This thing about block trades, reminds me about "dark pools of liquidity" where similar is being done by large NY firms like GS, Morgan and etc, on large equity trades. Too bad it is allowed, and another thing we would need to adopt. At least these block trades will be reported within 5 min, not sure if this will be of any help for us who day trade.
Why should be a deterrent, since it allows the player to have large transaction done without slippage on the mkt?
Well, what works for one large player may not work for the other. We'll have to study this to see the possible effects. To date there have been none and I'm wondering if the FOMC or NFP will bring any out.
Don't forget most larger institutions are able to trade equity blocks with each other on DLP's now, and in many cases "shut out" the broker, as well as the NYSE. It is not good for you and I, but I can see the advantage of a hedge fund looking to move size ES or NQ on GLOBEX without disturbing the inside market.
Probably the block trades work with a RFQ mode; so both the counterparties agree with the transaction and the costs. I agree with you about FOMC and NFP...especially if something goes wrong with the Tsy on Globex.
This block trading has been allowed all along on eurex, it hasn't caused any problems for day traders in there. It's just a way banks can match up counterparties neatly without risking showing the bid/offer in the market by doing an open cross and getting partial fills for each party. I have ex prop bank traders around me, now day trading for themselves, who I asked and they used to do it all the time. They say it won't make the slightest difference to the day traders. Probably freak out the small guy more when they do it on screen. Much ado about nothing! Chill
On Eurexâs Bund and Stoxx futures, for example, it isnât unusual to see large sizes showing on Time Sales (eg 5000 lot today) which exceeds the total sizes on the bid or offer (10 levels) on the DOM. The prices/sizes on the DOM donât budge. But why should they? These âsizesâ are not going through the book, therefore they have no impact and are ignored as irrelevant. Eurex now offers 20 x 20 market depth (for a price). Maybe Eurex will take some localsâ business from CME. Grant.
When I asked Mr. Barker, Director of Interest Rate Products (Peter.Barker@cmegroup.com), about the 5x5 on the DOM he responded (and I'm paraphrasing here) he didn't seem to believe greater depth was very useful to traders and expressed a concern that the system could be overloaded causing data delays. (Don't quote that as it's just my one sentence take one his detailed multi-paragraph response.) However, he also stated that the depth has been changed a number of times in the past "so if we hear that the trading public really prefers more depth, we can always go back the other way â its been done before." Based on this, it sounds like they're open to the possibility of increasing the depth based upon feedback from the trading public. So you'll have to let them know if you want it changed. My concern is with the combination of less DOM and reduced tick size we're now going to have only 25% of the price visibility we had before. I say this because with e-cbot on ZB we had 10/32nds on each side, now on Globex we have 5/32nds on each side, with the tick reduction and 5x5 we will have 5/64ths. I would think that when cutting the tick by half they should double the DOM visibility at the same time just to keep the same price value visible. Correct me if I'm wrong here. So to put it back to e-cbot levels they would need to show 20/64ths or 20x20 once the tick value is reduced. I would suggest that if we want to see more depth we need to let folks like Mr. Barker aware and it might happen. (Thank you again Mr. Barker for your prompt response. Hope you don't mind me sharing with other concerned traders.) -gdh
- How other exchanges are able to broadcast 10+10 efficiently? - When did it happen that CME increased the depth to more than 5+5 for a single instrument? - I agree with you that now we have just less information than before. So, Mr Barker -- let us know how to do you reply to these concerns. :eek: