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Functional Requirements Specification for Single Stock Futures          Page 3

I. Introduction

In the near future the American Stock Exchange intends to begin trading Single Stock Futures.

The scope of market data processing will be increased to include Single Stock Futures.

At implementation, the AMEX plans to trade Single Stock Futures (securities futures) on the fifty (50) to one hundred (100) stocks or ETF's which underlie the most active option classes. Narrow-based indexes will not be traded initially.

Although securities futures have attributes of equities as well as options, the AMEX has determined that securities futures will be treated like standard options on an underlying equity symbol. Securities futures 'series' are defined by an expiration month and year, but do not have a strike price or a put/call designation. The expiration month will be identified by the call month code used for options; see the table at 3.1.16. Like standard options, securities futures will be traded in contracts of 100 shares.

An option can be exercised at any time up to its expiration date. A SSF requires delivery of the stock on the delivery date, which occurs after the expiration date.

Securities futures will clear through the Options Clearing Corporation (OCC) in a manner similar to standard options, although new procedures may be required.


Basis: in commodities futures, the basis is the difference between the price of the commodity and the price of the futures contract. Generally the futures contract will trade at a higher price than the price of the equivalent amount of the commodity (in this case, the number of shares of the stock). If the commodity is trading at a higher price than the futures contract, it is said to be trading at a premium basis.

Contract: a SSF is a contract representing an obligation for 100 shares of the specified stock.

Convergence: as the expiration date approaches, the price of the SSF will approach the price of the underlying equity.

Expiration date: the last day on which a Single Stock Future contract may be traded.

Fungible: for the purpose of Single Stock Futures, they are fungible if a product sold by one exchange can be traded on any other qualified exchange. Single Stock Futures are not yet fungible. An AMEX product is not necessarily tradable on any of the other SSF exchanges. The exchanges planning to offer SSF's may not issue products based on the same underlying equities, and may issue products with different expiration cycles.

Single Stock Future: (SSF) a Single Stock Future (or a securities future) is a contract requiring the seller to deliver to the buyer a certain number of shares of the specified stock on a specific future date, the delivery date, which comes after the expiration date of the SSF. The price to be paid for the stock at delivery is its price on the day the contract is made, not its price on the day of delivery. On the AMEX one SSF contract will be an obligation to deliver (or take delivery of) 100 shares of the stock. SSF's are a derivative of the underlying stock, that is, the value of the future is based on the value of the stock.
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