Nikkei day trading cost more than double of other index?

Discussion in 'Index Futures' started by laputa, Apr 4, 2007.

  1. laputa


    Nikkei SGX have a min move of 5 points = 5 * 500 yen = 2500 Yen... A RT market order would cost 2 * 2500 yen = 5000 yen...

    With a contract price of 17000 * 500 = 8500000, it represents a ~0.06% transaction cost (for 1 tick spread).

    On the other hand, ES RT would cost ~0.03% (for 1 tick spread)and Hang Seng RT would cost ~0.01% (for 1 tick spread, in reality more like ~3 ticks which is also ~0.03%).

    For Nikkei SGX, the trading cost is double of other index futures. The Nikkei OSE is even more expensive with 10 tick min move... costing ~0.12% for a RT

    This represent serious trading cost for day traders that use market orders. It is like trading ES with a spread of $25 instead of $12.5. In the case of Nikkei OSE, it's like trading ES with a $50 spread...

    Come to think about it if we trade ES with a $50 spread, a RT market orders would cost $100. It makes it very hard to day trade with such a high transaction cost...

    To put things in perspective, if we had a RT cost of $100 with ES, we would need to make >$667 net (13pts) per trade on average to keep cost below 15%. This is almost impossible to do for day trading...

    Are the japs trying to discourage day trading activities or what? Or maybe the Nikkei that is so volatile that market makers demands extra compensation for selling liquidity?

    I'm scratching my head for ways to reduce cost with limit order... but the trade off with non-fills doesn't seem to be worth it...

    Any thoughts and comments?

    Maybe I'm missing something here?
  2. cmaxb


    Yeah, if you use a market order on Nikkei, you'd better be right. I found in practice that limits are not a problem. Plenty of time to get into a position as it waffles.
  3. a RT market order would only cost you 5 points not 10. If the price stays at 17500 - 17505. A market order on a RT would only cost you 5. I dont understand where you get the 10. If it is 17495 - 17500, then in reality the market has moved 5 points against you.
  4. laputa


    Hi Nasdaq5048,

    You're right and I'm wrong.

    The Nikkei is still twice (four times for Nikkei OSE) as expensive (market order) compared to ES and HSI though...

    I guess I really need to work on my execution skills with limit orders...
  5. Pros and cons about the Nikkei.
    There are huge size available at each level. If u are a hedge fund, you would love it despite giving up 5 pts. And you can be sure you order will be filled within 5-10 pts. Not the case in HSI.
    In HSI, you dont get the market depth. The spread could be 1 point at one second, it could be 5 at another second. When stops gets run, it could fall a 100 pts in a matter of minutes. In that case, you could be filled 20 pts lower with a market order. So, no gurantee on where you will be filled.
    The ES is definetly the most liquid and a relatively tight spread. I think the mini dow along with the Stoxx 50 is the only market in the world that has a 1 point spread that you can do size up to 10 contracts.
  6. Speaking of the SGX Nikkei, does anyone know why the cash index data in IB doesn't stream nor backfill historically? It's the same with the $HHI (Hang Seng China Enterprises Index) and $STW (MSCI Taiwan), no live nor historical data, just a static print of the prior day's close. The futures are fine, but the cash indexes themselves have no data other than the close.

    $HSI and $SPI cash indexes are fine, live & historical.