Say No To Thin E-mini Spread
- Thread starter estrader
- Start date
I'll propose that there's a minimum spread that keeps the spread traders happy, and when it gets too narrow, they will leave the arena. When the volume goes down after their departure, the spreads will widen and new spread traders will enter the market, bringing everything back into equilibrium.
To keep the spread artificially wide might keep volume higher than it would be otherwise, but at a Cost to the arbitragers, directional traders and hedgers. The market should decide what the optimum balance is between all these elements, not the self-serving exchange.
I would surmise the volume is higher now than it would be if the spread were allowed to narrow, but less volume is fine if the spread shrinks and the overall transaction costs are lowered.
To keep the spread artificially wide might keep volume higher than it would be otherwise, but at a Cost to the arbitragers, directional traders and hedgers. The market should decide what the optimum balance is between all these elements, not the self-serving exchange.
I would surmise the volume is higher now than it would be if the spread were allowed to narrow, but less volume is fine if the spread shrinks and the overall transaction costs are lowered.
Ditch: I agree lower exchange fees would be better (I would be an idiot not to). The fees should be based on value of the contract, so the emini fees should be 1/5 the fee for the big contract.
Bone: Unfortunately, the CME and CBOT have exclusive licenses to trade the S&P500 and the Dow Jones. So, Eurex could not trade them. I think that the CME even licensed the Fortune 500 to head off any competition. Sounds like a monoply to me. Eurex could come up with some other index, but traders have gotten comfortable with what the S&P500 and NDX represent. It would be difficult to start a new contract.
Bone: Unfortunately, the CME and CBOT have exclusive licenses to trade the S&P500 and the Dow Jones. So, Eurex could not trade them. I think that the CME even licensed the Fortune 500 to head off any competition. Sounds like a monoply to me. Eurex could come up with some other index, but traders have gotten comfortable with what the S&P500 and NDX represent. It would be difficult to start a new contract.
The way I see it the only difference between the bid-ask spread and support/resistance is the effect of tick size. If you eliminate it (or make it very small) you get a more efficient market. Not more, not less. If there is anyone out there making consistent money in the eminis scalping for ticks, my hat goes off to you. If you also think you would not be able to make consistent money if they reduced the tick size, my hat still goes off to you, but I wouldn't want to be you.
i was at an emini seminar with a big trader recently.he made the statement that he had done 700 contracts that morning and that his average profit was $12.he said thats what they do all day.provide liquidity.they dont pay commission though so it adds up.