|
PureBytes Links
Trading Reference Links
|
In a message dated 12/28/01 10:31:09 PM Central Standard Time,
schindlertrading@xxxxxxxxxxx writes:
<< Thanks for explaining the XFund contract, John. I heard a little about
them
at the FIA Expo last month and was disappointed to hear they'll be pit
traded. I think the CBOT should have put them on a/c/e. I like the
control, speed, and fills on Globex and a/c/e.
***** Aaron, you are welcome. I am a proponent of offering new contracts on
both the floor and a/c/e, like the CBOT did on the new 10-Year Swap contract.
That one, BTW, is trading almost exclusively in the pit. I think the reason
they want to put it on the floor is to help compensate the floor traders for
the trade that has moved off the floor. The exchanges are all about fair and
open markets, but they are also about member opportunity. The Xfund is an
attempt to create a new product that takes advantage of the floor traders
ability to use their cheap commissions to create liquidity in this new
product by arbitrage. The same would not be true for an off the floor
trader. However, some of the product components of the Xfunds may well be
traded on a/c/e. An Xfund could include bonds, ten years, dow, mini dow or
any of the other contracts that trade on a/c/e during the day, so you get
part of your wish.
Your post was the first I've heard of a fixed $300 bid-asked spread. If the
XFunds are pit traded where there are lots of buyers and sellers, how is the
spread fixed at 3 ticks? What if someone wants to bid or offer within the
spread?
****** There is no $300 fixed bid-offer spread, however that was the
expectation to make the arbitrage opportunity work. Anyone can bid or offer
in $100 increments in the open outcry environment, assuming that is what the
final tick value will be.
What is the motivation for your shadow traders? To see if they can
outperform the CBOT's stars ala the Wall Street Journal's Dartboard?
***** You hit the dart board right on the center. The idea of shadow traders
comes from the shadow open market committee that offers an alternative view
of monetary policy from the Fed's official FOMC. But the other thing is that
I think this would be a good exercise for this list to learn about this new
contract. This community represents the type of traders, with the skills,
tools and data, that could utilize this contract profitably. Thus, I think
it would be worth our while to learn about it together. There is a great
expectation that this concept will be the next big thing at the CBOT and on
some level I think that is true. Think about what the Exchange Traded Funds
have done on the option exchanges. This is a similar concept, but more
geared towards the active futures trader. But it is not just a static basket
(though I want some of those too), but rather an actively selected basket of
futures contracts that will perform well over the next two weeks. Call it a
short term smart ETF, a hybrid of a ETF and a managed futures account.
***** I figure we could argue about how low TRAD is going to go, or we could
try to learn about a new product that taps into the extraordinary skills,
tools and interests of the members of this list in an effort to learn new
ways to make money.
**** There are going to be a lot of new products available in the next few
years, with the introduction of Single Stock Futures and Narrow Based
Indices. Arbitrage is going to be one of the things that off the floor
traders will be increasingly able to do. So it is worth while to use the
Xfunds as a tool to explore ways to profit from arbitrage. And I just think
this might be interesting. I don't know that the CBOT will come knocking on
anyone's door asking them to be an official Xfund trader based on their Omega
List performance, but I don't know that they won't either. Who knows what
might come from this exercise.
Aaron Schindler
P.S. Good luck on the NFA election. When will the results be in?
>>
****** Thanks Aaron. The ballots were sent out the middle of December and
those ballots returned by January 15, 2002 will be counted to determine the
winner. I have greatly appreciated all of the support I have received from
Omega List members and many other in my election effort and the many emails
and recommendations that have been sent to various Introducing Brokers. It
is a credit to the interest of the OL members and others take in this
industry and I appreciate it.
Regards,
John J. Lothian
Disclosure: Futures trading involves financial risk, lots of it! Past
performance is not necessarily indicative of future results. John J. Lothian
is the President of the Electronic Trading Division of The Price Futures
Group, Inc., an Introducing Broker and a candidate for the NFA Board of
Directors representing Guaranteed Introducing Brokers.
|