The OBX index normally comprises the 25 most-traded shares of Oslo Børs, and is a tradable index in the derivatives market. The changes now being implemented are the result of preferences expressed by participants in the market.
Until now, the OBX index has only been adjusted for dividends to the extent that a dividend exceeds 5% of the share price. Unexpected changes in dividend policy by certain companies have from time to time caused a reduction in liquidity for OBX options and OBX forwards due to the uncertainty these changes cause for market makers. With effect from 21 April, the OBX index will be a true yield index, which means that the index will be adjusted for the full amount of dividends. This change removes all uncertainty over dividends. Historic figures for the index will also be fully adjusted for dividends.
Splitting the index 4:1 will both reduce the current value and historic value of the index by three quarters. Index options and index forwards with maturity dates in May and June will be adjusted by reducing the exercise and forward prices by three quarters while increasing the number of contracts by four times.
Reduction in fees
In connection with the split, Oslo Børs and NOS have adjusted the fees charged for trading and clearing. The fee for OBX options is reduced by 30% from 1% to 0.7%, while the minimum fee is reduced from an NOK 3 to NOK 2. The fee for OBX futures is reduced from NOK 10 to NOK 2.50, while the fee for Swedish OMX options is also reduced by 30% from 1% to 0.7%.
"Splitting the index significantly reduces the exposure represented by each contract, and we are confident that this will encourage private individuals to discover the many opportunities that these products offer. Adjusting the index for dividends also makes these contracts more suitable for investors who do not follow the market extremely closely. We believe that these changes, together with the sharp cut in fees, will help to ensure that both professional players and private individuals find derivative contracts more attractive", explains Linus Lönnroth, head of the Derivatives department at Oslo Børs.
The Norwegian derivatives market is currently experiencing its most rapid growth ever. The number of contracts traded in the first quarter 2006 was 50% higher than in the same period last year.
