Who moves prices even if it is not trading....

Discussion in 'Trading' started by Spark, Jan 13, 2003.

  1. Spark


    In my trading window, I usually display future contracts (say SP500, DAX, HSI, SPI, etc) of different maturity dates. Watching them closely, I noticed their price movement pattern. The prices (both bids and ask prices) of these contracts move simultaneously in either direction even if they are not trading. I am wondering who moves prices? Is it automated by the exchange house? Thanks:D
  2. def

    def Sponsor

    Market makers, traders, brokers, etc.

    Scenerio 1: Most markets are electronic. Say I have an offer on the screen of 100. A retail guy enters 99 bid. He then enters 99.5. them 99.8. I say, you had your chance now I'm 101 offer.

    2: I'm a market maker, I've got an automated bid/ask in the system for a future. No trades take place but some of the components in the index tick or trade. The underlying cash increases and I just move by spread higher in relation to the fair value of the future.

    3: A combo/roll market is entered in for a future. If one month ticks/trades higher, the other months will follow in order to maintain the combo prices. (ie. if I'm willing to pay 5 for the roll then a bid will be made 5 points higher in the second month off of the active front month future.

    4: I make a market in 5 different futures. Say SPX and ES to make it simple. If we trade the SPX, we'll move our ES along with our SPX price.

    5: Europe rallies, US moves, vice versa

    6: etc.
  3. Spark


    Thanks def for the explanations!

    I am still wondering why Hangseng Index future makes a sudden leap (up or down) when wallstreet makes a big move? There is no smooth transition between previous day's closing price and following day's openings price...As HSI jumps wildly, I rarely keep it overnight.
  4. def

    def Sponsor

    It doesn't trade overnight thus the market takes into account overseas moves while the market is closed.

    For example, HSBC is 29.8% of the index. It trades in London and the US. At a minimum, the future will reflect the HSBC overnight move.
  5. are the bids and offers overnight

    various firms , hedge funds , competing with each other

    or is it one or two well capitalized funds making a market

    and sometimes just moving prices up and down to hit stops

    and produce profits for them ?
  6. bone

    bone ET Sponsor

    Some exchanges frequently calculate 'fair' settlement prices for calendar spreads and OTM options that may not have traded for say, the last hour of trading. Quite common. I think it's necessary for SPAN clearing.
  7. def

    def Sponsor

    I'm certain they don't do this for SPI and HSI. They only disseminate markets if there is an actual market being made.