although that car comment is true, i don't see why the market authorities (read exchange) should come between two people wanting to trade inside the bid/ask. i feel that free market principles are being thwarted by forcing wide spreads...
So the spread would be $5 like YM? And ES would then perhaps trade like YM? That would suck... ES would be like YM on steroids?... I don't think I like the idea at all... It would ruin ES trading for sure... I don't know. Maybe I am missing something...
That's really not unreasonable. With electronic trading you should be able to select any (reasonable) price to make a market at. You could have standard increments of say 0.1 which the trading platforms show the quotes at (and the incremental bids in between the 0.1's are rounded to the closest 0.1 to show volume) and then trading is allowed at any price in sizes of 0.01 You don't have to see where the market is trading at to the tick but can have as coarse or fine a granularity as you want. Example in the ES: Currently: If the market is 1230.00/1230.50 bid/ask then you can step in and offer 1230.25 and move to the front of the queue. Possibility: If the market is bid/ask 1230.00/1230.25 then why can't you offer 1230.24 to push to the front of the queue? Everybody wins. A tighter spread, free market to select prices, bidder gets a better price etc.
'Not unreasonable': you are more than right on this guy! You wonder why they changed it when they started the ES next to the pit SP, that's what I call unreasonable. Supposing that these actors are rational, there must have been a reason. Anyone having a theory on this? PS. I advanced mine on the ND-NQ tick values. I think it's simply to allow some fat cats to syphon off some easy money without any risk. I think the FTCS should have looked into this a long time ago already.
market makers lose. I support 0.1 tick size though. Higher spread = higher "house edge" to overcome: http://www.elitetrader.com/vb/showthread.php?s=&threadid=53586
this is true - and if we lose the market makers then we lose a lot of liquidity which isn't good for the market. What would the market makers do if the spread size was reduced? Would they move to another market? Or stop trading?
Nonsense, I think its something to do with performance bond... In spite of the little fellow's belief to have a fairer chance in eminis, this is may only partially true. Nobody ever explained why pit and mini should differ in ticksize. It must have some kind of a reason.