Why is 2007 onwards different?

V

Vortex

Hello!

We are in the process of launching a commodities fund, trading some of the most liquid commodity futures on CME and ICE. We have chosen 15 instruments in all, but they are the most actively traded instruments in each category: energy, agriculturals and metals.

My question is as follows: I have been conducting a lot of research and I have found something peculiar that I hope one of you can help me with.
For some reason I see regular, large gaps between closing and opening prices in most futures in the years 2004, 2005 and 2006. (My research is only from 2004 onwards, so it is possible that the pattern is the same for earlier years.)
NB: These are not weekend-gaps, this is normal mid-week gaps.

From 2007 onwards these session gaps all but disappear. I could never understand this, since I understand the gaps between sessions are a mere 15 minutes up to an hour only. Were the trading sessions different in the past? Were these markets that illiquid in the past? I do understand there will be slight moves during these open and closing times, but prior to 2007, these were quite large gaps!

Any explanation out there from more experienced folks than me?
Thanks a million for the help!
:confused:
 
I can't talk prior to 2007 but I traded the overnight session on these instruments for 5 years( until I stopped in 2012 ), and the overnight session is much more liquid now than it was in 2007( and more efficient ).

In 2007, typical B/A spread on wheat was 10 ticks, gold 4 ticks, natural gas 10 ticks. Now it's 2, 1, 2...Overnight sessions were quite new on commodities in 2007.

I think liquidity can be one of the reason why it doesn't move as much now. Liquidity grew more than volume, hard to move a market like this.
 
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