Anyone have any ideas how much this is going to clog up the pipers...First decimilization, then SSF's having to be broadcast...And, who knows how IB will be able to handle this huge capacity issue since it seems they are already maxed out with the surge of Globex traders in the past six months
IB's switches and hardware continue to be upgraded so not too concerned about speed. Anyway, the question is will SSF's replace options for hedging. The answer is a defacto --- NO They are completely different animals. In fact, it may lead to more options volume.
I completely agree, and thought I mentioned it earlier...the SSF's may "accentuate" the underlying security, or even replace it with certain strategies, but they have little to do with the option portion in my mind. Don
Vinny: i cannot imagine a different way - futures are always paid / received daily, otherwise they would be called forwards. also, the 20% margin is then afterwards "applied" every day new.
IMAO (in my arrogant opinion) SSF's have the Option's boys running scared, as their license to steal/earn your money -- is expiring during triple witch. SSF's don't seem to have the same problematic issues that the discussions between Specialist::MarketMakers, simply put, how many guys are more pleased that they've switched to electronically trading the E's (Emini's, etc.) from having traded ETF's, Index Shares or the other individual equities.
Volume on new markets is a Catch22. If there is volume people trade it. There is no volume until people trade it. That being said, my view is that a substantial portion of the daytrade volume on the stocks listed as SSFs, will ultimately migrate to the SSFs due to increased leverage and *presumably* lower transaction costs (commissions and spreads and transparency). Also, the trading of SSFs on certain stocks should tend to increase overall trading volume on those stocks and should tend to make them more volatile.
limitdown, if you look at the list of market makers for the SSF's you'll note that they are mainly option market making firms. They option players are not running scared, and in fact are all for them. You are talking apples and oranges. Your complaint is against the system of trading as opposed to the players. w/o market makers you wouldn't have many markets to trade. It is the exchange system that allows for bad trading practices and inequities. Competition has been changing that. As for SSF's there are some SERIOUS issues. Do you know that OneChicago does not want fungibility with the same SSF's that will trade on NQ/LIFFE? In other words, if you buy an IBM future on NQ-LIFFE becuase it was the best price, you can not sell it on OneChicago. (the reason is that OneChicago believes they have the early lead to establish being the exchange of choice and want to stymie competition). Monopolistic rules like this lead to confusion. Hopefully they won't lead to biased rules in favor of the exchange members.
I know some of the players on the list of MM firms, and they are not running from anything. They will make good markets, and find every possible arbitrage edge available. Overall, this can be a very good thing for the marketplace (SSF"s) provided we get enough "outside" players. Only time will tell about that. Since the SSF's will basically offer an alternative to equities for hedging, the options players on the floor should embrace this new product. Don
hey guys, you slammed me pretty hard, and perhaps I deserved it. Cross market spreads, especially when they transcend country and national borders, well, just on the surface of it, I don't think I'd like to insure them/that either. Knowing that the MM's are looking forward to this is good, because if they didn't support it, it wouldn't fly. Knowing the apples and oranges of the Specialist system are indeed two different animals in the fruit basket. Def got it right, with the franchise having competition through the MM system as opposed to the Specialist system. Let's face it, these haven't had an impact in the trading arena, or haven't actually started trading, and until they do and the weight of their participation in the financial system is known, all we're doing is speculating. 20 Bid 25 Offered 5 up -- any takers?