Originally, trading in stocks was sold to the public as a way to raise funds for the start/financing of public companies. But where's the economic benefit in having several options and futures exchanges all offering several copycat indexes. ISE AMEX CBOE BOX PHLX They all offer the same crap. It seems to be more like legalized gambling shrouded as ''trading'' nowadays.
Just good old competition. Trader will gravitate to instruments that suit their purposes. Exchanges/instruments that don't suit the traders will just be discarded in the dust bin of history. It's highly democratic hehe, and no one can manipulate votes in this system. Futures/options exchanges are definitely not the same as casinos. The price quotes coming out of exchanges have real effects on how producers/consumers make their decisions. Whereas casinos, who outside its walls gives a sh*t what numbers came off the roulette wheel?
What effect on producers/consumers does options on 4-5 exchanges based on the same thing like buiders, oil cos, steel, etc have? Other than to generate commissions/fees and other profits for themselves? I just fail to see any economic purpose.
There is none. Publicly traded stock exchanges serve the purpose of giving companies revenue streams (via ipo's). Options/futures/indices don't really create any tangible economic benefit (other than giving investors/traders more thinks to trade). In the case of options for example, its a zero sum game. every transaction theres a winner and loser, and the brokerages taking a piece of the action. That said I like the fact that they do exist since they allow me to 'bet' on a move (or non move) that i believe will occur. indices just make things easier for the consumer since they dont have to buy everything individually (but no real economic benefit unless the idea of lesser electronic transactions saves money overall). The other benefit from it all is entertainment (i view investing/trading as a hobby), which is hard to quantify.
it is spreading the risk.speculators have a purpose in a free market. that purpose is to take the other side of trades producers and consumers want to make to offset their risk. could all of the risk be offset on one exchange. yes but then the people making the transactions would be at the mercy of that one exchange for transaction costs.
You are all right. The markets serve an economic purpose. AND It's a Casino. Both. Simultaneously. At the same time , too.
I believe that options/futures trades all have a tangible economic effect. For example, when I buy a bunch of CALLs at the market, the options market maker may choose to hedge his risk by buying the underlying stock. He has commission advantage so he can pull off a profit because of the wide options spread vs the underlying. So my purchase of CALLs resulted in the stock being bought. This may not be a 100% transfer of CALLs bought to stock bought, if enough people do it, it will have a definite effect. Same thing for index futures. If I go and buy 10,000 ES contracts, I bet some of the institutional players that sold me will buy the stocks in the index to hedge his risk. Again my actions resulted in stock trades.
Ever heard of Collars? Options are used to preserve wealth. Hence they *do* serve a major financial and economic purpose. Mark Cuban would agree.
Preserve who's wealth? Options are zero-sum. Whatever 1 side makes, the other loses, so where's the wealth preservation? With all these exchanges pushing so many options it's *definetely* not in the interest of the small speculator to get involved and not only that, it just means more manipulation in an already saturated marketplace with very little volatility.