How much of a typical day's action gets its impetus from the floor traded contracts? Is there still significant volume at the pits, and do certain currencies conduct a greater percentage of size on the floor? Thanks in advance.
The euro is the most active contract, Wednesday it traded 139,634 contracts, of that 2.4% went through the pit, the rest was Globex. The pits are dead, long live electronic trading.
http://www.cme.com/trading/dta/hist/dbindex.html Click "Latest Bulletin" I think thats what your asking about. If I'm reading it right the floor is of little consequence. July 26th Euro FX Floor : 3382 contracts Globex : 135,750 contracts
Thanks for the quick replies. So I suppose the total globex volume still doesn't compare to how much is transacted in the cash market? Is the interbank market as or more liquid than globex when it comes to intraday trading, or is the vast majority of cash transactions OTC?
Interbank FX market rules. take that 139000 euro contracts and multiply by their value of 159K per contract and you get about $22 billion in trade. Average daily international foreign exchange trading volume was $1.9 trillion in April 2004 according to a study from the Bank for International Settlement. Probably higher now.
Illiquid, No offense, but if you are asking this question then you should continue to do alot more preparation and simulation trading before jumping into FX. In FX, the cash(spot market) is the dog and the CME FX futures are the tail of the dog. Futures volume ( pit and electronic volume combined) is a small portion ( maybe 2 to 5%) of daily FX turnover ( futures, cash, and OTC fwds combined). The FX Marketspace product that is due to be released sometime in 2007 is a cash FX product the CME is involved in with Reuters and may take a bigger portion of the FX pie as time marches on. It will all be electroninc though and to answer your question, very few locals or large players use the physical FX pit (or electroninc FX futures period ) to move large size. Back in the day, the FX futures players did have the potential to move the market but not thesedays. Generally speaking there are banks who take the cash then add or subtract the fwds ( cost of carry from the spot date to the IMM expiration date) to get a running spot to futures conversion price which they post all day on Globex to provide real time FX futures prices all day. They are the ones who are the bid and the offer all day long in the FX futures. If the Cash moves then the futures is adjusted almost immediately. Price discovery these days is fine in either cash or futures just shop around. Good luck
I know that interbank is where the bulk of commercial transactions take place, but for those funds and institutions who take quick, intraday positions on a speculative basis -- I'm assuming they trade vs market makers who provide bids and asks all day on the interbank platform? As for the pits, I was thinking of visiting a friend in Chicago and was just wondering about what I'd see at the CME if I dropped by -- a bunch of guys playing chess? On a more serious note, do you guys think globex fx futures will go the way of the dodo as well?
LOL. Yeah, but only about 600 billion of that is spot. The rest is swaps and other currency derivatives. Euro transactions represent some 35-40% of that 600 billion. Which comes out to roughly $225 billion. But there are many Euro crosses. The most popular, EUR/USD probably makes up about 75-80% of that or 30% of the $600 billion. So that's about $175 billion daily turn over in EUR/USD. Think retail players have access to the breath and depth of that? Not a chance. More than 50% is straight interbank dealing. So that leaves about $92 billion for retail in EUR/USD. Uh oh, wait, almost forgot. Another third goes to fund managers and other non bank institutions. So shave off another $58 billion. So that leaves, what? $25 billion for retail. So it appears that retail access to the EUR/USD is about the same to little more than the notional value of the Euro FX futures. BTW, YOU cannot play the interbank FX. (interbank FX is as it says - between banks.) Though you have tertiary access to the spot scraps. All for 2- 3 pips and some slip via a market maker who trades against you, might not honor quotes, might stop hunt occasionally, might by artifically widening the spread, and who let's you play 100:1 to 400:1 with as little as $500. Because for them, given their setup and the shear number of account that blow up, it's all money in the bank. Now, of course, if you're using an ECN type broker or front end. Then you've got a real and viable alternative to CME's futures. But the future of retail spot is looking brighter thanks to CME and Reuters new joint venture - FX Marketspace - which will commence operation during the 1st quarter of 2007. Have a look into it.
I visited the CME around 1990 I think. It was interesting. Even then when currency futures were still big (before globex and eminis took off) the S&P pit was much bigger and busier than the currency pits.
I'll take the tail over that setup anyday. Fortunately, I don't think the globex-interbank lag is any greater than that experienced by a retail trader trading nyse or amex stocks, likely far less actually. And don't worry fxxx, I understand and completely embrace the fact that I am trading the "tail"