As a broker I am excited for this exchange and the products they are offering. We are ready for live trading as soon as we get the green light.
i cant understand their 75 stock product, so its a future that has 75 most active or what exactly? do you know by any chance?
Bear with me maybe iam slow but the question is what are the stocks? The components? If iam thinking similarly its a future contract like an etf xle lets say, xle though u can see its holdings this some reason i cant find it
It's really buried. You have to go to the Documents link at the bottom of the Small Exchange site, download the Small Exchange Rulebook, rename it with a .pdf at the end because they didn't so your computer won't recognize it, go to Chapter 30, which directs you to another site, https://indexit.dxfeed.com/, where you have to click on the Components and Weights pdf. TLDR the info you're looking for is at https://indexit.dxfeed.com/docs/SMFE - Stocks 75 - Components.pdf However I put the whole string in to demonstrate how ridiculously hard they make it to find something as basic as their futures contract specifications. Not a great start to an otherwise promising venture, hopefully this doesn't represent the overall preparation they've put into this launch!
I don't believe the components are as relevant as having a decent correlation to the S&P 500 and conforming to the regulatory limits.
The problem with correlation and a 75 company index is that it's not a static thing and it's easy to overfit. For example, UBER and LYFT are both in this index, both with more than a 1/75 weighting. They also include TSLA and GRUB in the index. Those 4 stocks certainly aren't what one would image if asked to guess what was in a market representative 75 company index! Heck, the largest weighted component, at 6.3% is Freeport-McMoRan (FCX). In case you had to look that up like I did, it's a mining company stock with a beta of 2.25. It's closely followed by The Mosaic Company (MOS) at 4.8% which again, if you had to look it up like me is a potash mining company with an average daily trading volume of only 6 million shares on a $12 stock. Keep in mind, the index claims it "finds the most active stocks from the five major sectors". A potash mining company with a daily volume of 6 million shares? Seriously? This looks to me like someone told a math guy with little market experience to do a regression and find the 75 stocks that gave the best fit for a very specific thing over a very specific time period. You end up with the index you see here, which per the above is almost certainly overfit.
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