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Futures and Wash Sales?

  #5 (permalink)

Legendary Market Wizard
Houston, TX
 
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There's two meanings for wash trades.

I think you are talking about the IRS's definition of a Stock/Equities wash trade - which is all tax related, while @Stage5 Anthony is highlighting the CFTC/Futures definition - which is related to whats legal and what isn't.

If your question is, does the IRS Wash Trade rule apply to futures, the answer is NO. All futures trades are marketed to market at year end, and as such FIFO, LIFO or wash trade accounting are all irrelevant.

With regards to the ICE definition, I believe a key expression is "but does not subject the Principal to any market risk or change in position or aid in price discovery." Without that expression it would be illegal to enter into cross exchange arbitrage, but the addition of "aid in price discovery" could be be abused in my opinion.

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