OneChicago LLC

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OneChicago
OneChicago.gif
Founded May 14, 2001
Headquarters Chicago
Key People David Downey, CEO; Thomas McCabe, Chief Operating Officer;
Products Single-Stock Futures
Website http://www.onechicago.com/

OneChicago, launched in 2001, was a fully electronic exchange owned jointly by Interactive Brokers, CBOE, and CME Group. It was a privately held company regulated jointly by the Securities and Exchange Commission and the Commodity Futures Trading Commission. It offered single stock futures on approximately 1,800 equity, ADR and ETF-based futures contracts. The last trading date of the exchange took place on September 18, 2020, when 99.4 percent of the open interest expired naturally. [1]

On December 21, 2020, the CFTC granted OneChicago's request to vacate its designated contract market (DCM) status, a designation first granted on June 11, 2002.[2]

Interactive Brokers owned 40 percent of the exchange and CME and CBOE each owned 24 percent. The balance of the company was held by management.[3]

OneChicago was ranked 36th globally by derivatives volume in 2018 with 7 million contracts traded, down 52 percent from a year earlier, according to the annual volume survey published by the Futures Industry Association (FIA).[4][5]


Background[edit]

OneChicago offered single-stock futures as a better financing alternative for stock holdings than traditional stock loan costs.[6][7] They offered a stock loan calculator[8] to help investors evaluate their stock financing costs and equivalent single stock futures costs. They also offered an online single stock futures tutorial.[9]

OneChicago used a Lead Market Maker (LMM) system in which LMMs provided a continuous, two-sided market.[10]

Senior Executives[edit]

Electronic Platform and Clearing[edit]

Security futures at OneChicago were traded on the CBOEdirect electronic trading platform and were cleared through The Options Clearing Corporation or CME Clearing. Customers also could trade via an API connection to either CBOEdirect or the CME's Globex platform, which routed the trades to CBOEdirect.

All members of the CME Group and CBOE were automatically members of OneChicago.

The company announced that it would begin to migrate its products to a new proprietary match platform called OCXdelta1 on September 22, 2014. OCXdelta1 replaced the OCX.BETS platform for blocks and EFPs and its CBOEdirect platform for traditional non-block non-EFP orders. OCXdelta1 supports both the reporting of bilateral blocks and EFP's as well as the trading of regular, SSF, block, EFP, and spread markets. The merger of blocks and EFP markets with its SSF markets marked the first time these products have been available on the same platform.[11]

Trading Volume News[edit]

During 2006, OneChicago reported record trading volume of nearly eight million security futures contracts, a 43 percent increase over 2005 total volume of 5.5 million. Average daily volume (ADV) for the year was nearly 32,000 contracts.

In 2009, OneChicago ranked number 45 in 2009 in the FIA's global list of top 53 derivatives exchanges measured by volume, down 25.6 percent on 2008's volume figure.[12] The FIA list, published in early April 2010, reported that that total volume for 2009 fell to 2.98 million from 2008's figure of 4.01 million.

In 2010, OneChicago reported a yearly volume of 4,971,160, up 67 percent from 2009. Five years later, volumes more than doubled to 12.3 million contracts traded in 2016 and topped 14.9 million in 2017.[13]

By 2019, trading volume at 7.4 million contracts had fallen to less than half of the 2017 level. Volume for 2020, OneChicago's last year of operation, totaled slightly more than 3 million contracts for the nine months of trading.[14]

Trading Through A Broker[edit]

Investors could access the security futures trading through a broker, using either a futures account or a securities account. At one time, OneChicago was connected to more than 500 firms and had 125 clearing member firms and more than 7,500 individual members. The exchange's website listed several brokers that connected to OneChicago, although one could trade through brokers not on the list as well.[15]

Products[edit]

Single Stock Futures Contracts[edit]

The exchange offered more than 609 security futures, including 589 single stock futures, eight narrow-based indexes and 12 futures on ETFs. A OneChicago single stock futures contract was an agreement to deliver 100 shares of a specific stock at a designated date in the future, called the expiration date. In most cases, four expiration dates were available for trading OneChicago single stock futures. [16]

OneChicago's single stock futures settled into physical delivery rather than cash. That meant if you were long 10 futures contracts on stock XYZ and you hold your position until delivery, you would receive 1,000 shares of the stock.

The price of a single stock futures contract typically closely tracked the price of the underlying stock.

Futures on Narrow-Based Equity Indexes[edit]

Futures on ETFs[edit]

  • Futures on DIAMONDS
  • Futures on iShares
    • iShares FTSE/Xinhua China 25 Index
    • iShares MSCI Brazil Index
    • iShares MSCI Emerging Markets Index
    • iShares Russell 2000 Index
  • Futures on MidCap SPDR Trust Series 1
  • Futures on PowerShares QQQ
  • Futures on SPDR Trust Series 1
  • Futures on SPDR Selects

Futures on single stocks and ETFs were physically delivered at expiration date. Futures on narrow-based indexes were cash settled. The contracts had a margin requirment of 20 percent. The exchange offered simultaneous trading in up to four contract months.

