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Mrket making in Emini SP500 futures


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Mrket making in Emini SP500 futures

  #1 (permalink)
 Gianni78bari 
Bari, Italy
 
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In the following CME page (https://www.cmegroup.com/education/market-maker-directories.html) I read:
"The following market-making firms provide liquidity for Interest Rate futures and options markets, E-mini equity options markets, Agricultural options, FX options, Blocks and Exchange-for-Physical (EFP) trades."
For indices including E-mini S&P 500 Futures, market makers act only for block trades?
When I place an order on emini SP500 future book I would expect my counterpart to be a market maker? or the liquidity mostly derives from institutionals, hedgers and retails?
I hope I made my question clear.

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 matthew28 
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When the large S&P contract traded in the pit there were market makers/floor traders making the market by quoting the prices they wanted to trade at.
Now it is electronic there is one CME price that everybody sees. If you want to trade against market makers go to a product which doesn't have a centralised exchange, like CFDs, then your broker will be the market maker.

As far as the CME goes, with the liquidity, it is all equal, the order book shows all the orders irrespective of whoever you are, whoever you work for or how large your account is.
Therefore for products that are traded based on their order book position only, you trade against whoever is in the queue when your order makes it to the front of the queue. Or if you enter with a market order you are filled against the orders at the front of the queue.

I don't know how block trades work, or why they are done or even whether they actually are except on very infrequent occasions and as it isn't something for retail traders, I don't worry about it.

That's my understanding anyway. I'm sure somebody will correct me if I have said something fundamentally incorrect.

You do not win as a trader, you just get to play again the next day. If that game doesn’t appeal to you then you should not trade. Gary Norden
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  #3 (permalink)
 Gianni78bari 
Bari, Italy
 
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matthew28 View Post
When the large S&P contract traded in the pit there were market makers/floor traders making the market by quoting the prices they wanted to trade at.
Now it is electronic there is one CME price that everybody sees. If you want to trade against market makers go to a product which doesn't have a centralised exchange, like CFDs, then your broker will be the market maker.

As far as the CME goes, with the liquidity, it is all equal, the order book shows all the orders irrespective of whoever you are, whoever you work for or how large your account is.
Therefore for products that are traded based on their order book position only, you trade against whoever is in the queue when your order makes it to the front of the queue. Or if you enter with a market order you are filled against the orders at the front of the queue.

I don't know how block trades work, or why they are done or even whether they actually are except on very infrequent occasions and as it isn't something for retail traders, I don't worry about it.

That's my understanding anyway. I'm sure somebody will correct me if I have said something fundamentally incorrect.

Thanks for your reply.
I think the following is a good explanation:
https://www.investopedia.com/ask/answers/06/quoteorderdrivenmarket.asp

In my understanding:
- bonds, currencies, and commodities are traded in a quote driven market with a market maker who "will either fill your order from its own inventory or match you with another order. Of course, investors can try to negotiate better prices, either themselves or through their broker or agent". Anyway "your own order for x shares of ABC stock at $y per share would not be posted in this system".
- the EminiSp500 is traded in an order driven market, with market maker acting only for particular reasons (block trades etc., I know that it's now possible to track this trade thanks to a Cme service).
- Equities are traded in a hybrid market.
- The option market for every underlying should be a pure quote driven market.

I hope I made it clear

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 matthew28 
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Gianni78bari View Post
In my understanding:
- bonds, currencies, and commodities are traded in a quote driven market with a market maker who "will either fill your order from its own inventory or match you with another order. Of course, investors can try to negotiate better prices, either themselves or through their broker or agent". Anyway "your own order for x shares of ABC stock at $y per share would not be posted in this system".
- the EminiSp500 is traded in an order driven market, with market maker acting only for particular reasons (block trades etc., I know that it's now possible to track this trade thanks to a Cme service).
- Equities are traded in a hybrid market.
- The option market for every underlying should be a pure quote driven market.

I hope I made it clear

I looked at the page you posted. That Investopedia page appears to be talking about different market types.
I have no experience of Options or Equities so will ignore those and just stick to the ES, the e-mini S&P furures contract on the CME which you mentioned in your first post.

I agree with what you say above, from the Investopedia page, the ES is an order driven market as all the bids and offers are available to see (excluding block trades). Which is also what I said in my first post.

But I would disagree with your first paragraph that I quote above where you say " bonds, currencies, and commodities are traded in a quote driven market with a market maker who "will either fill your order from its own inventory or match you with another order. Of course, investors can try to negotiate better prices, either themselves or through their broker or agent".
Maybe they are market maker traded products in their respective cash markets, but regarding the CME futures products which I thought was what you were originally asking about, they are all "order driven markets".

It doesn't matter what CME futures product you trade, everybody sees the same order book through the Depth of Market screen and everybody's orders are queued at one exchange (again excluding block trades). With CME single exchange traded products there are no market maker middlemen to negotiate with or who will fill your order from their inventory or match orders themselves.

You do not win as a trader, you just get to play again the next day. If that game doesn’t appeal to you then you should not trade. Gary Norden
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  #5 (permalink)
 Gianni78bari 
Bari, Italy
 
Experience: Beginner
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Trading: Emini ES
Posts: 86 since May 2018
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matthew28 View Post
I looked at the page you posted. That Investopedia page appears to be talking about different market types.
I have no experience of Options or Equities so will ignore those and just stick to the ES, the e-mini S&P furures contract on the CME which you mentioned in your first post.

I agree with what you say above, from the Investopedia page, the ES is an order driven market as all the bids and offers are available to see (excluding block trades). Which is also what I said in my first post.

But I would disagree with your first paragraph that I quote above where you say " bonds, currencies, and commodities are traded in a quote driven market with a market maker who "will either fill your order from its own inventory or match you with another order. Of course, investors can try to negotiate better prices, either themselves or through their broker or agent".
Maybe they are market maker traded products in their respective cash markets, but regarding the CME futures products which I thought was what you were originally asking about, they are all "order driven markets".

It doesn't matter what CME futures product you trade, everybody sees the same order book through the Depth of Market screen and everybody's orders are queued at one exchange (again excluding block trades). With CME single exchange traded products there are no market maker middlemen to negotiate with or who will fill your order from their inventory or match orders themselves.

Yes, I agree with you.
I think Investopedia refers to forex for currencies, or auctions for bonds which certainly are not driven order market.
Maybe in particular situations there are market maker in Cme designated not only to trade block trades but also to add liquidity to the DOM.

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Last Updated on November 1, 2021


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