OPTIEBEURS-EERSTE HANDEL

It has been discussed for ages, but finally the 1 cent tick size will arrive in the AEX index options. Starting September 2nd, the options below the 5 euro threshold will be quoted with cents – instead of the current 5 cent ticks increments. While this is common practice in all AEX single stock options, it’s another ballgame in the index.

The market in the index is usually quoted with a very tight bid-ask spread in terms of implied volatility. Quoting with 1 cent increments won’t change that, but the systems will probably be flooded by quote updates – and Euronext Liffe’s track record in keeping the market open is terrible. We’ll see.

The return of AEX Light

Ages ago we’ve had the AEX Light options. These options shared the same specifications with the regular index options, but had a smaller multiplier. You needed to buy more to earn the same money. Nobody every traded them. Per September 2013 Euronext Liffe will relaunch mini options and mini futures on the AEX and the CAC.

Can’t imagine anyone waiting for this. If you can’t afford to buy or sell just one index option, you’d better stay out of the market anyway. Trading mini options would be burning your money on transaction fees.

Source on mini options and futures : Euronext notice (pdf)

Cosmetic changes

Smaller tick increments and light mini options : cosmetic changes won’t make a difference when the transaction fees remain at the current high levels for retail investors. Anyway, the times (and spreads) of the good old future pit won’t come back.

Update July 19

Euronext decided to postpone the introduction of the 1 cent tick size increment. Reason is feedback from members. The original plan was to skip automatic checking of combination orders against implied market prices, to avoid slowing down the trading system. Maybe in 2014.

Jack
Jack