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Looks like someone lurking on the omega-list (Brett Vietmeier)
forwarded our bitching about the pits to someone from the pits.
Interesting reading, though.
----- Original Message -----
From: "David Lerman" <dlerman@xxxxxxx>
To: <roos@xxxxxxxxxxxxxxx>
Cc: <ronin@xxxxxxxxxxx>
Sent: Wednesday, April 19, 2000 4:23 PM
Subject: RE: The ugliest rally...
: Gentleman-sounds like you folks are a tad unhappy with conditions in the
ND
: pit....
:
: I can't "disagree" with you, but lets assume that the ND bid/offer spread
: is indeed 10 points...
:
: At $100 per point that is $1000.00. The notional value of the contract is
: roughly $360k. $1000 out of 360k is about 27 basis points. As part of my
: job, I keep an eye on the markets. I watch bid offer spreads on lots of
: instruments. I also noted the bid offer spreads on Thurday, Friday as
well
: as this past Monday and Tuesday (4/17 and 4/18). I also compared these
bid
: offer spreads with those in the QQQ, the options on the QQQ, OEX , SPX,
NDX
: etc. When implied volatility reaches all time highs (which it did in the
: Nasdaq 100 options) of 70%, the "chaos" causes markets to react quite
: differently-as veteran traders (you folks sound like you have experience)
: you should know that all markets experienced wide bid offer spreads. Yes
: it is frustrating, but everytime we get big swings, markets widen, it
: happened in 87, 97, 98 and recently.
:
: As I said earlier, a 10 pt bid offer spread is high, but the 27 basis
: points compares well with other instruments. The QQQ bid offer was ? to
: 1point and sometimes wider-figure the amount of QQQ needed to equal 1 ND
: contract and I think you'll find a favorable comparison. Options too had
: enormous bid offer spreads. None of this makes any trader happy. But it
: is a fact of life that volatile markets can sometimes be more expensive.
:
: Regarding margins...just pretend for a second that you own an FCM. You've
: built a good business. Now a customer wants to trade ND futures. CME
: minimum performance bond is about $37,500. The daily changes of late have
: been in the range of $20,000 to $35,000-nearly the entire performance bond
: amount. The thing is swinging 5-10% regularly!! As an added protection
some
: firms choose to increase this performance bond for customers above the CME
: minimums. Yes it is a hinderance to trading for some, but it is
considered
: good risk management by some in the industry. Put yourself in their shoes
: for a second, and the "extra margin" haircut might make sense. As
: volatility decreases-and statistically speaking it should, markets should
: get cleaner, and performance bonds should decline.
:
:
:
:
: David Lerman
: Sr. Director
: Equity Index Products
: 312-648-3721
:
:
: -----Original Message-----
: From: Vietmeier, Brett
: Sent: Wednesday, April 19, 2000 11:02 AM
: To: Redding, Rick; Lerman, David
: Subject: FW: The ugliest rally...
:
:
: -----Original Message-----
: From: Don Roos [SMTP:roos@xxxxxxxxxxxxxxx]
: Sent: Wednesday, April 19, 2000 10:58 AM
: To: index@xxxxxxx
: Subject: Fw: The ugliest rally...
:
:
: ----- Original Message -----
: From: "Don Roos" <roos@xxxxxxxxxxxxxxx>
: To: "Andy" <ronin@xxxxxxxxxxx>
: Cc: <omega-list@xxxxxxxxxx>
: Sent: Wednesday, April 19, 2000 10:45 AM
: Subject: Re: The ugliest rally...
:
:
: > The most greedy and ugly piranah on the cme floor reside in the nasdaq
: pit.
: > That market would be dead in the water if it were not for the liquidity
: > provided from arbitrage with the NQ mini. A 10 point spread to line the
: > pockets of the piranah is something that the cme should not tolerate. I
: > welcome the time when the floor traders have to go upstairs and actually
: > compete with the rest of us instead of playing the ripoff game. They
: might
: > find trading is a bit more difficult than their present game.
: >
: > Don
: >
: > ----- Original Message -----
: > From: "Andy" <ronin@xxxxxxxxxxx>
: > To: "Timothy Morge" <tmorge@xxxxxxxxxxxxxxx>; <frwd@xxxxxxxx>
: > Cc: "List, Omega" <omega-list@xxxxxxxxxx>
: > Sent: Wednesday, April 19, 2000 10:36 AM
: > Subject: Re: The ugliest rally...
: >
: >
: > > : My floor broker in the Nasdaq futures tells me that conditions are
so
: > poor
: > > : today, he isn't even willing to trade for his own account. The
: off-floor
: > > : traders that normally trade 20-30 lots at a time are either trading
5
: > lots
: > > or
: > > : smaller now or are off the entire week because their children are
off
: > from
: > > : school until Monday. And the larger CTAs that normally are always in
: the
: > > : markets have not been seen since last Thursday.
: > > :
: > > : It's very thin out there. Be careful if you choose to trade in these
: > > : conditions.
: > >
: > > Don't forget that some houses have raise the margin. CME's margin
: > > requirement is $38K for initial for ND while Refco/LFG and EDF Mann
: > requires
: > > $60K per contract for initial, $48K for maintenance. And then forget
: the
: > 10
: > > point spread between the bid and ask, as well as it's only good for 10
: > > contracts. I know that the ND's have always been thin but this is
: > > ridiculous.
: > >
: > >
: >
: >
:
:
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