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Michael:
Actually, it is more complicated than that. I sat in
last week on a "strategy meeting" at the CME and one
of the topics discussed was the E*Mini Russell and the
S&P contract under development that will "replace" it.
In a strange quirk of poor decisions, the folks at the
Russell allowed the CME the ability, should the CME
lose this contract, to continue to trade it as far out
as there were contracts on the books on the day the
legal agreement to move the ownership or listing of
the contract is consumated. That actual date has not
occurred, since regulatory approval has not been
finalized. While that process goes forward, the CME
[it was intimated] has been quietly doing one lot
pairs out into the future delivery months, so that a
string of small contracts far out into the futute is
on the books. This means that the CME has the option
to NOT de-list the Russell for quite some time--you
can speculate how far out they would go, but dates
like Sep 08, Sep 09 and Dec 2010 were routinely
mentioned.
Would they do this so they could grow the contract
right under the nose of ICE? Probably not. Instead,
they would do it to annoy ICE and muddy the waters
while they introduced the new S&P created product that
they claim will have a 99 percent correlation to the
Russell 2000 [as close as possible without violating
copyrights]. The only undecided issue on the new
contract is its margining, weighting and settlements
quirks, because the Russell contracts do not margin or
re-weight like other contracts. The CME and S&P now
have to decide if they are better off introducing a
new contract that uses "traditional" weighting and
re-balancing and margining OR if the use of old
Russell contract's unusual methods in the new similar
contract will make institutions accept it as a
replacement that much more quickly.
So, the short answer is...September is not a drop dead
date. ICE doesn't even have an electronic platform for
server and clearing yet--even if they DO end up with
the CBOT. And once they do begin trading it, its not
clear who will follow to the ICE and when there will
be only one contract trading. In other words, its a
logistical mess. The Russell folks did get well
compensated for changing exchanges. Now we'll see if
it was a short term gain that will be a good or bad
long-term business decision.
For all of us? Having taught day in and day out at the
CME and CBOT and having specifically used the E*Mini
Russells live in many seminars, I can tell you that it
was easy to see when the floor arbitrage guys and
girls were either taking a vacation day or a long
lunch. And I think people will be surprised how less
liquid the "new" ICE traded Russell will be, at least
initially. Will the S&P based replacement be able to
fill the Russell shoes? I don't know and I can'y
hazard an educated guess. Too many variables are open
and up in the air. But I do know that so far, there
are more questions than answers in the Russell's
future.
Hope that helped.
Tim Morge
--- Michael Guess <mguess@xxxxxxxxxxxxx> wrote:
> Folks,
>
> I've been inquiring (eSignal and Genesis) re the
> purchase of the
> Russell contracts by ICE from CME. There's been
> almost no publicity.
>
> I'm wondering about loss of liquidity due lack of
> publicity and
> possible double exchange fees. Traders who are
> currently using the
> Merc's mini exchange fee package now will have to
> add on the ICE
> exchange fee just to trade the Russell mini.
>
> I would think ICE would promote the Russell to
> ensure it remains a
> popular trading vehicle. Perhaps eliminate the fee
> for awhile? We've
> only got until early September, as I understand, so
> the deadline's approaching.
>
> Any thoughts on this?
>
> Michael Guess
>
>
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