|
PureBytes Links
Trading Reference Links
|
I wondered about the validity of the a 50% margin requirement statement. I
assumed it was an error.
The poster must have gotten confused with sec rules regarding securities.
Of course this instrument is not a security but a futures contract. But
anything is possible if the sec wants to be apart of the regulatory body
overseeing it. I agree if a 50% margin turns out to be the requirement
then why have it? The ability to sell it without an uptick or borrow the
stock would be the only advantage. The foreign futures exchanges have
futures contracts written on a select number of US stocks now. I don't know
if trading has commenced yet nor what margins they have in place for them.
Only US citizens can not trade them.
Robert
At 04:56 PM 2/18/01 -0500, M. Simms wrote:
>Better question is:
>WHO suggested that 50% be the default margin for single-stock futures ?
>
>The new instrument will have a hard enough time gaining <any> popularity,
>but the above margin req. will just "kill it" IMHO.
>
>margin: chance of success comment
>------ ------------------------
>30% : maybe
>20% : it has a 50-50 chance
>10% : now you're talking "winner"
>
>That's right....I want to control $60k of Microsoft for a measley $6k
>tie-up.
>Effectively: A $1 move = 17% return on margin
>
>Anyone else ?
>
> > -----Original Message-----
> > From: I4Lothian@xxxxxxx [mailto:I4Lothian@xxxxxxx]
> > Sent: Saturday, February 17, 2001 10:52 PM
> > To: omega-list@xxxxxxxxxx
> > Subject: Re: stocks suck...electronic futures "rule"
> >
> >
> > As many of you know, I write a daily Industry News e-mail and
> > send it out to
> > a variety of different people. These two stories were part of my Lead
> > Stories section and M.Simms picked up on the significance and the
> > juxtaposition of the headlines.
> >
> > To me it is significant that the e-mini contracts at the CME has
> > continued to
> > thrive, while volume on the online individual stock side has been
> > cut from
> > the frothy levels of last year. In fact, there were some interesting
> > statistics that came out of several of the stories on my e-mails. The
> > average size of an account at Datek was down about half from last
> > year and
> > several online stock brokers found it hard to make money. Talk about
> > industry consolidation is in the air.
> >
> > On the futures brokerage retail side, some firms' index volume is
> > as much as
> > 75% of their overall volume. E-mini contracts make up a big part
> > of that.
> >
> > To a certain extent indices have benefited from the huge volatility
> > experienced by traders of individual stocks. Futures used to be the Wild
> > West of trading and investing. There is tremendous leverage
> > involved there
> > no doubt, and sometimes the index markets move so fast and so
> > badly for some
> > traders that you could not have physically burned the cash in the time it
> > took for them to get in and out of the markets. However, this is pale in
> > comparison to the risk adjusted return of some of the high flyer
> > tech stocks
> > that we have seen in the last year or so.
> >
> > There are 4 trends I have seen since stocks have proved they can
> > go down too.
> > First is the decline in the online trading volumes on the stock side.
> > Secondly, is the value of focusing on trading indices, either futures or
> > mutual funds. Thirdly, is an increased interest in alternative
> > investment
> > strategies, i.e., managed futures and hedge funds. See this
> > week's Business
> > Week for coverage about that. Lastly, I see no talk on the
> > securities side
> > about Single Stock Futures.
> >
> > At last week's Managed Futures Association conference there were several
> > stories about the dim prospects for Single Stock Futures. Why
> > would futures
> > traders use to paying 5 - 10 and 20 percent margins want to put up 50%
> > margins to trade Single Stock Futures? A better question for me is, "why
> > wouldn't stock traders attracted to index futures trade single
> > stock futures
> > also?"
> >
> > The list of potential competitors for single stock futures is
> > large. ECNs
> > are registering as exchanges, some both futures and securities
> > exchanges.
> > There are ongoing and serious talks to merge the Options Clearing
> > Corp. with
> > the Chicago Board of Trade Clearing Corp. This would allow for greater
> > margining and offset efficiency for options, futures and single
> > stock futures
> > all at the same clearing house. One of the reasons for the
> > success of the
> > multiple listing of stock options is that all the exchanges share
> > the same
> > clearing house. The currency they all deal in is the same.
> >
> > Single Stock Futures would share this similarity in a couple of senses.
> > First, is potential for the trades to clear the same clearing
> > organization,
> > the OCC/CBOTCC if the merger takes place. Secondly, Single Stock Futures
> > would trade in a market that the retail public knows and that the general
> > public has cheap and easy access to trade in the cash market.
> > There is no
> > more simpler commodity to trade or take delivery of than stocks.
> > Even blue
> > haired old ladies do it. Thus, if you buy a futures contract on some
> > exchange, while liquidity is still developing, you may find the
> > best way to
> > exit the trade is to sell the cash stocks against it. Would there be an
> > exchange for physical market to unwind such a position? I think
> > there would
> > be. Thus, traders will have the ability to trade stocks or
> > futures on many
> > different venues and not have to worry about the liquidity to unwind the
> > trade.
