CME's hot Nasdaq 100 pit attracts defectors
(have you thought of being a defector lately??)
biz.yahoo.com
By Melissa Goldfine
CHICAGO, March 7 (Reuters) - Recent warmer temperatures hint of an early spring in Chicago, but not in the Chicago Mercantile Exchange's Nasdaq 100 index futures pit -- it's been hot there all winter.
Floor traders at the CME, lured by soaring high-technology stocks, are abandoning quieter trading arenas and flocking to the sizzling Nasdaq pit, which recently doubled in size to make room for them.
``There's more opportunity to make money,' said one local who traded eurodollar futures for more than six years before moving to the Nasdaq pit. ``Volatility goes up every day, so I came here.'
Traders said a large portion of newcomers left the CME's less volatile currency and eurodollar pits to trade in the Nasdaq pit, where prices move more rapidly and greater risk can bring larger profits.
``If you look at a lot of these faces, they were people that were in the currency pits,' said a trader for a large commission house.
Part of the Nasdaq pit's draw is its expanding liquidity. The futures contract on the technology-laden index (^NDX - news), which includes stocks like Apple Computer Inc. (NasdaqNM:AAPL - news) and Intel Corp. (NasdaqNM:INTC - news), recently reached record volume and open interest levels. On Feb. 24, Nasdaq 100 futures volume reached 35,176 contracts and open interest climbed to 43,181, both record highs.
In February, Nasdaq 100 futures traded a total of 366,408 contracts, versus 132,436 in February 1999. Open interest at the end of the month stood at 35,428, versus 15,384 a year earlier.
Prices have also skyrocketed. The lead-month March contract reached a high of 4,315.00 in February and was trading around 4,470 at midday Tuesday. Last August, the lead month reached a high of 2,477.00 on a continuation chart.
One veteran who has been on the CME floor since Standard & Poor's 500 index futures opened in 1982 said he has seen nothing that compares to the Nasdaq 100 contract's success.
``It's in its own little world,' the trader said. ``There is more money running after that market than I've seen since I've been trading here.'
The Nasdaq pit's growing popularity created a problem: the pit was overflowing with volatility-hungry traders, and even those used to spending the day standing shoulder to shoulder said the pit was packed to capacity.
``There was just no more room to put any more people in pit,' said Rick Redding, vice president of index products at the CME.
The exchange responded by nearly doubling the size of the Nasdaq 100 open outcry pit about two weeks ago, to 625 square feet from 325. The new space accommodates about 120 traders, twice as many as before, Redding said.
The exchange also built 23 booths around the perimeter of the elevated pit, so now brokers can see for themselves what is happening inside the pit. Nasdaq 100 trading is out of the line of sight of most traders on the floor, so previously they depended on others to either shout or gesticulate to them the pit's price action.
``We were just totally reliant on the clerks, and a lot of times they're off,' said the trader at the large commission house, which will occupy one of the new Nasdaq booths.
Even after the expansion, the pit is still crowded. By midmorning Tuesday the March Nasdaq 100 contract had already set an all-time high and tumbled 82 points to its initial daily lower limit. In view of such wild swings, the pit is likely to stay packed with volatility seekers. |
