DAX and Euro stocks trading

Discussion in 'Trading' started by Machal, Mar 7, 2003.

  1. Maybe it can happen. I have traded eurex bunds during 5years. I was sitting next to the eurex guys (the bank was an eurex member) and I have never heard of such things.
    Moreover, if someone comes to me and asks a bid in 100mio eur 10yr bunds, I will make him a straight bid for his size and will take care of the position myself (hedging with bund futures... of course with slippage if I have been hit in 100mio).

    But it's true that these spikes in volume are on the charts, so your explanation could be a possibility.
    #21     Mar 20, 2003
  2. Machal,

    The answer to your question about Violume spikes is Block trades. The exchange allows brokers to Cross large orders between counterparties in a Block Trade facility. This is highly illegal in the US, but common practice on Eurex and LIFFE.

    Risk Less

    #22     Mar 20, 2003
  3. Riskless, you are right. I had never heard of this and don't like at all!

    1.2.3 Cross Trades and Pre-arranged Trades
    Orders and quotes relating to the same contract or to a system-supported combination of contracts may, in case they could immediately be executed against each other, neither be entered knowingly by an Exchange Participant (a cross trade) nor pursuant to a prior understanding by two different Exchange Participants (a pre-arranged trade), unless the conditions according to paragraph (2) have been met. The same shall apply for the entry of orders as part of a quote.

    A cross trade or a pre-arranged trade is admissible if the purchaser, prior to entering his order or quote, enters a cross request. The purchaser and the seller must enter the order or quote giving rise to the cross trade or pre-arranged trade five seconds at the earliest and 65 seconds at the latest after having entered the cross request. The order or quote hereby must refer to at least a minimum size of contracts. Minimum size is

    in the case of options contracts, equivalent to the minimum quote size of the respective contract established for Market Makers or half of the intended contract amount notified with the cross request, if half of the intended contract amount notified with the cross request is smaller than the minimum quote size established for Market Makers

    in the case of futures contracts, five contracts or half of the intended contract amount notified with the cross request, if half of the intended contract amount notified with the cross request is less than five contracts

    (3) Paragraphs (1) and (2) shall not apply to transactions consummated during the netting process in the opening period (subsection 1.1.3 paragraph (2)).
    #23     Mar 21, 2003
  4. In some academic circles a plea has been made for facilitated block trades, to actually be a benevolent activity for price discovery and volume.

    Facilitated block trades make institutions more easily take up certain positions, resulting in more active (finetune) hedging activities on the exchange itself, benefitting the overall volume.
    #24     Mar 21, 2003
  5. This is the theory in London and Frankfurt and their volumes have exploded because of it.

    #25     Mar 21, 2003