ADEX shows signs of coming of age and is no longer used as speculative tool to drive the bourse down

Greece’s derivatives market (Athens Derivatives Exchange or ADEX), despite being just six years old, is one of the busiest markets in Europe. Its turnover, as a percentage of that in the underlying stock market, is Europe’s fifth largest, after German/Swiss derivatives exchange Eurex, Euronext.Liffe; the London-based derivatives market of Dutch-based Euronext (a coalition of the Amsterdam, Brussels, Lisbon and Paris bourses); the Italian Derivatives Market (IDEM) and the Warsaw Stock Exchange’s derivatives market. In 2004, ADEX turnover was 74 percent that of the Athens Stock Exchange, slightly below the 2003 figure (76 percent), but far less than 2002, when it reached 111 percent. This figure itself, partly the result of a low turnover on the ASE, back then in its third full year of a bear market, gives rise to suspicion of market manipulation and profiteering through the ADEX. The so-called «stock shorters,» those who sold future contracts betting on a fall in the underlying stocks or the ASE indices, accelerated the ASE’s fall by taking advantage of its low liquidity. Signs of maturity Last year, however, was a year of maturation for the derivatives market. Turnover increased only slightly (1.10 percent) and more products were created – essentially futures contracts on stocks – thus widening investment opportunities and the number of individual investors increased. A number of mergers reduced the number of ADEX member brokerages. The remaining members, however, have a stronger capital structure and a more active clientele. Specifically, two new trading firms entered the market, while nine were struck off the rolls as a result of mergers, reducing the overall number of traders to 60 from 67 in 2003. Similarly, the number of clearing members declined from 47 in 2003 to 41 in 2004. The average number of contracts per active investor account rose from 253 in 2002 to 300 in 2003 and 311 in 2004. The 10 top ADEX member companies accounted for 80 percent of turnover and the top 20 for 90 percent. December business In December, the average number of daily transactions was 16,266, a marginal decline from the average in the three previous months, which was 16,437. Last month’s main feature was the increased interest in futures and options contracts on the FTSE/ASE Mid-40. Specifically, transactions of futures contracts on the mid-cap index increased 86 percent, while option transactions rose 116 percent compared to the average of the previous three months. This rise was also reflected in the ratio of the turnover of FTSE/ASE Mid-40 options to the turnover of the index’s constituent stocks, to 78 percent in December from 68 percent in November. ADEX executives attribute the rise to measures taken by the ASE to boost liquidity. There are also continued incentives offered to would-be investors in derivatives in the form of lower commissions – 33 percent and 17 percent, respectively – on futures and options on the FTSE/ASE-20 blue chip index, a discount offered from the beginning of this year. There was also a great rise in share futures (44 percent) and in futures on the euro/dollar exchange rate (17 percent). There are 24,373 investor accounts in the ADEX; of these, 2,328, or 9.55 percent, were active in December, compared to 10.15 percent in November.

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