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20-50mm size in FX with IB
- Thread starter traderhf
- Start date
Interesting questions. I would agree with others that you should go the prime broker or EBS route if you can. It depends on how you are set up. On these ECNs, the liquidity you see is largely a function of who you are. IB does aggregated bank feeds. Hitting everything at the top of the book is more difficult than you may initially think.
As the order has to be broken into chunks, you are correct that some of the bank pricing engines may back off on their support quotes rather than offering more size after the first chunk of your order is done. Trying to get your trade done against multiple execution venues can be tricky. I think IB is not a long term solution due to breaking those trades up. You may find that you are on effective spreads of 4-5 pips.
Is it feasible for you to establish a credit line with one of the quoting banks and ask for a price in 40 mio? Perhaps it would be more helpful if we had an idea of what you are trying to achieve taking all of this liquidity at the open.
If you understand the order flow in the FX markets you can see where it will take size without moving the price (and likewise for every other market). Perhaps it is better for you to scale in your orders in smaller size over the course of a few minutes, if you can read that the price will not get away from you.
Take a look at the CME FX futures. Most of the liquidity is support pricing by competing banks. If you cross a bank support price you will get done in 180-250 lots most of the time in 6E futures during London session. I do not trade this size myself but I have seen it done. You may have problems getting out if the market is against you and will need to pay up a few points if you've got it wrong. MMs will vary the liquidity they offer based on how their book is balanced.
If the entries are correct you should be able to get 25 mio or so done in one trade on the futures, and scale the rest in before it gets away. There is no size limit in the FX futs (ie 50 lots / 5 mio at a time). The effective spread is usually 1 point. If you cross a support price (ie buy limit at the current offer) you will get quite a bit in one go - you're also first in queue FIFO for the rest.
I would recommend gradually increasing the size and see when you start to get problems with fills. Then consider taking the liquidity in the FX futures also. I think there is a basket trader facility in IB - for example if you wanted to split an order across NQ futures and QQQQ ETF.
As for whether the liquidity provider will see this....it depends on your edge and who you are trading against. If they have sufficient flow on the other side it won't affect them. If you are trading size on very small fluctuations and it is coming out of their book you may notice smaller quotes / wider spreads in time. I've not worked in an institution so I don't have any direct experience of spot FX market making.
As the order has to be broken into chunks, you are correct that some of the bank pricing engines may back off on their support quotes rather than offering more size after the first chunk of your order is done. Trying to get your trade done against multiple execution venues can be tricky. I think IB is not a long term solution due to breaking those trades up. You may find that you are on effective spreads of 4-5 pips.
Is it feasible for you to establish a credit line with one of the quoting banks and ask for a price in 40 mio? Perhaps it would be more helpful if we had an idea of what you are trying to achieve taking all of this liquidity at the open.
If you understand the order flow in the FX markets you can see where it will take size without moving the price (and likewise for every other market). Perhaps it is better for you to scale in your orders in smaller size over the course of a few minutes, if you can read that the price will not get away from you.
Take a look at the CME FX futures. Most of the liquidity is support pricing by competing banks. If you cross a bank support price you will get done in 180-250 lots most of the time in 6E futures during London session. I do not trade this size myself but I have seen it done. You may have problems getting out if the market is against you and will need to pay up a few points if you've got it wrong. MMs will vary the liquidity they offer based on how their book is balanced.
If the entries are correct you should be able to get 25 mio or so done in one trade on the futures, and scale the rest in before it gets away. There is no size limit in the FX futs (ie 50 lots / 5 mio at a time). The effective spread is usually 1 point. If you cross a support price (ie buy limit at the current offer) you will get quite a bit in one go - you're also first in queue FIFO for the rest.
I would recommend gradually increasing the size and see when you start to get problems with fills. Then consider taking the liquidity in the FX futures also. I think there is a basket trader facility in IB - for example if you wanted to split an order across NQ futures and QQQQ ETF.
As for whether the liquidity provider will see this....it depends on your edge and who you are trading against. If they have sufficient flow on the other side it won't affect them. If you are trading size on very small fluctuations and it is coming out of their book you may notice smaller quotes / wider spreads in time. I've not worked in an institution so I don't have any direct experience of spot FX market making.
