Emini trading increment
- Thread starter Tea
- Start date
How do you know it is the bear market and not decimals. Institutions complain, market makers complain, I would bet 90percent of traders who were profitable before decimals complain. The only ones not complaining are the specialists. Not knowing where the liquidity is hurts most traders. Desks on wall street have been torn apart. When the bull market returns and traders want to get a market who will be on the others side? A guy from datek for 32 shares of yhoo?
Look as the b.s. going on in the nazdaq with everyone hiding their size because some pinhead can step in front for a penny. Is that really good for markets? I do not know but neither does anyone else.
Look as the b.s. going on in the nazdaq with everyone hiding their size because some pinhead can step in front for a penny. Is that really good for markets? I do not know but neither does anyone else.
Originally posted by TriPack
Actually I think the solution would be dual electronic and pit traded big S&P contract. The pit would be gone within two years.
You may be right about the .1 change on the EMinis. If they ever do change to .1 ticks then I sure hope this is the case. It's not like I wouldn't rather pay $5 than $12.50 for a fill.The EMini may have achieved the needed liquidity so that fiddling with the minimum tick wouldn't do too much to lessen liquidity. But I still think there is a magic $ number per tick that is needed to make a contract attractive to arbs - as illustrated by the Dow contract woes. I think if you get too far under $10 per tick it just doesn't work very well because of the commission and clearing fees hurdle. I'd be interested in hearing how minimum $ ticks on the two contracts Pabst mentioned compare to the the EMini, as well as their average daily ranges.
On the liquidity issue, volume does create some liquidity, but arbitrage creates a lot more liquidity. Liquidity after all isn't the same thing as volume. Liquidity has more to do with how many ticks you will need to pay to get into or out of your position, and this is more a function of how many contracts are being bid and offered at the time. Bids and offers are dominated by arbitrage. The little guy simply can't do enough size to make a market liquid with their 1-3 contracts and at $5 per tick most couldn't cover commission costs. Even when you get down to the cheaper commissions there is an ultimate limit that is dictated by cost.
And one more thought to think about. When the big S&P contract did a reverse split from $500 to $250 and from .05 minimum tick to .10 the thing that stayed the same was the $ per tick of $25. This change effectively doubled both bid/ask spread cost on a leverage basis (5% to 10%) and the commission cost as well. In other words it got twice as expensive to trade. You'll recall that at this time retail commissions were still around $20/rt. Yes it made the contract more affordable to individual traders I will concede. The cry at the time was that the doubling of cost would kill the contract. But in spite of the increased cost the change dramatically increased contract liquidity. I don't think that increased participation alone accounted for the increase, as the volume continued increasing, though gradually. At the time the change was made it was not uncommon for the market to trade in .5 or even 1.0 increments much of the time. It got much more orderly after that and actually started trading in .1 increments (which was rare even before the change).
If they ever do implement a .1 EMini spread, I sure hope you guys are right about the ramifications.
Even at IB's $4.80 rt in ES that equates to $24.00 per 1 SP. Lot of bread. I know guys who trade SP retail for $12.00, and members are at $1.60. Thats for a contract 5x ES. Plus the added edge and yes I'll argue, ES is not nirvana unless your a swing or day trader. The guys on this board(and many days I'm one of them) who are rapid fire clicking on Globex for 1pt. moves, are playing a losers hand. Same way a good card counter can still win out of a four deck shute, but wouldn't he rather play the house with one deck.
check out recent IBD; its monday's issue. there's an article with the SEC CEO whining about the narrowing of the spreads (decimalization) and how it is hurting SMALL companies, 'cause MMs like ML wont handle them for lack of a profit. "we" are not allowing them enough profit - what a crock! no one has a gun to ML's collective head - that big fine they just paid wasnt from charitable work. watch for SEC to start building a base on: "decimalization is bad for small companies," "its unfair to small companies," etc. afterall, wasnt isld "purged" because of "unfair" fills and to "protect the small investor"? how did island survive w/o MM/specialists?????
man, are we gonna end up back in the stone age, or what? first they essentially blackout isld for ETFs. now all they need to do is increase the spreads. be glad the spread is only $.25, once they herd everyone into the futures, they will then WIDEN the spread somehow. maybe to protect the small investor??????
im a republican, but bush has to go... it took him almost 2 years to get in a head of the FDA, and the SEC is beginning to look like a union for the MMs/Specialists. paul O'Neill is the invisible man - he actually acts like a secretary, but not of the treasury! i dont think bush stands for fairness and honor and it is beginning to manifest in the actions of govt agencies. he's promoting amnesty for illegal aliens and my kids are bringing notices home from middle school in Spanish? votes for sale??? while i dont think saddam is anything but bad, i dont trust bush anymore. would he kill for oil? sure! god i sound like a whacko liberal!
BTW, i not suggesting clinton was any good either.
a quote from the IBD article: "since the implementation of decimal pricing, the stock market has continued its downward spiral..... the NAZ is down 25% since April 9, 2001..." now i know why the market is tanking, its the lack of a big juicy spread for MMS!:eek:
BTW, before becoming CEO of the SEC, Mr. Simmons was president and CEO of Prudential Securities
he says that decimalization was "misguided"). still think your spreads are gonna go from a quarter to a dime?
man, are we gonna end up back in the stone age, or what? first they essentially blackout isld for ETFs. now all they need to do is increase the spreads. be glad the spread is only $.25, once they herd everyone into the futures, they will then WIDEN the spread somehow. maybe to protect the small investor??????
im a republican, but bush has to go... it took him almost 2 years to get in a head of the FDA, and the SEC is beginning to look like a union for the MMs/Specialists. paul O'Neill is the invisible man - he actually acts like a secretary, but not of the treasury! i dont think bush stands for fairness and honor and it is beginning to manifest in the actions of govt agencies. he's promoting amnesty for illegal aliens and my kids are bringing notices home from middle school in Spanish? votes for sale??? while i dont think saddam is anything but bad, i dont trust bush anymore. would he kill for oil? sure! god i sound like a whacko liberal!
