E-Mini Trading Limits

V

vanilla2

I've been trading the globex minis since April, and I'm realizing how vague my understanding is of the limit rules. The CME's rules for ES can be seen here, and are identical for all globex minis as far as I can tell:

http://www.cmerulebook.com/cmewg/wg.dll?page&file=c358

From my interpretation, pre and post market trading sessions (ETH) go limit at 5% ("One-half of the 10% Price Limit rounded down to nearest integral multiple of 1 index point") down from "the average closing price of the S&P 500 futures contract whose expiration date matches that of the current primary E-Mini futures contract, during the month prior to the beginning of the quarter (P) and rounded".

As I read the rules, it looks like this means that the price will stay locked at this 5% limit until the pit contract limit "ceases to apply". It sounds like this is then followed by a 2 minute halt, after which trading re-opens until the 10% limit is reached and so on down to a 20% limit when everything halts completely.

Am I misreading this, or can the globex minis actually drop 20% in one after hours session? Another naive but vital question, on the morning of 9/17, was it possible to sell a long position during the limit down period before 9:47? Were there buyers?

Thanks

 
Blatant bump to the top here, does anyone have a good summary of how the limits work that's a little more clear than the CME materials, or experience with limit down sessions on the indices?
 
One thing to remember when price trades to the limit, it just means that price can go no lower than the limit, so selling below the limit is not allowed. Buying at or above the limit is allowed. Price can come up off the limit at any point, it doesn't have to stay on the limit. If price is at the limit (limit ask) when the time expires (10 mins for first 5% limit for example) then trading is halted for 2 minutes then it is opened and the next limit (10%) comes into play. If price is above the limit price, then there is no 2 minute halt.
 
Quote from vanilla2:

Am I misreading this, or can the globex minis actually drop 20% in one after hours session? Another naive but vital question, on the morning of 9/17, was it possible to sell a long position during the limit down period before 9:47? Were there buyers?

Thanks

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You are misreading it. Check out:

q18 What are the ETH limits?
a18 For GLOBEX® non-pit trading hours there is a single price limit at 5%. Trading may occur only at or above the 5% price limit on the downside and at or below the 5% limit on the upside. If stock index futures are limit bid at 8:28 a.m. Chicago time in the lead month futures contract, then the 5% limit is removed. GLOBEX trading will be delayed until 6:00 p.m. C.T., if an NYSE trading halt is in effect at 3:00 p.m. C.T. or the lead month futures contract in the big S&P 500 futures is limit offered at 3:15 p.m. C.T.
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I am trying to find out EXACTLY what happens when trading limits on Globex are hit. I looked at www.cme.com/trading/prd/equity/pricelimits.html and called Globex (312) 456-2391. Still have questions, though.

During ETH (electronic trading hours) trading in the ESH8 contract is currently limited to +-70 points from the previous settlement price. (note; this number is from the docs above, it is calculated by CME and published quarterly) What happens to market sell orders when the lower limit is reached? Do they simply get rejected? For example, Friday's settlement price was 1325.25, does this mean that whenever the best offer is 1255.25 (=1325.25 - 70.00) then all market sell orders will be rejected by globex? Does anyone know the exact text of the error message? Has anyone had any experience with particular brokers that handle the situation elegantly?

I've never seen this situation. A guy at Globex said he had seen it about 6 or 7 years ago. Right now, we came within 1 point of these limits kicking in since the low is now 1256.25. What are some good trading strategies in this situation?

One obvious scalping strategy would be to go long at 1255.25, and then place a sell order 1 tick above that. Is it true that you would not have to worry about placing a stop loss order until 8:28am - the first time when the market could trade lower than 1255.25?

If this is the case, has anyone ever seen a market that has stayed limit down all night long? On the face of it, this seems extremely unlikely to me. It seems as though it would require that there always be enough SELL LIMIT orders at 1255.25 to meet the demand for every incoming MARKET BUY order. Is this a correct understanding of the situation?

BOTTOM LINE: Do 5% limits provide a very rare opportunity where scalping strategies are very likely to work?

Thanks,

LlewS
 
In April-2000, there was a memorable day when the S&P traded down through multiple limits. Scalping for 1-tick profits is a horrible idea. If you're "long & wrong" with a position, get out before a downside limit is touched. Otherwise, thousands of unfilled sell-orders can "lock" the market down with no upticks until the next limit is activated. Even then, it's possible for the market to immediately gap-down to the next limit(s) with very little trade in between. The "final bottom" should be in when the market trades down through one and more limits AND then trades above the most recent limit having flushed out all of the selling that there can possibly be........just like April-2000. Stay tuned.
 
Right!

So what you're saying, is that it is quite possible to get locked down at the 1355.25 price all night long, and then get your "protective stop" gapped over when the pit opens? Then, the "protective stop" could be filled at a terrible price and you could wind up owing your broker a whole lot of money!?
 
i think the number is 11453 for no sales below that until limit is lifted at 8:30am

= 12103 - 650

= friday's close - (this quarter's limit for YM)
 
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