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Legal licensing issues. The QQQ trades a tracking option. The SPY and DIA are
related to legal licensing issues. The AMEX recently went to arbitration with S
& P and CBOE about the right to trade options that track and deliver the SPY.
The dispute arises over the S & P license that each exchange holds and the
assumption as to what products are covered or not covered.
The article you mention also mentions the (soon) entry of Barclay's .. the
world's biggest indexer .. into the business.
Barclays will be bringing about 30 - 40 ETFs .. including an OEX (if the legal
stuff can be resolved) and most likely a tracking option. A tracking option
would settle into the ETF as opposed to cash.
Bottom line is currently it is mostly licensing and territory issues amongst the
exchange. You should also know that an upstairs market exists in QQQs, etc.
This upstairs market usually trades about 3X to 6X the listed market.
Dick Crotinger wrote:
> There is an interesting article in today/Sunday's NY Times about EFTs...
> "exchange-traded funds". If you are interested, the article is at
> http://www.nytimes.com/library/financial/sunday/110799invest-mutual.html
> (there is a no-cost registration, but otherwise the NYT is free of charge).
>
> Two of the more popular EFTs are SPDRs and DIAmonds. As explained fully in
> the article, these instruments trade like an equity, can be bought on margin
> and sold short. They are very liquid (SPY trades around 8M shares daily)
> and are a great proxy on the underlying, i.e., SPY is 10% of the S&P500
> index, and DIA is 1% of the DOW 30 industrials. According to the article,
> the AMEX (where these are traded) is about to see a mushrooming of a much
> wider variety of EFTs after the first of the new year. The gist of the
> article is that these will provide serious competition to the mutual fund
> industry due to their enhanced flexibility (open/close trades intra-day,
> real-time quotes, etc.), as well as have different tax and commission
> considerations than mutual funds (not always more favorable).
>
> Can anyone explain why options are not traded on these insruments? Every
> other equity trading these kinds of volumes has a significant market in
> options, but not the SPDRs. I've heard it said that the best reason is that
> it would take market share away from the SPX options, which also trade on
> the AMEX. With all the motion toward electronic trading, it's hard to
> imagine there is not a more compelling reason.
>
> Anyone able to ante up with an answer?
>
> Dick Crotinger
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