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Yes, that was a typo, I was referring to the introduction of single stock
futures. I do not disagree with your observations as they relate to current
market conditions. My comments are directed toward conditions existing in a
major cyclical bear market of the type and scope we have not seen for nearly
a century. Should those conditions emerge, I believe that the enthusiasm
for, and regulation of, derivatives will change markedly.
I should, perhaps, add a few caveats regarding my opinions. I am personally
extremely bearish in my view of the equity markets for the next decade. This
is reflected in the fact that my investments have been 100% in long term
treasuries and bond funds for well over a year now and I am even now
completing the process of switching bond funds (most of which contain GSE's
and corporates) for treasuries. Futures trading is another matter, I don't
care if the market goes up or down as long as it does one or the other,
preferably in a trending manner. Finally, my investment hat is in no way
married to the bear case should strong evidence emerge to the contrary,
however I am in no way interested in trying to time my investments to catch
the absolute bottom in this market.
Earl
----- Original Message -----
From: <I4Lothian@xxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Saturday, September 08, 2001 7:32 AM
Subject: Re: [RT] Markets: Stock Index Futures and regulation
> Earl:
>
> With all due respect, stock "index" futures have been a huge success. I
> believe you wish to be skeptical of single stock futures. And given then
> attendance and interest shown by the futures and securities industry this
> week at a seminar in Chicago by the Futures Industry Association, I beg to
> differ with your conclusion.
>
> Single Stock Futures, in my opinion, will be the single largest new
product
> we have ever seen introduced. There will be three exchanges in the U.S.
> offering them, a very aggressive and with it Nasdaq-LIFFE, the yet to be
> named but formidable Chicago Joint Venture of the CBOE/CME/CBOT and the
just
> announced AMEX. What product have we had launched by three exchanges all
at
> the same time?
>
> Keep in mind that the banks wanted nothing to do with the CBOT when they
> launched the bonds. Six months later they were knocking down the doors
for
> memberships and floor space. Look at the influence of stock volumes from
> tine introduction of options trading in the 1970s and stock index futures
in
> the 1980s. Volume took off and never looked back. Nearly 1/3 of the
weekly
> NYSE volume comes from program trading alone.
>
> The new single stock futures will offer tremendous capital and operational
> efficiencies to some of the largest players in the industry. No more
waiting
> t+3 for stocks to settle. Same day settlement. Marked to the market at
the
> same clearing house, the OCC, for all the single stock futures and options
> trading. Same clearing house for settlement and delivery of options and
> futures contracts.
>
> Take then that the biggest corporate names in the world are U.S. companies
> that can be traded as SSF. Take then that the U.S. capital markets are
the
> best in the world in terms of legal certainty, regulation and fairness.
>
> These are all parts of the equation why single stock futures will work.
Will
> they take volume from stocks? Yes and no. That same argument was made
when
> options and indexes were introduced and they only added to the liquidity
of
> the market. With the movement of time we have been able to introduce
better
> and better contracts to specifically meet the needs of traders, hedgers
and
> investors. We no longer need to run into gold or soybeans to hedge our
> inflation or deflation risk. These tools will only make what people want
to
> do, and do, more efficient.
>
> And I for one and going to do my best to make sure they will be
successful.
> Part of the reason I write my daily industry newsletter is to help people
in
> the futures and securities industry manage the changes all around us. Just
in
> the last week I have had a President and CEO of a U.S. exchange sign up
for
> the letter. A Senior Vice President of one of the Chicago exchanges
signed
> up. A large division of a clearing FCM will shortly be announcing they
are
> going to license my letter to offer to their clients and to attract new
> clients. They will be offering it at a single stock futures newsletter.
>
> So, all the signs I see say that these new products are going to work.
And
> as the Nasdaq-LIFFE said, they are going to "make" them work. I have
never
> seen an exchange so confident, so focused on the good of the customer, so
> focused on offering a level playing field for all participants as the
> Nasdaq-LIFFE. And I believe them.
>
> 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 clearing Man Financial Inc.
>
>
>
>
> In a message dated 9/8/01 7:17:41 AM Central Daylight Time,
eadamy@xxxxxxxxxx
> writes:
>
> << I doubt that stock index futures are going to get very far off the
ground.
> Essentially, stock index futures (low margin and high leverage) are the
last
> nail in the coffin of post-29 market regulation. I believe that we are in
> the early stages of a major cyclical bear market and I expect to see
stock
> market volumes diminish to levels not seen in decades as a byproduct of
> severe price declines ... the pendulum always swings from one extreme to
the
> other. I further expect that liquidity in the futures and options markets
> will suffer.
>
> I find it especially ironic that the post-29 market and banking
regulations
> were removed just as the markets moved to such excess. The fact that
these
> regulations were seen to be inhibiting the upward move of the markets
should
> have been a warning rather than a reason to remove the regulations.
>
> Earl >>
>
>
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>
>
>
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>
>
>
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