Single-stock futures regulation just days away, says Newsome

The US Commodity Futures Trading Commission (CFTC) is keen to hammer out regulatory issues related to the trading of single-stock futures in the US in "a matter of days", CFTC chairman James Newsome said this morning.

“Major guidelines have been agreed on, and all that now remains to be completed before security futures can begin trading are final joint rules on such things as margin,” Newsome said. “Last week I said that I believed it would be 'a matter of days' and I still believe it is a matter of days.

"Chairman Harvey Pitt [of the US Securities and Exchange Commission] and I are in close contact, and I sometimes hope that every conversation I have with him will be the last on the single-stock futures issue,” he added.

The requirement for margin on securities futures would have to be carefully calibrated so as not to undermine comparable stock options, he said.

Last week, OneChicago Futures Exchange became the third exchange to receive formal permission from the CFTC to trade single-stock futures. OneChicago is an electronic venture between Chicago's three derivatives exchanges: the Chicago Mercantile Exchange, the Chicago Board Options Exchange and the Chicago Board of Trade.

Nasdaq Liffe Markets - a partnership between the Nasdaq stock market and the London International Financial Futures and Options Exchange (Liffe) - and Island Futures Exchange, an affiliate of electronic share dealer Island ECN, recently bought out by Instinet, as well as the American Stock Exchange, have also received this formal permission. The status allows the recipients to trade futures contracts on individual securities and narrow-based securities indexes, collectively known as security futures products.

In 2000, the US Congress lifted a 20-year ban on the products, theoretically allowing them to be traded from 21 August, 2001, but market participants have criticised regulators for being slow to work out a regulatory framework.