Robert Morse
Sponsor
I don't know how many floor guys there are. We do business with XFA on the CBOE. Wedbush has a trading desk and you can access your own relationships. We have an off floor trading desk in Chicago too.
How do you recognize a commercial trade block?
- Thread starter MarkBrown
- Start date
Thank you for answering my questions Robert.
I just remembered that when I had pit audio from a different company (not Ben) I could clearly hear someone doing really small orders. Maybe this guy handles retail flow if there is any. The guy would yell out in an unenthusiastic manner for example "30 ON 1", "Half ON 1". These were 1 lot orders and no arbing was going on to my knowledge. The only way to shut the guy up would be is if price would move away a few points or on the rare occasion the order got filled lol....
Robert Morse
Sponsor
Not all pit orders are large. I there are a lot of hedgers out there that use brokers and send small orders to be crossed. Just the way they do business, they want two commissions.
Having personally taken part in block trades with respect to commercial energy and having witnessed many in the interest rate markets, IMHO your premise reveals the primary illusion re: block trades as an edge identifier. The executing parties ( let's say GS or MS or BoA or Knight, et al ) are frequently executing orders for institutional clients. So, arguendo just because GS bought 5K ES, does not necessarily mean that the Goldman Sachs proprietary desk is making a bullish bet on the S&P 500 per se. More times than not, they are executing for a client. And to take the logical next step, there is an equally enthusiastic counter party taking the other side of that trade.
As of May, 2016, this is the amount of customer segregated funds Goldman Sachs had on hand:
"13. Total amount in segregation (add lines 7 through 12) $21,431,978,499"
Personally, I would be scared shitless to know who took the other side of my trades. For me, price trumps everything. A block trade, to me at least, simply means two or more parties agreed on a fair price valuation at that space in time. What I am personally much more interested in would be a new price discovery in a new trading range that holds up over time - that tells me that the market has accepted that new valuation and therein the speculator can profit from that information. That's just what I've come to believe over a long period of time, just my 2 cents, YMMV.
Back in the early to mid 1990's, when the CBOT was in the process of giving away the entire enterprise to CME and Globex, the CBOT had an off hour electronic trading system called "Project A". There was a scrolling ticker banner on the bottom of the screen that listed trader's acronym and clearing firm. For example, I was "NUK/325", which meant that I was the local NUK and I cleared Transmarket Group. Now, I was spreading between 2s, 5s, 10s, 30s, and Cantor Fitzgerald cash. And God's honest truth, I would shit Tiffany Cufflinks when I saw that Goldman or Morgan or Bear or Lehman took the other side of my trade. But in the end, the trades worked out more times than not - which is all an honest trader could ask for.
Interesting that you lived through those times. I have no reason to endorse you but I have always thought that your spread trading training program seemed like a good program. I don't blame you for charging what you do, it keeps the riffraff out no doubt. I had no idea you were a Local on the floor in the past. Are there still many spreaders in the "big" S&P pit contract?
I would guess that there are a couple local market makers, but I have no way of knowing. I took on a client in 2010 that was transitioning off the floor from the S&P pit, and have had no knowledge of the comings and goings on since that time. My biggest push with that client was to embrace the opportunities that electronic spread trading presented to the independent speculator, and one of the great memories I had of him was a very nice spread trade he put on in Sugar of all things. It really opened his eyes to the possibilities.
Identifying commercial traders in the ES is not easy, yet not impossible. It certainly is not as simple as setting your time and sales to show >x trades.
Icebergs and HF trades are specifically designed to not show as commercial activity. (Nobody wants another robot fighting with their robot)
Whether a large volume trade takes place in one lot or is broken up it will generate a tradeable reaction on some level which is Mark's point (Newton's third law has not been disproven, especially in the markets)
Of anybody here on ET, Mark you certainly have the computing resources and programing ability to do it.
Identifying commercial activity by micro-profiling trade and dome volume....
T&S based
Trades at bid & ask
Size of trades at bid & ask
Speed of trades at bid & ask
Friction- Range vs trade volume (bid, ask & size) and speed of contracts traded
DOM based - deciphering the spoof or looking for icebergs
Injected vs cancelled bids & asks
Size of injected vs canceled bids & asks
Speed of Injected vs cancelled bids & asks
Icebergs and HF trades are specifically designed to not show as commercial activity. (Nobody wants another robot fighting with their robot)
Whether a large volume trade takes place in one lot or is broken up it will generate a tradeable reaction on some level which is Mark's point (Newton's third law has not been disproven, especially in the markets)
Of anybody here on ET, Mark you certainly have the computing resources and programing ability to do it.
Identifying commercial activity by micro-profiling trade and dome volume....
T&S based
Trades at bid & ask
Size of trades at bid & ask
Speed of trades at bid & ask
Friction- Range vs trade volume (bid, ask & size) and speed of contracts traded
DOM based - deciphering the spoof or looking for icebergs
Injected vs cancelled bids & asks
Size of injected vs canceled bids & asks
Speed of Injected vs cancelled bids & asks
i think this is probably closest to what i'm messing with. it seems to work pretty perfect the way i have the rules setup. i think the main problem with anyone doing this, is just not knowing what it looks like in the first place. once you have been on the commercial side and watched a huge commercial order go into the market you never forget how it looked.
commercials have a long term agenda and what's most important is that they get filled. so they place the order within a defined range. they have always done that even before electronic markets. it always looks simular like tracking an animal. but if you never seen those tracks before you have no idea what your looking at or even have the ability to see that it is a track in the first place because it doesn't fit what you think a track should look like.