Globex, stops and fat fingers

M

Mr Subliminal

In order to better understand how limit and stop limit orders work on Globex, I have found the following links to be of help :

http://www.cme.com/get/abtglx/enterorder987.html

http://www.cme.com/get/abtglx/matalgorit965.html

http://www.elitetrader.com/vb/showthread.php?s=&threadid=19650

http://www.elitetrader.com/vb/showthread.php?s=&threadid=10982

http://www.elitetrader.com/vb/showthread.php?s=&threadid=10610

Assume for the moment that my interest lies in a "fat finger" event and not a price shock due to some external event (eg. Saddam etc). In other words, assume for the purposes of this example that for the small delta in time before and after an order to, say, sell 100,000 ES is executed, there are no additional protective measures undertaken by other market participants (how could they know), and the market depth picture stays more or less the same.

Also assume before the button is pressed that :

(a) the market is at 1008.00 X 1008.25, last price 1008.00.
(b) Mr. Fat Finger's (MFF) order is to sell 100,000 ES limit 993.00.
(c) I am long and have a stop limit order (native to Globex) to sell at 1003.00 with a 5 tick limit.

My questions are :

(1) Does MFF's order have priority over any of the pre-existing stops below 1008.00?
(2) Assuming that when it reaches 1003.00 there are still some stops limit orders unexecuted (eg. sell at 1003.50, 5 tick limit), do these have priority over my order?
(3) Assuming no new orders are placed after the "event", who else, apart from (1) and (2) above, can get priority over my order?
(4) Assuming new orders are placed after (and because of) the "event", who else can get priority over me?

I appreciate your replies - however, when answering, please just refer to the mechanics of the system and not to the general philosophy of stop protection against fat finger events given that the price usually quickly reverts to pre-event levels, trades are broken under certain circumstances etc.
 
On globex MFF's order isn't going to come into play untill price hits his limit. It will be noticed by electronic traders , globex, when the market depth released by cme begins to display it. The problem is that the size of the order will throw it over to the pit. Don't remember the rules here but over a certain siize the pit may execute. They will see it and that will alter the landscape. Some body will have to step in with more complete info about that.
 
Quote from Banjo:

On globex MFF's order isn't going to come into play untill price hits his limit.
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Surely not, Banjo. If I sell 5 contracts limit 993.00, they will execute at 1008.00, assuming the bid quantity is greater than 5.
It will be noticed by electronic traders , globex, when the market depth released by cme begins to display it. The problem is that the size of the order will throw it over to the pit. Don't remember the rules here but over a certain siize the pit may execute. They will see it and that will alter the landscape. Some body will have to step in with more complete info about that.
More...
We've had these spikes before. As for the size of the order, assume he presses the "SELL 250 ES" button continuously.
 
Quote from Mr Subliminal:

In order to better understand how limit and stop limit orders work on Globex, I have found the following links to be of help :

http://www.cme.com/get/abtglx/enterorder987.html

http://www.cme.com/get/abtglx/matalgorit965.html

http://www.elitetrader.com/vb/showthread.php?s=&threadid=19650

http://www.elitetrader.com/vb/showthread.php?s=&threadid=10982

http://www.elitetrader.com/vb/showthread.php?s=&threadid=10610

Assume for the moment that my interest lies in a "fat finger" event and not a price shock due to some external event (eg. Saddam etc). In other words, assume for the purposes of this example that for the small delta in time before and after an order to, say, sell 100,000 ES is executed, there are no additional protective measures undertaken by other market participants (how could they know), and the market depth picture stays more or less the same.

Also assume before the button is pressed that :

(a) the market is at 1008.00 X 1008.25, last price 1008.00.
(b) Mr. Fat Finger's (MFF) order is to sell 100,000 ES limit 993.00.
(c) I am long and have a stop limit order (native to Globex) to sell at 1003.00 with a 5 tick limit.

My questions are :

(1) Does MFF's order have priority over any of the pre-existing stops below 1008.00?
(2) Assuming that when it reaches 1003.00 there are still some stops limit orders unexecuted (eg. sell at 1003.50, 5 tick limit), do these have priority over my order?
(3) Assuming no new orders are placed after the "event", who else, apart from (1) and (2) above, can get priority over my order?
(4) Assuming new orders are placed after (and because of) the "event", who else can get priority over me?

I appreciate your replies - however, when answering, please just refer to the mechanics of the system and not to the general philosophy of stop protection against fat finger events given that the price usually quickly reverts to pre-event levels, trades are broken under certain circumstances etc.
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1. Yes

2. Yes

3. Only those unable on stop limits from higher prices than you. i.e someone with a 1004.00stp limit of six points.

4. No One

It's time/price prioritized. FF is first in line till he's done. Then each stop at the higher prices goes next until done. In your scenario you are now a 998.00 offer in the que behind those who had higher unable stops, but ahead of newer offers.
 
Ooops, read it wrong, well those holiday barbeques with too much beer/ wine can certainley alters ones perception, lol.
 
Thanks for the reply, Pabst. So from what you are saying, is it correct to conclude that MFF has priority because his limit is lower than mine? In other words, had I had a sell stop of 1003.00 limit 992.00, my order would have been executed at 1003.00 before his?

Also, which is correct :

(a) An unexecuted stop above me would have priority over my order at 1003.00 if and only if his limit is lower than mine. For example :

My sell stop = 1003.00 limit 998.00, his sell stop = 1004.00 limit 999.00 - I have priority at 1003.00 (and all the way down)

My sell stop = 1003.00 limit 998.00, his sell stop = 1004.00 limit 997.00 - he has priority at 1003.00 (and all the way down)

or

(b) All unexecuted stops above me, regardless of their limits, would have priority over my order.
 
Quote from Mr Subliminal:

Thanks for the reply, Pabst. So from what you are saying, is it correct to conclude that :

(1) MFF has priority because his limit is lower than mine? In other words, had I had a sell stop of 1003.00 limit 992.00, my order would have been executed at 1003.00 before his?

(2) An unexecuted stop above me would have priority over my order at 1003.00 if and only if his limit is lower than mine. For example :

My sell stop = 1003.00 limit 998.00, his sell stop = 1004.00 limit 999.00 - I have priority at 1003.00 (and all the way down)

My sell stop = 1003.00 limit 998.00, his sell stop = 1004.00 limit 997.00 - he has priority at 1003.00 (and all the way down)

or

all unexecuted stops above me, regardless of their limits, would have priority over my order.
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1. Regardless of where your at you're in back of FF. He owns every bid down to 992.00 until he's done.

2. No the 1004's have priority over the 1003's as stops. After the stops are hit, priority becomes re-set as to where they are limited. In other words you are no longer a stop, you are now a limit seller. So a guy irregardless of whether he was higher or lower than you as a stop, if he's now a 997 offer he's ahead of your 98's. Or vica versa. Now the book is recalculated as such.
 
Quote from Pabst:

1. Regardless of where your at you're in back of FF. He owns every bid down to 992.00 until he's done.
More...
Thanks Pabst for your help and patience. However, in the above case, when the market is down to 1003.00, my stop limit is converted to a limit order to sell at 1003.00 with a limit of 992.00, as opposed to MFF's limit of 993.00, so why aren't I ahead of him at 1003.00?

Anyway, it's clear from your answer that a stop will not afford me any protection against a future MFF.

Edit : I just reread your first reply about time/price prioritization and how MFF gets executed till he's done. If this is the case, then disregard my question above.
 
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