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In a message dated 3/26/02 5:58:18 PM Central Standard Time, krf01@xxxxxxxxx
writes:
<< John,
Removing the limits has helped level the playing field in one respect but
exacerbated the inequality of having 10 ticks in the pit and only 4 in the
emini.
****** The limits have not been removed, they have only been expanded. And
expanding the limits to the modest 250 contracts has presented some
technological challenges that the CME is meeting head on. When you have a
250 lot that is filled a few contracts at a time, or a bid for a cumulative
250 contracts that is hit and filled, it creates an excess of messages
through the host that slows things down. The CME has had to put in some
adjustments to handle this. So even if the CME wanted to take the size
limits off completely, that would not necessarily be a good thing.
****** I actually think the difference in the ticks between the pit and the
screen is part of the genius of the emini and its ecosystem.
****** And I am not sure there is such a thing as a level playing field.
There is a more level playing field, but not a level playing field.
Actually, if you ever see a football field or baseball field they are not
level. They are pitched one way or the other to help with drainage. So
actually the cliche we use does not describe that which we think it does.
The members of the exchange will always enjoy some advantage, be it margins,
fees or otherwise.
Since the limits were removed last year, the emini S&P has extended periods
where the Bids and Offers are out of all proportion to what is actually
being traded. It seems that this is what has caused the very narrow ranges
where the market doesn't move for hours. During these times, the S&P is
almost catatonic and certainly not 'off to the races'.
****** Sometimes markets move sideways. I don't think you should blame the
messenger for this. The CBOT sees higher a/c/e volumes during slow times and
higher pit volumes when volatility increases. The market participants are
just expressing their preference for different venues under different
conditions.
Of course if you are arbing the mini vs the pit, it's paradise - but I can't
see how it can ever be considered a level playing field for intraday traders
while this difference remains.
******* The arbing versus the pit is a very important part of the market
being as tight as it is. That tight market and the information in the book
that is displayed goes a long way towards leveling the playing field from
what we had pre-emini.
******* I like trading the eminis more than trading the pit. Of course
because I am broker people will say that is because of the extra commissions.
That must be factored in. But I think the order flow efficiency of the
eminis, the surety of being filled, the control over the process and the
speed with which you can make decisions and change decisions actually favors
the emini trader over the outside trader trading the big S&P. So you could
say that we should start trading side by side with the big S&P and maybe we
will soon. The CME is looking at that. But right now that would be fixing
something that is not necessarily broke.
If the CBOT don't do that with the Dow, it would provide a serious
alternative.
Rgds,
Kim >>
******* I think the Dow complex will grow in popularity with this new mix of
products. I am not sure it accomplishes your goals, but it is a process and
maybe we will get there.
Regards,
John J. Lothian
Disclosure: Futures trading involves financial risk, lots of it! John J.
Lothian is the President of the Electronic Trading Division of The Price
Futures Group, Inc., an Introducing Broker.
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