Nicosia, 28 th March 2008 HELLENIC EXCHANGES DERIVATIVES MARKET Trading, Clearing and Settlement of...

Nicosia, 28Nicosia, 28thth March March 2008 2008

HELLENIC EXCHANGESHELLENIC EXCHANGES

DERIVATIVES MARKETDERIVATIVES MARKET

Trading, Clearing and SettlementTrading, Clearing and Settlement

of Derivative Productsof Derivative Products

Presentation to Members of the Cyprus Stock ExchangePresentation to Members of the Cyprus Stock Exchange

2

ATHEX Derivatives Market

AgendaAgenda

Derivative Products

Trading

Clearing and Settlement

Securities Lending – Short Selling

Trading System

Statistics

Benefits

3


FinancialFinancial DerivativesDerivatives::

Every financial product, the value of which depends on the value of another product (underlying product).

A transaction in a derivative product is a legally binding agreement between two parties, of whom, one promises to buy and the other to sell a certain quantity of a standardized product, at a pre-specified future date and price.

The underlying product can refer to stocks, indices, interest rates, currencies, parities, commodities etc.

4


FuturesFutures

Futures:

A legally binding agreement between two parties, of whom, one

promises to buy and the other to sell a certain quantity of a

standardized product , at a pre-specified future date (expiry date) and

price (futures price) within a regulated market.

Estimations for the future development of the underlying products

Rising AND falling movements

Margin

Leverage

Daily settlement of gains-losses

5


Gains & Losses from a Future’s PurchaseGains & Losses from a Future’s Purchase

+2.000

+1.500

+1.000

+500

0

-500

-1.000

-2.000

-1.500

1.500

1.400 1.600 1.800

1.900

2.000

1.7001.300

1.200

1.100

Gains (in €)

Losses (in €)

FTSE/ASE-20 points

Unlimited Gains

Unlimited Losses(1.500 * 5 €)

• Purchase of a Future @ 1.500 index points

• Multiplier: 5

• Purchase of a Future @ 1.500 index points

• Multiplier: 5

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Gains & Losses from a Future’s SellingGains & Losses from a Future’s Selling

Gains (in €)

Losses (in €)

FTSE/ASE-20 points

Unlimited Gains(1.500 * 5 €)

Unlimited Losses

+2.000

+1.500

+1.000

+500

0

-500

-1.000

-2.000

-1.500

1.500

1.400 1.600 1.800

1. 900

2.000

1.7001.300

1.200

1.100

• Selling of a Future @ 1.500 index points

• Multiplier: 5

• Selling of a Future @ 1.500 index points

• Multiplier: 5

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Purchase of a Future onPurchase of a Future on FTSE/ATHEX-20 FTSE/ATHEX-20

Derivative: Future Underlying Asset: FTSE/ATHEX-20 (blue chips) Multiplier = 5 € per index point Margin = 10% (leverage 1 to 10) Movement 2% in index = 20% change of capital

Purchase at 2.400 points Nominal Value of Position = 2.400 points * 5

€ = 12.000 € Margin 10% = 1.200 €

Selling at 2.450 points Nominal Value of Position = 2.450 points *

€5 = €12.250

Gain = 250 € or 50 index points * 5 € Capital: 1.200 €

Return: 20.8% (index change 2.08%)

Settlement DAILY (credit/debit of gain/loss)

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Selling of a Future on FTSE/ATHEX-20 Selling of a Future on FTSE/ATHEX-20

Selling at 2.400 points Nominal Value of Position = 2.400 points * 5 €

= 12.000 € Margin 10% = 1.200 €

Purchase at 2.300 points Nominal Value of Position = 2.300 points * 5 €

= 11.500 €

Gain = 500 € or 100 index points * 5 € Capital: 1.200 € Return: 41.66% (μεταβολή δείκτη 4.16%)

Settlement DAILY (credit/debit of gain/loss)

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Options:

An agreement that gives the buyer the right to buy (Call Options) or sell (Put Options) predefined quantity of the underlying asset at a pre-arranged price, at or until a pre-specified date

BUYER OF AN OPTION SELLER OF AN OPTION

CALL OPTIONHas the right to buy the underlying asset at the exercise price.

