PT  - JOURNAL ARTICLE
AU  - Guillermo Cano
AU  - Barry Feldman
AU  - Joseph Smith
TI  - ETFs, Swaps, and Futures: <em>Trade at Index Close (TIC) and the Coevolution of Financial Markets</em>
DP  - 2009 Sep 21
TA  - ETFs and Indexing
PG  - 50--58
VI  - 2009
IP  - 1
4099  - http://guides.pm-research.com/content/2009/1/50.short
4100  - http://guides.pm-research.com/content/2009/1/50.full
AB  - Trade at Index Close (TIC) is a new futures order type that allows futures contracts to be traded at a price relative to the close of an underlying cash (e.g., equity or fixed income) index. TIC allows a significant reduction in the tracking error risk associated with using futures to obtain market exposures. This risk reduction could allow some ETF sponsors using derivatives-based architectures to shift from using swaps to using futures when futures contracts that deliver the proper exposures are available. This could facilitate the introduction and growth of new futures contracts as well. ETFs obtaining market exposures through futures contracts will have lower costs, increased transparency, and lower levels of counterparty risk. The expansion of the breadth of futures markets will reduce the cost of swaps and allow swap providers to more economically deliver targeted exposures.