I'll state the obvious that 777 was talking about that I discovered. Liquidity in SPY actually got worse when they decided to pull its live market from ECN venders. It was actually an OK electronic market on Island and Instinet. Unfortunately, since it was invented by the AMEX, in a rare 'screw the public for the sake of the exchange's profits' it doesn't trade that way anymore.
The specialists use the e-mini to hedge and arb the SPY all day long. Since they control the market in SPY and can print wherever they want to, it is the worst kind of monopoly. The market maker can buy on one exchange, convert it, mark it up nicely, and sell it to you. Why not go right to the horse's mouth and but the futures yourself?? One other thing. For lets say $860,000 of exposure you would need 10,000 SPY at 86.00. That's $430,000 on margin or $215,000 on intra-day margin. For E-mini - 20 cars or $43,000 of intra-day margin is all thats required. More favorable tax treatment with mini. No comparison as to which to trade, it's E-mini hands down.
