PIMCO on Floor Vs. Screen

[Tea]

Quote from Maverick74:
Do you know who they are targeting with the mini? I'll tell you. Its the guy with 5k that can't daytrade stocks because he falls under the new PDT rules. It's the guy that is tired of daytrading stocks. It's the guy that doesn't have the margin for the big contract. It's the guy in Kansas that read he can actually make money when the market goes down by actually shorting something called the e-mini

Have you ever watched the tape for the e-mini s&p?

There are ones and twos, but also 10’s, 50’s, 100’s + being traded. I think a lot of the volume is coming from the plethora of small to medium sized hedge funds. The pit is losing its business. If not for the reverse arbitrage from the e-mini it would probably shrivel up.

Quote from Maverick74:
These guys stand on the floor of the NYSE, the CBOE, the CBOT and the Merc and they take the other side of your order. They assume all the risk.

Yea, they buy at the bid and turn around and sell at the offer a couple of seconds later and pocket the spread. These guys are heroes. I’ll bet when they go home at night, they put on a blue suit with a big letter S on the chest and they jump up and down on their beds yelling – I am a super-hero! The world is privileged to know me!

 

[Maverick74]

Quote from Tea:




Have you ever watched the tape for the e-mini s&p?

There are ones and twos, but also 10’s, 50’s, 100’s + being traded. I think a lot of the volume is coming from the plethora of small to medium sized hedge funds. The pit is losing its business. If not for the reverse arbitrage from the e-mini it would probably shrivel up.




Yea, they buy at the bid and turn around and sell at the offer a couple of seconds later and pocket the spread. These guys are heroes. I’ll bet when they go home at night, they put on a blue suit with a big letter S on the chest and they jump up and down on their beds yelling – I am a super-hero! The world is privileged to know me!

Hey Tea,

You do know that 90% of the guys on the floor blow out their account right. you do know that right. If you think its that easy, buy a seat and become a millionaire. But for every guy down there that makes a killing doing exactly what you described, there are 9 driving taxis. I'm afraid that the success rate down there is no different then going to work for a prop firm or anywhere else. If you think the floor is the ticket to easy street, go down there put your hands in the air and make a market and see how much you can make. I can assure it's not that easy.

Also as far as the size on the mini-screen its a 5 to 1 ratio in contract size so a 100 lot on the mini screen is basically a 20 lot in the pit. I would hardly call that size but like I said, maybe to joe daytrader, that is a lot of size.

 

[Maverick74]

Quote from cheeks:



If the spoos pit is always there to provide liquidity, what happened to Soro's order on Thurs morning 10/22/87.

The screen is not the only place the bids get pulled.

Cheeks I agree with you but let me pose a question for you. The day is september 11, 2001. You go into work that morning as local in the spoos pit. Spoos start trading at 7:20am. Your down there making your market. Suddenly a news alert comes out that an airliner just crashed into the WTC. Now here I come as a broker from Goldman sachs with a 10,000 lot to sell. You tell me, where is your market. Make a bid. Where are you bidding. I want to sell, where will you buy. Minutes later a 2nd plane crashes. Now there are 1,000 guys behind me screaming at you asking for a mkt, begging for a mkt. You still haven't given me your bid yet, where is it, I need to sell now. See I guess its not that easy.

 

[OVERtheLINE]

Quote from Maverick74:



Cheeks I agree with you but let me pose a question for you. The day is september 11, 2001. You go into work that morning as local in the spoos pit. Spoos start trading at 7:20am. Your down there making your market. Suddenly a news alert comes out that an airliner just crashed into the WTC. Now here I come as a broker from Goldman sachs with a 10,000 lot to sell. You tell me, where is your market. Make a bid. Where are you bidding. I want to sell, where will you buy. Minutes later a 2nd plane crashes. Now there are 1,000 guys behind me screaming at you asking for a mkt, begging for a mkt. You still haven't given me your bid yet, where is it, I need to sell now. See I guess its not that easy.

Maverick,
I am struggling with your example as I know this is not how it works. Pit traders are tough as hell and are out for blood, its one thing for Goldman to demand a market for a spread combination or somthing similar, but to get bullied into showing a bid/offer in the fututres in the face of a event is ridiculas.

Im not sure if you know who Jim Keller is (the pimco article)
but let me assure you that he is one of a few people who
can almost singlehandedly put a major hurting on the exchanges
continued existance. I know the CBOT is dead if he / countrywide and a few other key users decide to use swaptions instead of exchange traded hedging vehicles.

 

[cheeks]

Quote from Maverick74:



See I guess its not that easy.

I'm certainly not saying it is. You have to have big balls to be in that pit. Your trading against the world, and they have better information. I'm certainly not suggesting that locals do not take alot of risk, they do.

I'm not going to argue that electronic markets are a perfect creation. They are not. But look around at the world markets, what direction are they going/gone. The emini, dispute higher commisson cost is exploding in volume. I realize it was marketed towards small retail traders, but it is doing MORE dollar volume than the big pit. There is a reason this is happening.

Personally, I do not care what happens. There is more liquidity than I will ever need in the mini. To me this argument is purely academic.


