It was very small for me (maybe 3 trades per week) recently. But was much better when the Exchange first came online 10+ years ago when they had a 1C product (div risk) The option market is where I trade mainly so overall not a big deal. You have to keep working hard to find the "next opportunity" - as there always is one - and sometimes arbs you were doing years ago come back to life (even for a short period of time) so you have to constantly be scanning for new/old things. And when you find them - the key is to protect the idea. I'll give you an example. In the late 90's/early 2000's I was doing lots of back month currency arb (Globex). it was unbelievable how everyone ignored the back months. One day, on a message board (SiliconInvestor??) - someone asks - did you see the Canadian $ back month was offered at blah blah. Of course - about 10 guys (like the No free lunch guy) - say - "you are mistaken" - "bad quote" - "you are wrong". Well, I knew the guy was right because I got that trade and like an idiot - I posted them online to back up what the guy said. Big mistake - within a month that arb was automated and I was out of luck. It was going to happen eventually but when you find one - as tempting as it is to let others know - keep it to yourself. The OneChicago trade is over. But I get the feeling that you already know this....... Best of luck
Thanks for sharing. Based on this and some other posts of yours, I think you may have the most interesting story / approach of the guys here who actually trade for a living. Arbs are fun. I primarily take risk, but do trade an arb that fits perfectly with what your saying above. It's in delta1 and I actually never intended to trade it (assumed it was picked over). I was testing orders for another strategy I was going to automate and realized that there was "money" to be made. I put money in quotes because it's generally small but every few years it has windfall periods during events. I would imagine more opportunities pop up during elevated vol. Do you carry any short vol positions to supplement the slower times or just practice patience?
Basically all my trading (99.9%) is Arb related. No delta - no gamma - ever. lol In my younger days -yes. A mix of things but virtually all arb since 1999. Another story for you: Things changed for me in the fall of 1999 (Oct or Nov). I had visited Chicago in the 80's/90's and seen the pits and had always been intimidated by the US markets but that changed on this day in 1999. I was watching CNBC before the opening (9:15 est) on a quiet day and a guy from Dow Jones comes on and makes a big announcement live on the air. He says that they are making a major adjustment to the DJIA. Four companies leaving (forget which ones) and adding four (including MSFT and INTC). First time ever a company from the Nasdaq would be apart of the DOW 30. Both INTC and MSFT went up big in the pre-market (This was the a crazy time for these stocks). I kind of laughed at the market reaction but then I did a quick search and calculated that the Nas 100 should be up 40-50 points on these moves. However the futures were not moving - sitting there unchanged. Now you have to remember at that time the Pit was still dominant and was closed at 9:15 est - so just the globex was open. I bought about 20 contracts over a few minutes before I was "full" and the market still just sat there. I called a buddy of mine - he also bought a bunch. A few minutes later - "the big boys" finally figured it out and jammed them about 50 points higher. How could some dope like me (in another country) - be the first person to figure this out?? How sophisticated were these guys in Chicago? Well - it taught me to never over estimate the intelligence of the market. Since that day I have constantly built my business around arbs and as I said earlier virtually never carry a delta or gamma. From Becoming Warren Buffett: Circle of Competence Although this does relate to long term investing is also relates to what I do. Sitting and waiting for the right opportunity. Know your circle of competence and wait for the right pitch and that is how you find your edge.