Is obliged to sell the underlying asset at the exercise price.

PUT OPTION Has the right to sell the underlying asset at the exercise price.

Is obliged to buy the underlying asset at the exercise price.

OptionsOptions

Prediction regarding the development of the value of an underlying asset (index, stock, currency etc) with security

All possible combinations: Rising, falling movements but also stability Limited, unlimited, certain return Leverage

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Gains & Losses on expiration from the purchase of a Call OptionGains & Losses on expiration from the purchase of a Call Option

Gains (in €)

Losses (in €)

FTSE/ATHEX-20 points

Unlimited Gains

Limited Losses(premium)

+1.000

+750

+500

+250

0

-250

-500

1,500

1.450 1.550 1.650

1.700

1.750

1.6001.400

1.350

1.300

• Purchase of a Call Option 1.500 @ 100 premium

• Multiplier: 5

• Purchase of a Call Option 1.500 @ 100 premium

• Multiplier: 5

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Gains & Losses on expiration from the selling of a Call OptionGains & Losses on expiration from the selling of a Call Option

Gains (in €)

Losses (in €)


Limited Gains (premium)

+500

+250

0

-250

-500

-1.000

-750

1.500

1.450 1.550 1.650

1.700

1.750

1.6001.400

1.350

1.300

Unlimited Losses

• Selling of a Call Option 1.500 @ 100 premium

• Multiplier: 5

• Selling of a Call Option 1.500 @ 100 premium

• Multiplier: 5

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Gains & Losses on expiration from the purchase of a Put OptionGains & Losses on expiration from the purchase of a Put Option

Gains (in €)

Losses (in €)


+1.600

+1.200

+800

+400

0

1.500

1.420 1.580 1.740

1.820

1.900

1.6601.340

1.260

1.180

Limited Losses

Unlimited Gains ((1.500 -80) * 5 €)

• Purchase of a Put Option 1.500 @ 80 premium

• Multiplier: 5

• Purchase of a Put Option 1.500 @ 80 premium

• Multiplier: 5

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Gains & Losses on expiration from the selling of a Put OptionGains & Losses on expiration from the selling of a Put Option

Gains (in €)

Losses (in €)

FTSE/ATHEX-20 points0

-400

-800

-1.600

-1.200

1.500

1.420 1.580 1.740

1.820

1.900

1.6601.340

1.260

1.180

+400 Limited GainsPremium

Unlimited Losses((1.500 -80) * 5 €)

• Selling of a Put Option 1.500 @ 80 premium

• Multiplier: 5

• Selling of a Put Option 1.500 @ 80 premium

• Multiplier: 5

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Purchase of a Call OptionPurchase of a Call Option

• Purchase of a CALL DEC 2006 2.350 @ 20

premium points

• Capital: 20 * 5 € = 100 €

• Selling of a CALL DEC 2006 2.350 @ 65

premium points

• Gain: 45 points (65 - 20) = 45 * 5 € =

225 € (return: 225 %)

• Purchase of a CALL DEC 2006 2.350 @ 20

premium points

• Capital: 20 * 5 € = 100 €

• Selling of a CALL DEC 2006 2.350 @ 65

premium points

• Gain: 45 points (65 - 20) = 45 * 5 € =

225 € (return: 225 %)

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Purchase of a Put OptionPurchase of a Put Option

• PURCHASE of a PUT DEC 2006 2.350 @

20 premium points

•Capital: 20 * 5 € = 100 €

• Selling of a PUT DEC 2006 2.350 @ 60

premium points

• Gain: 40 points (60-20) = 40 * 5 € = 200

€ (return: 200 %)

• PURCHASE of a PUT DEC 2006 2.350 @

20 premium points

•Capital: 20 * 5 € = 100 €

• Selling of a PUT DEC 2006 2.350 @ 60

premium points

• Gain: 40 points (60-20) = 40 * 5 € = 200

€ (return: 200 %)