Weekly Futures[edit]

OneChicago launched a suite of products called OCX.Weekly on June 20, 2014. The exchange continued to list weekly futures each subsequent Friday. [17]

History[edit]

OneChicago was created on May 14, 2001 when the CBOE and CME announced they formed a for-profit joint-venture exchange to trade single-stock security futures. Security futures had previously been outlawed in the U.S. until the passage of the Commodity Futures Modernization Act of 2000 (CFMA). Late in the negotiations between the CME and CBOE, the Chicago Board of Trade (CBOT) agreed to participate with a 10 percent stake in the joint venture. Because the CBOT joined OneChicago so late in the process, their name did not appear on the banner at the announcement event, and the CBOT CEO at the time was not seated at the dais.

CME and CBOT merged in July 2007, and are now known as CME Group. On March 16, 2006, OneChicago LLC announced that electronic broker-dealer Interactive Brokers Group LLC had made a significant equity investment in OneChicago.[18]

On Nov. 20, 2009, the CFTC and SEC reached an agreement to allow OneChicago to broaden its listings to U.S. investors. According to the agreement, any security that could underlie an option could also be pegged to a futures contract. The measure also allowed futures to underlie certain debt securities that were not registered with the SEC.[19]

On August 18, 2011, OneChicago decided to allow traders to take bearish positions on European stocks in reaction to stricter short-selling rules.[20]

Board of Directors[edit]

JLN Managed Futures Video: OneChicago's Mark Esposito[edit]

Mark Esposito of OneChicago Discusses Their NoDivRisk (“1D”) Single Stock Futures
Mark Esposito, a 25-year trading veteran on the floor of the Chicago Board Options Exchange (CBOE), is the managing director, business development at OneChicago.In 2012 former John Lothian News Editor-at-Large Doug Ashburn spoke with Esposito about OneChicago’s NoDivRisk (“1D”) Single Stock Futures products and how commodity trading advisors and managed futures funds can use them.Watch at JohnLothianNews.com[22]

John Lothian News Interview:Tom Regazzi[edit]

Single Minded: Tom Regazzi of UBS Finds a Niche with Single Stock Futures Interview

Single stock futures in the United States were launched in 2001, but were often forgotten after their big splash introduction 12 years ago on two exchanges. Quietly, however, single stock futures grew at OneChicago, the sole marketplace for the instrument. Through the first nine months of 2013, its volumes were up 49 percent, with 6.96 million contracts traded, topping total volumes posted in all of 2012.

The market also caught the eye of UBS and Tom Regazzi, managing director at the firm’s Global Synthetic Equity department. He spoke with JLN editor-in-chief Jim Kharouf in 2013 about how UBS uses single stock futures and the potential for the product going forward. [23]

Contract Volume[edit]

Year Total Annual Volume Percent Change
2018 7,066,292 (-)52.6%
2017 14,929,997 20.5%
2016 12,391,455 5.8%
2015 11,714,015 7.4%
2014 10,907,977 14.6%
2013 9,515,194 14.6%
2012 ~6,300,000 74%

References[edit]

  1. ↑ OneChicago to Close on September 18 for Trading. Long Live OneChicago. John Lothian News.
  2. ↑ CFTC Grants OneChicago LLC Request to Vacate DCM Designation. CFTC.gov.
  3. ↑ The Wallendas Hit Wall Street. Forbes.
  4. ↑ FIA Annual Volume Survey. FIA.
  5. ↑ 2018 Annual Volume Survey. Futures Industry.org.
  6. ↑ Trading Strategies. OneChicago.
  7. ↑ Who’s afraid of single-stock futures?. Medill Reports.
  8. ↑ OneChicago Calculator. OneChicago.
  9. ↑ OneChicago Single Stock Futures Tutorial. OneChicago.
  10. ↑ Lead Market Maker (LMM). OneChicago.
  11. ↑ OCXdelta1. OneChicago.
  12. ↑ 2009 Annual Volume Survey. FIA magazine.
  13. ↑ OneChicago Reports December Volume, up 83% over December 2009; Year to date volume up 67%. OneChicago.
  14. ↑ Exchange Volume Reports. Futures Industry Association.
  15. ↑ Selected Brokers. OneChicago.
  16. ↑ OneChicago Single Stock Futures. OneChicago.
  17. ↑ OneChicago OCX Weekly Futures to List Each Friday. MondoVisione.
  18. ↑ INTERACTIVE BROKERS TO MAKE SIGNIFICANT EQUITY INVESTMENT IN ONECHICAGO. OneChicago.
  19. ↑ CFTC to Gain Sole Authority Over Eurex Volatility Index. The Wall Street Journal.
  20. ↑ OneChicago offers derivatives to counter short ban. MarketWatch.
  21. ↑ OneChicago Exchange Management. OneChicago.
  22. ↑ Mark Esposito of OneChicago Discusses Their NoDivRisk (“1D”) Single Stock Futures. John Lothian News.
  23. ↑ Single Minded: Tom Regazzi of UBS Finds a Niche with Single Stock Futures Interview. John Lothian News.
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