Futures market fail at TOM
So far for the dogs and gods, back to trading. The alternative exchange TOM has captured a large market share in the options market. Especially in the short term index options, Euronext Liffe lost more than half of their flow to their rival.
Futures underlying for options
Monthly options on the AEX index are usually priced with the corresponding future contract as reference price and as a hedge for traders. The volume in the future market is substantial, so there’s a lot of opportunity to grab for Willem Meijer and his firm. Even on very quiet days the volume rarely drops below 15.000 future contracts traded.
Future market at TOM deserted
The index future market on TOM opened on November 11th this year. The FTI futures are called XNLF at The Order Machine. However, what a surprise. The experiment with futures turned out to be a failure, with an open interest of only 69 contracts after three weeks. This means the real process of price discovery still happens at Euronext Liffe and the trading doesn’t migrate as easily as the option market did.
Latency issue
Playing copycat works as long as latency isn’t relevant, and connection with all traders worldwide is not required. Suppose this is a painful experiment for TOM. Apparently they can’t be seen as a serious exchange. Maybe the automatic order flow from the Binck and Alex customers is making them lazy. At least some razor sharp competition is still lacking among exchanges.
In contrast – the DeGiro online broker is routing everything to the good old Euronext Liffe. Charging their customers a fraction of the Binck fees.
why is TOM successful with options and not with futures? Any idea?
Options are static products, futures algo strategies
what explanation is this? Most options are traded by MM algos and prices change continuously
futures flow is institutional and not headed to tom where as option flow is retail and headed to tom?
Unlikely that in eu there is so much retail option flow, in us this theory could be valid
so if both option and futures flow is from same institutional, they are being routed in two different venues? or is it dependent on which instutionals are very heavy in futures and not using tom and which institutionals are heaving in option and already using tom?
because options can be calculated and priced to a higher degree than futures. options are a much more complex derivative.
arbitrage opportunities, spreading advantages, and HFT profit potential is much more evident in options than futures.
DeGiro is cheap, but frequently doesn’t work at all. Buggy website, buggy helpdesk.
Today tried to sell a weekly AEX call. Was long the DEC FTI future.
Bug. No transaction. Helpdesk responded after an hour, when market dropped already.. penny wise, pound foolish.
Yeah, heard similar stories. Not a reliable broker for trading, this DeGiro
execution quality is much much more important than transaction cost, lse vs chi-x was another such example
the logic that there are more opportunities in options due to pricing is bs, there are more opportunities in options simply because of wider bid-offers and lesser number of participants compared to simple futures market, the spread in future is razor sharp with excessive number of participants, is that why perhaps option participants being small have migrated, but the large number of futures participants care so much about the execution quality and not tiny little transaction cost?
can somebody at TOM give an answer to the first question? It would be a very bad sign if TOM management does not know what’s going on
Calm down fella, which one is the first question?
Agree with 2:50
Tom only excecutes orders from Binckbank. This is mainly retail order flow. Small investors use options, but not much futures.
as always retail getting shafted by wide bid-offers, hopefully they are at least not short options and risking getting killed on a large move
‘Small investors use options, but not much futures’
why is TOM then not creating their own futures with smaller notional for retail investors and perhaps also the others? Small is better than big for an exchange and will lead to more transactions and volumes.
why do you need smaller futures when etfs already exist for retail?
because ETFs are by construction more expansive and less efficient (just think about management fees and rebalancing) , the concept of futures is much more beautiful if you think about it. It is true that small futures might cannibalize ETFs but an exchange not trading ETFs should not care about this
how do you mean expansive, etfs can be very sector focused etc?
mgmt fees in etf vs rollover cost in future?
rebalancing = tracking error, not end of world?
futures of course provide lot more leverage, but even the bloody e-mini’s is like 100k, what’s the reason why exchanges can’t go 10-20k cash delta on future contract, too much hassle for not enough volume?
There’s ETFs and CFDs. With that no one needs smaller futures.
People who trade too small to trade normal futures don’t care about management fees of 0.2% in an ETF. They do care about not having to roll over positions every month or quarter.
There were (are?) small options on the AEX, but the interest in those was pretty much 0. Only a few small time investors would want to trade that. Anyone who trades slightly bigger won’t touch these things because the transaction fees per contract stay the same, so the transaction costs multiply compared to normal options.
Small options and futures have been reintroduced by Euronext. Search this site for AEX Light, I remember. Don’t know about any trading volume in this products.
http://www.amsterdamtrader.com/2013/07/aex-1-cent-tick-size-and-return-of-aex-light.html
so transaction cost and the volatility is unch for smaller size contract and no market maker is going to touch them, so obv retail have no-one to trade this against, oh well, back to etf and cfd