Cash

["Joel Geier" <jgeier@xxxxxxxxxxxxxxxxxxxx>]

The cash cannot lead the futures (in theory) it is mearly a function of how
the index is calculated that gives that illusion.

Firstly the cash price is calculated periodically of a basket of stocks, and
is not as timely as the transmission of futures, though the SPX is very
timely, the xtra dax (electronic) trails the dax futures by 30 seconds and
the dax index (floor traded) by upto 90 seconds.  Another example is the all
ords index which is calculated once per minute.

Secoundly Index prices are calculated from the last traded price, which can
be missleading when the bid/ask has moved but the stock has not traded.  I
know traders that create synthetic cash indicies on the mid point between
the bid/offer instead of the last price, its suprissing the difference.

Thirdly but less important than the first 2 is that in reacting to some
ecomonic event one can executed a position in the futures market very
rapidily and worry about about getting out of the stocks latter.

Floor traders with this information can thus give us the illusion that they
are leading the market.

Regards Joel