You can get that limit changed if you contact their trading desk or your rep (if institutional account, and if you are not, you should be at those volume levels) and they can raise your trade limits. If you look at the depth, it should be no problem getting filled for 20MM with minimal slippage.
I trade at this size every day, on multiple venues, and can share these observations:
1) IB's arbitrary limit on the order size in unimportant. Regardless of the size of your order, you will receive partial fills in the 1-2 million range, so it really doesn't matter how big an individual order is. This is true for EBS and Reuters also.
2) You cannot expect to fill this size in under 5 seconds, in a normal market. You are correct that LP's will back off their quotes after they get hit for some amount. If you stick around with your limit order it will often get filled eventually, of course.
3) It is possible to go elsewhere and get quotes for a minimum size, such as 10 million or larger. You will pay a couple of pips on each order for this -- for me that is too much to pay. YMMV.
4) Moving to EBS or Reuters only helps for a few currency pairs. For the rest of the crosses, you are much better off at IB. Currenex is not as good as any of the above usually, but there may be local variations depending on your broker and the time of day which turn out to be pretty good.
5) No matter where you get filled, it will affect the offering prices at all other venues immediately. A few years ago that might not have been true, but the LP's improved their technology.
1) IB's arbitrary limit on the order size in unimportant. Regardless of the size of your order, you will receive partial fills in the 1-2 million range, so it really doesn't matter how big an individual order is. This is true for EBS and Reuters also.
2) You cannot expect to fill this size in under 5 seconds, in a normal market. You are correct that LP's will back off their quotes after they get hit for some amount. If you stick around with your limit order it will often get filled eventually, of course.
3) It is possible to go elsewhere and get quotes for a minimum size, such as 10 million or larger. You will pay a couple of pips on each order for this -- for me that is too much to pay. YMMV.
4) Moving to EBS or Reuters only helps for a few currency pairs. For the rest of the crosses, you are much better off at IB. Currenex is not as good as any of the above usually, but there may be local variations depending on your broker and the time of day which turn out to be pretty good.
5) No matter where you get filled, it will affect the offering prices at all other venues immediately. A few years ago that might not have been true, but the LP's improved their technology.
Quote from traderhf:
After this behavior for 20 days, will liquidity providers take out liquidity and widen spread as soon as I hit 10-15 mm?
Um why dont u just play around with the market makers?!
If this pattern starts to happen whenever you buy, then sell one block first, wait for them to pull liquidity then reverse and buy and fill your order. This way you will get better execution then if you were just new to the market and no one was front running you yet.
Dukascopy routinely shows half a yard volume on eur.usd. Not sure if it's deal-able or redundant quotes.
Quote from Blotto:
As for whether the liquidity provider will see this....it depends on your edge and who you are trading against. If they have sufficient flow on the other side it won't affect them. If you are trading size on very small fluctuations and it is coming out of their book you may notice smaller quotes / wider spreads in time. I've not worked in an institution so I don't have any direct experience of spot FX market making.
Am i wrong or this sound like there is no anonymity in orders we are
sending and they see who is hitting the bid?
Quote from braveheart2008:
I wiil/can answer your question in 10 years.
I means talk to the ICAP directly £¬just like you are a bank corporation not a individual . ICAP may guide you next move.
with 10m per trade size £¬they will treat you VIP.
Braveheart, they won't treat you like a VIP, they will treat you like shit. Better to have lines with 15 banks and when you want to do size, have everyone in your room help you get down the trade at the same time.
does it help using aggregated Forex platforms like
-CAX FX
-Milan
-Dukaskopy
?
(Dukaskopy has this liquidity model:
http://www.dukascopy.com/swiss/english/forex/swfx/liquidity_business_model/
connected with hotspotFXi, Currenex, LAVA, Banks, Traders, other ECNs)
any suggestions?
-CAX FX
-Milan
-Dukaskopy
?
(Dukaskopy has this liquidity model:
http://www.dukascopy.com/swiss/english/forex/swfx/liquidity_business_model/
connected with hotspotFXi, Currenex, LAVA, Banks, Traders, other ECNs)
any suggestions?