Flummoxed by Action in the Index Futures Markets? You're Not Alone

If you are flummoxed by the relationship between pre-market moves and market action when the market opens, then you are not alone.

The movement in the e-mini futures has been volatile in the last half hour of trading, after the market closes and before the market opens. Given the lack of liquidity in the equity markets right now, it does not take a huge amount of trading in the e-minis to move the markets in a dramatic fashion.

The problem is that the futures markets are regulated by the CFTC and stock markets are regulated by the SEC. Both are failing to take action as this problem gets more virulent. Something needs to be done by either of these regulatory organizations or our legislators to restore order to the markets. If you want to understand index futures in greater detail I suggest you read an article that I wrote for The Street.com (TSCM) last year titled Five Things You Should Know About Index Futures .

Comments

[Jimmy Lathrop:]

You can contact John Crudele at the New York Post and he will explain the volatility in the index futures to anyone who asks. It's the Presidents Working Group on Capital Markets, also known as the Plunge Protection Team.

I watched many hours of congressional testimony and no elected official asked any administration figure as to how many futures contracts are purchased by the PPT to stimulate the economy. Maybe its because we prefer overt manipulation by the government as opposed to secretive manipulation. Its like a battered wife enjoying a beating at the hands of her abusive spouse rather than having him go off somewhere where she didn't know what he was doing.

Five years from now when the manipulation is uncovered there will be a tiny amount of outrage from the tiny amount of people who think the index futures have any relevance to anything.

2008 Nov 20 07:23 AM