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I attended a seminar for CME members, clerks and brokers the other day put on
by the NYMEX and the CME. Just a couple of comments. The NYMEX has
something like 72 new trading permit holders who will be surrounding the
Crude Oil and Natural Gas rings with electronic trading terminals. They are
allowed to only execute the arb. They may not just buy the pit. They may
not just trade the minis. They must do both sides of the arb. This is a
very restrictive caveat.
The NYMEX memberships are like $1 millions now and their members and leaders
seem very nervous about doing anything that would hurt the value of those
memberships. Thus, the contracts are listed only for the spot month, until
the last 4 trading days when the next month is also listed so people can roll
their positions. Additionally, there is a 50 contract limit on the order
size.
The NYMEX does not want their large commercial clients to use this contract.
They want them to use the pit. The NYMEX is doing this half step electronic
trading venture to lure new retail interest into their markets.
There is great allure to these markets for the retail investor and I think it
will even attract some commercial interest. But it could also be a fractured
market with big air pockets from time to time when the arbitrage is not quite
as efficient as we would hope it to be.
The contracts are not fungible, as the pit traded contract is physical
delivery and the emiNY contracts are cash settled. However, there is an
Exchange for Futures transaction that can be utilized to exit trades where
you are long one and short the other. Right now that is a manual labor type
of transaction, though I think it should be and could be an electronic
central market place. So you will have to call your broker and they will
have to find someone to take the other side.
I think these contracts will be a success despite themselves. The reason I
think that is true is because of the service deficit for the retail trader
and the efficiencies they will be able to enjoy on the Globex platform. The
shear fact that Globex has such distribution is another factor. And lastly,
energies are something everyone understands and regularly pays for. This
price awareness, coupled with the Quantum leap in accessibility and trading
efficiency, will make this contract work.
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.
In a message dated 6/14/02 2:55:54 PM Central Daylight Time, irat@xxxxxxxxx
writes:
<< On Monday June 17 trade NYMEX Crude and Natural Gas mini's on eLocal's
J-trader platform through Globex. Special opening at 9 a.m. C.S.T.
Regular hours are Monday
thru Thursday at 3:15 P.M. E.S.T. to 2:30 P.M. the following day. On
Sunday trading begins at 7 P.M. E.S.T. One hour breaks occur daily from
11 P.M. to Midnight and
9 A.M. to 10 A.M. Hope that this helps. >>
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