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International Development of Futures and Options

International Development of Futures and Options. Karyn Yamamura BA 543 May 26, 2005. Overview. FLEX and Exotic Options Developed and Developing Markets Europe China Trading Floor Movement Electronic vs Open Outcry. FLEX and Exotic Options. Flexible Exchange Options (FLEX) 1993 CBOT

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International Development of Futures and Options

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  1. International Development of Futures and Options Karyn Yamamura BA 543 May 26, 2005

  2. Overview • FLEX and Exotic Options • Developed and Developing Markets • Europe • China • Trading Floor Movement • Electronic vs Open Outcry

  3. FLEX and Exotic Options • Flexible Exchange Options (FLEX) • 1993 CBOT • Customization • Exotic Options • Average Rate (a.k.a. Asian Rate) Option • Barrier Option • Knock-out • Knock-in • Basket Option

  4. Developed Markets • Europe - London • Has some of the most developed and widely used Futures and Options Markets • Eurex • Euronext.liffe • OMX • Consolidation • Electronic trading system

  5. Developed Markets (cont.) • Euronext.liffe • Euronext established in 2000 • LIFFE (London International Financial Futures Exchange) • LIFFE Connect • Euronext.liffe is creating a single market for derivatives, by bringing all its derivatives products together on a single electronic trading platform • Future • Consolidate • Acquire London Stock Exchange

  6. Developing Market • China • 1500 to 1978 country faced war, poverty, corruption • Prohibited foreign investment • 1978 opened economy to outsiders • 1990 Futures Market established • Corrupt • Plagued with insider trading, scandals, fraud, etc • Many Markets closed • 1992 CSRC (China’s Securities Regulatory Commission) • Similar to the SEC (Securities and Exchange Commission) • Enforce regulations • Future Opportunities • One of the world’s leading countries in natural resources, population, and land • Futures market limited to domestic financial institutions • Options markets

  7. Traditional Open Outcry Sentimental value 150 year history in USA Excitement Shouts, hang signals, etc. Source of Revenue Tourist Attraction Employment Floor brokers, clerks, assistants, etc. Electronic Platform Speed milliseconds Cost 20-30% less Robustness/Stability Fewer mistakes Resilient to catastrophes Trading Floor Movement

  8. Conclusion • FLEX and Exotic Options • Developed and Developing Markets • Electronic vs Traditional Open Outcry Trading Floor

  9. Questions?

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