I can quite literally see block trades for ICE Swaps of 5,000 contracts within 5 tics of the futures best bid/offer. Happens routinely - dozens and dozens of times per day. Some heavy days like EIA data releases much more.
If Shell Houston wants to do 8,000 CL contracts they don't sweep the book for 40 cents. And they don't bid for 8,000 on the CME futures market. It gets brokered by Prebon Yamane or Amerex or Garban and it clears as a Swap through ICE or Clearport.
Point being: none of that liquidity will filter down to a micro contract. None.
I can't argue with what you say as you are in a far more knowledgeable position than me, I am just a humble retail trader from New Zealand.
But what I don't understand/can't reconcile therefore are the following:
1/ how then did the micro equity contracts work so well and successfully.
2/ how do we explain why the micro Gold contact (which has the same tick size as the mini Gold) has seen increasing volume since the introduction of the micro equities when brokers like AMP reduced the Gold micro margin to 1/10th and significantly sharpened the pencil on commissions. At the same time the QM volumes have remained static. By my calcs micro Gold has gone from a daily average of circa 10k to 40k while QM has remained at circa 20k.
3/ your focus in your responses is sort from an institutional perspective, and I am probably too retail centric focused. But what about players in other markets a micro CL could attract? By this I mean all the CFD players (outside of the USA) who are being ripped off by market makers and bucket shops. I always thought micro futures contracts coupled with realistic commission costs would entice a number of CFD players to a regulated exchange. Indeed I have been surprised that the US/Eur micro FX futures contract has still languished even after the reduction in margins and commission costs - and I put this down to a lack of granularity ie it's tick size is not small enough nor the same as the emini.
Just to build on the point about me being in NZ. One of the reasons I am interested in a micro CL is that CL is one of the instruments that often has good movement during the US night (presumably because of the huge oil trading out of London) and therefore makes it attractive to trade in the NZ timezone. The US/EU FX contract would be the same if it had better volume. There are thousands of CFD traders outside the US who would/could benefit from 'lower cost' and reasonably liquid micro futures contracts that have good movements in the US overnight.
Why would the CME not want to pick up some of that business that the CFD shops are getting right now?
I know I can trade the MHI on the HKFE or the MJNK on Osaka, but that is not business for the CME. Surely the CME would be interested in expanding the range of their business to pick up activity that is currently traded elsewhere during the US night.
