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Micro ES SP500 contract "coming" (E-Micro)
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Micro ES SP500 contract "coming" (E-Micro)

  #101 (permalink)
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SMCJB View Post
I suspect HFT will ensure the liquidity is there. The order flow, and tick to tick pricing, will be completely different though. You will need to watch the eMini chart but actually trade the Micro contract same way as people do with QM (Crude eMini) and CL etc.

Just to ensure I understood you correctly. You're basically saying to trade the Micro, or in your example the Emini Crude Oil, "blind"? Is that correct, watch the CL both in terms of Order flow, Charts, T&S, whatever your tools are but place your orders in the QM?

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  #102 (permalink)
Market Wizard
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MessageOfTheTape View Post
Just to ensure I understood you correctly. You're basically saying to trade the Micro, or in your example the Emini Crude Oil, "blind"? Is that correct, watch the CL both in terms of Order flow, Charts, T&S, whatever your tools are but place your orders in the QM?

I wouldn't agree with the 'blind' comment but yes I would agree with watch the CL (or ES) both in terms of Order flow, Charts, T&S, whatever your tools are but place your orders in the QM (or ES Micro)?. I would recommend the same for anybody trading any of the other Mini's or Micro's. (eg QM Natgas, MGC Gold, The Currency Micro's etc). Equity Index's (ES, NQ, RTY etc) are the only eMini's that I can think of that have more size and liquidity than the full size products. In all other products its the other way around.

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  #103 (permalink)
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SMCJB View Post
I wouldn't agree with the 'blind' comment but yes I would agree with watch the CL (or ES) both in terms of Order flow, Charts, T&S, whatever your tools are but place your orders in the QM (or ES Micro)?. I would recommend the same for anybody trading any of the other Mini's or Micro's. (eg QM Natgas, MGC Gold, The Currency Micro's etc). Equity Index's (ES, NQ, RTY etc) are the only eMini's that I can think of that have more size and liquidity than the full size products. In all other products its the other way around.

Thanks for the explanation! So for any product, watch the "big one" (volume-wise, leading contract for the product) but trade the smaller one since arbitrageurs will unequivocally let them "mimic" (for lack of a better word) the prize of the "big one". That's what i mean by 'blind'.

I can just hope that the brokers adjust commision fees for the micro contracts. At $7 per round trip I'd need a whooping ~1.5points just to break even

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  #104 (permalink)
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MessageOfTheTape View Post
I can just hope that the brokers adjust commision fees for the micro contracts. At $7 per round trip I'd need a whooping ~1.5points just to break even

I have this problem with ICE's Natural Gas Contracts. The NYMEX NG contract is 10,000 MMBtu and exchange fees are $1.50 for non-members. The ICE Henry Hub contract is only 2,500 MMBtu and clearing fees are $0.655, so on a similar size basis, ICE costs $2.62 versus $1.50 on NYMEX. On top of that my broker charges me the same commission for the ICE trade as they do the NYMEX trade making ICE even more expensive. I have been told there are clearers out there that charge less to clear ICE because of this, but I have never found them!

i don't think they have announced exchange fees yet but for some perspective
CL is 1,000 barrels and it's exchange fee is $1.50 versus QM 500 barrels and $1.20. So QM is 60% more expensive.
NG is 10,000 MMbtus and it's exchange fee is $1.50 versus QG 2500 MMBtus and $0.50. So QG is 33% more expensive.

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  #105 (permalink)
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I'm personally very glad that this has been public. It has been hard biting my tongue for a while while this was being developed. I think this will save many traders from blowing up. I really have wanted a product for about 10 years and met with them 6 years ago to start the push for this. It will be worth it and I think it will be a successful product.

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  #106 (permalink)
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I've been following developments on this small exchange from the tastyworks folks, sounds like they are in the CFTC application phase, though there's not much info on it yet.

The smaller contracts sound interesting, no idea about what liquidity would be like, etc. Is anyone else following this or know about what's going on with it?

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  #107 (permalink)
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For those of you concerned about cost/fees, I can't speak to that at the moment, but think of the 6E vs M6E contract. The 6E has $1.60 per side in exchange fees and you must add $0.02 for NFA before FCM and broker costs. The M6E which is 1/10th the value is at $0.16 plus $0.02 for NFA + broker/FCM costs. So I would expect the Micro-Indices to go down the same path.

Unfortunately, I know for a fact that FCM costs won't go down based on the product. So that is fixed. This means that as a proportion of the total cost, what your FCM takes (because it is a fixed large overhead business) would represent a larger proportion. This is to be expected and makes sense. Let me know if this needs to be explained. Brokers have a bit of leeway, but not much because they are also constrained by what the FCM has to get paid for backing your trades.

I hope that reduces the anxiety about in terms of cost.

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  #108 (permalink)
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This would make a great product for many developing traders. Very good news

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  #109 (permalink)
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vegasfoster View Post
Agreed, good for new people, but you will reach a point where you would like to be able trade the equivalent of 1 to 2 full contracts broken down into 3-6 units, so IMO it's no good for providing a comfortable transition to trading multiple full contracts.

Exactly my thought, it will provide a good base for traders trading multi legs, and also based on margin positional trades will be easy

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  #110 (permalink)
Market Wizard
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SMCJB View Post
I have this problem with ICE's Natural Gas Contracts. The NYMEX NG contract is 10,000 MMBtu and exchange fees are $1.50 for non-members. The ICE Henry Hub contract is only 2,500 MMBtu and clearing fees are $0.655, so on a similar size basis, ICE costs $2.62 versus $1.50 on NYMEX. On top of that my broker charges me the same commission for the ICE trade as they do the NYMEX trade making ICE even more expensive. I have been told there are clearers out there that charge less to clear ICE because of this, but I have never found them!

i don't think they have announced exchange fees yet but for some perspective
CL is 1,000 barrels and it's exchange fee is $1.50 versus QM 500 barrels and $1.20. So QM is 60% more expensive.
NG is 10,000 MMbtus and it's exchange fee is $1.50 versus QG 2500 MMBtus and $0.50. So QG is 33% more expensive.


FuturesTrader71 View Post
For those of you concerned about cost/fees, I can't speak to that at the moment, but think of the 6E vs M6E contract. The 6E has $1.60 per side in exchange fees and you must add $0.02 for NFA before FCM and broker costs. The M6E which is 1/10th the value is at $0.16 plus $0.02 for NFA + broker/FCM costs. So I would expect the Micro-Indices to go down the same path.

Unfortunately, I know for a fact that FCM costs won't go down based on the product. So that is fixed. This means that as a proportion of the total cost, what your FCM takes (because it is a fixed large overhead business) would represent a larger proportion. This is to be expected and makes sense. Let me know if this needs to be explained. Brokers have a bit of leeway, but not much because they are also constrained by what the FCM has to get paid for backing your trades.

I hope that reduces the anxiety about in terms of cost.

I've been thinking about this some more. I suspect the profile of a person trading the micro's is somebody who has a small account size and is probably paying higher clearing fees. While the exchange fees may be proportionally lower, paying the same clearing fee on a contract a 1/10th of the size will have a significant impact. If you look at the table below, eMini's even at high retail rates are less than double* the cost of trading the full size contract, but Micro's are over 5x the cost. Trading the Euro Micro, M6E, If your paying $1.50** in broker clearing fees then that will be $1.68 per side or $3.36 per round turn. With a tick size of 0.0001 or $1.25, that's equivalent to 2.688 ticks. In comparison a member with good clearing fees is probably paying about $1 per round turn to trade a full size, which is just 0.08 ticks!

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* With the exception of QG which is worse due to the eMini being a 1/4 the size rather than 1/2.
** Not uncommon. $1.50 is Tradestation's base rate for less than 300 contarcts a month.

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