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One of the things you experienced early in NDX was it went from having a
fairly efficient trading crowd at the opening.....to a DPM...back to a
crowd. It was traded by the DPM against what is called a virtual basket
and for a while it's quality may have suffered.
There is a difference between experiencing what might be a product that
is over supported and the allegation that chumming(putting up trades to
paint the tape)is being done.
Apparently some of my previous possts were lost with the forum being
doown, but DJX did some hugh vlume the first 4 days...with almost
100,000 contracts traded on Tuesday. This brought out the allegation of
chumming to paint the tape. Putting up trades to simply paint the tape
and create volume. Some people seem to make the argument this is common
in futures. In securities if done intentionally it is prearranged
trading and a felony. About a decade ago we had a prettty significant
case of it oon the CBOE floor and it turned out to be very expensive to
those involved. If it is commonplace in futures, as some argue, that
would really bring into question the market integrity. Any market that
allows prearranged trading is one that NO SELF RESPECTING TRADER would
ever use.
There is one narrow exception to the prearranged trading issue and this
is a sticky point. Let's say you want to do 50 options at a price of
say 3 3/16. Right now you can't trade at 1/16 above $3(soon to change).
So you do 25 at 1/8 and 25 1/4...we are seeing some of this as the
markets become more efficient. The question becomes....and we are
currently answering it...should we bring enforcement action or rush the
process of 1/16 everywhere and then decimals?
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