Question to e-mini traders - Access to Globex book

[akurov]

From Futures magazine (May 2000):

David Downey, executive vice president at Interactive Brokers says customers trading on the CME's Globex system don't receive the same amount of information as local traders because his customers only can see the current bid and offer without seeing the orders underneath them.

"It's the same interface being used. It's the same access into the matching engine except it's not equal access because one subset of the population out there has access to the book of data that all the other people don't have access to," Downey says.

Do locals still have this "special" access to Globex order book? For example, can you see five best bids and offers and their sizes on your screen? If not, is that kind of information important to you?

I am working on a paper that looks at the e-mini markets. Locals have an edge in e-minis if only because they have direct access to the open outcry pits. If they also have better access to the Globex book, it must be hard to compete with them. I understand that locals have to pay for their seats but still there seems to be a fairness issue here. What do you think?

 

[ddefina]

I use IB and can see 5 levels of market depth on Globex. Don't use it though for anything more than the calming hypnotic effect it has on me after a losing day.

 

[tntneo]

ddefina.. LOL good one !

 

[Tea]

I don't think that the 5 levels were available at the time of the interview. The pub date according to your link is may 2000. The interview was probably done 2-6 months before that.

It sounds like the IB guy's bitching paid off.

But don't let your enthusiasm go to waste.

If you want to investigate something - look into why Emini s&p traders are hobbled with a trading increment (tick) of .25 versus .10 for the big contract.

This may have made sense when the emini was first launched, but now with the Emini S&P having more volume and liquidity than the big contract it no longer makes sense except to line the pockets of the exchange members at the expense of the emini trader. A reverse Robin Hood scenario.

It might also be a fascinating paper to discuss how price discovery has switched from the pit traded contract to the electronic emini.

You could win a Nobel prize for this.

 

[ddefina]

Originally posted by Tea

If you want to investigate something - look into why Emini s&p traders are hobbled with a trading increment (tick) of .25 versus .10 for the big contract...
.

I'll definately vote for reducing the minimum tick.

I haven't found an edge in using the market depth with the mini's, other than to know there's plenty of liquidity for me to get in and out all day long. What did the author suggest was the advantage, other than moving big size around?

 

[akurov]

Originally posted by Tea
I don't think that the 5 levels were available at the time of the interview. The pub date according to your link is may 2000. The interview was probably done 2-6 months before that.

It sounds like the IB guy's bitching paid off.

But don't let your enthusiasm go to waste.

If you want to investigate something - look into why Emini s&p traders are hobbled with a trading increment (tick) of .25 versus .10 for the big contract.

This may have made sense when the emini was first launched, but now with the Emini S&P having more volume and liquidity than the big contract it no longer makes sense except to line the pockets of the exchange members at the expense of the emini trader. A reverse Robin Hood scenario.

It might also be a fascinating paper to discuss how price discovery has switched from the pit traded contract to the electronic emini.

You could win a Nobel prize for this.

Thanks for ideas. Who do you think wins from the high minimum tick in ES? The locals? My impression is they do not focus on scalping in e-minis. Arbitrage and trading on the open outcry order flow are likely to be more profitable for them.

I have actually done some work on price discovery in these markets. It looks like the institutional order flow that comes to the pits is still important for price discovery. But that information seems to get impounded into e-mini prices (through local trades) before it is reflected in the prices of floor-traded contracts because of fast execution in Globex. As a result, the e-minis appear to lead the floor.

 

[akurov]

Originally posted by ddefina


I'll definately vote for reducing the minimum tick.

I haven't found an edge in using the market depth with the mini's, other than to know there's plenty of liquidity for me to get in and out all day long. What did the author suggest was the advantage, other than moving big size around?

I can see that for traders who "move big size" access to depth info is more important. Still, I guess even for a small trader it could be important to check how much liquidity is out there.

Do you know by any chance when IB customers started getting the depth information?

 

[ddefina]

Originally posted by akurov


...Do you know by any chance when IB customers started getting the depth information?

Not sure when they started offering Market depth for Globex? Def from IB can probably answer that.

The emini's are an awesome trading vehicle, and even with the .25 minimum tick, you can make money on one tick with a decent broker. Just seeing the success of the emini's shows that all exchanges should be electronic IMO. But with all that money flowing through the pit, it's going to be hard for the humans to let go anytime soon.

 

[Tea]

Originally posted by akurov
Thanks for ideas. Who do you think wins from the high minimum tick in ES? The locals?

The guys in the pit win in that the emini is made less attractive for higher volume users. Higher tick means greater costs getting in and out (losing the spread) for the emini than the pit contract.

Originally posted by akurov
I have actually done some work on price discovery in these markets. It looks like the institutional order flow that comes to the pits is still important for price discovery. But that information seems to get impounded into e-mini prices (through local trades) before it is reflected in the prices of floor-traded contracts because of fast execution in Globex. As a result, the e-minis appear to lead the floor.

The way I see it, price discovery has two elements price and depth. While depth remains in the pit, as that is where institutions with size are looking for a price. Short-term price has definitely moved to the emini. I think there are two reasons for this, one, the technology is faster in getting trade data out on the emini and two, the universe of traders for the emini is larger and more diverse than for the pit contract.