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EntitiesEntities

Capital Market Commission

Athens Exchange

HELEX (securities and derivatives clearing/settlement)

ATHEX Members

Clearing Members

Cash Settlement Bank

Margin Banks

Vendors

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Life CycleLife Cycle

Margin Requirement Purchase/Selling of a Future Selling of a Call or Put

Clearing (daily) After the end of the trading session

Settlement on expiration Final Settlement Prices

Expiration: Expiration on a month basis:

Futures on the FTSE/ATHEX - 40 Put Option on the FTSE/ATHEX – 20 & FTSE/ATHEX - 40

Expiration on a trimester basis: (March, June, September, December) Futures and Put Option on Stocks Futures on FTSE/ATHEX - 20

The Final Settlement Prices results from the prices of the Intraday Auction of the Big Cap

Category (it is realized every 3rd Friday of each month).

The Final Settlement Prices results from the prices of the Intraday Auction of the Big Cap

Category (it is realized every 3rd Friday of each month).

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Market Model Basic PrinciplesMarket Model Basic Principles

Operation and regulations through the ATHEX Rulebook

Order Driven market (Continuous trading) with the participation of

the Market Makers

Anonymity of transactions

Priority «Price – Time»

Clearing and Margin on a basis of Final Investor

Cash Settlement on a Member basis

Totally Electronic Trading & Clearing

Real Time market and Market Makers’ obligations surveillance

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Derivative ProductsDerivative Products

Put Options on:

• FTSE/ATHEX-20 index

• FTSE/ATHEX Mid 40 index

• 6 Stocks (Big Cap)

Put Options on:




Securities Lending on (Stock Repo, Stock Reverse Repo and STRAs):

• 60 stocks of the indices FTSE/ATHEX-20 and FTSE/ATHEX Mid 40

Securities Lending on (Stock Repo, Stock Reverse Repo and STRAs):

• 60 stocks of the indices FTSE/ATHEX-20 and FTSE/ATHEX Mid 40

Futures on:




Futures on:




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Procedures HoursProcedures Hours

Trading Hours Trading 10:00 - 17:00

Market Makers 10:45 - 16:30

Phases

Transactions

Continuous Trading

On-Line operations available

Calculation of Settlement Prices

Calculation of Margin

Clearing

Transactions Clearing

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User TypesUser Types

Market Place Assistant (MAW)Market Makers Supervision (MPA)Clearing (CLCO)Database Administrator (PD)

Market Place Assistant (MAW)Market Makers Supervision (MPA)Clearing (CLCO)Database Administrator (PD)

DTW (Front Office) – Order Volume LimitDCW (Back Office)API Users (for connection 3rd party applications - Front, Middle or Back Office,Quote Machines)

DTW (Front Office) – Order Volume LimitDCW (Back Office)API Users (for connection 3rd party applications - Front, Middle or Back Office,Quote Machines)

Internal UsersInternal Users

Member UsersMember Users

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Order TypesOrder Types

Simple orders Fill or Kill

Fill and Kill

Rest of Day

Until Expiration

Specific Date

Standard combination orders Fill or Kill

Fill and Kill

Non standard combination orders Fill or Kill

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Information DisseminationInformation Dissemination

ΟΑΣΗΣ System

Real Time Market Data

Websites

www.adex.ase.gr and www.athex.gr

Statistical Bulletins

Daily Statistical Bulletin

Monthly Bulletin

Annual Bulletin

Statistical Products

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VendorsVendors

Greece1. FORTHNET SA2. ZEYS3. K-TEL KALOFOLIAS4. INFOREX5. PROFILE SA6. TENFORE SYSTEMS LIMITED

Cyprus1. AG - FINANCIAL ΝΕΤWORK LTD

Foreign 1. BLOOMBERG LP2. GL TRADE SA3. REUTERS LIMITED

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Market MakersMarket Makers

Basic Obligation: To provide on a continuous basis bid and offer prices for predefined quantities of contracts. The spread between bid and offer prices cannot exceed the highest limit

allowed that ATHEX sets for each product. If the Market Maker does not enter quotes he pays a fine.

