ASX200 Price anomalie

[superking]

Hi 

Does anyone know why there is a price difference between live ASX200 price on www.asx.com.au and ASX200 on IG Markets?

Today (2nd July 2018) price difference was around 7 pips, some days are negative other days the difference is 4 pips, everyday it is different.

Looks like there is some arbitrage opportunities here.

[Caseynotes]

Hi @superking,  you are looking at the exchange price which will always vary from all broker prices, there might be arbitrage opportunities between brokers but as a retail trader you don't have access to trade on the exchange. Apart from all the regulations needed to adhere to to even apply the application alone to trade on the exchange is about $50,000, hence the need for brokers. 

[superking]

thanks  but the spread is quite significant.

 

Edited July 2, 2018 by superking

[Caseynotes]

Lucky it's not the nyse. The IG spread on ASX is higher outside of Australian market hours.

[superking]

how come some times the difference is 0?

[Caseynotes]

Hi @superking,  because each exchange is dynamic and dependant on their own participants setting current price for that exchange so 2 different exchanges can have very different prices for the same asset. This is seen most dramatically on the crypto exchanges (unregulated).

IG derives it's pricing from multiple sources such as exchanges, banks etc seeking the best available at the time so may well have the same price as one of the exchanges.

Take a look at the pic of the current live prices of some cryptocurrencies on the different exchanges.

See bitcoin varies 6580 - 6587. 

 

 

[superking]

But isnt the ASX shares usually only traded in 1 exchange while crypto are traded in many exchanges around the world.

[Caseynotes]

I was generalising about exchanges though I would assume big Oz companies could be listed on a number of exchanges just as do big US and UK companies. The current price on any exchange is where the buyers and sellers operating on that exchange are exchanging contracts and that may well be at a different price to a different exchange.

[superking]

I am pretty sure ASX200 shares are only traded on the ASX during Australian market opening hours.

[Caseynotes]

Forgot to add to the last post that prices don't just come from the exchanges themselves. Brokers also use multi-venue technology that combines prices from primary exchanges with MFT data from hybrid systems such as Bats Chi (Australia) and Turquoise (Australia).

 

[superking]

Ok thanks Caseynotes.

Currently the price difference between ASX200 on www.asx.com.au and IG Markets is 7pips.

Traders at IG Markets could be making millions of dollars in arbitrage by trading on their platform and trading on the ASX.

 

[Caseynotes]

Hi @superking,  not sure IG even has traders anymore and don't think that is part of their current business model. The thing is what prices can you get. As a retail trader you can only trade through a broker and live price comparison is only one aspect of what makes a good broker, some would argue other aspects are more important.

Just for interest here is a snapshot comparison of current prices on 3 top UK broker firms, watching for a period of time you can notice quite wild swings back and forward as they reach for different sources for price. It is not consistent, trying to play arbitrage out of that would be a gamble.

[superking]

Hi I also have an account with CityIndex, difference between ASX200 in IG and ASX200 in CityIndex today was around 6-7pips during 10am-4pm AEST. Last week difference was only 2-3 pips. CityIndex always trades closer to the real price for ASX200.

[superking]

The difference between the broker price and the real price shouldnt fluctuate this much day to day. There is something wrong here.

[Caseynotes]

Looking back at my snapshot see the Cityindex spread on the Dax was 6 pip compared to IG which was either 1 or 2 pip depending on the exact time so what does that mean for the '6-7 pip difference' between IG and City's quoted prices? The difference is swallowed up.

Also see FXPro where the dax price was 12300.5 when the Cityindex price was  12325.5, a 25 pip difference.

So brokers run a parallel market and the objective is not necessarily to simply quote as close to any particular exchange as possible, there are many other variables/costs to consider and all brokers place more or less importance on each of those variables in their business model and it is up to the client to study and decide which combination suits them best when choosing a broker. Also there is no such thing as the 'real' price, merely a price at which,for a very short period of time, some traders are willing to swap contracts.  

[superking]

 "real" price usually means the price of the underlying asset that is quoted on the ASX where ASX200 is derived from.

I prefer IG over City for ASX200 because City ASX200 only trades during the day session.

I only trade ASX200.

[Caseynotes]

Yes that's the thing, all brokers are different and it's a case of contrast and compare, there will not be one broker that beats all others on everything, it's just not possible. Some will offer a better this  to lure clients but by necessity that  will automatically be a little worse. Ya pays ya money and takes ya choice.