How does IB implement a simulated stop order on Globex?

Steveyd · Jan 3, 2007

From what I have read Globex accepts STOP LIMIT orders only. IB simulates the STOP (market) order. How does IB implement this? Is any part of the order submitted to the exchange before the trigger? I am interested in the ES and ER2 futures products.

MajorUrsa · Jan 3, 2007

Quote from Steveyd:

From what I have read Globex accepts STOP LIMIT orders only. IB simulates the STOP (market) order. How does IB implement this? Is any part of the order submitted to the exchange before the trigger? I am interested in the ES and ER2 futures products.

I don't understand your question. They have your order on their own servers and when the trigger is hit they send a market order, I think. Just as the exchange would do when they would support the order.

Ursa..

Steveyd · Jan 3, 2007

Quote from MajorUrsa:

I don't understand your question. They have your order on their own servers and when the trigger is hit they send a market order, I think. Just as the exchange would do when they would support the order.

Ursa..

IB simulates Market Orders too for Globex:

http://www.interactivebrokers.com/en/trading/orders/market.php?ib_entity=llc

So if they "send a market order" as you propose, then what do they actually send? "Market with Protection" is how Globex implements a market order (http://www.cme.com/trading/get/abt/enterorder987.html), which would not guarantee your order is completely filled in the case of an extreme market event.

What are most people using now on IB for Globex emini stops: STOP or STOP LIMIT orders?

MajorUrsa · Jan 4, 2007

Quote from Steveyd:

IB simulates Market Orders too for Globex:

http://www.interactivebrokers.com/en/trading/orders/market.php?ib_entity=llc

So if they "send a market order" as you propose, then what do they actually send? "Market with Protection" is how Globex implements a market order (http://www.cme.com/trading/get/abt/enterorder987.html), which would not guarantee your order is completely filled in the case of an extreme market event.

Ok, I understand now. Didn't know Globex didn't do market-orders.
I guess they buy at the Ask for the amount wanted, and scale up when not filled completely.
I don't think they make use of any special order-type of the Globex. IB often emulates most ordertypes in realtime and does a good job at it.
Sorry, can't help you any further.

Ursa..

SideShowBob · Jan 4, 2007

There is a slight difference -- with a simulated stop the order does not reside at the exchange -- so if IB lost connectivity to GLOBEX your order would not fill. Also, you get put into the queue when your stop trigger hits, so anyone already there will get executed first, possibly at a better price. An alternative is submit a stop limit order (which is native) where the limit price is a point or two away from the stop price (above the stop price for a buy order, below for a sell order). In most cases you would get filled, but a gap could of course prevent you from getting filled at all (say if the fed does a surprise hike/cut).

Steveyd · Jan 4, 2007

Quote from SideShowBob:

There is a slight difference -- with a simulated stop the order does not reside at the exchange -- so if IB lost connectivity to GLOBEX your order would not fill. Also, you get put into the queue when your stop trigger hits, so anyone already there will get executed first, possibly at a better price. An alternative is submit a stop limit order (which is native) where the limit price is a point or two away from the stop price (above the stop price for a buy order, below for a sell order). In most cases you would get filled, but a gap could of course prevent you from getting filled at all (say if the fed does a surprise hike/cut).

That, indeed, is the trade-off. Under normal market conditions, one is unlikely to see any difference in results between the two methods. Under extreme market conditions there is no way to know which method would yield a (better) fill.