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Spiders expected to be in demand

New York Times

A group of markets started trading options today on one of the most popular exchange-traded funds, Standard &; Poor's Depositary Receipts, better known as Spiders. The change, a temporary resolution of an intellectual property debate, will allow investors to own an option that industry analysts predict will be in high demand.

Until today, investors had not been able to trade options on Spiders, which were created by Standard &; Poor's in 1993. Last week the International Securities Exchange, an all-electronic options marketplace, announced that it would start trading the Spider options. McGraw-Hill, the owner of Standard &; Poor's, said that the exchange needed to obtain a license to do so and won a temporary restraining order in federal court in Manhattan on Thursday to prevent the trading.

The parties hammered out a resolution late Friday night in which the International Securities Exchange and five other exchanges were granted the right to licenses to Spiders.

David Guarino, a spokesman for Standard &; Poor's, declined to comment.

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Spiders track the Standard &; Poor's 500-stock index, making them a popular way to bet for or against the market. Exchange-traded funds are similar to index funds in that they represent a basket of stocks. But unlike index funds, exchange-traded funds work like single stocks, meaning investors can buy and sell them throughout the day. Mutual funds, by comparison, are priced once a day and are generally more expensive to own.

The simplicity of exchange-traded funds has made them wildly popular. Investors held more than $212 billion of such funds at the end of November 2004, compared with $151 billion at the end of 2003, according to the Investment Company Institute.

As exchange-traded funds have become more popular, so have options on them. For example, on Friday, 123 million shares of the Nasdaq 100 index fund changed hands, while 834,866 contracts, or roughly 83 million options, on the index traded. In comparison, investors traded 69 million shares of Microsoft stock the same day.

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