Unless the tick size change led to a margin requirements change, you would still be able to do that if the tick size changed to .1 rather than .25. The only difference is that 1 ES point would be 10 ticks rather than 4.
Yes, exactly. In fact if this tick size did change, it would be easier to move through bids and offers, there fore we may actually see MORE movement than with quarters. A one point move in quarters from 1181-1182 might be 1181-1182.10 in dimes, therefore allowing you to squeeze out another $50 in the trade. This happens all the time in the pit contract, allowing it to be arbed.
and maybe this is the reason it wont change. why would pit traders (people who are probably good friends with the guys running the show) give up an edge like that?
Dropping that to 10 cents from 25 cents means a need to drop the commission for retail to at least 1/2 of the current going rate. I used to pay retail rate and that is an important factor to consider if you stay retail on size.
One measure of the cost of trading is the commission/tick size dollar. This measure shows how expensive it is to trade a market. Larger tick sizes may make it easier to overcome the commission. But, also require larger accounts to trade. I would prefer a model that scales commission to the dollar amount. this would make it much easier to scale up a trading system or test it with less capital. Granularity, Liquidity/Scalability, Trading Hours.. a lot goes into what makes a great market. I feel the ES is still one of the best markets. But, the capital requirements make it unfeasible for most retailers. Personally, I would not want to see the ES changed at all as it would make historical testing more difficult. I would like to see a new product based on the ES that has a cost structure more like Forex. I am currently trading NADEX products for that reason. Even so, they have some limitations that make it more difficult.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=191927&highlight=tick+size http://www.elitetrader.com/vb/showthread.php?s=&threadid=195420&highlight=tick+size
To be honest, I don't think it would change pit-emini arb that much. For example if the pit is 1120.10 bid at 1120.50 offer, and the emini is 1120.30 bid at 1120.40 offer, some one would still be able to over cut the bid in the pit and immediately sell the bid in the emini. There should be no difference.
The problem with the ES is the $50 multiplier. Note that the ES options trade in 0.05 ($2.50) ticks. What we really need is an electronic S&P 500 contract with a $500 multiplier and a 0.01 ($5) tick. Plenty of tick noise and commission efficient.