NEW YORK (HedgeWorld.com)– Single-stock futures were long in the making and then started slow in late 2002, but some brokers suspect the instruments may take off this year.
Demand for commodity futures and other derivatives has been booming recently, fueled partly by the growth of assets in global macro and futures funds. The same trend bodes well for the new instruments.
Futures and macro managers did well in 2002 and are likely to retain investor interest in 2003, as moves in currencies and interest rates provide increased opportunities. Moreover, commodity trading advisers, a natural constituency for single-stock futures because of their experience with other futures contracts, are increasingly using technical trading programs that involve stocks.
“This is going to be a watershed year for single-stock futures,” said Marc Cohen of Fimat USA Inc., the U.S. arm of Fimat Group, a global brokerage organization and part of Soci?t? G?n?rale. “But the jury is still out.”
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One reason demand has been slow so far for the new instrument is that hedge funds have not yet embraced single-stock futures as part of their regular toolbox. Another issue is market liquidity–some traders feel there aren’t enough single-stock futures trades.
“Typically, new types of contracts are successful or unsuccessful depending on different kinds of developments,” Mr. Cohen observed. Sometimes an unrelated event provides the momentum that allows a market to take off, he pointed out.