As a fun experiment to learn ESI and what can be done with contracts as I am getting back into even after a decade, I was weighing out trying and do a basic futures exchange matching engine based on them.
I know this had been done as a proof of concept before about ten years ago. But then it was found that the market’s were just too thin, not enough economies of scope and scale possible to make an exchange viable versus OTC (meaning classic Over the Counter here) with any commodity as a securities product, even Tritanium. And I’d guess that is still the case. But has the market developed enough toward needing an exchange for price discovery (highly doubtful as this is baked into the market interface from what I see given “GET /market/prices/” existing), needing ways to distribute risk (possibly, or more desire to speculate and seek arbitrage using leverage and margin?), etc?
What is the viewpoint of the market needing/utilizing futures contracts, and an exchange, for distribution of risk? Or is it by its nature and technology need nothing but OtC as it is, given the high liquidity and access to information?
There’s enough variability in mineral prices that I could see a place for futures contracts in managing risk — i.e., I know I’ll be able to buy/sell 10 million tritanium for xx price a month from now, allowing me to do some long-term planning.
As a practical matter, would this be a special form of courier contract with a delivery date attached? And would there be a secondary market mechanism for it (the ability to buy/sell existing contracts)?
When CCP still had an economy guy, this was discussed, and I think there was a devblog about, how this can work. But it’s not a priority for CCP and will probably never be. Apparently it’s too niche, to waste dev resources on.
That is where my R&D on the idea is now, with how do you take, keep track of, and distribute contract information from ESI to market participants. On the sell side, it so far seems simple enough, in that a hedger puts in a sell bid offer (courier contract), but on the buy bid offer side it is looking very deep into the book keeping based on the contracts and keeping track of margin, volume, etc. So still working out if that is even doable really. I think it is, as far as the mentioned book keeping. But it might fail for how slow ESI, to matching engine, to risk management, to end user might be.
As I drill down, and come to a base contract specification (then specific commodity ones), then I’ll have a better idea of what those would look like.