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Why more activity during regular trading hours
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Why more activity during regular trading hours

  #1 (permalink)
Trading for Fun
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Why more activity during regular trading hours

In crude oil (WTI on Nymex) I've noticed that there is generally substantially more activity during the hours 6am to 11:30am Pacific Time, which corresponds to the trading hours on Nymex trading floor in New York.

This doesn't make much sense to me. If you look at the Wikipedia page for Globex, it says that about 80% of trading volume for commodity futures originates electronically, not on the floor. The electronic exhanges of course are open almost 24 hours, so why would activity be consistently greater during regular floor trading hours if only 20% of the volume takes place during that time?

Anybody know?

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  #3 (permalink)
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Good answer, but I'm not sure it's accurate. A lot of electronic trading, particularly the large accounts, is supposed to be algorithmic/automated. I doubt these systems are turned on at 9am ET and turned off at 2:30pm ET every day.

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  #4 (permalink)
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I guess nobody here knows the answer?

Well, no big deal. Idle curiosity... I trade CL everyday. Since floor hours consistently provide the most movement, those are the hours I trade.

Just wondering why the floor continues to be such a dominant factor despite the electronic nature of today's markets. I did some lazy googling which didn't turn up anything. I suppose I could try tracking down someone in the industry if I really wanted to ...

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mwtzzz View Post
In crude oil (WTI on Nymex) I've noticed that there is generally substantially more activity during the hours 6am to 11:30am Pacific Time, which corresponds to the trading hours on Nymex trading floor in New York.

This doesn't make much sense to me. If you look at the Wikipedia page for Globex, it says that about 80% of trading volume for commodity futures originates electronically, not on the floor. The electronic exhanges of course are open almost 24 hours, so why would activity be consistently greater during regular floor trading hours if only 20% of the volume takes place during that time?

Anybody know?

Electronic transactions does not mean algorithmic origination, and most people sleep at night. Even if you look at how many orders are placed algorithmically, most of those are by hedge funds and such which are primarily being audited and maintained by real people, and thus -- during the day.

Mike

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mwtzzz View Post
I guess nobody here knows the answer?

Well, no big deal. Idle curiosity... I trade CL everyday. Since floor hours consistently provide the most movement, those are the hours I trade.

Just wondering why the floor continues to be such a dominant factor despite the electronic nature of today's markets. I did some lazy googling which didn't turn up anything. I suppose I could try tracking down someone in the industry if I really wanted to ...

I havent spent a lot of time pondering why, but my first initial thought was the "Brazil nut effect" ( Granular convection - Wikipedia, the free encyclopedia ). and while that's a neat idea I think it raises more questions than answers.

Large trades need large (in aggregate) counter-parties, and with a electronic market as young as crude oil, most of those trades still seem to originate from from the north eastern United States.

"If I agreed with you, we'd both be wrong."
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  #7 (permalink)
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Big Mike View Post
Electronic transactions does not mean algorithmic origination, and most people sleep at night. Even if you look at how many orders are placed algorithmically, most of those are by hedge funds and such which are primarily being audited and maintained by real people, and thus -- during the day.

Mike

Hi Mike,

Yes, but why would "waking hours" correspond identically to the pit trading hours? And also, I was under the impression that electronic trading bypassed the need to be filled on the floor. ... just trying to get a better understanding of the relationship between the electronic exchanges and the floor.


Last edited by mwtzzz; January 26th, 2013 at 01:14 PM.
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  #8 (permalink)
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addchild View Post
Large trades need large (in aggregate) counter-parties, and with a electronic market as young as crude oil, most of those trades still seem to originate from from the north eastern United States.

It certainly does seem that is the influential region. Which is interesting, because theoretically anybody in the world has access to the electronic market, yet the rest of the world has an almost negligible impact, which means either there are no big players overseas or the big foreign players funnel their orders through some broker in New York.

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  #9 (permalink)
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There definitely seems to be a disconnect between articles such as the following (more lazy googling) and what actually takes place every day when the crude oil trading floor opens:

Does commodities floor trading have a future? - Risk.net

The Death Of The Trading Floor

Articles like those make it seem like there ought to be no influence whatever from floor trading. Yet obviously not the case as by far the most action is consistently seen during pit hours.

One of those odd things that I'm sure has a very simple answer that any NyMex professional/insider would know ....

Anyway, I'm probably just beating a dead horse, because in terms of actual trading it doesn't really matter the reason

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  #10 (permalink)
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Less-lazy googling provides a bit of a clue: according to the Globex reference guide (www.cmegroup.com/globex/files/GlobexRefGd.pdf), orders initiated on Globex can be routed to the floor. One system that does this is the TOPS which takes orders entered by brokerage firms or by customers, and directs them to the trading floor. This means some of the electronic trading volume goes through the floor. The question is, under what circumstances does this occur, and what % of the volume?

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