interesting. are they expecting volatility and price to drop? what other reasons could precipitate a tick change
What implications will these new movements have on the efficiency of range and margin verses tick...? say compared to the ES or the other products?
Probably won't shift range but liquidity for each price point should decline a bit. They might as well have gone for .1 increments and created a higher volume Russell 2K future. Since the value per point didn't change I don't see why margin would move.
In my opinion, this is an attempt on Merc's part to reverse the decrease in NQ volume. ES volume is still growing month to month. NQ volume, on the other hand, has lost much to ER (and YM, I believe). So, Merc will probably not mess with a success (ES), but will tinker with NQ. Merc already tried to increase the messaging cancel / fill ratio for NQ to 10 : 1 (vs 5 : 1 for ES) during 4Q2005. This did not have any noticable affect on NQ volume (it continues to decrease), so now they are trying to reduce the tick size.
Sounds right. I didn't think about the commision/volume aspect until after I posted. If they really want to push it they should go to .1 tick size though. Heck, why not $.01 to match the QQQQ's and the index itself.