Liquidity/Volume of contracts

[LadyLuck]

After looking over some possible futures contracts to daytrade I have only come across a few with adequate liquidity/vol. Just curious about what determines how liquid a contract is. People tell me people trade the ones with liquidity ... but that's a catch 22 situation ... if no one trades them then the volume will never increase and hence no one is ever interested in them ....

So how do these contracts reach 'critical mass' when everyone joins up increasing the volume? does it have anything to do with people using them first as arbritrage? and as more and more discover this the vol automatically increases and thus attracting more directional type traders??

i'm looking at the cbot minidow ($2) .. still not that much volume there.. yet ES and NQ are at record levels ....

 

[Pabst]

An open interest of 5,000 contracts is the minimum that many funds use as liquidity criteria. The mini Dow is still new and IMO "too small" in contract size($200.00) every 100 DIA pts, to recieve much fanfare.

 

[metooxx]

Originally posted by LadyLuck
[B
So how do these contracts reach 'critical mass' when everyone joins up increasing the volume? does it have anything to do with people using them first as arbritrage? and as more and more discover this the vol automatically increases and thus attracting more directional type traders??[/B]

A lot of new contracts are structured to provide arb oppurtunities, however, sometimes they catch on and sometimes they don't.

 

[FX-Trader]

CBOT Appoints Market Makers for Its mini-sized Dow Futures

Chicago, April 3, 2002--Demonstrating its ability to create unique trading opportunities, the Chicago Board of Trade (CBOT®) today announced that Bear Hunter Structured Products L.L.C. and Susquehanna International Group, LLP (SIG) have been appointed as electronic market markers (EMM) to enhance liquidity for CBOT® mini-sized DowSMfutures contracts. The market maker program for the CBOT® mini-sized DowSMfutures complex, which trades exclusively on the exchange's electronic trading platform, will begin on April 5, 2002, the same day the exchange will begin trading a new mini-sized DowSMcontract with a $5 multiplier.

CBOT® Chairman Nickolas J. Neubauer said, "The introduction of a new CBOT® mini-sized DowSMcontract with a $5 multiplier complements our already existing DowSMequity and CBOT® index complexes, ensuring the best fit for open auction and screen arbitrage opportunities for our customers and members. This unique synergy in the CBOT® mini-sized DowSMfutures complex, combined with the launch of electronic market makers Bear Hunter and Susquehanna and the liquidity and trading expertise provided by CBOT® members, will provide a tight liquid market at launch."

CBOT® President and CEO David J. Vitale said, "The CBOT® is experiencing great volume success with ABN AMRO's recent participation in the exchange's new market marker program for its 10-year Swap futures. We continue to move decisively to initiate market maker programs where we deem it necessary to preserve market share or to concentrate capital investment in support of new product initiatives, as in the case of the CBOT® new mini-sized DowSMcontract. We look forward to Susquehanna s and Bear Hunter's involvement in this program."

Daniel McCabe, CEO, Bear Hunter Structured Products LLC said, "The electronic trading platform for futures has been very successful. We believe bringing an EMM to this platform will add liquidity. Bear Hunter Structured Products is uniquely positioned to meet the rigorous requirements of the CBOT®. We look forward to the challenge of this exciting new endeavor."

Eric Noll, Head of Strategic Planning and New Product Development for Susquehanna International Group said, "As one of the leading market making firms in the country, we believe we are primed to offer enhanced liquidity and superior execution in this new innovative futures product. We are pleased to join forces with the CBOT® and look forward to our continued partnership in other new ventures."

On April 5, the CBOT® will cancel side-by-side trading for its DJIASM futures and futures-option contracts. The new trading hours for the CBOT® DowSMJones complex are as follows:
DJIASM futures and futures-options--open auction: 7:20 a.m.-3:15 p.m., Mon.-Fri.; electronic: 8:15 p.m.-7:00 a.m., Sun.-Fri.

CBOT® mini-sized DowSM($2) and ($5) contracts--electronic: 8:15 p.m.-4:00 p.m., Sun.-Fri.

For more information on DowSMJones futures complex,
please visit the CBOT® website at www.cbot.com/equity.