Necessity of the Market Maker: Ensuring of liquidity in the market and spread reduction. Most of the derivatives markets operate with the presence of Market

Makers. Their role is very important for new products.

The purpose of the Market Maker: To maximize the volume by buying at bid and selling at offer or by hedging their position in derivatives with an opposite position in the spot market. It is not his purpose to take a position in the market, to influence the

market or to hold the market.

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HELEXHELEX ( (Clearing & Settlement of DerivativesClearing & Settlement of Derivatives))

Clearing House

Central Counterparty of the Final Investors

Clearing Accounts on a basis of a Final Investor

Cash Settlement on a Member basis

Physical Delivery of Assets on a basis of a Final Investor

Clearing Members – Guarantee of Clearing

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Risk ManagementRisk Management

Daily calculation and Margin collection Collaterals

Lines of defense in case of commitment violation: Margin of Investor Margin of Clearing Member

Direct Clearing Member: 0.5 Μ € General Clearing Member: 3 Μ €

HELEX equity capital

Acceptable Pledges% of the daily

valuation

Cash in Euro 100%

Cash in USA dollars 95.75%

Letters of Credit 100%

3-year Bond 88%

Variable Coupon Bonds 88%

3 - 9 years BondsΟμόλογα διάρκειας 3 - 9 έτη 83%

Bonds of duration >9 years 75%

Stocks of FTSE/ATHEX - 20 and FTSE/ATHEX - 40 50-65%

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Securities LendingSecurities Lending

1. Stock Repo (SL) / Stock Reverse Repo (SB)

Lending to and from a pool of stocks managed by HELEX

1. Stock Repo (SL) / Stock Reverse Repo (SB)

Lending to and from a pool of stocks managed by HELEX

LenderLender BorrowerBorrower

HELEXHELEX

Interest PaymentInterest PaymentInterest ReceiptInterest Receipt

Stock RepoStock Repo Stock Reverse Repo

Stock Reverse Repo

1. Lending to and from a pool of stocks managed by HELEX.

2. The interest of Lending and the available quantity is determined according to the offer and demand.

3. Management of Corporate Actions.

4. Stocks of the Big Cap Category which are underlying assets of a derivative product or constituents of an index which serves as underlying of a derivative product.

5. They are used for Short Selling and covering of physical delivery obligations of derivative products.

1. Lending to and from a pool of stocks managed by HELEX.

2. The interest of Lending and the available quantity is determined according to the offer and demand.

3. Management of Corporate Actions.


5. They are used for Short Selling and covering of physical delivery obligations of derivative products.

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Securities Lending (cont.)Securities Lending (cont.)

LenderLender

Pays interestPays interestReceives interestReceives interest

STRASTRA

2. Special Type Repurchase Agreement (STRA)

Stock lending between two parties

2. Special Type Repurchase Agreement (STRA)

Stock lending between two parties

1. Stock lending between two parties.

2. The interest of Lending and the quantity are agreed by the two parties.

3. Management of Corporate Actions


5. Possibility to choose the valeur of transaction and Possibility of clearing at the same day of the transaction

6. They are used for Short Selling, covering of physical delivery obligations of derivative products and for Failed Trades.

1. Stock lending between two parties.

2. The interest of Lending and the quantity are agreed by the two parties.

3. Management of Corporate Actions


5. Possibility to choose the valeur of transaction and Possibility of clearing at the same day of the transaction

6. They are used for Short Selling, covering of physical delivery obligations of derivative products and for Failed Trades.

BorrowerBorrower

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Short SellingShort Selling – – FrameworkFramework

Underlying Assets

Flat-tick

Time

Short-covering

• Stocks of the Big Cap Category which are

underlying assets of a derivative product or

constituents of an index which serves as underlying

of a derivative product.

• No price limitation (flat/up tick).

