I want to submit 10,000+ messages to CME/day, but not get fined.

A

applejuice

Hi,

I have devised an automated strategy but it requires that my bids and offers are constantly modified. I guess you could call it some sort of niche market making.

In an ideal world, I would probably clock up 100,000 messages to CME during RTH, but 10 or 20,000 would be acceptable. I could live with that.

Technology has moved on far enough, I think, that the modern exchanges can handle billions of order modifications in a single session... so any argument that I am clogging up the systems and making conditions more difficult for other traders... I frankly do not buy.

However, I am aware that CME doesn't take kindly to this, and that there is every chance of a $1,000/$2,000 fine being handed down via my broker to me, if I attempt it.

Is there any way around this? Will a ratio of [10,000 messages : 1 trade] most definitely prompt CME to drop the hammer on me?

The markets would benefit if I was permitted to do this - so please somebody - tell me it can be done?

Thanks,
AJ
 
For most products ratios are between 10:1 and 30:1. It's per product and the CME website has lots of documentation on it. Just search "messaging ratios".

Depending on who your broker is, in the past messages have been aggregated together across many individuals. That is changing very soon.

Also, in the past there has been some unpublished maximum number of messages that you can submit before they even really start counting. Somewhere around 5-10K msg. And some products are much more strict than others. But if you are submitting 100K messages and only getting 10 fills I'm quite sure you'd be in trouble.
 
Quote from applejuice:

Hi,

I have devised an automated strategy but it requires that my bids and offers are constantly modified. I guess you could call it some sort of niche market making.

In an ideal world, I would probably clock up 100,000 messages to CME during RTH, but 10 or 20,000 would be acceptable. I could live with that.

Technology has moved on far enough, I think, that the modern exchanges can handle billions of order modifications in a single session... so any argument that I am clogging up the systems and making conditions more difficult for other traders... I frankly do not buy.

However, I am aware that CME doesn't take kindly to this, and that there is every chance of a $1,000/$2,000 fine being handed down via my broker to me, if I attempt it.

Is there any way around this? Will a ratio of [10,000 messages : 1 trade] most definitely prompt CME to drop the hammer on me?

The markets would benefit if I was permitted to do this - so please somebody - tell me it can be done?

Thanks,
AJ
More...

I don't think the issue is technology. I think the issue is that by doing so, you compete with CME's registered market makers, who pay a nice sum of money to CME in order to deter said competition.
 
Quote from hft_boy:

I don't think the issue is technology. I think the issue is that by doing so, you compete with CME's registered market makers, who pay a nice sum of money to CME in order to deter said competition.
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I can see why it's tempting to think so, but there are very few CME products that have market makers. Mostly options and the ones in this link.


http://www.cmegroup.com/company/files/CME_Fee_Schedule.pdf


Also:

--I've never had to to pay to register as a market maker in similar programs on other exchanges.

--The benefits have always been reduced fees not increased message allocation.

I'm not saying there aren't people who violate message policies constantly and get away with it. I personally know firms that do but the violation is on the scale of using 5:1 for ED futures instead of 3:1 and the mechanism for getting away with it is being on/ having buddies on the board of the CME - not through a market maker program.

In my experience, enforcement of these policies is neither immediate nor absolute - your clearing company usually warns you first. But I don't know if policy has changed as it's been quite a while since I've been a violator.

If you can find a market maker program that allows for an increased message ratio let me know.
 
Quote from applejuice:

agreed 100%
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I'm not sure how you can have the knowledge to be able to agree or disagree. I'm not saying your question is bad - in fact this was my exact same question years ago when I first started mass quoting on the CME. It's a very good question

But if you were a member of the CME or had much experience with their compliance department it would be something you'd know the answer to. So I'm guessing you are not a CME member and as such probably not very familiar with their market making programs either.

I suggest calling the CME and let them know you are trying a new strategy. Tell them the product and your trading hours and see if the number of quotes you are submitting is something they are going to worry about. They are pretty friendly.

Also, you should call your broker and see if messaging ratios are aggregated by gateway or firm wide and how they determine who to fine and what their warning process is.
 
Why ask online? Why not just give your broker a 5minute phone call and ask them what the rules are - or call the CME??

Your thread title says 10,000+ messages but then you say it's 100,000+ messages with only 10,000-20,000 messages being "acceptable".

If you are sending in 100,000+ messages and only 10,000-20,000 are valid/legit that may trade you have to assume that your executions would be much less than 10,000-20,000 executions per day. That sounds like quote spamming to me.

Anything like this is suspect. If you don't have money behind it then it's time to put your money where your mouth is and start trading it. Usually your broker will give you a warning before you get a fine. Just trade it and see what happens. I'd bet that you will get much less than 10k-20k "acceptable" orders and the whole idea will be bust.
 
Just got off the phone with my broker. Well, he's been in the business for 40 years and use to trade in the pits, I don't think he has as much detailed knowledge about this as some of the posters here do, but he has offered to call CME and discuss (Something I can and may do myself).

More likely, I will just go ahead with it and wait until they warn me, as you said.

I remember reading a thread posted on this very forum, by a guy who claimed IB had fined him $2000 for going marginally over the ratio, like 40:1 for his product, nothing major.

He claimed he was not warned at all, which is a scandal if true.
 
Quote from garachen:

I'm not sure how you can have the knowledge to be able to agree or disagree. I'm not saying your question is bad - in fact this was my exact same question years ago when I first started mass quoting on the CME. It's a very good question

But if you were a member of the CME or had much experience with their compliance department it would be something you'd know the answer to. So I'm guessing you are not a CME member and as such probably not very familiar with their market making programs either.

I suggest calling the CME and let them know you are trying a new strategy. Tell them the product and your trading hours and see if the number of quotes you are submitting is something they are going to worry about. They are pretty friendly.

Also, you should call your broker and see if messaging ratios are aggregated by gateway or firm wide and how they determine who to fine and what their warning process is.
More...

Market participants designated by CME Group as Market Makers or enrolled in other Exchange programs designed to promote liquidity may be exempt from the Program or subject to Product Group Benchmarks that differ from the standard Product Group Benchmarks.

(ed: The "Program" referred to, being the messaging cap)
 
Quote from applejuice:



Is there any way around this? Will a ratio of [10,000 messages : 1 trade] most definitely prompt CME to drop the hammer on me?
More...

seems excessive. make sure you're doing modifications instead of cancel/replaces to reduce the messaging. The advantage to the cme market maker programs is prorata for some products and more importantly the ability to send quotes in one message with protection capability.
 
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