SERVING THE QUANTITATIVE FINANCE COMMUNITY

 
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BLOBY
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Posts: 113
Joined: May 17th, 2004, 5:07 am

Trackers (ETF)

May 10th, 2005, 7:16 am

Hi everybody, my question is naive, but how do market makers or structuring guys achieve to win money on Trackers ? For instance Eurostoxx Tracker ? Bid-offer is very tight, replication is almost perfect....
 
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erstwhile
Posts: 904
Joined: March 3rd, 2003, 3:18 pm

Trackers (ETF)

May 10th, 2005, 10:50 am

They don't, generally! ML was one of the first to issue ETFs in Europe, and it was done at a loss. There was almost no advertising budget! That was what convinced me it was a terrific product: nobody was getting wealthy off of it!They might make a little money off of stock loan, but that's not exactly coining it...
Last edited by erstwhile on May 9th, 2005, 10:00 pm, edited 1 time in total.
 
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BLOBY
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Posts: 113
Joined: May 17th, 2004, 5:07 am

Trackers (ETF)

May 10th, 2005, 1:42 pm

on Eurostoxx Tracker, do you think guys hedge their position with stocks ? rather than futures
 
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erstwhile
Posts: 904
Joined: March 3rd, 2003, 3:18 pm

Trackers (ETF)

May 10th, 2005, 2:39 pm

i think they may be required to hold the stock basket. can't remember why that was...
 
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BLOBY
Topic Author
Posts: 113
Joined: May 17th, 2004, 5:07 am

Trackers (ETF)

August 24th, 2006, 7:45 am

Does anybody got more information now on that topic ?
 
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Gmike2000
Posts: 801
Joined: September 25th, 2003, 9:49 pm

Trackers (ETF)

August 24th, 2006, 9:37 am

I have been trading the abn amro trackers in my personal acct. They track pretty much all markets (stocks, fx, commodities, rates, etc)...built in leverage means you borrow, and that may be how they make the money. They use futures to hedge...you can clearly see that on intraday charts. Also, the bid ask spread is not insignificant. Sometimes I feel they screw you, e.g. when you hit their price and the market moves suddenly in your favor, the transaction does not get through (error message). It is probably a very low margin business...also there is now a lot of competition.
 
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zrj
Posts: 48
Joined: December 29th, 2003, 3:59 pm

Trackers (ETF)

August 28th, 2006, 8:48 pm

QuoteOriginally posted by: erstwhilei think they may be required to hold the stock basket. can't remember why that was...i think they're required to hold stock because it's in the fund/tracker prospectus...i guess they can only try earning the mgt fees + tax arb on the divs + repoindeed they'd primary hedge w. futures, and work the basket afterward... whenever they ever need to
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