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Andrew wrote:
And the DTB Bunds are pork bellies right?
**** Bellies were once a huge contract. Not today, for some reasons related
to the issues I raised earlier, i.e. reallocation of voting rights of the
exchange memberships. I think a better market to compare the DTB Bunds would
be the E-mini S&P.
Electronic isn't fully implemented yet in the States.
****** You have that right.
Apparently, according to a report in Euromoney, most of the younger
financials pit traders on the CBOT favour electronic trading.
****** That could be. But, I wonder if they were really doing it if it would
hold up. Many pit traders are attracted to it partly for the physical
element. Many ex-athletes are attracted to pit trading. It would seemingly
be a change in culture for them to go from jumping up and down in a hurried
mass, to squirreled away on a trading desk or cubicle.
Just that they aren't full seat members like the creaky old grains traders.
****** The creaky old grain traders still have all the cards, i.e. most of the
voting rights. Until there is a redistribution of voting rights, or mass
retirements, progress will be slow.
Also surveyed were the larger trading houses who favour electronic.
I betcha most MFA members favour electronic.
***** The brokerage houses have wanted to get rid of the trading floors
forever. That has been a theme for the 20+ years I have in the futures
industry.
Pit traders do that too. When things get too hot, they just hang around
with their hands in the pocket and get entertain by the prices gaping up and
down.
What about declaring order imbalances by a market maker?
***** Pit traders who don't make a market for brokers get overlooked the next
time the broker has an order. There is a value to a pit trader for taking
some trades, even if they just scratch them, in order to keep the broker's
happy with them. Yes, sometimes traders leave the pit and sometimes they
don't trade. That is part of the markets figuring out where you can get
trades done and under what conditions.
***** Market maker order imbalances is stocks, not futures.
For contracts where there is outright dominance by a single exchange, the
shift will be slower. In the case of contracts under competition, the change
will be dramatic. The drama with LIFFE is proof.
In the case of contracts under competition with regulatory differences,
this will be new arena where electronic trading system will win out. In
Asia, it will be SFE vs SIMEX pretty soon. SFE wants to list some crummy multi
country Asian
stock indices. When that don't work out, its time to do some raiding.
Or even before that the Cantor could damage CBOT enough to spook it.
Cantor needs to get their screen up and across. Its slow cos it had to fight
political battles given CBOT lobbying against it.
***** The political battle should have nothing to do with rolling out the
screens and interface. I can't imagine they entered into the battle without
the expectation they would win, or win in some fashion.
To some Yankees yes. But you guys drive on the wrong side of the road. :-)
The US still use inches, feet, miles and 1/32s. Time will show.
****** We drive on the right side of the road. ;-)
Electronic stock exchanges have long shown they can handle multiplicity of
counters and volume. And once upon a time, they were floor based.
****** No doubt stocks are ahead of futures. But the equity business is much
bigger than futures. You are right it will happen. It is a question of the
pace.
Regards,
John J. Lothian
Disclosure: Futures trading involves financial risk, lots of it!
Disclosure: John J. Lothian is the President of the Electronic Trading
Division of The Price Futures Group, Inc., an Introducing Broker. >>
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