Nasdaq Liffe Markets Announces a New Transaction-“EFOs”
New York — Nasdaq Liffe Markets, LLC (NQLX) announced today the introduction of a new exchange transaction—an Exchange for Options or “EFO” transaction. An EFO, which is similar to an Exchange for Physical (EFP), allows two parties to link across markets the execution of a trade for exchange-listed security options with the execution of a security futures trade.
EFO transactions involving security options and security futures can be used to replicate, with futures, commonly used stock and securities options trading strategies. Such strategies include “covered call” or “buy/write” strategies, which involve the owner of common stock writing call options on the underlying stock as a hedge. Currently, the International Securities Exchange, Inc. (ISE) has rules that recognize, and give certain execution priorities to, EFO transactions involving specified combinations of security options and security futures.
Tom Ascher, NQLX CEO, said, “Our primary objective in establishing an exchange for options function is to empower our members and their customers with the means to execute the most sophisticated and current trading and risk management strategies. The value of a SSF vs. options trade is clear. Today we have reduced the risk and cost involved in such a trading strategy across multiple exchanges. The International Securities Exchange has already published a rule recognizing SSFs as a permissible component of a multi-part trading strategy.
Ascher added, “We commend the ISE for being the first options exchange to have recognized the potential customer benefit of these trades and for being the first to create rules to permit them. We think the exchange for options function will both heighten liquidity and ultimately enhance the efficiency of the U.S. capital markets.”
NQLX is a fully electronic, federally regulated exchange formed as a joint venture between The NASDAQ Stock Market Inc.® and LIFFE (London International Financial Futures and Options Exchange). It lists security futures on both exchange-traded funds and the largest U.S. companies through LIFFE's electronic trading platform, LIFFE CONNECT™. For more information on NQLX, visit: www.nqlx.com
NQLX: The Future of Financial MarketsSM |
