Aug 2011: Can't short these Stock Index Futures

General discussions about futures.
Post Reply
sluggo
Roundtable Knight
Roundtable Knight
Posts: 2986
Joined: Fri Jun 11, 2004 2:50 pm

Aug 2011: Can't short these Stock Index Futures

Post by sluggo » Mon Aug 15, 2011 1:01 pm

http://goo.gl/ZMnrN

I got a call this morning from my broker telling me that my short position in the French stock index CAC-40 can't be rolled over from the August contract to the September contract. He thinks the affected contracts are
  • French CAC index (CSI symbol "FCH")
  • Italian MIB index ("IFS")
  • Belgian 20 index ("BFX")
  • Spanish IBEX index ("MFX")
If my systems continue to maintain Short positions in these, I don't know whether I've got the cojones to hold all the way through (nondeliverable, cash settled) expiration or not. I guess I'll call the broker for some hand holding as expiration approaches. At times like this I'm glad to have a human broker who answers the phone and wants to help.

Mark Johnson
Roundtable Knight
Roundtable Knight
Posts: 122
Joined: Thu Apr 17, 2003 9:49 am

Post by Mark Johnson » Mon Aug 15, 2011 10:02 pm

email from broker
Attachments
Notice to Clients Short Sale Restrictions in EU 14 August, 2011.pdf
(54.18 KiB) Downloaded 546 times

PNW_Trader
Senior Member
Senior Member
Posts: 37
Joined: Wed Jul 21, 2010 1:00 am
Location: Portland, OR

Does not make sense

Post by PNW_Trader » Mon Aug 15, 2011 10:11 pm

I just can't grasp this. My understanding of futures is that there *must* be a short contract for every long contract. In terms of commodities, if I'm willing to sell a quantity of corn at a given price on a given day, then there must be someone on the other end willing to buy that quantity of corn at these terms. Otherwise there is no trade. How can they run a futures market with long only? Or, are they shutting down futures on these indices all together?

sluggo
Roundtable Knight
Roundtable Knight
Posts: 2986
Joined: Fri Jun 11, 2004 2:50 pm

Post by sluggo » Mon Aug 15, 2011 11:21 pm

If you short an index futures contract, it is EXTREMELY likely that your counterparty (who bought a contract) is a market maker. She/he wants to be hedged. After trading with you, she finds herself long 1 contract of futures, so she hedges by selling short the underlying stocks.

Thus your short futures position, "caused" a short stock position to be opened. In the view of the exchange, this is undesirable. So you are forbidden to short futures.

As the night she follows the day, n'est-ce pas, Captain Hastings?

marriot
Roundtable Knight
Roundtable Knight
Posts: 347
Joined: Thu Nov 20, 2008 3:02 am

Post by marriot » Tue Aug 16, 2011 4:49 am

For what i can understand and for what is write on my "on line trading bank", you cant short a list of stocks.
No words about index futures.

rhc
Roundtable Knight
Roundtable Knight
Posts: 464
Joined: Tue Nov 18, 2008 8:46 pm
Location: Oz

Post by rhc » Tue Aug 16, 2011 7:27 am

Sluggo, Hi,

I have an online account and for my own amusement I sold short 1 off September CAC40 futures and immediately covered that short just to see if I could do it.
I had no problems with performing this transaction and saw no error messages or red lights flashing.
Cost me 5 euro . . . should've held on a few more seconds before covering, could've made 10 euro !!

Here is my trade (performed on Tuesday 16th Aug. @ approx. 1:10pm CET);
Attachments
cac40.jpg
cac40.jpg (38.09 KiB) Viewed 5549 times

sluggo
Roundtable Knight
Roundtable Knight
Posts: 2986
Joined: Fri Jun 11, 2004 2:50 pm

Post by sluggo » Tue Aug 16, 2011 8:58 am

rhc wrote:I have an online account and for my own amusement I sold short 1 off September CAC40 futures and immediately covered that short just to see if I could do it. I had no problems with performing this transaction and saw no error messages or red lights flashing.
Well done, rhc! Very well done! Experimental results trump hypothetical arguments every time. I tried a similar experiment at a different broker on Sunday night (US), which was Monday morning at the MATIF in Paris. I tried to execute a spread order: { Buy 10 Aug11 and Sell 10 Sep11 CAC } but my order was rejected.

So it appears that different brokers are applying different restrictions -- just as different brokers require different margin deposits. My broker, it seems, is doing a CYA. Yours, not so much.

