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ES futures price increments
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ES futures price increments

  #1 (permalink)
Vancouver, Washington
Posts: 3 since Oct 2011
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ES futures price increments

Why are the ES futures in .25 increments? Seems to me would be easier to trade if it were in tenths. The fill rate is bad and might be better if in tenths. What do you think?

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  #2 (permalink)
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  #3 (permalink)
North Carolina
Trading Experience: Beginner
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This post has been selected as an answer to the original posters question Answer

It was probably designed to make arbitrage more profitable. You would need to look at what the big contract traded (don't know). A wider spread in theory, also, discourages wash trading and encourages liquidity. If it traded in 10th's, just taking a guess here, but small traders would probably get better fills while larger traders might get worse fills. The larger tick size also probably discourages certain types of scalping. With a smaller tick size, a larger trader would move the price more and it would allow possible allow for more market order scalping.

A smaller tick size might also disadvantage manual limit order traders or discretionary traders because the HFT would be able to pull orders and stack orders on more levels. But, keep in mind that the spread doesn't solely determine how much liquidity that will be offered: the overall market dynamics are a big part. Basically, smaller ticks would in theory make market order scalping for small traders more feasible while disadvantaging the smaller trader on the limit order. However, it would also require reducing the built-in trading fees or else your fees would be a higher percentage of the tick size. There are quite a few variables, as you can see. The reason it disadvantages you on the limit order is the HFT would have a lower cost to front you but you get an advantage on the market order if it tightens the spread. There are a lot of variables in play, and I am not sure that anyone knows exactly what would happen: you might get better fills except when you needed them though.

Anyway, it is never going to change: and I wouldn't want the existing contracts to change. But, I would like to see a smaller contract with reduced trading fees about 1/2 to 1/4 the size of the standard emini. This would be useful for the smaller trader.

Last edited by tpredictor; May 9th, 2018 at 05:53 PM.
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  #4 (permalink)
Market Wizard
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This post has been selected as an answer to the original posters question Answer

The full size contract, the SP rather than the ES is priced in tenths or 10 cent intervals compared to the ES 25 cent intervals.

S&P 500 Futures Contract Specs - CME Group

The full size contract is $250 a point though so five times the size of the mini.

Following on from what tpredictor said, I assume when it was introduced it was in quarter point intervals to increase liquidity on the Bid and Offer in the beginning to make it an alternative for large investors/traders seeking the advantages of anonymous order placement by computer rather than standing in the pit. Otherwise if it had been in tenths too it could have perhaps just been seen as a low liquidity cut price beginners version of the SP that wouldn't have been an option for those trading size. That's just a guess though which to me sounds kind of logical but possibly had nothing to do with it at all.

I wonder how long the SP will carry on trading. Yesterday it traded 1,400 contracts, the ES 1,250,000.

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  #5 (permalink)
New York
Trading Experience: Intermediate
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Favorite Futures: Emini ES
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Tradersword View Post
Why are the ES futures in .25 increments? Seems to me would be easier to trade if it were in tenths. The fill rate is bad and might be better if in tenths. What do you think?

I agree! always wondered that myself lol

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