AEX : 1 cent tick size and return of AEX Light
It has been discussed for ages, but finally the 1 cent tick size will arrive in the AEX index options. Starting September 2nd, the options below the 5 euro threshold will be quoted with cents – instead of the current 5 cent ticks increments. While this is common practice in all AEX single stock options, it’s another ballgame in the index.
The market in the index is usually quoted with a very tight bid-ask spread in terms of implied volatility. Quoting with 1 cent increments won’t change that, but the systems will probably be flooded by quote updates – and Euronext Liffe’s track record in keeping the market open is terrible. We’ll see.
The return of AEX Light
Ages ago we’ve had the AEX Light options. These options shared the same specifications with the regular index options, but had a smaller multiplier. You needed to buy more to earn the same money. Nobody every traded them. Per September 2013 Euronext Liffe will relaunch mini options and mini futures on the AEX and the CAC.
Can’t imagine anyone waiting for this. If you can’t afford to buy or sell just one index option, you’d better stay out of the market anyway. Trading mini options would be burning your money on transaction fees.
Source on mini options and futures : Euronext notice (pdf)
Cosmetic changes
Smaller tick increments and light mini options : cosmetic changes won’t make a difference when the transaction fees remain at the current high levels for retail investors. Anyway, the times (and spreads) of the good old future pit won’t come back.
Update July 19
Euronext decided to postpone the introduction of the 1 cent tick size increment. Reason is feedback from members. The original plan was to skip automatic checking of combination orders against implied market prices, to avoid slowing down the trading system. Maybe in 2014.
test
First!
This issue of how exchange transaction cost is well known for retail, rather similar to house advantage against the gambler. Lower costs would help retail volume but only on margin, the core retail crowd in options trading is the gambling sort, they don’t mind the constant bleeding, they are afterall paying for the gambling thrill and occasional small lottery win
What is the source for the 1 cent tick size? Can’t find it in the notice about the mini options/futures…
Rien did a good lobby for the AEX Lights I suppose 🙂
This 1 cent tick size news is true – but not officially released yet.
1 cent tick size is very good news.
More strikes and 1 cent tick size is the reason why i’ve been trading on Eurostoxx 50 and dax options for a long time. But i don’t think i will come back to AEX options. Volume is low compared to those index options…
Quote:
“the core retail crowd in options trading is the gambling sort, they don’t mind the constant bleeding, they are afterall paying for the gambling thrill and occasional small lottery win.”
=>Studies have shown that Retail traders predominantly SELL options. The lottery ticket buyers are not the main group for them. I think professional traders are more engaged in this kind of business. When i watch reported trades on ‘optionmonster i see that buying those options occur in large quantities, so not the small Retail trader.
selling options, collecting theta everyday is very well know behavioral finance weakness, you pick up a dollar everyday and loose your shirt one fine day of the year, yes this very much expected of retail crowd. In the sense of small profit everyday and huge loss one day is mirror of paying for lottery and huge payout one day, but the underlying dynamics of retail bleeding money is what is of consequence, whether through low probability of winning or high probability of loosing.
If Professional traders are making money of less liquid, high transaction cost option trading against high-freq mm, then they are nothing less than a legend. They would be much better served in focusing energy on more liquid products
Quote:
“Lower costs would help retail volume but only on margin, the core retail crowd in options trading is the gambling sort, they don’t mind the constant bleeding, they are afterall paying for the gambling thrill and occasional small lottery win”
This is a very naive statement. Options obviously compete with other products such as CFD’s and turbo’s. If fee structure is not competitive retail goes away to turbo’s or cfd’s. Look at the data, they actually are already moving away.
How can you buy an option for say 0.03, get charged a transaction fee of 0.03 and be expected to come back and trade again??
I don’t believe that options exchanges are responsible for the high transaction costs. It is the broker who demand those high fees. You can’t blame Euronext. Look at the American options exchanges. A Retail trader pays almost the same amount of money.
If you trade with Binck you pay 3€ for one options, if you go to Interactive broker you pay 1.5€.
If the Options Transaction Cost are already so high, how do you explain the retail who trade options? if they are not gambling sort, why else would, as a rational investor, participate in this high transaction cost market where odds are stacked against a high freq options mm?
And what exactly is naive in this line of argument?
Euronext Amsterdam and Paris is a JOKE….Market Markers are asking for for more messages per second in the AEX and the CAC since 2008, NOTHING has been done…I am speechless
Get used to it buddy…the future will be in less messages…….
how are you managing with less messages?
stat arb momentum strategies
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anyone ever find out how much Eclipse lost on that Kospi error last year?
