Future of CME?

[nielsendk 10]

I am new to trading and was wondering what you think the future will bring to trading, particularly in futures. I ran across this article today and there were some less optimistic points:

 

1. "A combination of the CFTC and the SEC, which has a much larger enforcement staff and budget, could heighten restrictions on the futures business at a time when CME's trading growth is slowing. Futures traders may be required to hold more money in margin accounts, for example, raising their costs and potentially driving down business. Also, CME could face a lengthier approval process for new contracts."

 

2. "Observers say it's also possible another idea unpopular with CME may resurface: a tax on futures trades."

 

But also

 

A. "We shouldn't have the concerns that others may have because our markets are already highly regulated," Mr. Duffy (CME Executive ) says. "You don't want to try to fix something that's not broke."

 

With Obama soon in office and Democrats ruling Congress, what do you think will happen?

 

Full Link to article:

 

http://www.chicagobusiness.com/cgi-bin/news.pl?id=31751

 

Thanks, looking forward to your thoughts

[sdoma 10]

With Obama soon in office and Democrats ruling Congress, what do you think will happen?

 

Probably nothing. Obama is a Chicago politician. Outsiders don't understand how things work here, but let me put it this way: The CME Group is a very important company in Chicago, and the people who run it are very, very well connected with the Chicago Democratic party. If any of you really think that Obama is a "new breed" of politician, I have some beach front property in Nevada I'd like to sell you. He will protect his friends and the people at home who supported him on his climb to the presidency.

 

I'd put the chances of a hike in taxes on futures at 33%. But again, the CME would scream if they even tried, and Obama hears the voices of well connected Chicagoans. We'll see.

[nielsendk 10]

Probably nothing. Obama is a Chicago politician. Outsiders don't understand how things work here, but let me put it this way: The CME Group is a very important company in Chicago, and the people who run it are very, very well connected with the Chicago Democratic party. If any of you really think that Obama is a "new breed" of politician, I have some beach front property in Nevada I'd like to sell you. He will protect his friends and the people at home who supported him on his climb to the presidency.

 

I'd put the chances of a hike in taxes on futures at 33%. But again, the CME would scream if they even tried, and Obama hears the voices of well connected Chicagoans. We'll see.

 

Hope you are right, but let's suppose, in the unlikely event, they raise the capital requirements to $25.000 (as with DTP Equities) to open an account - or demand higher margin than the current $6000+ for fx each contract for the ES by fx removing day trading margins.

 

Will that not deter a lot of new traders from entering and remove a lot of the current small traders? I would imagine it would take a certain amount of volume out of the market. I am not sure how most traders are capitalized, but you would think that many people in here, have, or at least started with less than $25.000 in start up capital.

 

I know the ES is a lot of large lots, but i trade the EC and JY as well, and it mostly trades in 1 or 2 contracts at a time.

[Soultrader 12]

Hope you are right, but let's suppose, in the unlikely event, they raise the capital requirements to $25.000 (as with DTP Equities) to open an account - or demand higher margin than the current $6000+ for fx each contract for the ES by fx removing day trading margins.

 

Will that not deter a lot of new traders from entering and remove a lot of the current small traders? I would imagine it would take a certain amount of volume out of the market. I am not sure how most traders are capitalized, but you would think that many people in here, have, or at least started with less than $25.000 in start up capital.

 

I know the ES is a lot of large lots, but i trade the EC and JY as well, and it mostly trades in 1 or 2 contracts at a time.

 

By adding the $25k minimum on futures, you will see many small time traders taken out of the market. However, I highly doubt removal of this group will have any impact on the markets. The volume is simply too small in my opinion. Most traders under $25k will trade 1-2 lots at a time. On a personal note, I do not think enforcing a $25k minimum is going to take effect. A broker with proper risk management should simply raise the margin rates in times of high volatility and lower it in times low volatility. Adjusting the margins is the best way to keep a small trader from going bust. Margin protects the securities firm, the exchanges, and the trader from himself.

[darthtrader2.0 10]

I wouldn't worry too much, Mr. Duffy isn't blowing smoke up your ass there.

The CME didn't cause any of the current problems, OTC derivatives are the problem, CME is the solution to the problem.

I imagine alot of hedging strategies need the leverage that a 5k margin provides..all it would do is hurt the CME and open the door up for an exchange to offer lower margin futures outside the US.

Worst case I imagine is a few cents a car tax...raising margin requirements by 500% is just not logical.

[link2randle 10]

I feel the only thing that Obama's adminstration will push is having margin rates raised. Other than that, we should be alright..