Transcripts

The Start Of Single Stock Futures Trading

PAUL KANGAS: The futures industry made history today when the first contracts on single stock futures began trading this morning on two electronic exchanges. The industry has been battling for years to bring this derivative to market. But as Diane Eastabrook reports, the launch of this new product comes at a difficult time for the financial markets.

IANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: When it comes to trading derivatives, Chicago has always been first -- the first to trade agriculture and financial futures, the first to trade stock options. Today, the city's futures and options exchanges, through a joint venture called One Chicago, were among the first to start trading single stock futures. The product allows investors to bet on a stock with less money up front than buying the stock outright. Chicago's three exchanges have been looking forward to the launch of single stock futures because sluggishness in the financial markets has been a drag on their business.

EDWARD JOYCE, PRESIDENT & COO, CHICAGO BOARD OF OPTIONS EXCHANGE: If people have more access to hedging markets, they can make more efficient markets and many times traders in the options markets that are making the market turn to the stock market to hedge, and this is another market that's available to them.

EASTABROOK: U.S. exchanges were prohibited from trading single stock futures until two years ago. And until just a couple of days ago, the Commodity Futures Trading Commission was still haggling over details about how the product could be traded. The CFTC wanted to take extra care in launching single stock futures because of the inherent risk of futures. Investors who bet the wrong way on a contract can lose a lot more than their initial investment. One Chicago launched trading on a handful of stock futures today and will increase that number to 85 within a few weeks. The exchange says it was difficult deciding which stocks to list, so it opted for a broad mix of them.

WILLIAM RAINER, CHAIRMAN & CEO, ONECHICAGO: It's very easy to come up with the 50 most active common stocks and list them; and for the most part, we will be listing those kinds of stocks. But we're also curious as to whether the marketplace wants to trade, on a futures contract basis, smaller stocks like Krispy Kreme (KKD) and Starbucks (SBUX).

EASTABROOK: One Chicago says in the months ahead it will monitor investor feedback to figure out what additional stocks to list and how this new product can be made more attractive to a wider audience. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.