I have done a bit of research and put together a spreadsheet and some charts in my attempt to predict the end of the SP futures contract. The 2 part article is named: Is the SP doomed? - What is the future of the SP? and Predicted End Date for SP - When will the SP stop trading? I'm running this poll in order to get your opinions and I'm hoping to keep track of this thread and poll in the years to come and see how accurate our predictions are. My guess is that the volume in the SP, if it remains in its current form, will dry up during 2008 - in two years time. What do you think?
Please clarify for a moment, I have not clicked on your links. You are referring to the ultimate demise of the pit traded contract correct?
The ticker symbol SP on the CME. Yes I am talking about the big pit traded contract - but remember that this contract also trades electronically outside pit hours on globex - so it would be inaccurate to just say the pit traded contract - and that's why I refer to the SP.
Hopefully never. The pit fulfills an important function-- major liquidity. Additionally avoids the problem of electronic devils-- that is, if the electronic pipe breaks the pit is still functioning. Given the amount of money which flows through the SPOOS and the weight the index carries globally I don't think it would be in the best interest of the Merc to close the pit down. It is like an insurance policy for liquidity. We shall see. It is sad to see many of the pits floundering but middle ground should be found IMHO.
The electronic breakdown is a good point but what about exchanges that have gone 100% electronic already? NYSE, LSE etc. How do they cope with this problem? Redundant system I believe... multiple sites, backups etc. I agree that it is sad that the pits are struggling because it was a vibrant and colorful part of the market. I don't think that the Merc will close it down - I think that it will close itself down - the liquidity will just dry up. The 0.1 point spread in the spoos gives it an edge over the E-mini but when that spread starts to widen then that advantage will disappear. How do the spoos add major liquidity? The E-minis trade 5 times the value of the Spoos each day...
There is no doubt that screen trading has been given a leg up due to the liquidity of the minis, however I also think that institutions will continue to man the pits as I said as an insurance policy and even an edge. That is my hope. I think completely electronic markets are a set-up for failure and that is an issue that we have yet to contend.
Ultimately when it comes to making money out of the markets people are going to vote with their paychecks and go to where they can make the most money. If the ES shows more money then the Spoos will be abandoned. Here's a question that I don't know the answer to and would love to hear the answer from somebody who really knows: How many traders are there in the Spoos pit on an average day this year compared to 1, 3, and 5 years ago? Or does anyone know where I can find that info?
Ask a Merc member. I know the options pits at the CBOT have remained active while many of the futures have dwindled and locals have left. This after many of the locals working for 10 or more years in those pits. So the prospect of having the SP pit close is real. You can park cars in all the sq. footage the BOT added and is now silent due to the migration to the screen.
I don't know any Spoos pit traders to ask that question to - unfortunately... If there are any pit traders reading this then please let us know...