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SFE 'Market Insights' 2nd Edition: Opportunities For CTA's - Independent Research On SFE

Date 07/07/2004

SFE is pleased to provide a link to the 2nd edition of 'Market Insights'.

Market Insights is a quarterly publication reviewing independent research on the Australian derivatives market.

The paper provides a fair assessment on whether there are new trading opportunities in SFE contracts relative to a suite of other contracts which are typically in the investment universe of Commodity Trading Advisors (CTA's). The key findings are as follows:

  • SFE contracts are amongst the most liquid in the world in their respective asset classes, suggesting that the cost of trading these securities is likely to be quite low.
  • The price volatility of SFE contracts is similar to other liquid futures contracts typically used by CTA's.
  • The correlation in price movements between SFE contracts and other contracts likely to be in the portfolios of CTA's are moderate. This implies that the addition of SFE contracts can provide new potential profit making opportunities, and can provide diversification benefits for CTA's.
  • Finally, the profitability of momentum-type trading strategies typically used by CTA's, or other tading rules based on predicting price movements on the basis of historical price movements, are likely to be as profitable on SFE contracts as those typically used by CTA's.
In summary, SFE contracts appear to provide new and potentially quite profitable opportunities for CTA's seeking to enhance their performance.

Next Issue

The next edition of market insights will examine the magnitude and determinants of price slippage for futures trading on the SFE.

Specifically, the research shows how minor the price slippage is on the four major contracts ? 90 Day Bank Accepted Bill Futures, 3 and 10 Year Treasury Bond Futures and the SPI 200 futures.

Please click here to download the 2nd edition of 'Market Insights'.