The SPX and Optimark and IPO's
Ok, time for some informative posts...
The S&P 500 Index is capitalization weighted, meaning that the largest stocks account for proportionately more of the index value. 14 companies accounted for99% ofthe S&P's return for the first 3 quarters of 1998, and 5 stocks made up half of that. MSFT and DELL were 1/3 of the gain. On an unweighted basis, the index only returned 8% through 12/16 versus 21.5% on a weighted basis.
Diversification matters for index followers, so those looking to trade the S&P futures would do well to monitor stocks like DELL and MSFT and compatre against performace of the other indices and the OEX.
Optimark
When a fund tries to sell or buy a large block on the floor, they generally have a tough time. Say they want to buy 300k shres of IBM so they tell their broker who contacts trading specialists on the floor. he sets his salespeople in motion to find sellers. Word gets around and before the big seller can be found the prices is up apprecaibly. Breaking the orders into smaller lots isn't any more effective, as commsions for the the trades are applied each time to them as well.
Enter Bill Lupien, forger head of Instinet, the guy who automated the Pacific WExchange, and the person who set up the Intermarket Trading System which links every majkor market in the US. he hired Terry Richard, the physicist and mathematician who spent 20 year doing intelligence systems for the Navy and together they developed Optimark - due to hit NASDAQ later this year.
Optimark allows you to place orders anonymously. You enter what price you will pay for what shares, say 50k at $175, 100k at 175.5 and 150 k at 175.875 (rather than one price for all like is done now) and Optimarks Toronto based sumpercomputer crunches billions of calculation is a few seconds on all thelatest bid/ask offers and findsthebest match. It then automaticallys fills and reports the order, without anyone have time to jack up or down your price quotes. Those size orders will still cause market movements, bujt the first won't be hurt, and the ones watching for the big buys or sells will now be ahead of the game.
Stocks now priced below their IPO price, that may be worth watching:
GERN
COC
FAMCX
UNP
lastshadow |
