Quote from bone:
The Nymex contract is not "broken".
I suppose I have some 'local' knowledge in this regard - after four years of trading interest rates with a Full Membership on the floor of the CBOT, I traded energy for several years for a large commercial in the 90's, and have traded both OTC and regulated futures contracts in the energy space for a hedge fund and for private equity pools since then.
Having much more size in the spreads is a common occurrence for any number of markets - indeed, most markets. For example, look at the Eurodollar order book right now at this very instant: ( 8:55pm Central). The GE Mar-Jun Spread is 5275 bid x 36 on the best offer and x 4297 on the next. The GE Mar future is 5509 on the bid, and 3452 on the offer. The June future is 1856 on the bid x 704 on the offer.
The Comex Gold contract Feb-Mar Spread is 184 bid x 72 offered, the Feb future is 1x1, and the Mar future is 6x3 but is also 4 tics wide.
The CBOT Corn Jul-Dec 11 Spread is 7x42 and is 5 tics wide, the Jul 11 future is 9 x 14, 3 tics wide and the Dec 11 future is 14 x 5, 6 tics wide.
The calendar spread is by far and away the most efficient mechanism for any commercial to roll forward their market exposure - for example, many commercials hedge with strips and use the calendar spread to roll it. An ETF uses the calendar spreads to roll forward their exposure (hence, the "Goldman" roll). And of course there are speculators like me who are in just about every spread market electronically available.
There are alot of large spec accounts who roll individual positions forward in order to maintain or adjust their exposure in the marketplace.
There are tons of uses for calendar spreads in the markets. PIMCO, for example, uses STIR futures to synthetically replicate cash position exposure. It is not uncommon for PIMCO to have on well over 100K Eurodollar futures on at any point in time. They very frequently have to adjust forward duration and curve convexity - and for them to do that with the least amount of slippage, they would, for example, sell a Jun11-Dec13 calendar spread to change that forward curve exposure profile.
So, having more size shown in spread markets compared to flat price futures has always been the norm - it was that way in the pits, and it is that way on the screen for most contracts and market sectors.
