ASX Warns Of Index Expiry-Related Volatility

This Thursday (15 December 2005), ASX and SFE December 2005 equity index derivatives contracts expire. The settlement price for these contracts is calculated with reference to the opening price of the component stocks in the relevant indices on that day. The indices affected are the S&P/ASX 200, S&P/ASX 50, and the S&P/ASX 200 Property Trusts Index.

During the opening phase at expiry, large equity index arbitrage positions are often unwound - leading to an increase in liquidity and a potential increase in price volatility.

ASX reminds traders, and in particular retail investors, that opening prices on Thursday may reflect arbitrage activity rather than the price fundamentals that apply to the individual stocks.