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FOUR more NEW MICRO's - Micro Treasury Yield Futures coming 16 Aug'21


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FOUR more NEW MICRO's - Micro Treasury Yield Futures coming 16 Aug'21

  #11 (permalink)
 
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 nothingbutprofits 
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You can see the micro treasury futures listed here:

https://ninjatrader.com/pricing/margins/

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  #12 (permalink)
 
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Here's a list of all the micro products going by the PDF above:

MES - S&P 500
MNQ - Nasdaq-100
M2K - Russell 2000
MBT - Bitcoin
M6A - AUD/USD
M6B - GBP/USD
MICD - CAD/USD
M6E - EUR/USD
MIJY - JPY/USD
MYM - Dow Jones Index
10YR - 10 Year Yield
30YR - 30 Year Yield
5YR - 5 Year Yield
2YR - 2 Year Yield
MGC - Gold
MCL - Crude Oil
FDXS - Dax
FSXE - Stoxx

Agricultural products next?

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  #13 (permalink)
 
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 SMCJB 
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Fluid Fox View Post
MICD - CAD/USD
MIJY - JPY/USD

Think those are NT symbols. The actual exchange symbols are MCD and MJY

Theres also
SIL Silver (1000oz, 1/5 of SI) https://www.cmegroup.com/markets/metals/precious/1000-oz-silver.contractSpecs.html
PAM Paladium (10oz, 1/10 of PA, but these don't trade) https://www.cmegroup.com/markets/metals/precious/e-micro-palladium.contractSpecs.html
but maybe NT doesn't allow them. SIL trades a lot.

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 Schnook 
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I may have spoken too soon. Interactive Brokers apparently does not yet allow trading in this product. While opening a ticket tonight I received an error message stating "YOUR ORDER IS NOT ACCEPTED. This product is only limited to certain test accounts."

The CME website shows that NinjaTrader, Tradestation, Tradovate, Ironbeam and AMP offer the product, but IB is not on the list.



This limited participation likely helps explain the slow start, volume-wise, but hopefully it will become more widely adopted soon. I inquired about this at IB and await their response.

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 Schnook 
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These contracts now appear to be available for trading on interactive brokers. I put in a test ticket a moment ago and, instead of an error message, I got hit

Remember, the DV01 (dollar value of a basis point) on these contracts is ten dollars, whereas the 10yr note contract (ZN), representing $100,000 notional, currently has a DV01 of $81, so right now you'd have to sell 8 micro 10yr yield futures to have the same DV01 as long 1 ZN contract (also, CTD right now is the Aug 28s, so ZN is in effect a bit further down the curve than 10Y). On IB I got charged a $0.57 one-way commission, so $4.56 for the DV01 equivalent of 1 ZN, which compares to just $1.62 for an actual ZN and $1.67 for ZB, so liquidity and transaction costs are still much better in the Treasuries than the Micro Yield Futures.

BUT the small size and ease of use should make the micro yield futures a very attractive product for curve traders and rate hedgers. Volumes are still extremely low but hopefully they'll pick up soon. I'd really like to see this product succeed.

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  #16 (permalink)
 
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 Schnook 
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Just circling back after a couple months to state that these micro yield contracts have been a disappointment. I traded them for a while back in September and October but then lost interest because, frankly, the costs far exceed the benefits of these things.

Liquidity and trading volumes have also been abysmal. There has clearly been little to no adoption by active institutional traders as I'm convinced they've all come to the exact same conclusions I have. Take a look at this screenshot from just a moment ago:



The screenshot shows footprint / numbers bars charts (on a range size periodicity) with attached DOM for 10 and 30 year micro yield futures. Actual traded volumes are shown inside the numbers bars (bid vlm x ask vlm) and the histogram below. You can see how little traded all day Friday and the DOMs illustrate how thin and wide the quotes are here during this Sunday evening session.

