appropriate management in place, they will approve foreign futures for US trading.
Options are a different creature yet again. SOME options on futures, the CFTC has no problems providing no-action protection on, meaning they're available for US trading. (See: physical commodities like brent, liffe, etc...) SOME options on equity indices the CFTC is instead treating as securities, meaning they should go through the (very expensive/complicated) SEC registration process... which in practice, no one does. The only other alternative, I believe, is if you're a significantly large fund (>$100mm in AUM).
So, this is why we can trade N225 futures, but *NOT* N225 options. But no, I can't figure out why the Singapore-listed N225 options *are* listed as trade-able via IB... that was the question I posed to IB, and no one I could speak to (not even my fund-level contact) had an explanation.
And don't get me started trying to figure out the tax implications of N225 options... are they 1256, or are they not?
Is anyone very clear on this topic?
For what it's worth, I know people that have very small funds and do trade Japan/Korea/HK equity options, but they do it via some sort of offshore master entity. In general, to do anything serious globally, your best bet is not to be domiciled in the US (opens a whole bunch of other problems, e.g. taxation, but at least you can trade).
That helps a tremendous amount. It sounds like SGXNK options have the highest liquidity for US customers. I'd love to trade OSE options though. Thanks for taking all that time to give me a little of your history.
has some information and links to searches that show what has been approved and what is pending.
I also do not want to be limited to a crippled subset of Asian (and even Canadian) investment and trading vehicles and have started looking into setting up an offshore entity. However the CFTC warns against setting up "dummy corporations" abroad, so advisers are reluctant.
We in the U.S. are not even allowed to trade Canadian or Hong Kong stock options either which is completely ridiculous and makes it next to impossible to even invest in Canadian stocks since the risk cannot be hedged with options. Also no margin purchases of foreign stocks! And of course no CFD's either.
Woah! Why do I feel like this paragraph is new...? I don't recall seeing it before:
Foreign exchange-traded broad-based security index futures contracts (and options thereon): The CFTCâs Office of General Counsel must first issue a no-action letter to allow the offer or sale of a foreign exchange-traded broad-based security index futures contract (or option thereon) in the United States. If a futures contract has been the subject of such a no-action letter, the option on that particular contract (the futures option) may also be offered or sold in the United States, without any further regulatory action from the Office of General Counsel.
I would suggest checking with the exchange in question whether they believe their product is cleared for trading in the U.S.
Probably they market their products to brokers, and brokers will not offer them until the exchange assures them that they have received all U.S. regulatory clearances, including SEC where needed as well as CFTC.
Separate names with a comma.