POLL: Would you like to see ES's tick size proportionate to that of SP?
- Thread starter Thunderdog
- Start date
Thanks for the advice. In fact, I do trade NQ. Personally, I don't consider trading an unnecessarily larger tick index as a matter of confidence. I regard it to be a matter of compromise. With NQ, I don't have to compromise, and I take comfort in knowing that the tick size of the mini contract is proportionate to the tick size of its larger counterpart.
You and others are missing the point in thinking that a smaller tick leads to "cheaper" slippage. A tick is a tick. I could get into a real philosophical spiel about that statement but I'll try to simplify. The edge you receive will equal the edge you give up. Here's an example.
Present system. A 37.50 at 37.75 board. A trapped short wants out immediately and pays the .75 offer. You're early in the FIFO que (sp?) and sell a 3 lot. Momentarily the market goes half offer so you received a .25 premium on the trade. Nice job T-Dog!! Now the dime way. A 37.50b at 37.60. Mr. Short Covering pays 60 and the market goes 50 sellers. Mr. Short Covering saves .15 in slippage. However you who were offering 70's (an already .05 cheaper than .75's) gets nothing. Later you may save just as Mr. Short Covering did and it's he who get's a berry edge in return. Even if NQ was a hundred wide it would be the same dynamic.
Present system. A 37.50 at 37.75 board. A trapped short wants out immediately and pays the .75 offer. You're early in the FIFO que (sp?) and sell a 3 lot. Momentarily the market goes half offer so you received a .25 premium on the trade. Nice job T-Dog!! Now the dime way. A 37.50b at 37.60. Mr. Short Covering pays 60 and the market goes 50 sellers. Mr. Short Covering saves .15 in slippage. However you who were offering 70's (an already .05 cheaper than .75's) gets nothing. Later you may save just as Mr. Short Covering did and it's he who get's a berry edge in return. Even if NQ was a hundred wide it would be the same dynamic.
Your point is not lost on me. (At least I don't think it is.) My preferences are asymmetric, as I had explained earlier. My objective is not to make a tick or 2 in profits. I will certainly take any tick I can get, but that is not my principal preoccupation. I am more focused on my risk at around the time of entry, and I wish to exit as cleanly as possible when I feel I should do so. Stated differently, I am more concerned with not losing an extra tick than I am about making an extra tick, because in my winning trades, an extra tick or so is just rounding error. However, in a losing trade, an extra tick or two is more than just rounding error to me. Therefore, from my perspective, it makes more sense that the tick be smaller. I would have thought that a larger proportion of people would have agreed with me.
But why shouldn't that "edge" be as small as possible?
Of course floor traders and other such market makers want that edge to be greater, because that edge is their bread and butter. but the markets are not there for them, but rather for buyers and sellers.
Smaller ticks help buyers and sellers, especially those with small orders, because they get to keep more of that edge.
Why does ES HAVE to have a greater tick?
Why NOT a smaller tick?
In a free market that frowns upon monopolies, shouldn't participants be free to keep more of that edge they have given up to market makers?
This whole defense of greater ticks reminds me of real estate agents who insist that they have to have that 2 1/2% commission, because they are so important, or the days of fixed commissions for NYSE stocks.
Again, that e-mail address is info@cmegroup.com
If you voted "Yes" and you really mean it, then let the CME know. Tell your friends!
If you voted "Yes" and you really mean it, then let the CME know. Tell your friends!
Do you trade Globex or Eurex? It's an ELECTRONIC FIFO MATCH. There's no black hand collecting profitable edges from you. In fact it's the auto-arb spreaders who want smaller ticks in Treasuries. It is they who possess superior knowledge of value to the nth degree.
I'm not trying to sound like a pompous dick but markets exist for institutional users to interact with speculators in a price discovery forum. Worrying about the smallest possible increment so an exchange can compete with Party Poker isn't the best way to facilitate millions of contracts in crisis situations.
Thunder, you sound like my cheap a$$ italian buddy. When I told him to dump amazon at 100 back in 1999 , he held it because he did not want to pay taxes on it. If you are not into scalping ES then why does the tick size really matter ? I believe the wider spread actually helps smooth out the noise and by making it smaller you would end up with a more whipsaw instrument like YM is. Maybe I am an exception, but I never sit on the ask or bid if I want in or out. If you are buying on the bid and it is getting hit, odds are you are wrong on the direction anyway. Why would you want to join the crowd on the bid and ask ?
But why SHOULDN'T the tick be as small as possible (in a free market, of course)?
Wouldn't smaller ticks actually help in the price discovery process?