• Stocks lending can be realized until Τ+3

(settlement day)

• In case of stock purchase that results in a closing of

position of a short selling, the buyer is not obliged

to return them to HELEX (Stock Reverse Repo)

Users • All investors

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Derivatives Trading System OASISDerivatives Trading System OASIS

ΟΜ (basic Software)

Stability

Security

High return Orders

Average: 250.000

Max: 550.000

Transactions: Average: 4.000

Max: 6.000

Availability: 99.94% trading, 99.80% clearing

International Standard System market model

OMNet API)

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Derivatives Trading System OASISDerivatives Trading System OASIS

DTW DCW

OMNet

DTS DCSS

MSS MAW CL_CO

SAS

CDB PDPD

OASISETS

DataVendors

CSD

SettlementBank

MarginBank

Accounting

3rd partyapplications

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StatisticsStatistics – – Number of ContractsNumber of Contracts

1999 193 193 193

2000 996 3,624 55 49 4,725 2351% 1 53 54 4,779

2001 124 56 7,426 556 662 8,825 87% 180 249 429 696% 9,254 94%

2002 821 9,836 1,980 2,317 14,954 69% 462 646 1,109 159% 16,063 74%

2003 300 1,933 45 14 11,685 3,456 2,168 19,601 31% 915 777 1 1,692 53% 21,293 33%

2004 325 3,635 92 16 11,558 2,276 1,445 19,347 -1% 701 737 4 1,442 -15% 20,789 -2%

2005 87 5,726 71 16 10,087 1,676 1,124 18,788 -3% 1,483 1,064 228 2,775 92% 21,563 4%

2006 0 9,946 51 18 10,579 1,591 1,102 23,288 24% 3,198 2,078 176 5,453 96% 28,741 33%

2007 0 12,308 321 103 10,888 1,232 1,271 26,123 12% 4,584 3,485 1,413 9,481 74% 35,604 24%

Feb-2008 0 11,383 394 372 12,430 990 937 26,507 14% 6,620 5,277 2,453 14,351 51% 40,858 15%

Growth

Derivatives Market Cumulative Daily Average Volume Per Product

Stock American Put Option

Stock Index

Put Option

SL Repo

Stock Index Call

Option

Total GrowthTotal

ReposSB

RepoGrand Total

GrowthYear

Ten Year Bond

Future

EUR/USD Currency

Future

Stock Future

Stock American

Call Option

Stock Index Future

Stock RA

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StatisticsStatistics - - VariousVarious

1999 3

2000 112

2001 67

2002 75

2003 105

2004 130

2005 139

2006 198

2007 256

Feb-2008 267

YearTurnover Nominal

Daily Average Turnover

1999 36

2000 833

2001 1,647

2002 1,855

2003 2,085

2004 2,114

2005 2,421

2006 3,275

2007 3,349

Feb-2008 4,158

Daily Average Number of Trades

Year # of Trades

1999 20 20 40

2000 40 36 76

2001 65 42 107

2002 70 47 117

2003 67 47 114

2004 60 41 101

2005 55 36 91

2006 54 37 91

2007 49 35 84

Feb-2008 49 35 84

Derivatives Market Members

YearTrading

MembersClearing Members

Total

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Underlying MarketUnderlying Market

InvestorsInvestors

BenefitsBenefits

More investment choices

Gain in rising or falling cycle

Possibility of hedging of stocks portfolio

Investment in a whole sector with low cost

Depiction of sophisticated expectations for the market

Possibility to increase leverage

Market completion

Increase of market efficiency

Vitalization of liquidity

Market maturity

Increase of international interest (Visibility)

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InformationInformationInformationInformation

Athens Exchange S.A.(www.athex.gr, www.adex.ase.gr)

Pantelis Lamprou, Director of Business Development – Products Division

110, Athinon Ave, 104 42 Athens

Tel: + 30 210 3366 261

Ε-mail: [email protected]

Nicosia, 28 th March 2008 HELLENIC EXCHANGES DERIVATIVES MARKET Trading, Clearing and Settlement of...

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Transcript of Nicosia, 28 th March 2008 HELLENIC EXCHANGES DERIVATIVES MARKET Trading, Clearing and Settlement of...