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I still can't comprehend how each DOM level now only has <300 cts, not even a tenth of what this number used to be back around '10. Beside algos who else is to blame(If algos were to be blamed at all)? What are the fundamental liquidity/market change reasons behind this?
Can you help answer these questions from other members on NexusFi?
Well, as the index grew in number, the moves in point terms are larger, therefore the moves must be on thinner volume. Makes sense thinking of it this way but still doesn't actively "explain" it
I agree that the rise in volatility is what seemed to thin out most liquidity, same with the RTY. The first reply is also 100% logical. At the same time, you could still do a 25C lot on ES and it'd swallow it up like nothing. Try that on the RTY
I think a lot has to do with ETFs, I think a lot of traders and institutions prefer to trade ETFs instead of futures, I didn't check this in detail but I've heard many times that ETF have had a tremendous success over the last 5 years.
Now that shares are traded commissions free, that would be also a great incentive for people to trade etfs (that are normally treated as shares).
Concerning micros, that's also an interesting factor, now micros volume is 3x mini's volume.
ETFs have cannibalized the mutual fund industry, but not futures.
I would attribute a better part of the decline in depth to the increase in the index value, as already mentioned above. Back in 2010 the S&P500 was trading at about 1000, so one tick (a quarter of a point) represented 0.025% of the price. Today, with the ES trading north of 4000, that same 0.025% of price liquidity represents 4 ticks.
Another factor may be technologies employed by the primary market makers today. Though this is not my area of expertise I would assume that faster and more responsive pricing algorithms make quotes a bit less "sticky" than they were a decade ago.