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

From experience, I'm pretty sure they will issue a warning/fine for this behavior and I do support their decision in doing so.

You said that your algo would benefit other market participants but that's just not true, when push comes to shove, I'm pretty sure you will not be able to absorb thousands of contracts to provide liquidity when needed.

Worse, if they were allowing excessive message ratios to go unpunished, cost for all other market participants would go up (bandwidth, networking gear, ticker plants, etc.)
 
If you are trading RTH and your products have a benchmark, no way they will let you trade 10000/1. And they are right to stop you...

However, if your product have no benchmark( oats, lumber, palladium, e mini MSCI EAFE...) or you are trading at night on benchmark products, it is possible that you get away with it. IB shut one of my systems in 2010 for trading metals with a 250/1 ratio in the overnight session, but it was due to IB policy. I was totally compliant with exchange rules.

And by the way, the ratio is calculated per FCM , so if your firm has a lot of market takers, perhaps it will average your exorbitant ratio.
 
Quote from marketsurfer:

Huh, am i in a time warp? Isn't this known as HFT? The collocated guys will eat you alive.

surf:confused:
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If he were quoting inside market that would be totally true. He'd get killed. But then he wouldn't have to worry about message rates. You can get away with quoting outside the market and make money without being collocated.

Yes, IB will fine you with no warning. And the fine is per contract which can add up quickly. Proactive communication is not their strong point.

I also think msg ratios are good. Thankfully, since the futures exchanges have near monopolies on their products they are able to create rules like this without fearing competition from other exchanges catering more to HFT. Ironically, this actually benefits futures HFT players by keeping costs more reasonable.

The equipment/bandwith required to parse equity feeds that have no such rules is much larger.

I encourage you to press onward and try it out. Rules are there to prevent people from doing things they want to do. Since they had to create rules about it, obviously then there are benefits to updating quotes very frequently. So if you are continually operating in grey areas of the rules it's likely you can turn a profit.

For example all you have to do is look at all the crazy exchange specific order types and execution rules on any of the stock exchanges and it's pretty much a roadmap of how to create HFT algos that take advantage of flaws in the system / uninformed traders.

And then as you progress and find collocation makes things better you'll find that the CME is one of the easiest exchanges to collocate with. Depending on who you go with you should be able to get a 1U server in Aurora for around $500/month. That's cheaper than what you'll have to pay for the execution provider (TT, RTS, Orc, etc). Just the guarenteed power and network stability are worth far more than that.
 
Quote from TraDaToR:

If you are trading RTH and your products have a benchmark, no way they will let you trade 10000/1. And they are right to stop you...

However, if your product have no benchmark( oats, lumber, palladium, e mini MSCI EAFE...) or you are trading at night on benchmark products, it is possible that you get away with it. IB shut one of my systems in 2010 for trading metals with a 250/1 ratio in the overnight session, but it was due to IB policy. I was totally compliant with exchange rules.

And by the way, the ratio is calculated per FCM , so if your firm has a lot of market takers, perhaps it will average your exorbitant ratio.
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Interesting to hear IB shut you down. I was running similar ratios with them - even during the day and was always afraid of getting fined or shut down. Luckily, that was in the early days of the Policy so the exchanges weren't enforcing it (and apparently IB wasn't much either). Thankfully, it sounds like I got off of IB in time before they started cracking down.

Originally, the ratio was by FCM, then it turned to Gateway and in a month or two it will be at Firm/user level. (There was some CME bulletin about this a few weeks ago.) There's a huge regulatory push for the Exchange/SEC to know at all times exactly who is trading and how. So the exchanges have been pushing the FCMs hard to make sure orders all include this information and that it's accurate.


for OP
10,000 to 1 seems like a pretty bad idea to start with. If you can't make money using at most 100 to 1 you might want to revisit some of your assumptions.
 
Quote from garachen:

Originally, the ratio was by FCM, then it turned to Gateway and in a month or two it will be at Firm/user level. (There was some CME bulletin about this a few weeks ago.) There's a huge regulatory push for the Exchange/SEC to know at all times exactly who is trading and how. So the exchanges have been pushing the FCMs hard to make sure orders all include this information and that it's accurate.
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I didn't know it had changed. Good to be up to date. Thanks.

One other exchange where you really need to respect the policy is IPE. One day I tried to trade Gasoil with the same kind of ratios, I got a call after 2 hours from IB. "Can you please stop this?"
 
Quote from garachen:

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.
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Thanks for the info. The reason I thought that way is because when I got a similar message some weeks ago, I did some googling and came across this document: http://www.cmegroup.com/globex/files/CMEMessagingProgram.pdf, which led me to believe that market makers can somehow get special treatment on this issue.

EDIT Oh, I never actually got the message from CME, the message came from IB.
 
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
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when the system goes down on a big move because it's overloaded with jerks like yourself and you can't get in to get out of a loss,it will be a lot more than 2k
 
Quote from TraDaToR:

I didn't know it had changed. Good to be up to date. Thanks.

One other exchange where you really need to respect the policy is IPE. One day I tried to trade Gasoil with the same kind of ratios, I got a call after 2 hours from IB. "Can you please stop this?"
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Sounds to me like you should be moving away from IB. If you trade a lot (and it sounds like you do) their fees are very high. And it sounds like they are preventing you from doing good stuff.

Gasoil is a wonderful contract. So are almost all of the crack spreads which for some reason IB doesn't permit people to trade.

At even a few hundred contracts a day it totally makes sense to move away from IB.
 
Quote from ammo:

when the system goes down on a big move because it's overloaded with jerks like yourself and you can't get in to get out of a loss,it will be a lot more than 2k
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Serious? The CME going down from over messaging? Do you not have a sense of scale? The CME processes many orders of magnitude fewer messages than a stock exchange. I've never once seen the CME go down from over messaging. Not only that, they have the extra computing bandwidth to calculate 2nd and 3rd generation implied prices throughout the entire energy complex even during the flash crash. The are *seconds* where I'll do 100-200 trades.

That's like my wife saying that I bought the expensive yogurt today so we can't afford a car anymore.

If you said LME - that's a totally different story. That exchange goes down if you breath on it.
 
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