Frequent cancelling of limit orders

[guru]

For any particular stock, cancelling/reordering max. few times per minute. However, I'm considering applying the same strategy for multiple stocks simultaneously, so combined it might be 100 stocks, and for each might need to cancel/reorder a couple of times within a 5-minute window, for example. This should be ok?

About spoofing - it means cancelling the order when the market starts to move your way and you risk getting a fill, correct? Notice that I'm kind of suggesting the opposite here: all the orders are meant to be filled, and cancelling/reordering only if it looks like I'm not getting filled quickly enough.

What’s illegal is market/price manipulation, where you’d try to trick others into thinking you’re a large buyer wanting to buy a million shares, but then you’d either cancel or change your orders. I think. The SEC can try to prove market manipulation regardless how’s its done, but as long as you’re just trying to buy or sell shares and only scalp them at a good price then you should be ok.
Here is a sample SEC case:
https://www.sec.gov/news/press-release/2019-216

 

[Tradex]

where you’d try to trick others into thinking you’re a large buyer wanting to buy a million shares, but then you’d either cancel or change your orders.

My dear friend, that's PRECISELY what HFT algos are doing every single day.

 

[guru]

My dear friend, that's PRECISELY what HFT algos are doing every single day.

True, and that’s why retail traders complain they aren’t allowed to do the same. You know what happened to the guy who tried, Navinder Singh Sarao, right?

 

[Tradex]

You know what happened to the guy who tried, Navinder Singh Sarao, right?

How can we forget?

Big money will always protect big money, never the retail (dumb money for them) traders.

 

[qlai]

Extrapolating the above, is it legal for a retail trader to program a system that automatically places limit orders, cancels them shortly and/or adjusts them as needed?

Perfectly legal. The rate depends on broker and exchange. Sometimes broker will require you to have minimum fill rate - for example 3% of all orders should be filled. Most exchanges allow you to use cancel-replace orders which are faster and may not count as cancels.

 

[NinaB]

How many are you planning on cancelling and reordering per minute? Per second?
I would say unless it's thousands like spoofing then there's no problem

I was worried about this lol! I cancel a few trades a day and get paranoid that my broker thinks i'm doing something tricky! phew

 

[traider]

If you are cancelling or amending manually, it is really hard to hit the limits. HFT does this 10000000000x faster.

 

[Kernel007]

What’s the idea of cancelling and placing such small increment orders within a minute? Is your algo benefiting from that small change in the fill price within that minute? Just curious

 

[ValeryN]

I'm new to trading and especially automated/algorithmic trading. However, I have some programming skills and have been thinking about experimenting with some strategies.

A couple of questions regarding rules/law:

First, can one place a limit order to buy a stock, cancel the order quickly if it does not get filled, and then immediately place a new limit buy order at a slightly different price? Are there any rules to how often this repeated cancelling and placing can be done? The purpose of this procedure would be to get a liquidity adding limit order to be executed as quickly as possible (i.e. at a better price than current ask).

Extrapolating the above, is it legal for a retail trader to program a system that automatically places limit orders, cancels them shortly and/or adjusts them as needed?

I wasn't sure and discussed this with IB support and they said that for SMART orders they don't charge any fee for cancel or modification of LMT orders via API for equities, no matter how often it's done.

If you directly route to exchange - they WILL charge you. There is pricing on IB's website. It sounds like you probably already figured it out. You get credits for the ones that actually executed.

Watch out for orders that can't be cancelled because already filled. It can happen during high volatility. Let's say you didn't get an order update of execution yet but order is already in non cancellable state.

Val

 

[Edwin Lefevre]

I had a similar problem recently and ran into problems on the ES when constantly quoting and modifying away from the inside market. I received a few messages to stop as I was breaking messaging ratio rules.

To work around this I'm trying to continue quoting away from the market but use a Limit if touched order. Therefore the quoting only becomes active when the price reaches the quoted level.

I have also added a Fill or Kill on top of that to ensure that I get filled instantly.

I'm still to test this properly - It really comes down to how fast the LIT order can react and become active during quick price movements. Unlike constantly quoting where I was sure of getting filled.