After sleeping decades without any competitors, Euronext Liffe started to pick up some speed in defending their option market against new entrants. The one cent tick size started today. The other major announcement was the introduction of options and futures on the AMX Midcap index.
AMX futures end of March
No time to lose. Introduction of the AMX futures (FMX) will start 26th of March. The option market will open April 10th. As usual, there well be a dozen of competitive market makers and three primary market makers. I’m confident Optiver, Leopark and Caerus will sign for quoting as PMM.
Most of the components of the index have options traded on them. Still, the liquidity may be an issue. Euronext decided to have the market makers quote for a minimum of just five lots.
The rationale for AMX options and futures is simple. Retail investors are fond of the midcap stocks. Enough room for fantasy in stocks such as AMG, Pharming and Aalberts to name but a few. Maybe it could work for the index too.
AMX index is trademark
The other reason is to create a small line of defense against TOM. An index is a registered trademark. TOM can’t legally launch options and futures on the AEX and AMX. Well, they can. And they will, someday. But it would ignite a legal battle in court between TOM and Euronext – which could eventually buy a little time for the old exchange.
Dividend futures are deserted
Quoting futures. The dividend futures are deserted. Nobody is interested in making a market in these contracts. Even SIG has left the building. Tomorrow, March 9th, is the last day to sign up for quoting the futures. Without futures, there won’t be any option market. Curious who would like to be liquidity provider in the FMX.
The professional market isn’t very interested in the AMX index. Index linked products of any importance do not exist. No ETF’s or warrants of any size. Total assets under management linked to the AMX index is a very, very tiny 26 million. If the AMX options would be hit, the next index options and futures will be the small cap index. For real increase of trading volumes, the transactions fees will have to be axed.
Update – Fee incentive program
Without a liquid market in the futures, there’s not viable option market these days. Remember the good old days with the Top 5 options, an index of 5 largecap stocks? The spreads have changed over the years.
Anyway, Euronext is feeling insecure about market maker support for the AMX options and futures. Liquidity providers will get a fee holiday until October 31th. The rest of the market will have a 50% discount in the fees. That should also reach the retail traders.
There’s a lot of room for more cuts in transaction fees in regular option classes. This time the incentive didn’t come as a surprise. The deadline for signing for liquidity provider for the FMX futures ended last friday. Not much enthusiasm among the market makers, apparently.
- Fee incentive program (pdf)