Derivatives products based on the OBX index of Oslo Børs are popular contracts, not least because of the good liquidity and lower transaction costs they offer. By buying index futures, investors purchase an instrument that gives the right to a return equivalent to the performance of the OBX index of the 25 most liquid shares traded on Oslo Børs. No payment is required when first purchasing an index futures contract, but a deposit equivalent to 10% of the exposure involved must be provided as security. The holder of a contract then receives or makes daily payments depending on the profit or loss arising from changes in the futures price.
It was previously only possible to trade index-related products in blocks of 10 contracts at a time. A single contract is equivalent to 100 underlying index points, and with an index value of NOK 450 this represented an exposure of NOK 45,000 (100x450). In other words the minimum exposure involved was around NOK 450,000 and this meant that trading in index futures required a security deposit of some NOK 45,000. With effect from today it is possible to trade just a single contract, allowing investors to take a position in OBX futures with an initial deposit of just NOK 4,500.
The introduction of trading in single OBX options and OBX futures contracts will also make it significantly easier for institutional players to operate in the Norwegian derivatives market. These players will now be able to use OBX derivatives to create the precise exposure they require by electronically trading in multiples of single contracts.
