Quant opinion: Is an exchange like CME or Interbank a zero sum game between the traders involved?

(Last Updated On: October 31, 2011)
Learn the Secret

Get  our 2 Free Books

Get these now which land directly to their inbox.
Invalid email address

Quant opinion: Is an exchange like CME or Interbank a zero sum game between the traders involved?

Lets say on the long run.

What about commissions?



With or without commissions, is the bulk of money held in open positions a zero sum game between the traders involved in the exchange on the long run?


What is the reason of your posting? Do you mean that CME acts like a market maker to traders? No, it doesn’t. But any market is a negative sum game, not zero sum, thanks to commissions paid to the exchange.


commissions and other fees aside, is the rest of the money in open positions a zero sum game between the participants on the long run?

In other words, someone has to lose money for someone else to profit, how true is this statement?


The reason for this post, I want take an opposite approach of researching losing patterns that are generated by systems be it human or program, for use as indicator in the trading system.

Therefore knowing to which degree trading is a zero sum is crucial to this idea.


Set aside commissions, any exchange-traded market is a zero sum game. For
OTC markets I am not that sure.



For OTC, it depends on the security. Bonds for instance are not zero sum as there is a coupon payment and theoretically one can hold the position to maturity and be returned invested principal by the issuer. Stocks/ETFs/Indexes also pay dividends which again is not zero sum though there is no end payout.



NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!
This entry was posted in Quant Opinion and tagged , , , , , on by .

About caustic

Hi i there My name is Bryan Downing. I am part of a company called QuantLabs.Net This is specifically a company with a high profile blog about technology, trading, financial, investment, quant, etc. It posts things on how to do job interviews with large companies like Morgan Stanley, Bloomberg, Citibank, and IBM. It also posts different unique tips and tricks on Java, C++, or C programming. It posts about different techniques in learning about Matlab and building models or strategies. There is a lot here if you are into venturing into the financial world like quant or technical analysis. It also discusses the future generation of trading and programming Specialties: C++, Java, C#, Matlab, quant, models, strategies, technical analysis, linux, windows P.S. I have been known to be the worst typist. Do not be offended by it as I like to bang stuff out and put priorty of what I do over typing. Maybe one day I can get a full time copy editor to help out. Do note I prefer videos as they are much easier to produce so check out my many video at youtube.com/quantlabs