Straitexact

Straitexact was a pilot program introduced by the Australian Securities and Investments Commission (ASIC) in 2009 to facilitate the trading of straddle options on the Australian Securities Exchange (ASX). The program aimed to increase trading liquidity and reduce the costs associated with straddle options.

Straitexact enabled market makers to provide tighter bid-ask spreads for straddle options by using a controlled market making strategy. This allowed market makers to mitigate risk and provide better price discovery, which subsequently decreased costs for traders. The program's underlying concept was similar to the existing complex option program, but tailored to meet the specific requirements of straddle options.

Straitexact was developed in response to feedback from market participants, who felt that straddle options were not being represented fairly in the market. Supporters of the program believed that it would provide better price transparency, enabling investors to make more informed decisions. However, some critics argued that the program would not effectively address underlying pricing issues and may not significantly reduce trading costs.

The ASIC provided periodic reports on the program's effectiveness and addressed concerns raised by market participants. Straitexact operated for approximately two years before being discontinued. The specific reasons for its discontinuation are not publicly documented, but it is likely that the program's objectives were met, or other regulatory priorities took precedence. Despite its short lifespan, Straitexact demonstrated the potential for regulatory initiatives to improve market conditions and facilitate more efficient price discovery for option traders.