IB and new CME Cancel/Modify

[richardyu301]

I hv got confirmation from IB that it is postponed (msg reproduced below):

The CME has decided to postpone the implementation of their new cancellation fee policy (messaging fees) until further notice. _As such, IB will not be implementing cancellation fees for Globex at this time.

 

[squeeze]

Quote from Lawrence Chan:

It seems no one is looking at the bright side of this.

For traders who keep changing their orders again and again with small # of executions, they will be penalized.

And that is the norm for pit trading, those who keep adjusting their orders every few minutes will tend to get their orders ignored and sometimes, the firms will simply ask the customer to take their business elsewhere.

So, that is not much a problem - the small traders just have to deal with it, like any other issues in trading.

Now, take a look at the bigger players who hide themselves behind customized bots that place 500 small orders to fulfill the objective of, in reality, 1 single order.

It is going to cost these players and they will have to rethink their strategies of hidng orders through their bots.

That way, you will see "real size" of the trades.

Based on what we've seen in past 6 months of tick data, it is obvious a lot of the bigger size trades no longer show up in the eminis like ES, NQ, etc. when real-time extremes are hit. If these trades started to show up again, CME's new rule will actually help every one trading these instruments ... except those being exposed

The new CME rules will not have much impact on this sort of algorithmic trading. The message ratios are high enough that the majority of tranching programs will not need to be modified.

 

[Businessman]

Quote from IBsoft:

It seems the CME/GLOBEX is reconsidering some aspects of their new proposal to charge for orders/cancellations. Based on our communications with GLOBEX, it seems likely that they will postpone the implementation of the new fee scheme until at least August 1.

Accordingly, as IB considers the imposition of cancellation fees as essentially a pass through of exchange charges, we will postpone charging for excessive order submission/cancellation for GLOBEX orders until the GLOBEX finalizes the details of their plan.

Does anyone have an update on this?

 

[IBsoft]

Quote from Businessman:

Does anyone have an update on this?

It is delayed until October 1st; the message limits will likely be different from those that were originally announced.

incidentally I have been looking at a user who today executed 78 1 lots on Globex and submitted 16,254 revisions. I would argue that majority of IB customers would benefit from SOME cancellation fees, as they would prevent the overly active customers from burning the existing bandwidth to Globex.

 

[ssternlight]

Quote from IBsoft:

It is delayed until October 1st; the message limits will likely be different from those that were originally announced.

incidentally I have been looking at a user who today executed 78 1 lots on Globex and submitted 16,254 revisions. I would argue that majority of IB customers would benefit from SOME cancellation fees, as they would prevent the overly active customers from burning the existing bandwidth to Globex.

That's an average of 208 changes per trade. It's not hard to imagine an auto-system that updates stops and targets every minute doing that. It only 3.5 hours of updates/trade...

From my perspective automated trading is only going to get bigger and trying to squelch it with surcharges is not smart. I'd route to Eurex if I were in that situation...and they had the product and the liquidity.

 

[IBsoft]

Quote from ssternlight:

That's an average of 208 changes per trade. It's not hard to imagine an auto-system that updates stops and targets every minute doing that. It only 3.5 hours of updates/trade...

From my perspective automated trading is only going to get bigger and trying to squelch it with surcharges is not smart. I'd route to Eurex if I were in that situation...and they had the product and the liquidity.

Yes, indeed and then they would quickly institute the cancellation fees just like they did in Europe.

I agree that the automated trading is going to get bigger. However, the customers who utilize the routing system disproportionately to the income they generate to their broker and exchange through the execution fees/commisions will have to get charged some other way. There is no free lunch.

 

[ssternlight]

Quote from IBsoft:

Yes, indeed and then they would quickly institute the cancellation fees just like they did in Europe.

I agree that the automated trading is going to get bigger. However, the customers who utilize the routing system disproportionately to the income they generate to their broker and exchange through the execution fees/commisions will have to get charged some other way. There is no free lunch.

While I agree that there is no free lunch, $1 is excessive. If you want to monitor and update your orders via an API, you are going to do that multiple times a day under any circumstances. If I do that once every 10 minutes (39x/day from the open) -- which is absurdly slow -- then I am out $39 less the $5 credit just to track my position properly.

That $34/day is around $8500/year just to manage one position. That's robbery!

 

[IBsoft]

Quote from ssternlight:

While I agree that there is no free lunch, $1 is excessive. If you want to monitor and update your orders via an API, you are going to do that multiple times a day under any circumstances. If I do that once every 10 minutes (39x/day from the open) -- which is absurdly slow -- then I am out $39 less the $5 credit just to track my position properly.

That $34/day is around $8500/year just to manage one position. That's robbery!

I agree that the $1 charge combined with the 5:1 execution credit is excessive. (As I indicated earlier, the limits will be different from those originally announced). At the same time though the execution credit should not have to be 208:1, to satisfy the bandwidth-guzzling customer I described. He will very likely have to change his strategy to avoid payment.

 

[ssternlight]

Quote from IBsoft:

Nowhere did I say the charge should be $1 and the credit for the execution should be 5 to 1. (Look at the first sentence of my reply where I say that the limits will be different from those originally announced). At the same time the execution credit should not have to be 208, to satisfy the bandwidth-guzzling customer I described. He will very likely have to change his strategy to avoid payment.

IBsoft,

Go easy.

My comment wasn't directed at you/IB.

It is the CME's math that has me irked. However, as you say we don't now what the full picture is yet so I'll just chill out, have a cool one, and wait to see what comes forth in the next month or so.

However, my real point is that your "bandwidth" guzzling customer isn't really doing anything that unusual for an autotrader. And CME's "offer" to make use of the bandwidth is absurd.

 

[IBsoft]

Quote from ssternlight:

IBsoft,

Go easy.

My comment wasn't directed at you/IB.

It is the CME's math that has me irked. However, as you say we don't now what the full picture is yet so I'll just chill out, have a cool one, and wait to see what comes forth in the next month or so.

However, my real point is that your "bandwidth" guzzling customer isn't really doing anything that unusual for an autotrader. And CME's "offer" to make use of the bandwidth is absurd.

I have changed the wording of my post.