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The ambition of the changes is to revive the dwindling Danish derivatives market. On 27 November 2000, the derivatives were transferred to a new trading system, Click, and in 2001 we expect the Danish products to be traded in Stockholm and London together with the corresponding Swedish and Norwegian products.
The changes are merely of a technical nature and below some of the most important changes are outlined:
The reference periods have been changed so that the two 6-month periods run from 1 December to 31 May and from 1 June to 30 November. Thus the new reference periods are better related to the December and June expiration dates of the KFX futures contract. This means that in future a new KFX portfolio will be published approx. three weeks prior to the entry into effect as against approx. seven weeks today. Due to these changes the next reference period will be a 7-month period, i.e. from November 2000 to 31 May 2001.
The price basis will be based on the all trades average price of the day instead of the closing price of the day. At the same time, the expiration period for the derivatives has been changed from one hour to one trading day, and here the all trades average price will also be used.
To ensure consistency between the derivatives and the index sides, dividends/allotments amounting to more than 10 per cent of a share’s market value will in future result in an adjustment of the index.
So far it has been administratively onerous to make adjustments in connection with certain types of issues, e.g. the issue of convertible bonds or issues related to the market price. In order to simplify trading in and maintenance of the hedge portfolio, future adjustments of the KFX Index will only result from events of a price-sensitive nature. I.e. the KFX portfolio will be locked, so to speak, between the reviews, unless a price-sensitive event should occur.
As a consequence of the changes in the KFX Index the existing Guidelines for calculation of the share indices on the Copenhagen Stock Exchange will be divided into separate sets of rules. The rules governing the KFX Index are available now, and rules governing the KF MX and KVX indices are in preparation.
Commenting on the new rules, President and CEO Hans-Ole Jochumsen said: “The ambition of the new KFX rules is to give investors better facilities for hedging positions through the use of futures and options on the KFX Index. This will no doubt please the increasing number of foreign investors who will now have access to derivatives designed on the basis of international standards to hedge their Danish positions.”
The new KFX rules are available at the Exchange’s web site, http://www.xcse.dk/uk/bestilling/pjecer/index.asp?n=3#3
