I am not talking about a financial future that has an electronically traded cash market nor am I talking about the volume during roll over or in the spread market during roll over. I am talking about the US government 10year note futures traded on the floor of the Chicago Board of Trade and on the screen on the e-CBOT. There is more volume on the screen on any given day then on the floor, hence it is easier to execute large size on the screen
Isn't this criticism a bit harsh? Afterall, Eurex is the #1 exchange in the world (in # contracts traded). They must have been doing something right.
I know what you're talking about. I TRADED in the ten year pit. I wasn't disputing your statement. Treasuries ARE financial futures.
No criticism. Just fact. It's a German Exchange that appropriately captured German products. That's as far as their expertise goes. Is the FTSE, or short Sterling or Cac-40 on Eurex. Of course not. Why would anyone then think that Eurex would grab share in the States?
Yes, plain vanilla transaction are done much better on the screen, for instance the 10yr futures front month, the corresponding cash market is enormous and the amount of global liquidity is enormous. As someone who is able to see the 10yr pit everyday I'll tell you how must guys move a 5000 lot plus like Goldman, Lehman, JP Morgan. The guys at the desk still get orders from their customers to execute, but now they do the majority of it themselves rather than using their old pit broker, very few customers want to assume execution risk, so they pass it on to the desk guys on the floor at the CBOT. In this case, if a desk guy has to buy 5000-10,000 ten years, and the market is 17.5 bid at 18, he'll work a 17.5 bid 250 only in the pit and then work 2000 on the screen, depending on what market is showing. On the other hand, some of the bigger execution desks on the CBOT floor don't even use the pit for futures (hence why the volume on average is only about 30k a day or so). Most houses will do this splitting the big orders 70/30 screen/pit in most cases, while the small retail desks are 100% on the screen. Everyonce in awhile Goldman will do an order in the 5 or 10 year futures pits that seems to be only working in the pit (i.e. when they did about 20,000 sep five years in the pit couple weeks back), but more often than not they will split their large orders (5000 lots plus) around 70/30, sometimes a lot more, sometimes lot less. Why else would Hardy Brumfield your biggest screen local in the 10yr be paying two guys to tell him what is going on in the pit on a daily basis. The pit remains just as liquid as the screen, as both the biggest local and biggest paper still tend to split orders up, but the percentage of the orders going to the pits will get smaller and that is when the pits will slowly phase away for futures (although I hope not), Treasury options is a whole different story.
Gentlemen Electronicaly order can be executed in 3 sec. without any human agent between market and operator. Any human agent between market can compromise operator winning/loss ratio (small delay, not best quote &) In this case pit can give more profit for member firm ,if trading volume on pit equal to electronicaly trading volume . Correct ? Author would very pleased for answer.
Yes, Mike McKenna is filling ALL Goldman orders, while Ardel gets some stuff during roll and CSFB stuff. Mike also does Hardy's stuff when GET is not there, with Tim Farmer (on headset with Hardy) standing next to him and telling him who to take out on the bid or offer. Brian Michael (BMI) still fills a bunch of Fimat stuff and will get Goldman occassionally, along with Man Financial stuff. EDE gets a ton of the JP Morgan and Lehman stuff, and they do a shitload during roll. Savino really is not doing a ton any more, they get a decent amount of option local business, do some UBS Warburg, and some Carr futures biz. ITO did a 20,000 lot outright for RJO Obrien earlier this year and did a great job on it 5 minutes before a 10-year auction. On a daily basis Mike McKenna is still doing anywhere from 2-5,000 contracts, and as much as 20-50,000 during roll on some days, although everyone is pretty much cut down to one or two clerks, with a lot of brokers wearing some headsets themselves now without clerks. Its hanging in there. Can't remember who does the Goldman stuff in five year, but they do all of their curve stuff and roll, including occasional big outright orders. I think that group did about 100,000 (no joke) during roll one day this year (about 40,000 spreads and a 20,000 lot outright), that was fun.
Interesting thread. A look @ volume reports on CBOT and CME show the vast majority of volume trading electronically for interest rate products and equity indexes.It wasn't that many years ago that it was not the case. I suspect the rest of the markets will follow over the long term. Although it will take many years to unwind the vested interests of the pits. Obviously as the exchange all move to publicly traded companies the pace will pick up. One thing is for sure, the exchange decision makers move like elephants. lol.