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Spot FX vs M6E futures
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Spot FX vs M6E futures

  #11 (permalink)
Trading Apprentice
Toronto Ontario
 
Futures Experience: Advanced
Platform: Firm's OMS, fxTrade, MetaTrader
Broker/Data: Equities: Through my work (firm.) Spot FX: Oanda, Pepperstone
Favorite Futures: US / Canadian Stocks, Spot FX
 
Posts: 23 since Jan 2013
Thanks: 3 given, 38 received

I think some of you might be forgetting to count the spread in the micro futures as part of the total cost.

M6E's active contract, during the most liquid times (london nyc overlap session,) will flux between 1 and 2 ticks spread. And during not-so-liquid times it's ~2-3 ticks.

Tick value of 1.25 euro. Plus an average commission of $1.60-2 RT depending on your broker.

All this puts your best case scenario at ~$3 USD per contract traded RT (or ~3 ticks in value.) Which, by comparison to most spot brokers, is expensive. Even the more costly brokers top out ~2.5 pips in total spread without commissions these days (and frankly you can find much better deals than that, I'm just tossing out the high end in costs.)

What's worse, if the best case scenario doesn't take place, and you're trading during an average of 2 ticks in spread and with a broker who charges you on the high end in fees for micro futures (~2+RLT), that pushes you to near double the total cost of a pricey spot broker for the same underlying exposure (or 4-5x the cost of some of the more aggressively priced spot brokers out there.)

Don't get me wrong, I like what futures have to offer (can't do calender spreads in spot, and there's something to be said about exchange based trading) but when it comes to Micro currency contracts I have yet to find a compelling reason to justify such a higher total cost of trading.

The full contracts on CME are pretty decent though.

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  #12 (permalink)
Elite Member
seoul, Korea
 
Futures Experience: Intermediate
Platform: Multicharts
Broker/Data: CQG, DTN IQfeed
Favorite Futures: YM 6E
 
treydog999's Avatar
 
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Jack Larkin View Post
I think some of you might be forgetting to count the spread in the micro futures as part of the total cost.

M6E's active contract, during the most liquid times (london nyc overlap session,) will flux between 1 and 2 ticks spread. And during not-so-liquid times it's ~2-3 ticks.

Tick value of 1.25 euro. Plus an average commission of $1.60-2 RT depending on your broker.

All this puts your best case scenario at ~$3 USD per contract traded RT (or ~3 ticks in value.) Which, by comparison to most spot brokers, is expensive. Even the more costly brokers top out ~2.5 pips in total spread without commissions these days (and frankly you can find much better deals than that, I'm just tossing out the high end in costs.)

What's worse, if the best case scenario doesn't take place, and you're trading during an average of 2 ticks in spread and with a broker who charges you on the high end in fees for micro futures (~2+RLT), that pushes you to near double the total cost of a pricey spot broker for the same underlying exposure (or 4-5x the cost of some of the more aggressively priced spot brokers out there.)

Don't get me wrong, I like what futures have to offer (can't do calender spreads in spot, and there's something to be said about exchange based trading) but when it comes to Micro currency contracts I have yet to find a compelling reason to justify such a higher total cost of trading.

The full contracts on CME are pretty decent though.

1-2 tick spread is normal. you cant have less than 1 tick because then we would have a trade. I have traded Spot FX during the volatile or illiquid times you can get 10 pip spreads and trade requotes/ Order cancellation. So i dont think its a fair assessment because most brokers are giving variable spreads. I know some of the spreads given by ECNs / NDDs are like 2.5-3.5 which is equivalent to the futures because you cant bucket futures contract orders. Which is what the 1 pip - 2 pip variable spread fx companies are doing.

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  #13 (permalink)
Trading Apprentice
Toronto Ontario
 
Futures Experience: Advanced
Platform: Firm's OMS, fxTrade, MetaTrader
Broker/Data: Equities: Through my work (firm.) Spot FX: Oanda, Pepperstone
Favorite Futures: US / Canadian Stocks, Spot FX
 
Posts: 23 since Jan 2013
Thanks: 3 given, 38 received



treydog999 View Post
1-2 tick spread is normal. you cant have less than 1 tick because then we would have a trade. I have traded Spot FX during the volatile or illiquid times you can get 10 pip spreads and trade requotes/ Order cancellation. So i dont think its a fair assessment because most brokers are giving variable spreads. I know some of the spreads given by ECNs / NDDs are like 2.5-3.5 which is equivalent to the futures because you cant bucket futures contract orders. Which is what the 1 pip - 2 pip variable spread fx companies are doing.

Some ECN, ECN-like, and STP brokers consistently quote spreads sub-pip. Like 0.1-0.5 pips. They usually charge a commission that brings the total cost of trading up a bit, but even then it's not anywhere near as expensive as the total cost of trading on M6E.

Some brokers do increase spreads during volatile news times but not all of them do so, it depends on your broker.

One broker I use has sub-pip spreads throughout news times as well. Though, that doesn't save you from slippage in such fast moving markets.

Honestly speaking, EUR/USD quoted 2+ pips wide is really expensive in this day of age, but I used it as an example since some major brokerages out there that service the US (where I'm assuming most of you are from) still have spreads like that. My examples from the other post show that even with a 2.5 pip spread, M6E can still be more expensive.

The whole point was that you still pay the spread on M6E, not just the commission. And that adds to the total cost of trading.

Exposure for exposure, unless we're talking about full sized contracts (6E), spot has M6E beat in the cost department.. at least with most spot brokers.

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  #14 (permalink)
Trading Apprentice
Ontario
 
Futures Experience: Advanced
Platform: NT7, Metatrader
Favorite Futures: Futures
 
Posts: 6 since Mar 2013
Thanks: 1 given, 4 received

Interesting topic.

I have been trading 6E for quite some time now.

I initially started with the spot Euro as it seems most new traders gravitate towards spot as it is easier to open an account, less maintenance margin required and the ability to trade a very small account.

As I matured as a trader I moved over to 6E due to various advantages that I saw.

Anyhow in terms of cost, it is usually cheaper to trade spot with most reputable brokers than M6E; also keep in mind M6E liquidity can dry up during certain times of the day, while spot will remain fairly liquid.

On the other hand I found with the current position size that I trade, 6E is cheaper or at least on par with trading in spot.

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  #15 (permalink)
Trading Apprentice
Greece
 
Futures Experience: Advanced
Platform: Ninza-Tradestation
Broker/Data: IB
Favorite Futures: eurusd
 
Posts: 6 since Feb 2010
Thanks: 3 given, 0 received

Hi,

1 M6E round turn costs 0.66 $ comm. in Interactive Brokers....which i believe is very nice...also
don't forget in a futures exchange you can get filled easily with limit orders at your price where on spot forex
has your bid limit to become the ask price to get you filled and vice versa ...you always pay the spread cost in spot
forex...not possible to overcome this...

regards
Kon

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  #16 (permalink)
Elite Member
Melbourne, Victoria, Australia
 
Futures Experience: None
Platform: TWS, NinjaTrader
Broker/Data: numerous
Favorite Futures: index and currency futures, stocks, options, warrants
 
kickmic's Avatar
 
Posts: 265 since May 2011
Thanks: 42 given, 336 received


trader65 View Post
Hi,

1 M6E round turn costs 0.66 $ comm. in Interactive Brokers....which i believe is very nice...also
don't forget in a futures exchange you can get filled easily with limit orders at your price where on spot forex
has your bid limit to become the ask price to get you filled and vice versa ...you always pay the spread cost in spot
forex...not possible to overcome this...

regards
Kon

+1

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