Change the tick increment in ES from 0.25 to 0.1

Would you like to see the tick increment in the ES changed from 0.25 to 0.1?

  • Yes

    Votes: 115 52.8%

  • No

    Votes: 61 28.0%

  • I don't care but wanted to click a voting button

    Votes: 42 19.3%
  • Total voters
    218
Forgive me for being blunt (I can't help it once in a while), but do the people who are offering opinions and are asking questions about possible pro/con of 0.1 tick for ES, ACTUALLY DAYTRADE THE "ES" PROFITABLY ???

I really don't think so.

I mean, posters like guy2 and Remiraz have gone through the trouble of explaining the issues, so that even a schoolkid can "get it".

If they still don't get what an "edge" is and how tick increment affects it...
 
I have never been profitable over time trading ES and now I trade it very occasionally on after-hours.

But if i saw a change in ticksize I'd probably start trading it more often and maybe then I'd have a chance of becoming profitable.
 
Quote from mtzianos:

Forgive me for being blunt (I can't help it once in a while), but do the people who are offering opinions and are asking questions about possible pro/con of 0.1 tick for ES, ACTUALLY DAYTRADE THE "ES" PROFITABLY ???
More...

Since you seem to be so smart about everything... answer the 5
questions I asked above... and in detail... :cool:

And base your answers on the difference between having ES at
$100 a contract instead of $50 a contract. So far, no one wants
to put out any answers to these questions. I guess they don't know?...

I have my own anwsers to these questions but want to see if
anyone else has any intellectual input (vs. making statements like
"does this guy make $$$" or "does that guy make $$$" statements
that don't really add anything at all to the thread...

Not that it really matters. Because nothing is going to change.
Some traders will still keep on griping and crying about the spread...:D

Almost kind of like they are the ones who can't make a dime trading ES... :D
 
Quote from version77:

Best idea I have seen yet... but...


1. Would it decrease the daily range compared to now?

There would be no contraction in volatility. ATR could possibly dip by .10pts or so. Obviously there's days the dime increment would contain a high of 1243.90 instead of 1244.00.

2. Would it decrease daily volume compared to now?

Theoretically volume would be cut in half. IMO the reduction in contracts would be more like 35-40%. The facilitation of "in between" trades at the newly created dimes would certainly increase the number of orders both entered and filled each day. And of course any decrease in volume less than 50% would be an actual increase in notional volume.

3. Would it double intraday/overnight margin rates?

Yes. Definitely.

4. Would it have an effect on commissions?

Probably. I'd guess the CME would raise Globex fees and brokerage firms would feel the need to "make up" for the decrease in contract volume by raising commissions. However I'm sure it would still work out where 1 newly created 100x ES would be cheaper to trade than two of the present 50x ES's.

5. Would it wipe out ER2? (Would ER2 traders go back to ES)...

No effect at all on ER2.

ER2 traders are motivated by three factors. One, ER2 is the more volatile index and that appeals to some momentum scalpers. The suggested changes to ES would not increase ES volatility so ER2 will remain the choice of those traders.

Secondly there's a pool of undercapitalized traders who use the additional volatility of ER2 without having to pay the margin premium of 2 ES. Since ES margins would double, the smaller guys would be even less compelled to move back to ES.

Thirdly the Russell has become a bona fide benchmark index for many miudcap portfolio managers. With the decrease in serial correlation between ES and ER2, managers see the need for sector hedging and hedgies LOVE the spread opportunities between all these multiple index products.

What other possible negative/positve effects would this change
have that anyone can think of?
More...
 
I've tried to give a worked theoritical example of the ES tick size at 0.25 and 0.1 points here: Bid/Ask Disadvantage

Let me know if this clears it up for anybody. More importantly, let me know if I've got anything wrong in there!
 
Quote from guy2:



Let me know if this clears it up for anybody. More importantly, let me know if I've got anything wrong in there!
More...

Looks good to me. I would say we are getting totally ripped off
by the spread being so wide. Can hardly believe it would make
such a big difference to have the tick size down to .1, but it sure is
obvious after looking at your article.... :(
 
Let me try once more:

The idea behind this thread is to have CME just use the SAME tick increment for ES, as with pit SP, i.e. trade in increments of 0.1 rather than 0.25.

ES multiplier could stay the same, apparently ~$50-60k contract value seems to accomodate most traders

In such scenario, IMO there need be no change in anything else, like margin, commissions or range (where did people think about this?!?)

As long as contract's notional value stays the same, I wouldn't expect much change in ES volume (actually I'd expect ES volume to increase a bit, as more "micro-scalpers" will be able to get fills "in-between").

It's quite simple: In 1998-2002 SP500 daily range was about THREE (3) times bigger than nowadays. So tick increment was not a big issue. Now it is a big issue (imho).
 
I echo what mtzianos has just said.

He is spot on 100% correct.

That's the reason that I didn't join in the chat previously about what would happen to the ES if the tick size was changed from 0.25 to 0.1.

The answer is that nothing would change except that the volume might pick up a bit.

Remember that the ES is cash settled on the SP500 index which is based on the 500 largests stocks in the US. If nothing changes to them then nothing changes to the ES.

It's like allowing the gas pumps to dispense gas in 1/4 gallon increments and then changing them to allow gas to be dispensed in 1/10 gallon increments. The car will behave in exactly the same manner and the way you buy gas will hardly change at all except you'll be able to put a couple more 1/10 gallons into your tank when you fill her up.
 
I'm bumping this poll because I've just received an email from someone at the CME which ended:
...CME has received feedback at cutting the tick size from .25 ($12.50) to .10 ($5.00). This is something CME is monitoring currently.
More...
...and I wanted to see if there were any more votes out there...
 
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