Have there been thoughts about creating daily contracts (in place of monthly contracts) to be traded at exchanges? By daily contracts, I mean futures contracts that expire on daily bases rather than by the months. Then there will be 200 (number of working days) or so contracts in any year, instead of the 12 contracts in a year. I guess this can be done very easily in this digital age - I take it that the monthly contracts are for practical reasons in the old times. This new contract structure would then eliminate the large discontinuity problem, and also create some nice arbitrage opportunities for the large trading parties. Any problems with this?





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2 Comments so far

  1. Ed on March 27, 2012 2:28 pm

    I can’t see any reason for this product. I must be unaware of “the large disconuity problems” You speak of.

    You might consider looking into the history of why futures markets trade. Most of the product specifications, delivery dates, etc (that are so befuddling to the new speculator) are for the benefit of Hedgers and commercial users. The discounts and premiums to spot on the forward curve are used every day to make economic decisions about production and storage.

  2. Matthew Anson on March 28, 2012 9:32 pm

    200 contracts per year would mean 16.67 times more contract dates. This would mean that on average there would be 16.67 times less trades done each day for each contract, as trades would be dispersed over more single contracts rather that collected into monthly futures.
    There would be less trading on each individual future, meaning less liquidity


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