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jeffersondaarcy

Is Reading the Tape (time/sales) Obsolete Due to CME Reporting Changes?

By jeffersondaarcy, in General Trading

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jeffersondaarcy    10

jeffersondaarcy
Posted

As of last Monday, the CME changed the way that they disseminate trade information for equity index futures. Due to the changes, there are now 2.5 times more reported trades in the e-mini SP500. Here are the highlights and potential ramifications:

 

There used to be, on average, 1800 trades a day of 199 contracts or more. After the change, we are averaging about 400 trades a day of 199 contracts or more. In addition, the average trade size used to be 12 contracts. It is now between 3-4 contracts. Needless to say, it has become very difficult to follow "the smart money" (large buyers and sellers). This is because trade reporting is based on counterparties. Prior to the changes, if I placed an order to buy 100 contracts at market, the tape (time and sales) would show a single 100 contract market order executed, or possibly one 25 executed market order and a 75 executed market order (or something to that extent). After the CME changes, my 100 contract market order will now be reported based off of each counterparty. Therefore, if it takes 70 different counterparties to fill my 100 market order, the tape will reflect all 70 trades individually Keep in mind that it could be a single counterparty executing my trade, they could just be offering out 70 one and two lot offers as opposed to a single 100 lot offer (I called the CME, this is how they explained it to me).

 

Another side affect of the CME changes is that physically watching the tape is damn near impossible at times since what used to be a displayed as a single trade at 200 contracts could now be executed and displayed as 200 single contract trades. These 200 trades flash on the tape (time and sales) in under a single second. The human eye cannot physically process all this information, it is literally impossible. Has the tape (time and sales) now become obsolete due to the sheer velocity of trades as well as the possible ineffectiveness of tracking the large buyers (sellers)?

 

The question I would like to pose to the group is this: There has obviously been some amazing technical progress (charts, indicators, etc.) made in regards to trading over the last decade. However, the tape (time and sales) is still somewhat stuck in the 20th century, meaning there have been no significant technological upgrades to it. Therefore, how do we not only make the tape relevant again, but also bring it into the 21st century technology wise?

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jeffersondaarcy    10

jeffersondaarcy
Posted

2 1/2 times as many trades, average trade size goes from 12 to 4, and amount of big lots traded (199+) shrinks by 80%... Change bro.

 

The CME is now reporting equity index futures trades in microseconds. This obviously gives platforms and programmers more information with which to work. Does this provide enough info to parse trades back together (smart/big money cant hide even by breaking up larger orders into many small orders)?

 

Attached is trade data the CME sent me from last Thursday 9:00:45. Hundreds of individual trades were executed in under a second. Tracking big lots is dead. However, new opportunities have emerged. What are they?

es45mjk.xls

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strtedat22    10

strtedat22
Posted
2 1/2 times as many trades, average trade size goes from 12 to 4, and amount of big lots traded (199+) shrinks by 80%... Change bro.

 

The CME is now reporting equity index futures trades in microseconds. This obviously gives platforms and programmers more information with which to work. Does this provide enough info to parse trades back together (smart/big money cant hide even by breaking up larger orders into many small orders)?

 

Attached is trade data the CME sent me from last Thursday 9:00:45. Hundreds of individual trades were executed in under a second. Tracking big lots is dead. However, new opportunities have emerged. What are they?

 

I'm sure you've noticed that large lots have been getting smaller (icebergs) since websites like TL and ET have hit the scene. Read tape near your entries.

 

IMHO, with the tape speeding up it will confirm emotion/direction in the market. I hate when the tape is slow during my entries cause i don't when exactly the market is going to take off/breakdown. This new change will keep me on the sidelines when my perfect setup arrives but the tape doesn't confirm it.

 

As far as piecing back the info mentally...Good luck because that seems like a monotonous task to do if you're not a programmer (like me).

 

You use tape for entries/exits.

 

strtedat22

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Jleon    10

Jleon
Posted
As of last Monday, the CME changed the way that they disseminate trade information for equity index futures. Due to the changes, there are now 2.5 times more reported trades in the e-mini SP500. Here are the highlights and potential ramifications:

 

There used to be, on average, 1800 trades a day of 199 contracts or more. After the change, we are averaging about 400 trades a day of 199 contracts or more. In addition, the average trade size used to be 12 contracts. It is now between 3-4 contracts. Needless to say, it has become very difficult to follow "the smart money" (large buyers and sellers). This is because trade reporting is based on counterparties. Prior to the changes, if I placed an order to buy 100 contracts at market, the tape (time and sales) would show a single 100 contract market order executed, or possibly one 25 executed market order and a 75 executed market order (or something to that extent). After the CME changes, my 100 contract market order will now be reported based off of each counterparty. Therefore, if it takes 70 different counterparties to fill my 100 market order, the tape will reflect all 70 trades individually Keep in mind that it could be a single counterparty executing my trade, they could just be offering out 70 one and two lot offers as opposed to a single 100 lot offer (I called the CME, this is how they explained it to me).

 

Another side affect of the CME changes is that physically watching the tape is damn near impossible at times since what used to be a displayed as a single trade at 200 contracts could now be executed and displayed as 200 single contract trades. These 200 trades flash on the tape (time and sales) in under a single second. The human eye cannot physically process all this information, it is literally impossible. Has the tape (time and sales) now become obsolete due to the sheer velocity of trades as well as the possible ineffectiveness of tracking the large buyers (sellers)?

 

The question I would like to pose to the group is this: There has obviously been some amazing technical progress (charts, indicators, etc.) made in regards to trading over the last decade. However, the tape (time and sales) is still somewhat stuck in the 20th century, meaning there have been no significant technological upgrades to it. Therefore, how do we not only make the tape relevant again, but also bring it into the 21st century technology wise?

 

These changes are a bummer but at the same time there is technology such as the TT Depth of Market that helps exploit these orders to the trained eye. If staring at a DOM is not for you then hiring programers to exploit these orders would be the best thing for you. Good Luck.....

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