ASX200 Cash price calcuation does not reflect market price during open

[Guest sww]

Hello,

 

During the session open I find the ASX200 Cash price to always be different to the price quoted by the ASX. I understand out of session IG probably needs to blend the ASX200 price with the futures price but in session why is there any disparity??

 

I also find the price to sometimes not update for several minutes. For instance right now it says updated 13:21:23 though it is definitely into 13:22:xx. Somtimes this gap in updates is even longer. Would paying for live data feed fix this problem? But if the price is not an accurate reflection of the actual ASX200 then paying for live data is probably pointless anyway.

 

I'm considering testing other providers to see if this is something particular to IG. Would appreciate your advice.

 

Thanks

 

 

 

 

[JamesIG]

Hi  - a great question! Let me try and explain how our index instruments are priced.

 

The index value you see on the TV or generally quoted by the exchange itself is a numeric value which is given to represent the value of the constituents contained in it. For example the ASX is the largest 200 companies in Australia, whilst the Dow is made up of 30, and the FTSE 100 of 100. This means that an Index such as the ones above can NOT be traded - it’s simply a numeric value use to describe its constituents and give investors an idea of market strength. You can't go and buy an ASX200 - to do so would require buying the required weighting in all 200 companies and then re-balancing continually. It basically just can't easily be done.

 

There is, however, something called a Future which can be traded, and correlates to the index which it represents because it will settle basis the underlying market price at some time in the future. For example you can get an ASX Future, the DJIA Future, and a FTSE Future. The ASX 200 on the IG platform is a tradable instrument and a derivative product which is based on this: the most liquid front month Future for the ASX. These Futures basically reflect the underlying index, however they will generally be slightly different.

 

The only difficulty is that these Futures are based exactly on that - the future price. In between now and their time of expiry there will be events such as dividend adjustments and interest. To bring the Futures prices back to a fair current day value we make a 'Fair Value' adjustment by taking out any Dividend and Interest. This will be similar to the index price you see on the TV, however it will not be exactly the same, because this is a tradable instrument rather than just an indication index value.

 

I hope this clarifies things on why there maybe a different between the actual index price and the ASX 200 on IG. If the price isn't updating this could either be because the market isn't moving, or it could be a technical issue with your charts. If it's the later please give us a call and we can go through some troubleshooting methods with you.