the exchanges have decided to lower the bund price to 0.1 ticks and euribor to 1/4 ticks. they also announced to slash fees for black box systems to zero. they also announced that all locals and arcades will now be re - routed through south america for efficiency and productivity reasons but mainly for cheap labour to get costs down. the 2 second slowdown would not be a disadvantage for traders. they explained that this was in the best interests of all market participants and that it was trying to create a level playing field for everybody. they also went onto say that this set up would allow a small local trader trying to earn a decent living for himself to compete directly with a multi-billion fund with multiple black box systems which had low costs and direct access next door to the exchange in high prime real estate location. their motto ' fair play , fair execution , fair costs and fair access for everybody 'would be unchanged.
You know what to do: A) Join an multi-billion$ fund. B) Learn to drive a taxi. Black boxes will take care of everything else.
I could understand the move to half ticks if the reason was to make the calender spreads more dynamic. Trading a market that is several hundred thousand up at rollover doesn't sound like much fun to me, and reducing the tick size of the spread needn't affect the outright, as was the case with the t-bond a few years back. However can anyone tell me what else could eurex be doing other than pandering to the black boxes? I've read some articles that say that these systems are so expensive to set up and maintain that they are being priced out of the market -at the very least the law of diminishing returns is starting to kick in -so what's the best short term solution for them -reduce the tick size... Eurex probably think that it will increase the volume, but this was not the case with the schatz market (if you consider that volume is in an up trend anyway). So what are local traders supposed to do? Accept that for their current risk they are going to get half the reward, or double the risk to maintain their income? I for one will be looking to trade another market -I stopped trading the schatz when they halved the tick size and now I think it is time for me to move on again. The saddest thing is that that eurex behaviour doesn't suprise me at all. They have only ever been about sucking the cocks of the big banks, and that is all they will ever continue to do.
The Beaker - very good post. We're singing from the same song book, although to be fair yours is a lot funnier. I too fear that the time to leave the Bobl might soon be upon me. First the closing of the LIFFE Floor, and now this rule-change. It has been both a good and enjoyable run. I guess I'll have to embrace the changes somehow.....