30 Bonds 1/2Tick

F

FarmerTed

Has anyone noticed a decrease in volume across all US Treasury Futures since the bonds went 1/2 ticks?

I understand that the CME switched to 1/2 tics to increase volume, but that's not what is happening. From what I have seen as a result of the switch to 1/2 tics (other than a decrease in volume), is a decrease in size on the screen, less people trading the Treasuries and a decrease in seat prices.

I am guessing this is not what the CME wanted to happen by switching to 1/2 tics.

Am I reading into this to much?

Any feedback would be appreciated.
 
Yes on all accounts. The 1/2 tics took away a ton of spread trading volume and some market making scalpers. These participants accounted for a good percentage of the volume in the 30's. This is why the margins have increased so much for them, they simply have to move more since the bid/ask is thin. The Vix has dropped considerably over the last month or so but yet the treasury margins haven't budged from their recent highs.

If it ain't broke don't fix it, right?
 
I have called the cme and emailed them consistently for the last two months,,, they still say that they are collecting data and not enough time has passed to measure the effect of the change.

I believe that there are a number of problems with the treasury markets,

1. Banks are not trading as much size because of the mortgage securities trade dried up. These traders no longer need their A.M cbot seats and thus are selling them off, 400k last aug to 170K last trade.

2. The half tick move crushed a lot of the local scalpers who could not trade any sort of size and thus would not leave working orders either.

3. I have no idea what this is doing to the spread between 2,5,10,30 but it seems that the spreads are pretty volatile. (?)

NONE of this is fact just speculation.

I encourage all traders to send the cme an email and explain in your own words why they should change the 30Y back to full ticks.

I used to be 2% of the 30Y market and some of my friends were much larger %'s

I got short CME stock about two weeks ago when i noticed the steep decline in volume month over month and compared to last year

seats are going to be 100K by the end of the summer
 
Quote from FarmerTed:

Has anyone noticed a decrease in volume across all US Treasury Futures since the bonds went 1/2 ticks?

I understand that the CME switched to 1/2 tics to increase volume, but that's not what is happening. From what I have seen as a result of the switch to 1/2 tics (other than a decrease in volume), is a decrease in size on the screen, less people trading the Treasuries and a decrease in seat prices.

I am guessing this is not what the CME wanted to happen by switching to 1/2 tics.

Am I reading into this to much?

Any feedback would be appreciated.
More...

As a retail trader i have started to trade this instrument due to the reduced tick.

I pay larger exchange fees (per contract) than someone with a seat.

Not saying they are making more money, but lower volumes doesnt necassarily always equate to less revenue for the exchange.
 
Quote from Businessman:



Not saying they are making more money, but lower volumes doesnt necassarily always equate to less revenue for the exchange.
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Ok, pls elaborate this idea.
 
Quote from Bernard111:

Ok, pls elaborate this idea.
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As a non member i pay much higher exchange fees, i think five times as much as someone who is a member.

So if CBOT lose 200K a day in volume from members trying to make the bid ask spread, but they gain just 50K from non member day traders attracted by the smaller spread (like myself), they actually make more in exchange fees than before.
 
Don't forget they cut the 5 year to 1/4 tics. Now if you are a 5 year trader, your depth that you can see on each side is a full tic and a quarter. Thanks guys.
 
Quote from Bernard111:

why a retail trader should be attracted to trade 30Y thanks to the reduced tick size when he already has the 10Y?
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The 30YR is more volatile!
 
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