Quoting index futures

[skc]

I have a question on how market makers (like a CFD provider) quote their cash index prices (say for ASX200). I understand that they don't just take the XJO figure, but it is based on the fair value of the index future prices. So do they base the cash prices on SPI contracts? How does this provide enough ticks throughout the day? Or, am I missing something completely?

Hope someone here can clarify for me. Thanks

 

[Trembling Hand]

All Index and FX CFDs are linked Tick for Tick to the corresponding Futures market not to the Index, Not ever!!

 

[skc]

All Index and FX CFDs are linked Tick for Tick to the corresponding Futures market not to the Index, Not ever!!

Thanks. I am aware of this. But according to the ASX / SFE website, there are only 424 contracts changing hand in the SPI200 today. But there were way more ticks than that being quoted by the CFD provider.

Also, given the low volume, can people manipulate the market so they can create a tick up on SFE, say, and at the same time sell a larger contract with their market maker, and create some arbitrage profit?

 

[Trembling Hand]

?? There was well over 20,000 SPI traded today

 

[skc]

www.asx.com.au/sfe/volume_summary.htm

Exchange Commodity Description Type Volume
SFE YT 3 Year Bonds Futures 5,344
SFE IR 90-Day Bank Bills Futures 4,085
SFE XT 10 Year Bonds Futures 2,188
SFE YO 3 Year Bonds Overnight Call 900
SFE AP SPI 200 Futures 464
SFE AP SPI 200 Call 100
SFE AP SPI 200 Put 100

Wrong place to look?

 

[James Austin]

SKC,

30413 contracts today on SPI (9.50am to 4.30pm)

 

[skc]

Thanks TH. I believe you.

Is there a free public source for this information, instead of through brokers. I'd thought ASX / SFE would have this information, but they show totally different numbers.

 

[Trembling Hand]

You get what you pay for.

 

[overit]

All Index and FX CFDs are linked Tick for Tick to the corresponding Futures market not to the Index, Not ever!!

I have just stumbled across marketech recently and they appear to be linked directly to the XJO index. I could be wrong but it definitely doesnt match up with IG markets graph of the aussie 200 which I assumed was based on the futures. Not sure exactly where they get their numbers from but every 30secs when my etrade quotes the XJO it has always lined up. I am going to open an account there and if someone could could enlighten me I am all ears.

I watched it this morning and they open punting at 10:10am so you cant get the jump on for the morning gap up...BUMMER! Haha!

 

[Trembling Hand]

Really?? The XJO quotes are not Dynamic. They are snap shot and are quoted every 30 secs on the min and half min. If you get any more ticks than 2 a min they are not liked to an Index. And If they are linked to the Index they will lag the Futs big time.

If that is true I'm in big time. Have signed up for a demo and will see tomorrow.

 

[overit]

I look forward to your findings. Like i said the market keeps ticking away but every 30secs when my etrade quotes the XJO they seemed to be aligned. I setup my IG markets graph and marketech graph side by side to see if I could gain any insight. They are definitely different but I couldnt seem to gain any obvious advantage although have only watched for a few hours today. I was on your line of thinking too.

 

[Trembling Hand]

Already have my doubts. Looking at their demo chart of today's action the 1 min candles are OHLC. Not possible with only 2 quotes per minute.

We will see tomorrow.

 

[overit]

I do agree with you there TH about the bars and more than 2 ticks a minute. I have a screen shot from the other day with both the IG Markets graph and Marketech graph on it for side by side comparison if you would like me to email it too you. Maybe a little big to post on here for maximum detail. I took it at around 2pm.

I have no idea how they calculate their index number but when I was talking to the guy on the phone he agreed with what I was saying about being linked to the XJO but whether he didnt know exactly himself is another question. It is not at all impossible I would think that they could use the same formula to calculate it off the top 200 as the asx and get a continual price.

They have tighter spreads on the financials and materials so I am going to open an account there anyhows. Always good though to know how things work so you can understand them better and make money. Probably the reason IG markets shut me down.

Lets see what happens today.

 

[overit]

This is an attachment from the open 6mins in. You cant start trading on marketech until 10mins after open. Marketech and the XJO throughout open were very very close. I guess they are using some algorithm to plot their own numbers or something but as far as practical seems to be the same so far. I hit print screen as soon as etrade change. I lost a little detail when I shrunk it down but it is 5096.1 on the XJO.

 

[overit]

I may have missed your direct point about them being strictly adhered to the XJO ie only 2 ticks a min. Obviously this is not the case as they are constantly updating. But it is certainly a different system they are using. If they did only use 2 ticks a minute well then yes you would be printing money. Hopefully we are on the same page.

I still find how they do there index intriguing none the less.

 

[Trembling Hand]

OK Overit you are right its not linked to the Futures like all the other Index CFDs and its not linked to the actual XJO that is quoted by the ASX.

Have not seen this before but it makes sense now. It is set up the same way they and CMC run the Sector CFDs. That is they have their own algorithm calculating all the Bids for the ASX200 to get their prices. Makes sense.

And very interesting. Would be possible arb as well as straight trades with this and the SPI. the 2.6 spread + @ market orders takes away a fair bit of opportunity but will be interesting to watch.

 

[skc]

I watched it this morning and they open punting at 10:10am so you cant get the jump on for the morning gap up...BUMMER! Haha!

Marketech actually opens at 10:12am... that 2 minutes seem to make a huge difference as their XJO quote catches up with the action of the futures. The difference between the two providers rarely moves beyond 2-3 pips which is not enough to cross their quoted spread (2pips for both).

 

[overit]

Indeed it seems very hard to gain any sort of advantage there but it is quite useful having the XJO and SPI open at the same time when playing the market maker.

Something I have started to work on now that I have a constantly moving XJO figure is tandem moves between the XJO and SPI. Alot of times one will have a breakout and the other will not move indicating a false breakout and caution. When they both start to move in tandem the move has more weight. Also obviously the XJO carries more weight as it is the device that the SPI is trying to predict. The XJO and SPI do seem to jiggle a different tune alot.

The market maker doesnt always bracket the SPI. Sometimes it is a little lower and sometimes a little higher. I see these as 3 different entities that you need to get in the right order. You are trying to catch the MM out. I started scalping the MM when it would overshoot before a reversal on resistance and it was working quite well. But then the MM accused me of having a slow internet connection to gain an edge. BULLSH#T! They did something to my account and I stopped being able to get on in quick moving markets. Now I have to go back to looking for larger moves.

 

[skyQuake]

Instead of the XJO feed that refreshes every 30 sec, you can create the index yourself based on its constituents and weighting (assuming your data feed allows it)

But then again, that still follows the SPI more or less.