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USFE Fx Spot Equivalent Futures? 2 replies

USFE to list forex futures. Can we have your views on this?

  • Post #1
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  • First Post: Sep 12, 2007 7:54am Sep 12, 2007 7:54am
I only just read last month's copy of Currency Trader and hadn't noticed any comments regarding this article.

I'd be interested in hearing everyone's view on this. I assume the pairs are quoted in reverse as this follows the Futures Market's standard conventions?

Quote
USFE to list forex futures

The United States Futures Exchange (USFE) will begin offering spot equivalent futures (SEF) on Sept. 21. The contracts will trade 23 hours per day.

The USFE will begin with six contracts — U.S. dollar/euro, U.S. dollar/British pound, U.S. dollar/Australian dollar, Japanese yen/U.S. dollar, Swiss franc/U.S. dollar, and Canadian dollar/U.S. dollar.

The contracts are retail-sized, with a tick worth $5 for the three U.S.-dollar based contracts, 500 yen for the JPY/USD contract, and five Swiss franc and five Canadian dollars or the CHF/USD and CAD/USD contracts, respectively.

SEFs are structured to automatically allocate the cost-of-carry associated with holding a spot forex position open overnight, making them identical to a spot position.

Copyright 2004 - 2007, Currency Trader Magazine, Chicago, IL
hadnt seen this, thanks peter!

my take is that USFE is going to have a tough time competing with the CME on this, those boys have currency futures on lock! i will have to take a look at their liquidity and spreads to be a good judge though.

btw, could be some good arb oportunities here. anything "new" has inefficiencies, but they tend to be found fairly quick these days.
Relax and be happy.
Quoting merlin
hadnt seen this, thanks peter!

my take is that USFE is going to have a tough time competing with the CME on this, those boys have currency futures on lock! i will have to take a look at their liquidity and spreads to be a good judge though.

btw, could be some good arb oportunities here. anything "new" has inefficiencies, but they tend to be found fairly quick these days.
I thought this had huge potential, even if not in the short term, and couldn't believe no-one had a response.

Obviously, you are more aware of the futures market than me, but the concept of an FX style exchange without all the 'strike price, in-the-money, greeks, persians?, Attila the Hun terminology' it seemed to have the makings of a viable alternative to the normal retail stuff most folk base their complaints on.

Looking at the site http://www.usfe.com/products_foreign.html it looks like the margin is too big for me at the moment, but might suit some.
Hi Peter,

I think Merlin is right. This product is already offered on larger, established exchanges like the CME. The PBOT also just introduced currency futures. The PHLX and ISE offer currency options and you can even trade currencies as a stock symbol now.

I think the one thing that you'll find is that we are so spoiled on leverage in the spot market that some of these other instruments do not appeal to the smaller trader. You already mentioned the margin required to take up a position. Trading futures and options are more difficult and there's more to the game than clicking buy/sell. I think trading spot is like checkers and futures/options is like chess, especially options. I've tried to start topics on currency options in the past and they never got much interest so I trade them and keep to myself.

The ironic thing is that a lot of people moan how forex is rigged and that you can't win but when presented with the opportunity to trade the same instrument on a regulated exchange they pass.
you might be right peter, there could be potential with this. i depends on exactly how it is traded, we will have to see because i cant get much info from the site. i am wondering exactly what they mean by "One contract lasting 5 years. First expiry is December 2011." it sounds just like normal currency futures contract with an extended settlement date.

