CME Equity Futures Enhancement

Posted in News by tharnett on October 7, 2009

On October 4th the CME went live with some changes in how they send out data for their equity futures contracts. We have had a bunch of questions and rather than providing you all the technical jargon, we will try to summarize its impact on you as a MarketDelta user.

:: Summary ::
The CME has begun “unbundling” some ticks/trades that were previously being sent as a single tick. From inspecting charts of the ES, it appears that the net result of this change is that approximately 2.5 times as many ticks or trades are being sent on average, WITH a much smaller average size per trade. The change does not effect the volume, just the number of trades (more trades with a smaller average size).

:: Here is what it means and what you will begin seeing ::
1) More Tickbars: If you are using tickbar charts, you will start seeing approximately 2.5 times as many tickbars per day as you were before because there are approximately 2.5 times as many ticks per day. The CME claims this will give the user a more accurate tickbar picture.

2) Slower Backfill: Backfill or downloading of historical data will take longer since there will be more ticks/trades to download.

3) Larger Database: The amount of the space in the database required to store a day of tick data will increase. Thus, the time it takes to backup or verify the database will increase.

4) Fewer Big (large lot) Trades: If you are filtering trades based on volume (in Time and Sales windows or using the Volume Breakdown indicator), you will see fewer large trades since many of these larger trades have been replaced with a few smaller trades. This change is rather substantial. The number of large trades (> 199 lots) per day on the ES dropped from approximately 1800 to approximately 400.

Here is a chart that demonstrates the changes most likely to be observed:
CME Data Changes

These are daily bars (day session only). The first three days/bars are before the change, while the last three display the larger tick counts after the change. Notice the volume per day stays relatively consistent, while the number of trades per day increases from around 170k/day to around 370k/day. The lower pane shows the average size per trade, which drops from around 12 contracts per trade down to an average of 4.5 per trade.

And below is a 10,000 tickbar chart (10,000 trades per bar). I set this to cumulate each bar (add each bar to the next) to clearly show the number of trades/tick per day has significantly increased.

You can see that the number of tickbars per day more than doubled after the change went into effect. In order to get the same number of bars per day as before, a user would need to multiply his periodicity by something around 2.5. So a 100 tickbar chart would change to a 250 tickbar chart, etc.

5 Responses to CME Equity Futures Enhancement

  • Thanks for the info!!! Got nadda on this from my broker (or any other source).

    —phoenix
    October 7, 2009 at 2:31 pm

  • Thanks for this crucial alert Trevor. We will have to carry tests to re optimise the volume breakdown filtering. I did notice things going badly awry

    In the meantime can you answer this question please.

    When an iceberg order is sitting off the market on the ES and the market moves to hit it, is the tick size based on the large iceberg order that is hit by smaller orders ? Or, is the tick size based on the fills of the smaller orders ? In other words, are they now breaking up iceberg orders into the smaller lots taking the other side of the trade ? If they are doing that then I would imagine they also break up relatively arbitrary groupings of ticks affecting medium and large size orders, not just iceberg orders ?

    Hope you can shed some further light in this respect.

    Thank you,
    David.

    —David Oldham
    October 8, 2009 at 2:59 pm

  • I hope you answer the above question from David. I would like to know as well. There seems to be a lot of confusion out there about this.

    Thank you.

    Marty

    —Marty W.
    October 10, 2009 at 9:36 am

  • In response to David’s question here is what I believe to be the case.

    It is based on the smaller orders and this seems evident based on increase in number of ticks AND decrease in average trade size. I really can’t see it being any other way since the exchange is now trying to provide the smallest level of granularity trading matching.

    For those who don’t know, an iceberg is an order type not showing its entire quantity. An example would be the following: Lets pretend you and I are the only participants in the market. Lets also say I am offering to sell a 500 lot but as an iceberg order type and set to only show a quantity of 20. (I think this is the nature of your question, otherwise leave another comment) IF you are a buyer and submit a market order to buy a 50 lot as one order, there would be three trades (ticks) disseminated. A 20 lot, another 20 lot, and a 10 lot for a total of 50.

    Of course I recommend research

    —Trevor
    October 11, 2009 at 6:54 am

  • Is there an advantage of using a multi-core CPU platform to take advantage of any built in multi-threading in the MDelta application? Would this be a way for us to help defend against any lag which would be introduced by a huge increase in Tick quantity that now has to be processed by MD?

    —Mark S
    October 18, 2009 at 1:13 pm

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