emini tick change???

[Risk Less]

The arb generates more overall volume and basically becomes a multiplier until the Market decides that the edge is smaller than the cost of doing business on two platforms. Right now the Arb is still creating more volume because there is still edge in it. Soon it will dissipate and the Floor should disapear, but the Exchange can put up some barriers to change. I have seen several Arbers make a move from Arbing to staright Electronic Execution in the last several months. It is starting!

An example of the Exchnage putting up temp barriers is:

As soon as the Bonds and Notes on the CBOT/Ace system hit the 60% level the exchange lowered the Floor fees and raised the Electronic fees substantially. ACE fees went from $.80 to $1.25. You would think that Business logic would necessitate a move in the other direction, so that the CBOT would not have to support 2 cost centers. Not done. The Exchange leadership was put in their by the Members.

The short story is: Don't look for Tick size changes in the near future. IMHO

Quote from Tea:





If the tick were reduced to .10, traders would save a potential $7.50 on each emini. This would increase the participation in the emini from medium and large hedge funds - making the emini even more liquid.

Since most of the arbitrage seems to be initiated in the emini and exited in the pit (because of the time lag of the pit), it would seem that the pit is taking liquidity away from the emini instead of visa versa. So reducing the tick size should increase emini liquidity, not reduce it IMHO.

The exchange (or should I say the corporation) makes 5 times as much in fees from dollar equivalent Emini as from the pit contract.
From a corporate point of view it would make sense to shift things from the pit to the emini.

The corporation has a fiduciary responsibility to maximize its profits - the profits of individual share holder's businesses is not its primary concern (whether they be pit traders or arbs). Otherwise they could be sued for favoring certain shareholders at the expense of the company and the other shareholders.

 

[Risk Less]

Very well put! I agree completely!

Quote from TriPack:



Maybe they will participate but maybe they won't. Will they move from the big contract to the emini contract? If they do then they are merely shifting liquidity, not creating any new liquidity for the overall market. You're assuming that the arb liquidity exists in a vacuum. That's a pretty big assumption.



Again this is shifting volume, not necessarily creating any more total market liquidity. If the change doesn't create new volume for the CME, then why should it do it if it is going to upset its entrenched pit member stakeholders?



Not to nitpick but it isn't cut and dry 5 times more. There is a complex schedule of rates for the different fees for executing your order, for various grades of member, and globex or pit execution. Pit execution for "other products" actually has lower cost than emini globex execution, which in turn has lower cost than "other product" globex execution.



Companies can be sued for lots of things. Whether you can find a judge to award you any money is another matter.

Rather than change the tick size for the EMINI contract, I would rather the exchange cut their fees in half. This would increase arb and little guy profits without the chance of decreasing emini liquidity. Second on my wish list is simultaneous trading of the big S&P with the globex S&P during RTH. That would lead to fast culture change IMO, and according to the fees schedule would also increase the CME's income from globex executed large S&P contracts during RTH.

 

[trader42]

from CME site

CHICAGO, Feb. 7, 2003 – The Board of Directors of Chicago Mercantile Exchange Inc. (CME) has approved a modification to the tick size for trading of calendar spreads in its E-mini™ S&P 500® and its E-mini NASDAQ-100® contracts. The reduction in the tick size for calendar spreads, from .10 index points to .05 index points for E-mini S&P 500 futures calendar spreads and from .25 index points to .05 index points for E-mini NASDAQ-100 futures, is in response to customer requests to bring more efficient pricing to the market and harmonize the tick size with the standard, pit-traded versions of the contracts.

They are listening to customers


Once implemented, the tick sizes for calendar spreads in each of CME's E-mini stock indexes, including the E-mini S&P 500, E-mini NASDAQ-100, E-mini S&P MidCap 400® and E-mini Russell 2000®, will be the same as the corresponding pit-traded version of the products.



At the same time, CME will increase the maximum order entry quantity restriction for calendar spread trades in all four E-mini products from 250 to 1,000 contracts. Orders for more than 1,000 contracts per quarterly contract month may be entered on the GLOBEX® system as multiple entries, each of which does not exceed 1,000 contracts. For outright trades in the products, the maximum entry quantity restriction will remain at 250 contracts.



In addition, calendar spread transactions in the E-mini S&P 500, E-mini NASDAQ-100, E-mini at S&P MidCap 400 and E-mini Russell 2000 futures executed by eligible participants will not qualify for the daily GLOBEX fee cap. Outright transactions will continue to be eligible for the fee cap.



All of the revisions become effective on Sunday, March 2, 2003 for a trade date of March 3, 2003.

 

[alanack]

Thanks for the post. I'm not quite sure why this topic generates such heated discussion, but in my book this is excellent news. You will be able to test the market(for eminis) for less than $10/contract with market orders, as opposed to about $20 before.

Alan

 

[toby400]

The Pits will go the way of the above bird I think. Albeit vested interests will cling to their club structure until the end.

Only an opinion folks.

:eek:

 

[ArchAngel]

Quote from alanack:
Thanks for the post. I'm not quite sure why this topic generates such heated discussion, but in my book this is excellent news. You will be able to test the market(for eminis) for less than $10/contract with market orders, as opposed to about $20 before.

Unless I read it wrong, the announcement applies only to calendar spread tick size - didn't say anything about changing the tick size on the straight contracts.

The calendar spread tick sizes on the eminis was already less than the straight emini contract tick - they're just reducing it further for calendary spread only I believe.

 

[Dr. Zhivodka]

Quote from alanack:

Thanks for the post. I'm not quite sure why this topic generates such heated discussion, but in my book this is excellent news. You will be able to test the market(for eminis) for less than $10/contract with market orders, as opposed to about $20 before.

Alan

It's only for spreads.

They're not so stupid as to do it across the board. It would kill the goose.


If *you* can't afford the mini's, stick to a 100 shares of SPY's

 

[Risk Less]

This will not effect the tick size for an outright, but is a step in that direction. I have to check my sources at the CME and find out what changed their minds???

 

[nitro]

Quote from sammybea:

cause you have a bunch of academics like tea...

tea is an academic?

bwa hahahahahahahahaha.

NO. Well, maybe at a community college...

nitro

 

[sammybea]

is there someway to short a CME membership? I would love to if the CME reduces the tick size on the emini. Damn i would be rich!

Quote from riskless:

This will not effect the tick size for an outright, but is a step in that direction. I have to check my sources at the CME and find out what changed their minds???