Well, we’ve seen this movie before. The CME changes the way it defines a “trade” and our tick chart settings need to change.
The last time this happened was in October 2009 when the CME decided to un-bundle trades. The result was the average trade size went from approx. 11 to 5 contracts (see the chart above). And my tick charts had to be changed from a 233/699/2097 combination, to the current 500/1500/4500 ticks.
At the time, we were all worried that:
“The Professionals / ‘vested interests’ have succeeded in degrading the information that retail traders receive. Previously, if a Professional executed a 500 contract trade, I could see it and tell it was Smart Money taking a position. Now, that 500 contract trade is broken down into say ten 50 contract trades. I have lost or have less visibility of the Smart Money action.”
In practice, the average trade size still “spiked” when Professionals stepped in and so Better Pro Am was still able to detect Professional activity. So maybe a storm in a tea cup?
MDP 3.0 is coming to a data feed near you …
Now it looks like the CME are reversing direction and going back to bundled trades!
At the end of 2014, the CME released a new data feed protocol called MDP 3.0. All data providers need to switch to this new protocol by October 2015. After that, the old CME data feeds will be disabled.
In this new data feed, trades are “bundled” and attributed to the “aggressor”. So if a buyer steps in and picks up 3 orders each of 5 contracts sitting at the Ask, this will be shown as: 1 trade for 15 contracts done at the Ask. Previously, it would have been 3 trades each for 5 contracts done at the Ask.
However, the individual trade data will still be transmitted in the MDP 3.0 data feed!
So data providers have a choice, whether to show the new bundled trade data or manipulate the CME data feed to split out the individual trades. And some providers are taking different approaches. Here’s the current state of play for a few of the data providers:
CQG has already cut over to the new data feed with bundled trades and average trade size for the Emini has increase by a factor of approx. 3
DTN IQFeed and Rithmic have both announced they will distribute un-bundled data
TradeStation have announced they will cut over to the new feed in August 2015 but whether this is bundled or un-bundled is not clear yet
I’ll update this list as more information becomes available. Plus recommend any changes necessary when using the ‘Better’ indicators. For traders using CQG data you might try using a 150/450/1350 tick combination instead of the usual 500/1500/4500.
And for a more detailed discussion of the issues, check out this thread on Big Mike’s Trading Forum or add comments to this Google+ post.
Hopefully TradeStation will make a formal announcement on what they plan to do. But in the meantime, this is the chart I’ll be watching closely (average trade size, Emini daily). Any large fluctuation in average trade size will indicate the data feed has changed.
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