who are the CFD and spreadbetting brokers hedging their bets with?

[tolland]

Hi,

So I can trade the Wall street cash and FTSE100 cash contract on igmarkets when the underlying exchange is closed... So I was wondering, how does igmarkets cover the exposure with an opposite bet? (or how are they pricing that bet while the market is shut?)

Thanks,

Tom

ps - sorry for the basic questions...

 

[A Dashing Blade]

S&P futures are traded (thinly) during European morning, after-hours (ie evening) FTSE will prolly be hedged using S&P.

 

[ns1000]

Hedged maionly in the s&p, but also by moving the price around to try to find two way business (if you need to sell, make your price the highest). Also could trade Hang Seng (HSBA, STAN both large components of HSI) or BHP in Australia.

First line of hedging though would be s&p futures as A Dashing Blade says.

 

[stevespray]

They 'bucket' the trades.

 

[tolland]

They 'bucket' the trades.

As I understand it bucketing trades requires someone to place the opposite trade with - so I guess I was looking for what exchange and instrument was being used.

 

[tolland]

hmm, the spread on the FTSE cash is only 2 points and its closed, and the spread on the Wall Street cash is 4 and its open...

so wheres the best place to check real time prices for S&P indices futures? my recent googling has been really confusing, I'm seeing exchanges like CME with prices but I can't find a specific ticker to watch.

 

[stevespray]

As I understand it bucketing trades requires someone to place the opposite trade with - so I guess I was looking for what exchange and instrument was being used.

No!

"Bucketing" means that they hold the trade themselves - effectively they are betting against you. Use Google and type in 'bucket shops' for a better and more full explanation.

Steve.

 

[tolland]

No!

"Bucketing" means that they hold the trade themselves - effectively they are betting against you. Use Google and type in 'bucket shops' for a better and more full explanation.

Steve.

ok, that was what I did .. I just didn't understand the results :-(

In order for them to do that they need to price the bet against you at something like a spread around fair value, which they either need to model for themselves, or peg to something that an exchange somewhere is pricing...

 

[stevespray]

ok, that was what I did .. I just didn't understand the results :-(

In order for them to do that they need to price the bet against you at something like a spread around fair value, which they either need to model for themselves, or peg to something that an exchange somewhere is pricing...

They have their own pricing models which generally creates a price based on the movements of other global markets which are open when FTSE is closed. For example S&P500 Futures and Dow Futures.

Steve.