CME and NYMEX

Does anybody really think the consolidation of the US futures markets into one mega exchange is good for traders (other than those who are members or seat holders)?

Already got off market block trades in the financials and a loss of market depth - bet we see the commisions up on financials soon.

Make 'em pretty, Chris

 

I see it as more positive then negative. It is great to have all products that one trades on one platform. As far as increasing fees, they probably will a little bit, but if they try to do it by a lot, some newcomer or somene like ICE will offer competing product cheaper, and thus will reduce the fees. This should not be the biggest worry.

 

A worry could be the fact that if one exchange goes down you could not have another exchange to offset/hedge the position, apart the pit - if possible.

However at the moment what we have on CBOT is not totally good:

- you have less market depth (5+5 v.s 10+10);

- there is no access to infinite DOM such as with CQG or other;

- they are going to introduce block trading to hide large transactions better even if CBOT always has been against it since it prevents a fully trasparent price discovery;

- it will be easier to increase exchange fees (they already increased them after the CME/CBOT announcement) for non-members obviously;

- they will cut , in little more than a month, the tick size on 5Y and 30Y to help cash --they said but the story is another;

- they probably will introduce more pro-rate algorithms on Interest Rates instrument to help large trades and kill small trader (no more FIFO);

- ..is this enough list of Cons?

Oh yeah there is - maybe - a Pro:
- better, reliable platform

Bah!

 

Hi Bernard,

When you talk about introduving block trades, does it mean that they will not even show up on tape?

Regards,
redduke

 

Yes that is what that means - they will not show up on tape, but they will be reported.

 

How will they be reported and what size will constitute for block trades?

 

Bernard started a thread here:http://www.elitetrader.com/vb/showthread.php?s=&threadid=115824

Some good info.

Chris

 

Block trades are 5000 cars for 2, 5, 10s. 3000 for 30 years. Half that for extended hours.

Will be reported on Market Data Platform.

 

Lack of transparancy on large trades, reduced ticks, reduced DOM (and you bet, probably someone is going to access to the full deck of bid/ask to gain an edge @exchange level...)
CME Group?! bah!