With the new release the IDEM market continues the process of technological innovation which over the years has enabled the introduction of new trading functions, an expansion of the range of products offered and improvement of the market's liquidity. In fact, as from May 22nd a new function called Tailor-Made Combinations (TMC) came into operation, which will facilitate the trading of derivatives product strategies.

Derivatives in fact permit the creation of strategies, in other words the simultaneous buying and selling of multiple financial instruments (options and futures), making it possible to optimise portfolio management and invest not only in bullish phases but also in situations of a rise in volatility or uncertainty as to the direction of the market.

TMCs for the first time offer the possibility to create tailor-made strategies and to trade them on the market. The investor can therefore decide which options and futures to buy and/or sell within his/her own strategy and the price at which he/she wishes to trade same. Once created, the strategy is visible to the entire market and can be concluded via the simultaneous execution of all constituent orders, at the price indicated by the investor.

The interest in the trading of derivative-based strategies is also shown by the presence of functions similar to TMCs on other markets. However, unlike the situation on such other markets, the TMC function allows the complete interaction of the strategies with the market, thereby increasing the liquidity and making this function unique in Europe.

The launch of the TMC function will therefore enable a multiplication of trading opportunities and a response to market interest particularly as regards options. Stock options, in particular, during the first 4 months of 2006 showed the highest growth, with a 42% rise in contracts traded compared to the same period a year earlier, while on May 18th last index options set a new absolute record in terms of volumes traded in a single session, with 41,815 trades.

How does a TMC work?

The function allows the trading of strategies (combinations) defined during the trading day by intermediaries via the entry of TMC orders that are shown in a special order book, remaining active only for the day of creation, and are automatically removed from the system at the end of the day.

TMC orders are a combination of several orders relating to two or more different series (up to a maximum of four), which are executed simultaneously upon the occurrence of suitable market conditions.

The series concerned with TMC orders can be based on the same underlying or on different underlyings, provided that the value of the index point (for index options and index futures) or the minimum lot (for stock options and stock futures) is the same.

It is therefore possible to combine different and non-consecutive series of options on the S&P/MIB index or series of stock options and futures: for example, it will be possible to create spread combinations on Autogrill and Autostrade, as opposed to on Unicredito Italiano and Banca Intesa.

Once entered, the TMC is executed:

• by matching with individual orders shown on the order books of the individual series comprising the combination, if suitable market conditions occur
  
  
• otherwise, the TMC order is displayed in a special book, where orders will be automatically sorted on a price-time priority basis. The orders present in the special book of combinations can generate orders (bait orders) on the books of individual instruments in order to facilitate the conclusion of the TMC. The TMC order can be matched with a TMC order of opposite sign shown on the specific trading book of the combined orders. The matching between the TMC order and another TMC order of opposite sign takes place when the order cannot be executed by matching with the individual series at the same price or at a better price