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Re: Mini DJ



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It may be a case of history repeating itself or it may be the opening of a 
new market segment.  When the CBOT came out with the Major Market Index in 
the 1980s it had a multiplier of $100.  The institutions said they would 
trade something so small, so the CBOT came out with a $250 multiplier.  The 
$100 issue was the MX or missile, the $250 was the Maxi.  The missile died, 
and so did the Maxi after the stock market crash of 1987.

Today we have a different environment.  It is much more efficient for 
brokerage firms to let clients trade such smaller contracts from an online 
interface.  The client has better access and a leveler playing field with 
first in first out basis.

One of the main reasons the Midam had any volume over the years is that it 
would offer a lower cost learning curve for new traders.  It also offered 
option hedgers a more accurate tool to hedge their deltas. 

The CME is coming out with a papertrading online interface, for new traders 
to try there hand at trading the eminis.  Wouldn't it make better sense to 
trade for real, but with a lower cost for the contract value?  I think that 
is the thinking of the CBOT.

Also, I think this contract will be very popular with brokers trading their 
own accounts.  It is a way to stay in synch with the market, but without 
having a lot of exposure.  The bigger the dollar amounts you have on the 
line, the more you pay attention to your own account rather than you clients. 
 And that is not a good career move.  So this is a contact that is small 
enough for new traders, small enough for many brokers to trade without being 
overly concerned with their position and a fit between papertrading and 
trading the eminis.  Only time will tell whether it will work.  I expect it 
will.

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.