Goodbye FROs!

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The End of FROs
Iím sad to report that fixed return options (aka FROs) will cease trading this spring, at least for a while. The last opening transactions on the product were entered on December 22 and final expiration is schedule for April 18.

(You can read more details in this NYSE Euronext memo.) As you may already know, NYSE Euronext acquired the Amex, the exchange where FROs were invented, partly by me.


Why Did FROs Fail?
I can think of a few reasons explaining why FROs didnít swim in this market. First, mixed marketing support resulting from the NYSE/AMEX merger led to slow adoption ñ although itís interesting to note that many new products take a while to catch on.

ETFs, for example, took years before they went mainstream. Combine that slow start with the NYSE Euronext acquisition and an unprecedentedly tough market this fall, and itís not too surprising that the merger team has decided to shelve FROs for perhaps a more auspicious re-entry later.

A Fresh Start
I really do hope NYSE Euronext does make that re-entry choice later, when things are more settled both internally and externally. I still believe in FROs as a product concept, and I think thereís plenty of value there under the right conditions: sufficient marketing and educational support, a fully merged entity, a less crazy marketplace generally. Iíll certainly keep you folks apprised of any fresh developments.

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