Q:

Interaction of SPY etf with futures?

In the discussion to this question JoshK mentioned that the SPY etf has special interactions with futures contracts. I am curious what this interaction might be in particular?

A:

in a previous question you were looking at using the VWAP price of SPY as a possible technical indicator or input variable in your investment decision process.  
The difficulty that you are going to encounter is that SPY and the S&P 500 future (right now ESU9) are interchangeable.  Here is a chart from Bloomberg showing SPY vs ESU9 from Bloomberg.

Now you can see that they trade in lock-step.  There is a constant difference between the two of them - that's called the basis.  The basis exists because of some technical factors that you can read about in a thousand other places.  
Now there is a little friction when exchanging between futures and SPY's, but it's pretty simple overall.  
This past Friday, for example, \$233b worth of ESU9 futures traded.  Only \$18b of SPY traded in the same period.  To make it even a little more complicated, SPY ETFs will trade some volume in the auction.  Often the auction is just a few equity financing people exchanging shares with each-other.  That really means little to anyone.  
So I guess the point that futures dwarf SPY moves from a volume perspective.  
You can have a whole other discussion about the importance of the underlying stocks, but that's for another time.

