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----Original Message-----
From: Lawrence Lewis <lel@xxxxxxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Friday, January 23, 1998 10:39 AM
Subject: Do SP Futures really lead cash?
>I've been wondering whether anyone here has done the following test with
>their real time feed:
>Compare the SP500 futures contract with the actual real-time tick by tick
>compilation of cash transactions on each stock which is a component of
>the SP500.
>
>I know the futures lead the REPORTED cash by a minute or so, but what
>about actually calculating the cash. This way you could also get volume.
>Even better, it seems one could estimate the cash even better by looking
>at bid/ask and size.
>
>What does anyone think?
>
>Larry Lewis
Larry, since you asked......
There are trading firms that make a good living by doing nothing more than
arb'ing the futures and the cash. Whenever one is out of sync with the
other, the arb is executed. Thus, while markets may temporarily be out of
whack, this condition is not allowed to persist. As to whether cash will go
towards the future of vice versa I haven't been able to determine a pattern.
John
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