Sydney Futures Exchange Eyes Regional Expansion in Equity Derivatives Market

The Sydney Futures Exchange (SFE) is preparing to launch a market in Australian equity futures, with a view to expanding its operations into the Asian and even American equity futures contracts. The exchange's chief executive, Mr. Les Hosking, has expressed interest in building on the success of the new contracts, which will be traded in May, and has identified Japan as a logical location for expansion in the Asian region.

The SFE's new equity futures contracts will be available for trading on shares in BHP, National Australia Bank, and News Corporation, representing between 20 and 25 percent of the total Australian sharemarket. However, due to the high concentration of the Australian sharemarket, the SFE may only be able to offer a maximum of 10 companies as futures contracts to ensure sufficient depth, prompting a need to look offshore for further expansion.

Mr. Hosking has acknowledged the potential for US traders to become interested in using the SFE's overnight computer-based trading system, Sycom, to deal in US equities, should the Australian equity futures contracts trade well. The SFE's only real competitor in the region is the Singapore Metals Exchange.

Key Takeaways:

• The SFE plans to build on the success of its new equity futures contracts, which will be traded on shares in BHP, National Australia Bank, and News Corporation.
• The exchange has identified Japan as a logical location for expansion in the Asian region.
• The SFE's new equity futures contracts will be settled in cash rather than the underlying shares to prevent the futures being used as springboards for takeovers.
• The exchange's only real competitor in the region is the Singapore Metals Exchange.
• Mr. Hosking has acknowledged the potential for US traders to become interested in using the SFE's overnight computer-based trading system, Sycom, to deal in US equities.
• There are regulatory gaps in the United States that prevent official markets for equity futures.
• The SFE's short-term focus will be on gaining acceptance for Australian equity futures.

Statistics:

• The new equity futures contracts will be traded on shares in BHP, National Australia Bank, and News Corporation, representing between 20 and 25 percent of the total Australian sharemarket.
• The SFE's only real competitor in the region is the Singapore Metals Exchange.
• It is estimated that as few as one in 10 of each new type of contract in developing futures markets fails to gain an acceptable market.

Sources:

• Australian Financial Review (no date)
• Sydney Morning Herald (no date)