Finex Set To Double Size Of U.S. Dollar Index Futures

EXCHANGES

Finex will double the size of its U.S. Dollar Index Futures contract when it lists the September 1992 contract this fall. The move, which will also effectively double the size of its U.S. Dollar Index options contract, reflects the exchange's efforts to appeal to its institutional customers.

"The CTA community has some $20 billion under management and they all want bigger and bigger contracts," says Richard Jaycobs, managing director at the New York-based exchange. Other U.S. exchange have also considered the move, but Finex will be the first among them to institute such a change.

The Chicago Mercantile Exchange is still considering a proposal to launch large lot currency contracts, but those would likely trade alongside the existing currency contracts, sources at the exchange said (FX Week, March 22). The Philadelphia Stock Exchange also talked about offering jumbo currency option contracts, but the proposal was shot down after brokers argued that a jumbo contract would ultimately sabotage their commissions (FX Week, November 9).

When the September 1992 Dollar Index Futures and Dollar Index options start trading September 19, each will be 1,000 times the value of the Dollar Index. "We're going to go from being about 50 percent smaller [than the CME's contract] to about 50 percent bigger," Jaycobs says.

Though the larger contracts may initially reduce volume at the exchange, Jaycobs believes "net net, by appealing to the CTAs and larger institutional traders we think it will actually raise volume rather than drop it." In addition, it will help those participants reduce commission fees.

Finex has taken an active role in trying to reach the institutional customers and has watched that strategy pay off in the last year. Its Dollar Index Options contract took off last year when two institutions stepped into the pit. The growth of the institutions and CTAs has also sparked the other exchange's interest as well. The CME formed a CTA/CPO advisory committee last year and is currently pursuing several proposals which it hopes will make the exchange an easier place for them to do business (FX Week, July 5). Meanwhile, the PHLX is targeting its proposed cross rate currency options contracts to institutional players.

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