> >
> > This is my optimistic view of the one aspect of the viability of
> > Single Stock
> > Futures. Some would say I am overly optimistic. I can accept
> > that. In my
> > Industry News letter I commented about how the Chicago Banks were
> > offered the
> > opportunity to become members of the CBOT and offered good locations on
> > financial trading floor before the introduction of the U.S. Treasury Bond
> > futures. The declined, thinking the futures would not important.
> > Six months
> > later they were pounding on the door to become members and get
> > floor space.
> >
> > I have not heard much out of the online stock trading community
> > about Single
> > Stock Futures. I don't see much movement there, strategically
> > speaking, to
> > position them for it. On the otherhand, I see firms like Refco and my
> > clearing firm ED&F Man International, Inc. acquiring firms (read
> > order flow)
> > on the futures side.
> >
> > Is there a cross pollination of futures firms acquiring online
> > stock trading
> > brokerage firms coming in the near future? Or, will we see the opposite
> > happen? Will a large Wall Street firm decide it needs to get
> > back into the
> > futures market by buying one of the bid futures FCMs? Only time
> > will tell.
> >
> > The interesting times we in the trading community live in now
> > requires paying
> > attention to the structure of the industry and the bigger
> > picture, because
> > there is so much change going on. That was one of the reasons I started
> > writing my Industry News e-mails. Certainly it is good marketing
> > to get my
> > name out in front of a lot of people. That is what I get out of
> > it, along
> > with the included Good Will. What my readers get is headlines
> > and hyperlinks
> > to stories about what is going on in the futures and securities
> > industries.
> > I also include some of my own commentary about what I see
> > happening in the
> > industry. I include notices and press releases from the exchanges,
> > regulators, ECNs, industry associations, brokerage firms and
> > stories from key
> > word searches of a couple of search engines. There is little to no
> > self-serving commercial element in the e-mails. I will occasionally make
> > announcements or include references to my own online trading
> > operations or
> > managed futures offerings, where appropriate, but these are few.
> >
> > The types of people receiving the e-mails include clients, prospects,
> > friendly competitors, exchange members, exchange staff, regulators,
> > securities brokerage staff, futures brokerage executives, media, quote
> > vendors, ethics trainers, trading software staff, CTAs and other
> > individuals
> > who I have come across on the Internet or in the industry meetings.
> >
> > A recent story from the Securities Industry Association said
> > online brokers
> > need to do a better job of teaching their clients about the
> > markets and the
> > risks involved in trading. I agree. In a small way I hope my
> > e-mails and
> > commentary helps recipients to achieve part of that goal. And
> > educated and
> > informed trading community is a better one for all of us;
> > brokers, traders,
> > exchanges, regulators.
> >
> > If you would like to see my e-mails for yourself and be added to my
> > distribution list, just send me an e-mail asking to be added.
> >
> > Regards,
> >
> > John J. Lothian
> >
> > Disclosure: Futures trading involves financial risk, lots of it! John J.
> > Lothian is the President of the Electronic Trading Division of The Price
> > Futures Group, Inc., an Introducing Broker clearing ED&F Man
> > International,
> > Inc.
> >
> >
> >
> >
> > In a message dated 2/16/01 12:48:10 PM Central Standard Time,
> > prosys@xxxxxxxxxxxxxxxx writes:
> >
> > << CME E-mini S&P 500, E-mini Nasdaq 100 Futures Set Volume Records
> > Feb. 15, 2001—Trading volume in E-mini S&P 500 and E-mini Nasdaq
> > 100 futures
> > rose to new record levels on Chicago Mercantile Exchange Inc.
> > yesterday, as
> > 138,187 E-mini S&P 500 futures and 126,045 E-mini Nasdaq 100
> > futures changed
> > hands.
> > The new records surpass those set on Oct. 10, 2000 and Jan. 10,
> > 2001, when
> > 132,063 E-mini S&P 500 and 117,021 E-mini Nasdaq 100 futures
> > contracts were
> > traded.
> > Both E-mini equity index futures contracts—the fastest growing
> > contracts in
> > the history of the exchange—are traded electronically on CME’s GLOBEX®2
> > trading system and are smaller-sized versions of contracts
> > traded actively
> > via open outcry on the exchange’s trading floor. E-mini index
> > trading occurs
> > virtually around the clock from 3:45 p.m. until 3:15 p.m. the
> > following day.
> > http://www.cme.com/news/01-20volume.html
> >
> > Schwab Trading Volume Down, May Hit Earnings
> >
>http://dailynews.yahoo.com/h/nm/20010215/wr/financial_charlesschwab_dc_2.htm
> l >>
|