unless they can distinguish themselves from the CME in some way, especially if they can make it easier to trade (like forex is), i dont see it being too big. either way definitely something to keep an eye on.
Relax and be happy.
Quoting philmcgrew
The ironic thing is that a lot of people moan how forex is rigged and that you can't win but when presented with the opportunity to trade the same instrument on a regulated exchange they pass.
LOL! good point!
Relax and be happy.
Quoting philmcgrew
Hi Peter,
The ironic thing is that a lot of people moan how forex is rigged and that you can't win but when presented with the opportunity to trade the same instrument on a regulated exchange they pass.
LOL. BTW I'll be putting a link to your 'get over it' thread from the newbies stuff I'm working on at the moment.
And I suppose margin, for us lesser mortals, will be the thing. But maybe, like all supply and demand, if they get demand they'll trim margin requirements to get to the smaller player. A bit like the mini-dow took off when people got to realise they could play that index without the big commitment of the full size instrument. (ooh I sound quite knowledgeable don't I - know tell me I'm talking bs)
Quoting PeterFM
LOL. BTW I'll be putting a link to your 'get over it' thread from the newbies stuff I'm working on at the moment.
And I suppose margin, for us lesser mortals, will be the thing. But maybe, like all supply and demand, if they get demand they'll trim margin requirements to get to the smaller player. A bit like the mini-dow took off when people got to realise they could play that index without the big commitment of the full size instrument. (ooh I sound quite knowledgeable don't I - know tell me I'm talking bs)
Margin on futures is a set formula and generally not something a broker can negotiate.

e-mini contracts on Forex, now that's a cool idea.
So guys, that was what I was thinking -- why are they trying to compete with CME? CME has had spot equivalent futures for awhile...

Regarding margin requirements, it really depends on the instrument. Pete, you might find that you can trade instruments like the mini's, and Hang Seng, for example, and the margin isn't all that different. I can handle pretty much all of the margin requirements for instruments, but if you can't, you can always find a bunch that will work for you.

Phil, you are dead-on about futures market being a different trading beast. See my environment thread... LOL.

But not only that -- I'd love to see someone who has been trading solely Forex go over and trade the mini-Russell. Heh... it would be a quick wakeup call...
Mr. Trend
Quoting Mr Trend
But not only that -- I'd love to see someone who has been trading solely Forex go over and trade the mini-Russell. Heh... it would be a quick wakeup call...
whats wrong with the er2?? thats one of my favorites!

what id love to see is a forex-only backtester try to build a strategy using continuous contracts
Relax and be happy.
Quoting philmcgrew
Margin on futures is a set formula and generally not something a broker can negotiate.

e-mini contracts on Forex, now that's a cool idea.
Yes, I have a basic understanding of the differences between the regulated futures market and the un-regulated FX market.

I suppose I was thinking that, as we are given access to the Interbank FX market via brokers who reduce the normal margin requirement, the USFE might, over time, reduce margin requirement allowing the smaller trader to trade these new instruments via FX style brokers.

I'm basing this assumption on the (mistaken?) belief that brokers offering mini/micro lots aggregate all the orders on their books before passing them through to the next level. Am I really to believe that my $500 position goes straight onto the market?
Quoting merlin
whats wrong with the er2?? thats one of my favorites!
There's nothing wrong with ER2, if you're slightly psychotic.

To consistently maintain profitability in the Russell market, you gotta be one darn good trader. FX traders have it made... the volatility associated with the Russell is nuts. FX traders aren't used to 10 ticks max, and you better get out before it reverses on you.
Mr. Trend
Quoting Mr Trend
... the volatility associated with the Russell is nuts.
ah. yeah im not so concerned about the volatility, my position sizing pretty much makes every market behave the same with respect to risk. though the wild markets are certainly more fun to trade
Relax and be happy.
  • Post #14
  • Quote
  • Last Post: Sep 16, 2007 1:43pm Sep 16, 2007 1:43pm
Quoting merlin
ah. yeah im not so concerned about the volatility, my position sizing pretty much makes every market behave the same with respect to risk. though the wild markets are certainly more fun to trade
Heh heh. Yeah, that's why I trade HSI and YM... more consistent and slower for my tastes. I trade 15 min on YM and it moves nice and consistent... If I tried that on Russell, I'd go down 10 ticks, up 20, down 15, up 7, down 3, up 10, down 2, up 20, down.... ARGHHHHHHHHHHHH
Mr. Trend
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