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In a message dated 7/2/01 8:54:19 AM Central Daylight Time,
markbrown@xxxxxxxxxxxxx writes:
<< i was clarifying that emini traders typically think they have an edge
somehow when in fact its most likely break even when you consider
commissions and other factors like not having a backup to call when
something goes wrong or being big enough to call the pit boss and
tangle over a fill. >>
Mark:
You are confusing issues. The playing field is more level for the retail
trader in the eminis trading on Globex2 than trading big S&Ps in the pit.
This is reflected in the growth in volume in the eminis. Regardless of
whether people are making money or not, traders know they are getting a
fairer shake with the first in first priority of Globex2. This is reflected
in the unprecedented growth of volume in these products.
There is about twice as much volume in the emini S&P versus the big S&P. If
you take into consideration the orders which trade in the pit of which the
public never gets a piece of (Merrill swapping 100 lots or more with Goldman
for example), the volume discrepancy is even greater.
Throw in the fact that you don't have to worry about locals and brokers
playing footsie (see the recent CME fines, they seem to all be from the S&P
pit) and you have more reason.
And, with the technology increasing in functionality and reliability, and the
people supporting it with more experience than we have ever had before,
electronically trading traders have the best and most fair access they have
ever had.
I will agree with you about needing to take a longer term view and the
relative unimportance of slippage and commissions to those trading such
systems. Perhaps there are more longer term traders on the Omega list, but I
find many emini traders like to go home flat. They are day traders, so
commissions and slippage are very important to them.
Also important is the fact that the S&P became too big relative to the retail
public's ability to manage the risk ( and still is for many). A smaller
contract size has allowed retail traders to take a longer term view,
relatively speaking.
The CBOT has decided to list the Midam bond as an a/c/e contract come
September and last Thursday the CBOT bonds traded more on a/c/e than in the
pit for the first time. The best part of all this is that people have choice
and they are voting with their feet and their dollars where they think they
are getting the best combination of liquidity, execution, trading costs,
trading platform functionality and support from their brokers.
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.
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