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I was out for a few days and am just catching up on my mail. Just for
clarification, the FED was given oversight of stock index futures margin
requirements following October 1987. Essentially the exchanges still set
their own margins but the FED can (and has -- February 1994) ask that the
exchanges adjust margins. My hope is that things go well enough early on
that the FED and the exchanges all feel comfortable decreasing margins over
time.
On the same subject, I've been of the opinion that the hidden growth
opportunity for futures exchanges is in the lifting of the ban on
"narrow-based" index listing. Under the Shad-Johnson Accord, sector index
trading has been the domain of SEC regulated exchanges only. In other
words, there have been sector index options but not futures.
Under the new rules, futures exchanges can list narrow based index futures
contracts such as technology indices, drug stock indices and so on. If the
exchanges go ahead and do this it will forever change sector index trading
and will likely shrink the sector fund business as those funds designed for
timers and traders will fall from favor. It would also be useful for the
CTA who trend trades stock index futures as this would allow him or her to
concentrate assets in hot sectors while backing off of out of favor sectors.
The manager could buy S&Ps and sell technology sector futures as an example.
-Sean
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