Magazine article Modern Trader

Coming Up ... the Main Event?

Magazine article Modern Trader

Coming Up ... the Main Event?

Article excerpt

As exciting as the U.S. stock market has been in recent years, the real excitement still may lie ahead. It's not that market moves themselves haven't provided plenty of thrills, but the big news is the market is poised to open up to many more investors via popular new vehicles to trade the market whether it plunges or lunges ahead to ever-higher highs.

In the years since the Kansas City Board of Trade (KCBT) traded the first stock index futures contract on Feb. 24, 1982, exchanges worldwide have introduced dozens of index products based on equities or some segment of the market. In the United States, stock index futures trading essentially narrowed down to one choice, the Standard & Poor's (S&P) 500 Index futures at the Chicago Mercantile Exchange (CME), a favorite of active day-traders. Despite a decline in volume so far this year, options on the S&P 100 Index (OEX) and the S&P 500 Index (SPX) also continue to attract huge volume at the Chicago Board Options Exchange (CBOE).

But the one contract area that has been missing all these years has been the most widely known U.S. stock market barometer of all - the Dow Jones Industrial Average (DJIA). That appears to be about to change as Dow Jones & Co. announced in early June that it has granted licenses to three exchanges to offer products based on the DJIA: the American Stock Exchange for exchange-traded funds, the Chicago Board of Trade (CBOT) for futures and options on futures, and the CBOE for options.

The CME never has shied away from competition and will fight to retain its current 95% share of the U.S. stock index futures and options on futures market. On the same day the new DJIA contracts were announced, the CME announced plans to introduce a "mini" version of its S&P 500.

When the S&P contract was launched in 1982, the index was at 116, and the $500 multiplier made the size of the contract about $58,000. …

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