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He really isn't that wrong .. liquidity in the interbank market is the best
.. the fuitures markets in currencies are virtually irrelevant by comparison
to the spot/fwd market .. in fact many of the biggest CTA's who trade
currencies only trade on the interbank markets and then move the position to
the floor later using EFP orders . posting margin is between your friend and
the bank he keeps his open positions with so noone knows what he is charged
. Initial margin is practically nonexistant between institutions
----- Original Message -----
From: "Andrew Nopper" <tradera@xxxxxxxxxx>
To: "Omega List" <omega-list@xxxxxxxxxx>
Sent: Friday, May 05, 2000 10:53 AM
Subject: Currency Trading
> A friend of mine, having recently sold his business, plans to trade spot
> currencies. Knowing that I traded index futures, he attempted to explain
why
> he had chosen currencies to trade, rather than futures, options or stocks.
> His rationale was that the leverage was considerably more than index
futures
> and that liquidity surpassed even that of bonds. He mentioned that the
> spread was 3 pips.
>
> Knowing nothing about spot currencies, I was at a bit of a loss to explain
> to him why the hair on the back of my neck was rising. On the question of
> liquidity, whilst the overall market for currencies would be huge, by the
> time you narrow it down to a specific currency and then consider that the
> large players wouldn't be interested in his pocket change, it doesn't seem
> that liquid. As for leverage, I imagine that when you compare the average
> daily range with the margin required, it won't look that attractive. A
final
> concern would be the 3 pip spread. I have no idea whether that is the norm
> nor indeed where the bid/asks come from.
>
> Any enlightenment here, public or private would be welcomed.
>
> Thanks.
>
> Andrew
>
>
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