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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host
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To: Diamond Jim who wrote (8523)10/23/1998 9:38:00 PM
From: MrGreenJeans  Read Replies (1) of 42834
 
SPY Split

Here is my guess. The SPY represents 1/10th of a share of the S and P Index. I believe it was financially engineered by the staff over at the American Stock Exchange (I am sure if this is not correct someone will correct me). One of the reasons why they decided to make the SPY 1/10th of the index was for liquidity purposes and to make it available as an investment to the smaller investor. Those with smaller portfolios can more easily hedge using this instrument than, let's say an S and P future, which represents $500*1070 (the level of the S and P Index) dollars-$500,000+.

If this instrument split it would represent 1/5th of each S and P point. It is more probable that the Amex or another exchange would come out with an instrument which represents 1/5th of an index point than for the instrument that represents 1/10th of an index point to split. I guess what it comes down to is that each financial derivative or instrument that trades is targeted to a certain target market to generate volume and revenues for the exchange that it is traded on. The exchange develops the product that generates the most volume and interest.

Further, a split means nothing anyway. The only thing that matters is the return on your capital.

FWIW
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