18mio usd give or take
they had to get a family office investor to bail them out
no bonuses this year as a result (or next year most likely) !
how much % of the company did they end up selling?
also, how is tibra going? I heard morale is still very high.
18 mio? thats pretty much their career earnings, poor cunts
tibra is hiring traders with min 5 year experience of oil, precious metals, treasury, stir, etf, itraxx; extremely selective; the trader would have to be pretty washed up to not be able to land any better than tibra after 5 years of trading experience specific to those areas
who is running the house these days that came up with this brilliant strategy
Banks are eliminating trading positions with a vengeance thus you might not get the best in Tibra but I guess there is enough supply of unemployed seasoned traders.
New regulation is also killing trading like never before (SolvencyII, Basel III, Dood-Frank, Transaction Tax, order/trade ratios, dividend arb death with stricter regulation, tax paradises gone, etc.) I am just an outsider who used to work in HFT as Quant but I don’t think is such a crazy idea, now is when employers can get selective or better just close the shop.
alright fella, since you haven’t worked on the sell side nor on the buy side and left the trading altogether, so let’s try get you updated on how things work in real life, what are you doing these days anyways?
banks are eliminating positions since seasoned staff is not worth the cash and there ain’t enough roe to be generated trading in absence of volume, client flow and volatility. It doesn’t mean your unemployed seasoned trader can just walk in some two-bit prop shop and make you millions, if he could do that he would find somewhere with better profit share than tibra, what is it, 30%?
and if there is enough supply of unemployed seasoned traders, what are they doing still advertising, let me guess, praying for some smart trader who is clever enough to make all the money but dumb enough take a low profit share?
why did you leave your job as a quant at hft, not worth the grind isn’t it?
while it’s great to be selective, but you are running a real business here in a real competitive market, you can’t just pull up some far fetched ideas off your ass and hope it’ll work, they wouldn’t have to worry abt closing shop, if this stupidity continues, it’ll collapse by itself
Joost vd Laan (former All Options) passed away two weeks ago, aged 44. RIP
That’s the third after Molenaar and Coehoorn. Scares me.
Tibra run by greedy management. I hear morale is at all time low. No bonuses. Layoff lots of guys few months ago firm wode just to hire “experienced hires” now? They are scrambling and sinking quickly I reckon…
Tibra profit share is 50%
50% of zero is still zero
Eclipse is going strong. No outside investors thank you. And yes, paid bonuses for 2012 after Kospi incident.
Didn’t eclipse drop 15-20 bucks on Kospi, how was that capital hole filled up, how much capital do they have now, what abt revenue, profits and bonus size for 2012?
When did Tibra raise profit share to 50%, wasn’t it 30-35%, is this the new ceo after bhandari who came up with this wonderful solution of 50% share for ‘experienced traders’, what about the min pnl they have to generate before they become eligible for 50%?
eclipse – heard that the partners took the hit.
Tibra has always been 50% go to employees
surely there has to be min there, you can’t expect to generate a buck and get paid half of that?
50% of net profit. after expenses
what is the deal at imc…. or is it whoever sucks up to the bosses most gets paid, like wim den hartog, the clown of goldman
what are you blaming hartog for, blame the game, not the player; you are so smart, why don’t you go become senior exec at goldman and then get hired by rob and suck up to him get paid serious dough?
how much is the expenses at tibra beyond which there is 50% profit share?
Hartog was a clearing guy at Goldman. Not that impressive. He was not part of the investment bank, which would be impressive.
He had a reputation for being cheap very cheap even for a Dutchman. He also was a sales guy only not a trader or manager.
well if it’s easy being the clearing guy at goldman, then do it, stop bitching already, it’s for your wife to be in the time of the month, not you
and there is nothing like ‘cheap very cheap’ and ‘dutch’ in the same sentence, it goes without saying, nothing personal, it’s just cultural
> 50% of net profit. after expenses
Not true. The total bonus pool is 50% of net. Shareholders are employees too and take a large chunk of the bonus pool. So it’s sounds good on paper but not so in reality.
Yes true. Employees get 50% of the net profit. Yes you can be a shareholder and an employee. Ever thought that maybe the really good traders get offered equity as well as a big bonus?
> Yes true. Employees get 50% of the net profit.
Ok, it’s true the way you put it now. All employee’s bonuses combined is 50%. A single trader’s bonus is NEVER 50%. Got it?
> Ever thought that maybe the really good traders get offered equity as well as a big bonus?
