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
ATHEX Derivatives Market
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.
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ATHEX Derivatives Market
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
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ATHEX Derivatives Market
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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ATHEX Derivatives Market
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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ATHEX Derivatives Market
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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ATHEX Derivatives Market
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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ATHEX Derivatives Market
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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ATHEX Derivatives Market
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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ATHEX Derivatives Market
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 €)
FTSE/ATHEX-20 points
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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ATHEX Derivatives Market
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 €)
FTSE/ATHEX-20 points
+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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ATHEX Derivatives Market
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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ATHEX Derivatives Market
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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ATHEX Derivatives Market
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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ATHEX Derivatives Market
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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ATHEX Derivatives Market
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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ATHEX Derivatives Market
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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ATHEX Derivatives Market
Derivative ProductsDerivative Products
Put Options on:
• FTSE/ATHEX-20 index
• FTSE/ATHEX Mid 40 index
• 6 Stocks (Big Cap)
Put Options on:
• FTSE/ATHEX-20 index
• FTSE/ATHEX Mid 40 index
• 6 Stocks (Big Cap)
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:
• FTSE/ATHEX-20 index
• FTSE/ATHEX Mid 40 index
• 25 Stocks (Big Cap)
Futures on:
• FTSE/ATHEX-20 index
• FTSE/ATHEX Mid 40 index
• 25 Stocks (Big Cap)
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ATHEX Derivatives Market
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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ATHEX Derivatives Market
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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ATHEX Derivatives Market
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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ATHEX Derivatives Market
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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ATHEX Derivatives Market
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
25
ATHEX Derivatives Market
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.
26
ATHEX Derivatives Market
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
27
ATHEX Derivatives Market
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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ATHEX Derivatives Market
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.
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.
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ATHEX Derivatives Market
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
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. 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
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. 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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ATHEX Derivatives Market
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
31
ATHEX Derivatives Market
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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ATHEX Derivatives Market
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
33
ATHEX Derivatives Market
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
34
ATHEX Derivatives Market
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
35
ATHEX Derivatives Market
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)
36
ATHEX Derivatives Market
37
ATHEX Derivatives Market
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]