BTW, i not suggesting clinton was any good either.
a quote from the IBD article: "since the implementation of decimal pricing, the stock market has continued its downward spiral..... the NAZ is down 25% since April 9, 2001..." now i know why the market is tanking, its the lack of a big juicy spread for MMS!:eek:
BTW, before becoming CEO of the SEC, Mr. Simmons was president and CEO of Prudential Securities
he says that decimalization was "misguided"). still think your spreads are gonna go from a quarter to a dime? How do I know?
I know because they say the same thing after every reform. It is like a reliable seasonal pattern. When fixed commissions were eliminated and discount commissions allowed â during the following bear market the brokers were telling everyone that it was allowing discount commissions that caused the bear market (i.e. there werenât as many full service brokers around to stop people from panicking). Of course that didnât stop all the bear markets from happening in the past when there were fixed commissions.
In the 1994 bear market they were saying that by allowing retail direct access to the Nasdaq, Level 2, SOES, the narrowing of spreads â that caused the bear market and it was why market makers were abandoning the smaller Nasdaq stocks.
And today, they are saying that decimalization has ruined the market and it is why market makers are abandoning small stocks. Same old â same old.
Market makers abandon small stocks because there is not a need for as many market makers when volume dries up in a bear market. When the bull market returns and volume increase so will additional market makers to support the smaller stocks.
Traders who have not been through a bear market or who didnât pay attention during the last one are susceptible to this propaganda put out by self-serving exchanges, brokers, market makers etc.
As a general rule, anything that lowers costs/reduces friction for traders is good. When the bull market returns and volume returns, the game will just get better for traders because their costs are lower.
Decimalization allows the market to determine the spread and not some artificial increment like fraction size or a fixed wide spread like with the Emini.
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Normally, I don't post in the middle of day but I had a good hour and I am not going to trade until this afternoon, so I came here to occupy myself.
Tea, you made a good response. But I did not argue that decimals caused the bear market. Cisco at 120 P/E or whatever necesitated a bear market. I am saying that decimals have made it difficult to find liquidity. I do not know if you traded listed stocks in the past but if you did you should be a little pissed off that when you have a nice trade on it is difficult to know where to put your price because the specialist can and will slime you. It takes profits from individuals and gives it to specialists and the brokers they like to work with.
Now if I see that problem. What do you think larger traders see? So while some of what you say is correct I also know that what I am saying is correct. Hence my statement noone knows.
Tea, you made a good response. But I did not argue that decimals caused the bear market. Cisco at 120 P/E or whatever necesitated a bear market. I am saying that decimals have made it difficult to find liquidity. I do not know if you traded listed stocks in the past but if you did you should be a little pissed off that when you have a nice trade on it is difficult to know where to put your price because the specialist can and will slime you. It takes profits from individuals and gives it to specialists and the brokers they like to work with.
Now if I see that problem. What do you think larger traders see? So while some of what you say is correct I also know that what I am saying is correct. Hence my statement noone knows.
Jem, I think I see what you are saying.
If you compare the bid-ask movement on a listed stock like GE to a NASDAQ stock like MSFT â the bid-ask on MSFT moves in a sequential manner reflecting the trend of the stock and the bid-ask on GE moves in an erratic fashion irregardless of the short term trend.
While they both trade in decimals â MSFT moves the way a market is suppose to move while GE does not. Why? Because the NYSE specialists are trying to preserve the black box spread that they once had where you had to throw in a market order and hope for the best price. They move the bid-ask around in such an erratic manner that it is almost like they are trying to dodge any limit order â hoping everyone will give up and just submit market orders.
The problem is not decimalization, but that the NYSE needs to be opened up more like the NASDAQ so that the bid-ask moves in a more sequential order like it is suppose to. More reform is needed, not less.
Bottom line â unfortunately, NYSE stocks can't be traded like NASDAQ stocks. You either have to submit market orders or come up with a strategy for placing limit orders so they get filled. The problem is not decimals, but chicanery by the NYSE specialists.
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If you compare the bid-ask movement on a listed stock like GE to a NASDAQ stock like MSFT â the bid-ask on MSFT moves in a sequential manner reflecting the trend of the stock and the bid-ask on GE moves in an erratic fashion irregardless of the short term trend.
While they both trade in decimals â MSFT moves the way a market is suppose to move while GE does not. Why? Because the NYSE specialists are trying to preserve the black box spread that they once had where you had to throw in a market order and hope for the best price. They move the bid-ask around in such an erratic manner that it is almost like they are trying to dodge any limit order â hoping everyone will give up and just submit market orders.
The problem is not decimalization, but that the NYSE needs to be opened up more like the NASDAQ so that the bid-ask moves in a more sequential order like it is suppose to. More reform is needed, not less.
Bottom line â unfortunately, NYSE stocks can't be traded like NASDAQ stocks. You either have to submit market orders or come up with a strategy for placing limit orders so they get filled. The problem is not decimals, but chicanery by the NYSE specialists.
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