Who are they? All the traders I worked with either resigned or were fired. There’s no long service employees left there except founders. It’s not funny – anyone I email to has resigned.
okay, so it makes sense to hire ‘experienced traders’ with 5 years experience if you got no trader left with that kind of experience
when you say 50% net get distributed, how much is the gross-net, i.e. costs?
also when you say bonus pool is distributed, is that discretionary or is there is some sense to connect to individual pnl?
Management is greedy everywhere, duh, usual exceptions apply of course…
Morale is all time low everywhere, duh, usual exceptions apply of course…
Why do you need to reckon? Do a probably analysis on time to default for tibra, use a gaussian copula if you have to include in correlation with I/M/C or AO
I xxxxx M xxxxxx C
IMC
do not write IMC, that’s forbidden!
> when you say 50% net get distributed, how much is the gross-net, i.e. costs?
Costs are high, up to $1M per trader
> also when you say bonus pool is distributed, is that discretionary or is there is some sense to connect to individual pnl?
Discretionary. The method of bonus distribution was not communicated to employees. At least I wasn’t aware of it.
> Costs are high, up to $1M per trader
From whose ass did you pull that from?
In the 2011 financial report, they had 216 employees, $85.3m AUD in expenses, and that includes “Personnel expenses” of $39.3m AUD.
$182k AUD per employee which suggests that it is inclusive of bonuses. So maybe all up you’ve got about $70m AUD of costs (including salaries) which works out to be a bit over $300k in costs per employee. If half of them are traders, then that is $600k per trader, including their own salary.
Exactly right what’s mentioned @12:50am
Tibra 50% payout to employees indeed. Other 50% profit to shareholders.
Except shareholders are also senior employees…and they all work on desks where it’s easier to make cash. So they get about 90% of the “employee payout” as well as the 50% as shareholders..because senior guys decide their own and others’ ratings. Conflict?!?
An Example:
So say €10M profits…(not likely!)
10 employees: 5 senior, 5 jr.
5 senior get €5M in shares
5 senior get ratings of 100
5 jr get ratings of 10
5 senior guys get 910k (plus 1M each as shareholders!)
5 jr guys get 90k (5M/550*10)
1.91M vs 90k for top few vs everyone else.
there is NO inbetween there.
Great for anyone in the cozy inner circle. Discretionary and they will try to give you less because they get more. worse in some offices.
@12:36pm is right too. They use to have senior guys but they all wised up and left to start own or work elsewhere. Only founders left trying to attract more guys w 5yrs experience or young uni grads that don’t get their game.
Doesn’t matter now though. They aren’t making anything. Sinking ship
What is the latest news on the financial transaction tax? Are there some tradingcompany’s going to move to other places to avoid the tax?
> 5 senior get ratings of 100
> 5 jr get ratings of 10
haha if you never saw anyone get ratings in the middle then its no wonder you left – you were probably about to be fired anyway.
@11:45 there is no tax coming
@ 9:32 and that’s based on?
There is already a FTT in cash and derivatives for France and Italy. I send the report myself to Euroclear, @9.32 post dumb comments.
Why these bunch of ignorants are still asking the same stupid question of post @11.45PM
There is no avoiding the tax. If a trader in Switzerland trades french ADRs in NYSE he is liable for tax for the french authorities or he trades french stocks in SIX. The rule covers all market participants independent where they are located. Only market making exception.
The new FTT what they are proposing is not the same as the tax applied in France so there are certain ways to avoid the tax; trade stocks of memberstates which do not participate in the tax(for example Switzerland) en trade de stocks from a location outside the memberstates which do participate(for example Switzerland, UK, Sweden)
“Trade stocks of memberstates which do not participate in the tax”, this is not avoiding the tax!!! this is just stop trading all French and Italian stocks (In the future german + rest EU?), off course if you don’t trade you don’t pay a tax.
“Trade de stocks from a location outside the memberstates”, this is not the current situation for the FTT in France and Italy.
Certainly the EU in the draft of the EFTT don’t have this exception, then there would be business migration from one country to other which they will avoid no matter what, French and Germans will not just give all their financial business to the UK and SW.
There is no FTT on derivatives btw
Example new FTT, a tradingcompany in Amsterdam trades a stock on the Swiss exchange, they have to pay FTT because the company is situated in the netherlands(assuming that the netherlands joins the FFT). If you trade the same swiss stocks in countries(Switzerland, UK, Cyprus) which do not join the new FTT you don”t have to pay the tax, that’s what i mean with avoiding the tax.
You have to pay the new FTT tax in the following situations;
– If your tradingcompany is situated in a state that is joining the FTT, you have to pay FTT for all the trades worldwide, also for stocks of states which ar not joining the FTT
– You have to pay FTT for stocks domiciled in joining countries, no matter where the trades takes places