one thing it may do is stop the gyrations in the 5 yr cash which you can see when someone misses on one side of a Basis trade, but I agree it overall sucks!
The reduced tick size disincents liquidity providers, and benefits liquidity takers. As a result, I expect the liquidity of the Bond and 5 Year products to decrease, all else being equal. I expect annual trade volume to decrease, which decreases fee generation for the exchange. Thankfully CME has not included the 10 Year in this...wonder why?
Correct me if i'm wrong but why would that increase cost to traders? the multiplier/leverage is the same right? The only that it'll allow is for people to get in and out easier thus increasing their revenue that way. But if I'm just trading x contracts now, by reducing tick size, it won't make me pay more since the multiplier is still the same. Am I missing something?
It depends how you trade. For some it won't matter but it will have a great impact on the market. In order to have a half tick and quarter tick market you will need half tick and quarter tick scalping algos/traders in order to make the market. Otherwise you will have some full tick (30) and half tick gaps (5). As I see it now, the liquidity is pretty low and the open interest is still high. This can't make it better. You won't be able to get in and out easier, especially if you're managing size.
You will see.,..they will also include the 30Y in a Pro-quota matching engine to F small traders confident on FIFO...
If the Bobl tick size reduction is anything to go by it won't necessarily make it easier for people to get in and out. You'd have thought the market would have the same ranges but just trade at twice the amount of prices but it hasn't worked that way,amazingly(at least in the short term) volume in there seems to have actually fallen even though they did it to INCREASE volumes - what's to stop this happening in 30yr and 5yr? With the reduction in tick size there will definitely be less liquidity so any decent market orders will move the market further than they used to and totally change the dynamics,especially for scalpers.It's just a fact,eventually new traders into the market regard the bid/offer as a 'tick',size will be condensed and the profits you look for smaller.But the round trips will be the same.
what about the block orders they are talking about, that never worked in the pit, if the 30 yr goes algo like the 5 yr did last year people will be pissed and bitch! It's the CME trying to turn everything (Fixed Income products) into another Eurodollar that sucks! I am a FIFO man already have to deal with bullsh%t in the cash market.
Iam a Bond trader who is pissed by the tick size reduction. I think it will increase my commisions and lower my profits. I called the cme and spoke with robin ross managing director of interest rates products. She seemed unaware of how many traders were upset by this and said she would like to speak with any of them. Instead of posting on this forum give her, or anyone at the cme a call and try to get something done about it. This news really sucks and it makes me sick to think about contact info Robin Ross 312 559 4989 ps, dont fade me
Until the idiot CB's of the world stop running the currency and interest rate markets who cares what the tick size is. The trade sucks anyway. My dad traded bonds for 30 years and all but stopped a couple of years ago. its not just algos and tick sizes, the market is hurt by governments. It will end one day and all hell will break loose.