carpe diem

karuner said:
when you "buy" at a futures exchange: in that same moment when your platform tells you that you got filled, you entered in a futures contract. not post-"execution" or at the time of clearing. when your order is filled, a new contract has come into existence and its counterparties are you and the exchange. no one denies that you can only be filled, when the exchange can simultaneously enter into a contract with another trader B who gets the corresponding fill (in this case selling). – this was why i pointed out that in this regard cfd-brokers (not all) operate not so differently from futures exchanges. did not claim that the exchange itself puts its own orders into the market. it "matches" them, but completely internally. no direct legal relation between two traders. (ed.: which is what cfd-brokers or their so called liquidity providers nowadays also do. not talking about those bucket shops.)
do you guys know that when you get filled with your buy-order, not one contract came into the world, but two? that is: 1. between you and the exchange and 2. between the exchange and Trader B. you guys seem to think that there is only one contract between you and Trader B and that clearing is something like the exchange introducing you and B to each other. "hi, nice to meet you, you owe me 100 Dows". lol
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What if you're previously covering a short? What happens to OI?

You have no clue how any of this works.
 
karuner said:
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do you guys know that when you get filled with your buy-order, not one contract came into the world, but two? that is: 1. between you and the exchange and 2. between the exchange and Trader B. you guys seem to think that there is only one contract between you and Trader B and that clearing is something like the exchange introducing you and B to each other. "hi, nice to meet you, you owe me 100 Dows". lol
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Then how do you explain odd lots in any futures contract?

The Open Interest column displays the total number of contracts long or short in the respective month, during both Globex and the Open Outcry session. Each open transaction has both a buyer and seller, but only one side of the transaction is counted when calculating open interest.

This is whey, for example.

drywhey oddlots.JPG


If there are two contracts for every transaction, how can their be just 3 OI contracts?

It is like buying a car with a bank loan. The car dealer writes up the contract, and you sign it. That is a single contract between you, the buyer, and the bank (car dealer), the seller.

Why would you then write a contract to the bank, stating the exact same thing? They would just nullify each other. Only one contract needed.
 
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Overnight said:
Then how do you explain odd lots in any futures contract?

The Open Interest column displays the total number of contracts long or short in the respective month, during both Globex and the Open Outcry session. Each open transaction has both a buyer and seller, but only one side of the transaction is counted when calculating open interest.
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thanks. i'll reply only to you, because the other guys her had no arguments for me, only insults. – you actually already cited the answer to your question: "but only one side of the transaction is counted when calculating open interest."
so what is counted is not the number of actual contracts - again, as i already cited from the CME site: "This means that when a futures contract is bought or sold, the exchange becomes the buyer to every seller and the seller to every buyer."
Each market postion (long or short) is itself one legal contract between the holder of that position and the exchange. the exchange, of course, may not have any market exposure itself, therefore they make sure that they match two traders internally (this is called the "open transaction" here). but this does not mean there is a contract established between those two traders.
be sure what i am talking about: "contract" in the strict legal, jurisprudential sense (which is what a futures contract is). not in the sense of "trade" or something.
and a ÇFD is a contract for difference, which is structurally not so much different from how futures work, even behind the scenes. as i already said: a sane (and regulated) cfd-broker can not have large market exposure – he will match his long and short customers (i.e. his contract counterparties) internally, and any bigger surplus he will hedge outside.

is it agreed, that in this strict sense of the word "contract" there are two contracts for every single "transaction", as i already described above, and as the CME or any book about futures and exchanges makes clear? because if even that is contested, i see no basis for further discussion. again, i am not moved by insults instead of arguments. (nothing against insults! but please, not in the internet. there's no real skin in the game here and therefore it's rather worthless.)

If there are two contracts for every transaction, how can their be just 3 OI contracts
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see above. they count only the market-order side of the transactions, not the limit order side.

It is like buying a car with a bank loan. The car dealer writes up the contract, and you sign it. That is a single contract between you, the buyer, and the bank (car dealer), the seller
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that is correct, but that is not a model for a futures contract. what you describe is more like a forward contract.
 
karuner said:
thanks. i'll reply only to you, because the other guys her had no arguments for me, only insults. – you actually already cited the answer to your question: "but only one side of the transaction is counted when calculating open interest."
so what is counted is not the number of actual contracts - again, as i already cited from the CME site: "This means that when a futures contract is bought or sold, the exchange becomes the buyer to every seller and the seller to every buyer."
Each market postion (long or short) is itself one legal contract between the holder of that position and the exchange. the exchange, of course, may not have any market exposure itself, therefore they make sure that they match two traders internally (this is called the "open transaction" here). but this does not mean there is a contract established between those two traders.
be sure what i am talking about: "contract" in the strict legal, jurisprudential sense (which is what a futures contract is). not in the sense of "trade" or something.
and a ÇFD is a contract for difference, which is structurally not so much different from how futures work, even behind the scenes. as i already said: a sane (and regulated) cfd-broker can not have large market exposure – he will match his long and short customers (i.e. his contract counterparties) internally, and any bigger surplus he will hedge outside.

is it agreed, that in this strict sense of the word "contract" there are two contracts for every single "transaction", as i already described above, and as the CME or any book about futures and exchanges makes clear? because if even that is contested, i see no basis for further discussion. again, i am not moved by insults instead of arguments. (nothing against insults! but please, not in the internet. there's no real skin in the game here and therefore it's rather worthless.)


see above. they count only the market-order side of the transactions, not the limit order side.


that is correct, but that is not a model for a futures contract. what you describe is more like a forward contract.
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The CME is the guarantor. That's the purpose of the exchange... the exchange makes no attempt to "flatten its book." You're conflating, yet again, the exchange's act of assuming credit risk with a dealer's business model.

The exchange charges a fee for each transaction to act as underwriter.
 
destriero said:
The CME is the guarantor. That's the purpose of the exchange... the exchange makes no attempt to "flatten its book." You're conflating, yet again, the exchange's act of assuming credit risk with a dealer's business model
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since you are obviously not someone who reads books, i'll just point you to wikipedia. read the article on futures exchange. you'll also find a standard book on derivatives cited there, john c. hull. he writes: "Once two traders have agreed on a trade, it is handled by the exchange clearing house. This stands between the two traders and manages the risks. Suppose, for example, that trader A agrees to buy 100 ounces of gold from trader B at a future time for $1,450 per ounce. The result of this trade will be that A has a contract to buy 100 ounces of gold from the clearing house at $1,450 per ounce and B has a contract to sell 100 ounces of gold to the clearing house for $1,450 per ounce." and: "the clearing house for a futures exchange becomes the counterparty to the two sides of a futures trade."


2 contracts, got it? – 1 trade, 2 traders, 1 exchange, 2 postions, 2 contracts, and the exchange a counterparty in each of those contracts. got it?

i've seen many things in trading forums and i am willing to believe that there are people speculating with money on futures exchanges without even knowing the simple arithmetics of 1+1 = 2. let alone how futures exchanges work. lol.

this is not my thread and it's a trading journal, not a substitute for reading a technical book. if this must go on, then not here.
 
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