Wisdom
Roundtable Knight
Roundtable Knight
Posts: 112
Joined: Fri Apr 02, 2004 1:40 pm
Location: Jupiter, Florida
Contact:

Post by Wisdom » Tue Aug 16, 2011 10:13 am

I saw this notice from Newedge as well, however MF Global apparently doesn't have the same policy at the moment. I just rolled some short CAC40 and IBEX35 to September.

svquant
Roundtable Knight
Roundtable Knight
Posts: 126
Joined: Mon Nov 07, 2005 3:39 am
Location: Silicon Valley, CA
Contact:

Post by svquant » Tue Aug 16, 2011 11:21 am

Well isn't Newedge closely related to the French Government and (partially) owned by some of the banks that have the short restriction? Guess they don't want to say to the public "don't short us" while allowing clients to effectively short them via the CAC.

Chris67
Roundtable Knight
Roundtable Knight
Posts: 1046
Joined: Tue Dec 16, 2003 2:12 pm
Location: London

Post by Chris67 » Tue Aug 16, 2011 12:20 pm

The bigger picture here is also interesting
Europe (excluding Germany) cannot even organise a short selling ban without causing mass confusion via its only inability to come up with a coherent policy / framework on what you can and cannot do - Am being told that certain funds are challenging the powers at be via their lawyers and saying "sorry - what youve said is bullsh^&*" - then selling these indices - the stuff issued by teh powers at be is full of loopholes - for example Eurostoxx - can you sell it or not based on the underlying;s ?

Anyway teh point is this sorry escapade only serves to highlight why Europe is in trouble in the first place

Chuck B
Roundtable Knight
Roundtable Knight
Posts: 469
Joined: Thu Apr 17, 2003 6:34 am

Post by Chuck B » Wed Aug 17, 2011 4:38 pm

Chris67 wrote:The bigger picture here is also interesting
Europe (excluding Germany) cannot even organise a short selling ban without causing mass confusion via its only inability to come up with a coherent policy / framework on what you can and cannot do - Am being told that certain funds are challenging the powers at be via their lawyers and saying "sorry - what youve said is bullsh^&*" - then selling these indices - the stuff issued by teh powers at be is full of loopholes - for example Eurostoxx - can you sell it or not based on the underlying;s ?

Anyway teh point is this sorry escapade only serves to highlight why Europe is in trouble in the first place
Do you really think they (they meaning some other country's "regulator") could try to reach into the Eurex's business, the EuroStoxx50 index futures, and tell them nobody could short that product? I seriously doubt Eurex and Germany would put up with such nonsense. That is until the rest of the do-do hits the fan and we end up with a world-wide short sale ban on everything. We'll know the end is here when that happens I guess.

zacharyoxman
Roundtable Knight
Roundtable Knight
Posts: 137
Joined: Thu Sep 23, 2004 11:19 am
Location: California

Post by zacharyoxman » Thu Aug 18, 2011 1:55 am

Chris

I'm short EuroSTOXX right now, and just exited some CAC shorts the other day (on stops, not forced out). No issues on my end.

Chris67
Roundtable Knight
Roundtable Knight
Posts: 1046
Joined: Tue Dec 16, 2003 2:12 pm
Location: London

Post by Chris67 » Thu Aug 18, 2011 2:41 am

yes you can be short now - but you cannot add to shorts or roll
I have just recieved a special notice from Nyse/ Liff that you cannot now roll the CAc 40 (why this exchange ?) - I dont trade the cac - but I do trade Mini / Full size Ibex 35 - cannot stay short !!!

All of this just makes me more and more bearish on Europe - its quite incredible that they will do absolutely everything possible except what is needed to solve the problem

Chuck B
Roundtable Knight
Roundtable Knight
Posts: 469
Joined: Thu Apr 17, 2003 6:34 am

Post by Chuck B » Thu Aug 18, 2011 9:14 am

Updated details for the CAC futures:
http://www.amf-france.org/documents/general/10111_1.pdf

Wisdom
Roundtable Knight
Roundtable Knight
Posts: 112
Joined: Fri Apr 02, 2004 1:40 pm
Location: Jupiter, Florida
Contact:

Post by Wisdom » Thu Aug 18, 2011 12:09 pm

and more on this developing story...

The AMF adjusts its position regarding the rolling forward of net short positions taken before the Publication of its Decision of 11 August 2011. Given the existing practical difficulties and time constraints, the AMF has adjusted the position it had established before today’s press release with regard to the implementation of the ban on the taking of net short positions in relation to pre-existing positions built through expiring derivatives. As a result thereof, the AMF admits that investors holding a net short position in relation to one of the securities concerned through expiring derivatives are allowed to roll forward their position, even if such a rolling results in the creation of a net short position with a further expiry date, provided that the net short position so created does not exceed the one held previously.

http://www.amf-france.org/documents/general/10117_1.pdf

Post Reply