Now, as to the costs:

First, commissions (at least on IB) are way higher in micro yield futures than they are in regular Treasury futures. As mentioned in the last post, to have the same amount of rates risk exposure (DV01 equivalent) in 10Y as you have with 1 ZN contract you need 8 lots of 10Y. IB charges me a commission of $1.62 per side for ZN and $0.57 per side for 10Y, which, multiplied by 8 is $4,56, or 2.8 times higher than ZN! It's even worse for the ZB contract which has a DV01 of $189, or 19 30Y contracts. $1.67 for a ZB contract vs. $10.83 for 19 30Y contracts (6.5x higher!). Seriously, that's just awful.

The round trip commissions even exceed the tick value on these things, so you need to earn more than one tick (.1 basis point) of gross profit on a trade just to break even. So forget about scalping them. (Scalpers, who are huge liquidity providers in rates futures, need to be able to scratch a lot of trades throughout the day, but these are just way too expensive to scratch. So no wonder there's no liquidity.)

Now, the small tick size is supposed to ease transaction costs because 1 tick in micro yields is equivalent to just 0.1 basis points, whereas 1 tick in ZN is twice that in yield terms (1 tick in ZN is 1/64 of a point which is $15.625, which, when divided by the DV01 of $80 equals 0.20 basis points). But the commission ratio is still higher, than the yield-equivalent tick value ratio so even if you get 1 tick liquidity (which you don't) in micro 10Y or 30Y yields you're still paying a lot more in transacton costs. Add in the wider bid/ask and it's not even close.

And the monthly expiration schedule is also annoying. I get why it exists, and no one complains about the monthly schedule in crude, but this is different in that no one is trading any back months in these micro yield contracts. I mean, why would you? If you're a rates spreader, you're not trading Dec 10 yrs vs Mar 10yrs, you're trading eurodollars in the front months or 2s / 10s, 5s / 10s, 10s / 30s etc. where there might actually be some day to day movement. And I think a lot of the retail and institutional curve players out there also tend to hold longer time-frame positions. I mean, if you're the type of trader that wants to put on a 2s/10s spread and hope to hold it until, say, the Fed begins to tighten, then you have to roll both legs of the spread every month and incur even more transaction costs every time you do it, which gets even more expensive. especially when liquidity is so poor!

So high commissions, wide bid/ask, and monthly rolls make these things way too expensive to manage and trade effectively. It was a neat idea, but unless the cost structure changes, I'm out.

Incidentally the CME just published an article " Two Months In" on their website (link in title) but the article is just a marketing piece and a weak attempt at that.

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I think these were designed to attract retail traders. Small size & a price they could understand instead a complicated bond price. Just don't think retail are as interested. Contract is to small for larger speculators.

If you think these are expensive to trade take a look at the Micro Bitcoin (exchange fee half, for a contract 1/50th the size so 25x more expensive) and the newly announced Micro Ether (exchange fee 1/15th, for a contract 1/500th the size so 33x more expensive)

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  #18 (permalink)
 
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I see the volume has increased.
Does anyone have a reference for the t-bond, t-note conversion to yield. I’m interested in transforming a continuous bond/note contract into yield terms so that I can look at historical data and maybe use that to develop an automated trading strategy.

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  #19 (permalink)
 
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 masterchanger 
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the 10y yield is essentially the inverse of the 10y note. just plot both and you'll see.

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  #20 (permalink)
 SpeculatorSeth   is a Vendor
 
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I've done a bit of work trying to sort out what the correct interest rate would be based on the larger futures, but there's more variables involved that make it difficult to calculate using the data we have available. You could use the dv01 to determine how much a 1 tick change in the futures should move the micro futures, but the problem is dv01 changes. I would have though that difference would be negligible, but it actually changes enough through the day that you can't just use the numbers you get from CME's free treasury analytics tool.

The right way to do this would probably be watch the cash market with CME broker tec data, but I'm having a very difficult time finding retail access to such data.

- SpeculatorSeth
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