The arb generates more overall volume and basically becomes a multiplier until the Market decides that the edge is smaller than the cost of doing business on two platforms. Right now the Arb is still creating more volume because there is still edge in it. Soon it will dissipate and the Floor should disapear, but the Exchange can put up some barriers to change. I have seen several Arbers make a move from Arbing to staright Electronic Execution in the last several months. It is starting! An example of the Exchnage putting up temp barriers is: As soon as the Bonds and Notes on the CBOT/Ace system hit the 60% level the exchange lowered the Floor fees and raised the Electronic fees substantially. ACE fees went from $.80 to $1.25. You would think that Business logic would necessitate a move in the other direction, so that the CBOT would not have to support 2 cost centers. Not done. The Exchange leadership was put in their by the Members. The short story is: Don't look for Tick size changes in the near future. IMHO
from CME site CHICAGO, Feb. 7, 2003 â The Board of Directors of Chicago Mercantile Exchange Inc. (CME) has approved a modification to the tick size for trading of calendar spreads in its E-mini⢠S&P 500® and its E-mini NASDAQ-100® contracts. The reduction in the tick size for calendar spreads, from .10 index points to .05 index points for E-mini S&P 500 futures calendar spreads and from .25 index points to .05 index points for E-mini NASDAQ-100 futures, is in response to customer requests to bring more efficient pricing to the market and harmonize the tick size with the standard, pit-traded versions of the contracts. They are listening to customers Once implemented, the tick sizes for calendar spreads in each of CME's E-mini stock indexes, including the E-mini S&P 500, E-mini NASDAQ-100, E-mini S&P MidCap 400® and E-mini Russell 2000®, will be the same as the corresponding pit-traded version of the products. At the same time, CME will increase the maximum order entry quantity restriction for calendar spread trades in all four E-mini products from 250 to 1,000 contracts. Orders for more than 1,000 contracts per quarterly contract month may be entered on the GLOBEX® system as multiple entries, each of which does not exceed 1,000 contracts. For outright trades in the products, the maximum entry quantity restriction will remain at 250 contracts. In addition, calendar spread transactions in the E-mini S&P 500, E-mini NASDAQ-100, E-mini at S&P MidCap 400 and E-mini Russell 2000 futures executed by eligible participants will not qualify for the daily GLOBEX fee cap. Outright transactions will continue to be eligible for the fee cap. All of the revisions become effective on Sunday, March 2, 2003 for a trade date of March 3, 2003.
Thanks for the post. I'm not quite sure why this topic generates such heated discussion, but in my book this is excellent news. You will be able to test the market(for eminis) for less than $10/contract with market orders, as opposed to about $20 before. Alan
The Pits will go the way of the above bird I think. Albeit vested interests will cling to their club structure until the end. Only an opinion folks. :eek:
Unless I read it wrong, the announcement applies only to calendar spread tick size - didn't say anything about changing the tick size on the straight contracts. The calendar spread tick sizes on the eminis was already less than the straight emini contract tick - they're just reducing it further for calendary spread only I believe.
It's only for spreads. They're not so stupid as to do it across the board. It would kill the goose. If *you* can't afford the mini's, stick to a 100 shares of SPY's
This will not effect the tick size for an outright, but is a step in that direction. I have to check my sources at the CME and find out what changed their minds???
is there someway to short a CME membership? I would love to if the CME reduces the tick size on the emini. Damn i would be rich!