Say No To Thin E-mini Spread

I used to be for a smaller spread, but after coming to my senses I realize that the .25 spread on ES is perfect.

It comes down to this:

"If it ain't broke don't fix it"

*AND*

If you aren't making money now because of a .25 spread in ES, you aren't going to make money just because the spread is lower.

So why change it?
 
Quote from aphexcoil:

I used to be for a smaller spread, but after coming to my senses I realize that the .25 spread on ES is perfect.
It comes down to this:

"If it ain't broke don't fix it"

*AND*

If you aren't making money now because of a .25 spread in ES, you aren't going to make money just because the spread is lower.

So why change it?
More...

Polly want a cracker? :D
 
It seems to be via the poll numbers, the opinions of the educated daytrader (US!), there is no overwhelming support... hell there isn't even a majority to change the spread of the emini. If retail daytraders are the supposed main benefactors of this proposal, AND THEY DON"T WANT IT, then whoever wants to change it needs to get a life. However, some people have obsessions, and i am sure they will try to push this forward.
 
It's not an easy formula to solve. Reducing costs, but losing possibly lots of liquidity. It would be interesting to see the weighting by volume of the various types of traders that supply volume to the futures contracts. I have a feeling (due to the large # of trades) that spread and scalp traders make up a lot of the consistent volume, with arbitrage and hedgers making up the other significant portion. Directional traders I would bet are probably least on the list, but only a guess. If this were true, messing with the contract spread and arbitrage opportunities might be detrimental to everyone if taken too far. I would propose they increment it down by a nickel per month, and see what the results are.
 
If having a .10 tick increment on the pit contract doesn't hurt liquidity there, why would having a .10 tick increment on the Emini hurt it?

The lower the friction and transaction costs are for the Emini the more the liquidity. Business will shift from the pit to the Emini making up for any lost liquidity due to the loss of the pit-emini arbitrage.

I'll bet most of the people here voting for wide emini spread have Globex terminals and don't want to lose their take. A Globex terminal trader is more professional than retail.
 
It does not get through to Tea that we dont care about additional liquidity and volume at this point (we got enough already, she even stated it in another thread). All we need is a trading tool that hops in bigger steps so we dont have to wait for all those .10 barries cleared. I am seeking to make money on this ES, not get in at 10 cents better or worse, and money is made when it moves by certain number of points. It will move faster if we have .25 increments than .1, 2.5 times faster. You want .10 trade other e-minis.
 
Quote from estrader:

All we need is a trading tool that hops in bigger steps so we dont have to wait for all those .10 barries cleared. I am seeking to make money on this ES, not get in at 10 cents better or worse, and money is made when it moves by certain number of points. It will move faster if we have .25 increments than .1, 2.5 times faster. You want .10 trade other e-minis.
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Is this the reason why you want a wide tick increment in the Emini?

I'm all for stronger intraday moves but IMHO a wider Emini tick is not going to make the market move further. Buying pressure and selling pressure move the market. If anything, spreading S/R over more data points with a thinner tick will let the market cut through S/R easier than if it hits bunched-up S/R at fewer data points.

The pit contract trades in a .10 tick increment and it is arbitraged with the Emini. So the Emini can't move anymore than the pit contract with the .10 tick. When the Emini gets ahead of itself the pit contract pulls it back. You would have to have a .25 tick increment in the Emini and the pit contract for your theory to work. So I don't see how having a wider tick on the Emini buys you anything.
 
I agree with you.

Quote from Gordon Gekko:

i'm not a fan of spreads, anyway. why should people have immediate losses when they enter a trade just because you like to take advantage of it? i'm not saying there's anything wrong with what you do, but i think spreads should be smaller across the board. really, if i buy an ES contract right now at the ask and sell it immediately at the bid, why should i have to lose a basically mandatory .25??? just so you can profit!?
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Will the .10 tick lower trading costs? I don't think so. If you look at the pit traded ES, the bid/ask is rarely even .20 and more typically .30,.40 or .50. Why? Because what trader is his right mind is going to make a market with such small compensation for taking on risk? Many floor traders make their money off the spread by scalping. There needs to be fair compensation for the risk of a trader willing to bid/offer 25, 50, or 100 contracts, especially when you take into account that the larger the trade, the greater risk and exposure to a career ending trade. This typically maintains a spread of at least .20.

Will the .10 tick reduce liquidity? To the extent that it reduces arb. opportunities between the pit and the screen, Yes, without a doubt. With the pit contract at 5x the size of the mini, an arb of 10 pit contracts provides 50 mini contracts in liquidity. This is pretty substantial over time. I would think that by reducing the tick, the contract would trace the pit more accurately, reducing arb, and liquidity. It won't steal trades from the pit and the full sized SP as some have suggested, because full size contracts are still the playing field of banks, hedge funds and the major traders and always will be. The dollar value of pit contracts is still 10 times that of mini contracts, and always will be.

Slippage? There isn't slippage in the e-mini market. The posted bid/ask is what the market is. Therefore reducing the tick to .10 wont reduce slippage, because slippage cant occur in an elec. market.

This being said, the ES has empowered retail traders more so than they ever could have hoped. I'm a floor clerk and will soon be trading the full sized contract so mini's don't concern me so much. In my opinion, switching won't benefit as much as many think.
 
ESTRADE, you are 100% correct......... the tighter spreads will make it much harder to trade size,,, everyone will be trying to shave each other and you wont get filled............................Tighter spreads will make it harder to get filled..... .25 points seems to be the right spread. the more choices of price levels the fewer bids or offers at each price level...... try getting filled on the spy or qqq's when the market starts to rally......tighter spreads will make it harder to play the game.............. everyone listen,,,,,,, listen to estrader,,,, write to CFTC........ don't let them screw this one up.
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Say No To Thin E-mini Spread
There is an effort underway by some malicious elements ( some even post on this site) to trim the E-mini ES spread to 1 penny from a quarter now. This is going to hurt many of us who moved away from trading stocks after decimalization. Dont let them take away another good trading vehicle from you, because there is no reason for this thinning of the spread. Voice your discontent loud and clear. Write to CFTC, write to its chairmain:

James E. Newsome
Chairman
CFTC
Three Lafayette Centre
1155 21st Street, NW
Washington, DC 20581
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