FOREX QUANT

February 12, 2008

FX Spot Equivalent Futures contracts (SEFs)

Filed under: Uncategorized — by TraderMade @ 4:17 pm
Tags: ,

Traders prefer using OTC Spot FX to exploit movement in the currency market. Although generally is not regulated in some extent, OTC spot FX provides a much more flexible trading condition compared to exchange traded currency futures (CME). This includes the minimum initial capital required to open an account, and the availability of a very flexible position sizing (you can trade 1 unit at oanda or micro lots at several FX brokers), and also the automatic rollover practice (i was told that exchange traded currency futures contracts need to be closed and automatically re-opened at the end of every trading day, resulting difficulties to track P/L of a certain mid-term positions).

But as we can see, the global currency market is still in its very early development stage. Regulation and market structure are still looking for its best form. One recent development is the introduction of the FX Spot Equivalent Futures contracts (SEFs), introduced by the U.S. Futures Exchange (www.usfe.com) in Chicago.

SEFs replicate spot foreign exchange markets in a U.S. regulated exchange environment. Trading is the same as on over-the-counter platforms, but with the customer protections and transparency of a regulated and cleared U.S. futures exchange.

Brokers available for trading this SEFs are: Lind-Waldock, MF Global Futures (Chicago), Daniels Trading, Infinity Futures, and MF Global Direct (UK).

More pointers:

  • Immediately access continuous markets with competitive bid/ask spreads provided by USFE’s dedicated market makers
  • Enjoy the opportunity to place orders and get filled inside the quoted market
  • Have your positions automatically rolled forward at the end of each day at no cost
  • Receive or pay a fair positive or negative end-of-day carry, with no bid/ask spread applied
  • Trade with all the safety, security, and protections that a fully U.S. regulated and cleared futures exchange provides

More info:
U.S. Futures Exchange
141 W. Jackson Blvd., Suite 1460
Chicago, IL 60604
T +1 312-356-3900
F +1 312-356-3901

6 Comments »

  1. “exchange traded currency futures contracts need to be closed and re-opened at the end of every trading day”

    I have no idea what you are talking about. One of the attractive features of exchange traded futures is that you can buy them (usually with good liquiditiy up to a year out) and sit on them doing absolutely nothing.

    I do NOT know spot FX trading at all, but I thought you had to roll a position every day (paying a spread) if you want to keep it. I admit I do have a bias against spot FX trading, because most brokers (for small traders) act as principals (meaning they try to give you the worst price they can). I much prefer a situation where they act in an agency capacity (meaning they pass along market quotes, and simply collect a commission on each trade).

    In contrast, futures seem easy – usually much tighter spreads (on the majors) and much lower costs.

    I do agree that these new futures have the potential to become interesting products (depending on the liquidity).

    Comment by Anon — February 13, 2008 @ 8:37 am |Reply

  2. Dear sir,

    thanks for the response and the feedback. really appreciate it.🙂 I’ve never myself traded the fx futures, but that impression i got was after an explanation provided by a spot fx broker i had a demo account with several years ago. they had to close all my open trades at the end of each trading days and re-open them automatically with price differences between the liquidation and the re-opening price are equal to interest paid/earned according to rate differentials. that made it difficult to track my original entry point of the trades that had been opened for 3 or 5 days. the broker told me that it was the way the futures market where they offset their position works, so they have to do the same thing to their clients. quite weird, tho, but then i thought it’s better to trade off the spot fx where open position will be let open through days without close/re-opening. its just that some interest must be paid/earned each day.

    so, if the exchange traded currency futures don’t work that way as i was mis-informed before, where open positions are left opened through days, and with tighter spread, lower cost per trade, better regulation and protection, then the only drawback of it compared to otc spot is the bigger amount to open account and less flexible position sizing.

    Comment by darma — February 13, 2008 @ 8:57 am |Reply

  3. The CME is one of the fastest growing companies and exchanges in the US. They are well diversified and consistantly expanding their products. I love trading their global eminis and using their many products. The addition of the NYMEX will only make trading easier. Thanks, Jim.

    Comment by Jim Beem — February 25, 2008 @ 10:24 pm |Reply

  4. The advantages of using the CME (GLOBEX) for a small speculator trading less than Five Million lots are so obvious and numerous I won’t bother to catalog them.

    The author of this piece either has a vested FOREX interest or is uninformed.

    T

    Comment by Tommy Ryan — March 20, 2008 @ 6:20 am |Reply

  5. I should add that having examined the SEF the instrument seems well designed and a fair deal — low spread, transparent rollovers at true institutional rates etc. — but for the life of me I can’t figure out why anyone would trade this instead of the well proven and liquid contracts out of Chicago.

    Can someone explain to me what niche this fills.

    T

    Comment by Tommy Ryan — March 20, 2008 @ 6:33 am |Reply

  6. I have info on another broker where this is available.

    Comment by PJ Vesa — April 2, 2008 @ 2:07 am |Reply


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