You have not said, but are you a local?

regards,


Cheeks

 

[Maverick74]

Quote from OVERtheLINE:



Maverick,
I am struggling with your example as I know this is not how it works. Pit traders are tough as hell and are out for blood, its one thing for Goldman to demand a market for a spread combination or something similar, but to get bullied into showing a bid/offer in the futures in the face of a event is ridiculous.

Im not sure if you know who Jim Keller is (the pimco article)
but let me assure you that he is one of a few people who
can almost singlehandedly put a major hurting on the exchanges
continued existence. I know the CBOT is dead if he / countrywide and a few other key users decide to use swaptions instead of exchange traded hedging vehicles.

Over,

That was my point. No one is going to make a mkt. I was just responding to cheeks as to why there might not have been any bids during the crash of 87.

As far as Jim Keller goes, my question is who cares? I don't care, do you. Are you an active player in the swaptions market? I don't know how this whole topic got moved over into the treasury mkts and such but the comment I made about 20 posts ago was to the practicality of one united exchange in chicago. I could care less about the fixed income markets. Thats not all they trade in Chicago you know. What about the metals, the indexes, the grains, the currencies, the meats. Is Jim Keller and his buddies at Pimco going to rule those mkts too. And if so, You think anyone is going to let you buy and sell those mkts without a spread. What difference does it make if you trade on the screen or the floor, bottom line is no one is going to sell you anything at parity ok. You are going to pay for it one way or the other.

I just believe that the city of Chicago is not going to watch their economy go to hell and let one of the biggest tax revenue sources in the city dissipate. I assure it will be 100 degress in december in that city before that happens. Now what role will the exchanges play. Who knows. But I have been hearing this open outcry extinction argument for years. I assure no matter what the future holds, the city of Chicago will play a large role in the derivatives mkts one or the other.

 

[OVERtheLINE]

Chicago in my humble opinion is the greatest big city in the world
and it will always be a major derivatives player, AGREED
but my money is on the screens and when it all shakes out there will be a hurting from administrators/lawyers/clerks/ floor traders/
FCM's downsizing etc. There could be a sharp drop in those beautiful 2 flat homes along fullerton parkway.

 

[jaming5002]

Quote from Maverick74:



Ok, so let me get this straight, you were trading futures on the floor where you say they were screwing paper and I presume they were profiting off of it so you must have been to. But now you were are trading the mini off the floor and paying 300% more in commisions and what are we suppose to get out of that. My guess is that you blew out your account and the mini is all you can afford. Why would you leave that money pit then?

Oh and as far as the locals being unethical, I'm not so sure about that. These guys trade billions of dollars a day in contracts based on one thing and one thing only, their word. You want to see unethical try looking at the nasdaq market makers. They are the most corrupt people in the world. They are bounded by nothing. I've heard of guys on the floor eating million dollar losses due to clerical errors, the trader just busted the trade and ate the loss. Try doing that with a nasdaq market maker, good luck. The bottom line is people can hide behind a screen, they don't honor their mkts, they fade your orders. I think I would rather have 200 locals fighting for my order vs some 26 year old NYU graduate on a market making desk who wants to fuck the hell out of me and he knows he can get away with it.

Couldn't have said it any better myself.

 

[jaming5002]

Quote from Maverick74:


As far as getting screwed by locals, look, what do you want market makers to do. These guys stand on the floor of the NYSE, the CBOE, the CBOT and the Merc and they take the other side of your order. They assume all the risk. So when goldman comes in to buy 1000 straddles on UAL a day before a bankruptcy announcement these guys in the UAL pit take the other side of that trade being clueless about the news. So they wake up the next morning and see the news and now some of those guys careers are over because they are f*cked. What do you want them to do. Sell options at fair value, sell futures at parity with the electronic mkt? You tell me? Should these people be compensated at all for taking the risk that you lay on them. I guess they should work for free right. Oh and I guess the guys on the screen, I guess they will provide liquidity for free too. No spreads. I mean come on, this rhetoric is getting real old. I read it every day on these boards. The specialist screwed me over a nickel, the option mm's faded my order, the guy in the wheat pit gave me a bad fill. I wish people would realize for one sec the amount of risk these guys take so you can get on your computer every day and trade. They are forced to buy crap and sell shit that is going through the roof. They keep the system running. These guys are willing to absorb your risk and all they want in return is a spread. But thats's too much I guess. I guess it would be better to have what happened in 1998 when russia defaulted on their debts and there was no liquidity to speak of in the fixed income mkts. Yeah that was a pleasant experience. In fact LTCM was trying desperately to get out of some on their bonds and these wonderful mm's on the screen refused to make markets, they refused to give quotes. The end result. A 10 billion dollar hedge fund went up in smoke and our entire economy almost collapsed. Oh and they called it a liquidity crisis. I think too many people take for granted the liquidity they get every day like its their right. It's not a right, it's a privilege, and don't forget for a sec who gives you that privilege every day.

In further support of Maverick, were any of you around during the Crash of 87? Because if you were, you'd know that every market maker in New York decided to turn of their Nasdaq screens, take their phone off the hook, and stop making markets. Chicago may not be perfect, but its far better than the screens.

 

[jaming5002]

Quote from cheeks:



If the spoos pit is always there to provide liquidity, what happened to Soro's order on Thurs morning 10/22/87.

The screen is not the only place the bids get pulled.

Familiar with efficient markets? Size affects prices in efficient markets. Also, wasn't Soros' broker to blame for screwing up his order?