ONECHICAGO TO CLOSE ON SEPTEMBER 18 FOR TRADING. LONG LIVE ONECHICAGO. JOHN LOTHIAN Executive Chairman and CEO OneChicago was a name given to a securities futures exchange that was an idea that never lived up to its name. It was initially a collaboration between the CME, CBOE and the CBOT. Securities futures exchange OneChicago put out a notice to members on August 14 that it would wind down trading operations and stop them entirely on September 18. The collaboration between the CME Group, Cboe Global Markets and Interactive Brokers ultimately fell apart after 19 years. The joint venture effort imagined as a battle between Chicago (derivatives) and New York (equities) is irrelevant today based on the changes to the industry, the markets and the firms themselves. However, adding a securities futures exchange arm to the partner firms of 2020 probably makes more sense than doing it collaboratively with competitors. We might just see one or more of the partners start a new securities futures exchange as a go-alone effort. The Cboe and CME Group have little reason to work together today to make OneChicago work and probably even more reason to start their own securities futures exchanges. Think about the world of 2001. The Commodity Futures Modernization Act was being implemented and securities futures were finally legal after being outlawed by the Shad-Johnson Accord. Back in 2001, Cboe Global Markets was the Chicago Board Options Exchange and was only an equities options exchange. The VIX and its futures were years in the future. The CME was ascendant based on the shift in interest rates towards the short end of the curve, the growing popularity of its emini S&P contract and its improving Globex system. The CBOT was an afterthought for the OneChicago joint venture and was only added at the last minute of the deal. Its logo didn’t even make it onto the banner displayed at a press conference announcing the joint venture. The imagined battle was between Chicago and New York for equities trading, but it was the internal rivalries and self-interest of the firms involved with securities futures that held the venture back. I will always remember then-CBOE Chairman and CEO Bill Brodsky going on CNBC to talk about the new venture and all he could do was talk about equity options trading. He said little to nothing about securities futures. It was not New York that held single stock futures back, it was protecting existing business lines. Both CBOE and Nasdaq were guilty of this. OneChicago was initially competing against a venture from Nasdaq and LIFFE called Nasdaq-Liffe. Trading Technologies was originally supposed to be a partner in that deal, but was usurped by LIFFE at the last minute as an electronic trading platform provider. NYSE in 2001 was “The Exchange” and never entered into the US securities futures business, but later it merged with Euronext.liffe, which had single stock futures in Europe. Securities futures were held back right out of the start by the margin protocol that put them on the same footing as equity options, instead of being margined like other futures contracts. Nasdaq and CBOE had no interest in seeing single stock futures have structural advantages over their existing options businesses. This move to unwind the joint venture rather than sell it or do a management buyout indicates that one or more of the partners is interested in launching their own separate securities futures exchange. Cboe Global Markets is the most likely to do so as their management has become very aggressive since buying BATS. The case could be made for the CME Group to start a securities futures exchange and offer stocks tied to their commodities. Imagine trading crude oil futures and Exxon Mobile single stock futures on the same platform. Both Cboe and CME are looking for growth. CME could be responding to signals that ICE is contemplating a U.S securities futures effort and want to be able to respond more directly to a potential challenge by owning its own exchange outright and trading the products on Globex. With stock indices at highs again, especially the popular FANG stocks, using leverage to manage equities positions via securities futures might be a good solution for today’s market paradigm. And maybe with the political muscle of Cboe Global Markets or CME Group behind this, rather than that of the meager OneChicago, the product will have more friends in Washington to help it compete against the vested interests of the stock loan business. Maybe the 2000-2001 hype around single stock futures can be revived. I know I bear some responsibility for that hype as I was a big and vocal supporter of the product back then, even if I had a small (but growing) viral newsletter at the time. The battle between Chicago and New York is long gone. The OneChicago partnership is being unwound. But that does not mean we have heard the last of single stock futures.
I've read that comment letter multiple times. DD (a former IBKR guy) understood the market but the industry didn't want this market to succeed. Nothing he could really do. Hopefully the next SSF Exchange will have better support from the industry. A good guy who isn't afraid to say what is on his mind. Someone on this thread also mentioned AQS's stock lending business which was basically bought and then shut down (lol) because of its threat to the industry. I was able to borrow equity via AQS at significant discounts to the "secret" stock lending market that exists today but unfortunately I was one of the few who actually traded on this market. yet another Exchange that had no chance...... Anyhow, I just opened my account(s) and its the first time in 15+ years that I don't have a SSF position on the books.... A day to reflect.
Indeed a sad day. If this product was treated as he argues it should have, it would have been a whopping success. Dave no doubt gave it his all.