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Hello Dan,
My point - I think MM's provide liquidity on QQQ futures only to
degree where they can offset risks borrowing liquidity on underlying
markets i.e. QQQ or NQ or Nasdaq and/or doing arbitrage. That's why
spread is count - they couldn't do that when spread equal or smaller
than underlying (imho).
Best regards,
Alex mailto:alex_bell@xxxxxxx
Tuesday, July 1, 2003, 1:43:12 PM, you wrote:
DG> Alex
DG> I think your generalization that 'liquidity is a function of spread'
DG> ignores both depth of market and my point about rough markets.
DG> If you are trading single contracts, or minimum round lots, you can
DG> ignore the depth of market.
DG> You should never ignore the 'rough market' problem...
DG> Regards
DG> DanG
DG> Alex Bell wrote:
>>Hello Dan,
>>
>>In fact, liquidity is a function of spread. IMHO nothing remarkable
>>that MM's are able to maintain liquidity on QQQ future keeping spread
>>5-10 times wider than on its underlying market (QQQ future spread 5-10
>>cents vs 0-1 cent on QQQ). Such a liquidity has little demand.
>>
>>Best regards,
>> Alex mailto:alex_bell@xxxxxxx
>>
>>
>>Tuesday, July 1, 2003, 12:47:21 PM, you wrote:
>>
>>DG> John makes several good points, but I would like to add one of my own.
>>
>>DG> When markets are trading smoothly, it is fine to evaluate liquidity by
>>DG> the volume of contracts. Markets are not always smooth, however, and a
>>DG> trader needs to consider how he expects a product to trade in rough
>>DG> markets. Will market makers still make a reasonable market when the
>>DG> bottom falls out? If not, will there be practical alternatives that will
>>DG> allow the trader to eliminate or offset risk?
>>
>>DG> Frankly, the proof of the pudding is in the eating, and we haven't had a
>>DG> good bite of bad-market pudding since the introduction of security
>>DG> futures. Traders should give some thought to how to exit risk through
>>DG> alternative markets (eg, buying puts or shorting stock to offset a long
>>DG> position), and watch those markets the same way a driver watches the
>>DG> traffic behind him in the rear-view mirror.
>>
>>DG> Regards
>>DG> DanG
>>
>>DG> John J. Lothian wrote:
>>
>>
>>
>>>>Earl:
>>>>
>>>>Security futures challenge our understandings of what liquidity is.
>>>>Most contracts are judged by number of contracts traded. However,
>>>>with security futures products like the QQQ ETF, and others, the
>>>>contracts market makers are continually making 2 sided markets. I
>>>>regularly see bids and offers 100 up on security futures at both
>>>>excchanges.
>>>>
>>>>Bill Rainer, former CFTC Chairman and CEO of OneChicago, recently
>>>>said that there has yet to be an order that is too large for
>>>>OneChicago market makers to handle. They have had 2000 and 3000 lot
>>>>orders all trade at the same price. I agree, and the same is true
>>>>for NQLX too.
>>>>
>>>>Security futures markets have the most liquid cash markets available
>>>>of any futures markets. These cash markets are accessible to all,
>>>>but the market makers have multiple avenues to lay off their trades
>>>>in broad based indices, cash stocks, options or other security
>>>>futures products.
>>>>
>>>>Thus, while we might brand low volume for a contract poor because of
>>>>low number of trades, that label does not really reflect the true
>>>>liquidity of those markets.
>>>>
>>>>Regards,
>>>>
>>>>John J. Lothian
>>>>
>>>>Disclosure: Futures trading involves significant risk. Security
>>>>futures are not for everyone.
>>>>
>>>>
>>>>--- In realtraders@xxxxxxxxxxxxxxx, "EarlA" <earl.a@xxxx> wrote:
>>>>
>>>>
>>>>
>>>>
>>>>>I see, Alex, thank you. I've not had much interest in the Single
>>>>>
>>>>>
>>>>>
>>>>>
>>>>Stock
>>>>
>>>>
>>>>
>>>>
>>>>>futures and was unaware of the QQQ futures contract. I would think
>>>>>
>>>>>
>>>>>
>>>>>
>>>>that the
>>>>
>>>>
>>>>
>>>>
>>>>>contract would have heavy headwinds going against the NQ, but at
>>>>>
>>>>>
>>>>>
>>>>>
>>>>1/8 the
>>>>
>>>>
>>>>
>>>>
>>>>>size of the NQ, it might appeal to those seeking a very small
>>>>>
>>>>>
>>>>>
>>>>>
>>>>contract. I
>>>>
>>>>
>>>>
>>>>
>>>>>would think however that, as you indicated, the liquidity would be
>>>>>
>>>>>
>>>>>
>>>>>
>>>>very
>>>>
>>>>
>>>>
>>>>
>>>>>poor.
>>>>>
>>>>>Earl
>>>>>
>>>>>
>>>>>
>>>>>
>>>>>
>>>>
>>>>
>>>>To unsubscribe from this group, send an email to:
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>>>>
>>>>
>>>>
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>>>>
>>>>
>>>>
>>>>
>>>>
>>>>
>>>>
>>
>>
>>
>>To unsubscribe from this group, send an email to:
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>>
>>
>>
>>Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
>>
>>
>>
>>
>>
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