Anyone want to elucidate who calculates the cash value of the SP 500 in any given moment in time. The framework behind it. I would imagine the private firms can calculate the cash value using the individual components with better infrastructure much faster. The reason I ask, if you put: - SP 500 cash - SPY ETF - E mini SP 500 on screens, which leads first?...
SPX cash is calculated every 15 seconds based on the last sale of the components The SPY and ES are traded based on supply and demand which can affect the cash through hedging. SPY fair value is calculated by a few different services in real time, but those are expensive. ES is based on the SPX cash with adjustments for interest and dividend flows. If you are looking for an edge this way, you will never beat the big guys.
If its done every 15 seconds, and print only occurs every 15 seconds. It means that the impending print can be calculated and zeroed in as the 15 second mark approaches. The next tick in cash shifts the algo's spread bias, whether to offer or bid. Probably firms like virtu, know what the next print will be because they are actively involved in making a market in the components. It would be interesting to analyze how the quantity shifts second to second on the bid or offer and if it front runs the next cash print.
Anyone looking for an edge that way is doing the SPX calculation themselves. They are not waiting for the update. They are also likely calculating the bids, offers, midpoint and last sale.
leads to where? All you can watch is the spread. It can only get so wide. But never wide enough for you or me to make any money. But enough that somebody with enough money already finds it worthwhile to sell the spread in hopes of making more than a longbond would pay. Lets's see, how much would I need to make a living buying and holding government bonds? And they don't even sit in front of the screen and watch. They buy expensive real estate right next to the exchange and use highpowered telescopes to see the price before it even gets transmitted electronically. They've traded it thousands of times before we even notice it moved. If you want to watch something that leads watch qqq or nq. Nothing is official unless it is leading.
If you think about it, external news leads most everything. And the news creators lead before the news. So there is a lot of room there in terms of time. That's why there are more incidents of retail traders trying to create the news to effect their positions. Billions season finale is same thing. Rothschilds, did the same thing. http://www.mindcontagion.org/banking/hb1815.html
For starters, nobody really cares about the official tick - what the real time arbs care about is the value built into the triangle of the actual basket price, price of SPY and index price implied by the futures. All of that can and is calculated in real (and I mean REAL) time. To gain an edge there you need a microwave connection (since it's faster then fiber), lot's of expensive hardware and C++ programmers. Usually these people say that they are doing index arbitrage but it's just a sub-section of high frequency trading and is done as part of HF market making. There is another, less latency-sensitive business that is also "index arbitrage". This one involves arbitraging the futures on the index against the basket with holding periods closer to weeks and sometimes months. The pick-up comes from predicting borrow rebates and funding edges, as well as having an insight in dividend dynamics. This business is usually well suited to delta one desks at large banks that have very advantageous funding and ROC requirements. Neither are suited well for a retail trader or even smaller pros, for obvious reasons.
Interpol and CFTC should look into any unusual positions or leverage prior to the bombing this evening (news creators).