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nwinski wrote:
>
> I have taken the liberty forwarding the below inquiry to the RT. I
> think
> this is a good question. But it addresses such a fine point in regard
> to the way the Chicago Mercantile reports trades and prices, and given
> that I never traded on the CME floor, I thought that this would invite
> comments by those who know.
> I hope this is ok with Dan. I will post my best guess when it appears
> on the RT.
>
> Regards,
>
> Norman
>
> ---------------------------------------------------------------
>
> Subject: Re: How is price determined?
> Date: Sun, 01 Feb 1998 19:45:57 -0500
> From: Dan Tillemans <dlt7@xxxxxxxxxxx>
> To: nwinski@xxxxxxxxxxxxxxx
>
> Norman,
>
> I was interested in this question as well. Hope you don't mind if I check
> on a related detail. (I daytrade the full size S&P contract and have
> placed about 65 round turns.)
>
> I use a tick chart that records every "price change" with a dot and then
> connects the dots with a line. Usually the dots are .10 apart, but during
> volatile times the dots move around in .50 increments. Sometimes when the
> market is crossing a significant point I will notice a phenomenon I have
> started to call the "zipper": a vertical line of rapidly advancing dots at
> .10 increments that runs straight up or down for one or two points.
>
> In "West of Wall Street" George Angell talks of certain times when nobody
> on the floor wants to take the other side of the trade and the markets get
> bid up or down rapidly.
>
> My question is this: When the recorders at the S&P pit punch in the prices
> that come across my live feed, are they punching in only prices where
> trades occurr, or might they be punching in a series of bids or
> offers---such as in the case of the "zipper"? If they are including bids
> and offers, do the recorders automatically punch in a higher bid or a lower
> offer as soon as they hear it--even if no trade is made at that price---all
> day long?
NW: My guess is yes to all of the above. The reporters punch in last
prices unless the the market as represented by the bid/ask moves away
from the last price without a trading having been done. But, that is
only my guess based on my experience on the CBOE and CBOT floors.
Now, could we please hear from anyone who has actually traded in
S&P pit or the CME floor on how the price reporting is done?
>
> Sounds like you have traded on the floor and know what you are talking
> about. I did take note of your response to Brent, "...the price can move
> without any trades, as the traders move the bid and ask up and down..."
> Any clarification on what I am seeing in the chart would be greatly
> appreciated.
>
> Thanks so much.
>
> Sincerely,
>
> Dan Tillemans
>
>
> >> Brent
> >
> >Brent,
> > Price is determined by the traders on the floor at the moment that a
> >buyer and a seller agree on a price. You say, "buy 5 march beans at
> >668" and I say "sell 10 march beans at 669". You then say "buy 5 march
> >beans at 668 1/2 and I say, "sold you 5 march beans at 668 1/2". It is
> >at that moment that the price and a trade is determined. Sometimes in
> >thin markets, the price can move without any trades, as the traders move
> >the bid and ask up and down based on some indicator, perhaps a related
> >market, without actually trading.
> > If you plan to seriously pursue trading, I highly recommend you make a
> >trip to Chicago to see the trading floors first hand.
> >
> >Regards,
> >
> >Norman
> >
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