LMAX price advantage measurement

londonkid said:
Well yeah. Placing a limit order with a dealing desk is essentially a buy(sell) stop in a synthetic 'market'. Placing a limit order with a genuine ECN is totally different. Dealing Desks are still doing very well in the UK from retail customers. I don't think these days are disappearing very quickly but LMAX is definitely an improvement for the retail trader.
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Well, the term "ECN" doesn't mean much. Dukascopy, which is a fabulous and well-respected Retail brokerage, says it has an "ECN". But when you try and find liquidity inside the spread, sadly, it's not there, because your only "retail counterparty" is some Dukascopy brokerage client. The success of LMAX from my perspective depends upon attracting "normal retail" traders using "market orders", which increases the size of the "retail" liquidity pool against whom I can transact, as a "mini market maker". If everyone in the market is a Bank Market Maker type, then there are no retail participants using "sloppy" trading techniques who can be my counterparties, and give me fills. But I just love the idea that I can take a small portion of liquidity "from under the noses" of the Big Market Makers, due to the fact that LMAX is a fair exchange and permits me to compete ! Sure, it's "small potatoes" but for my trading operation it can be significant.

HyperScalper
 
Here's a Long Scalp during extremely slow market conditions, so we see less
price improvement than at other times. Some small "nibbles" in partial fills also
show up. As liquidity dries up in slow markets, our pricing is closer to full retail as you can see.

Code: 
11-20 18:14:26.662 GBPJPY BUY B* (0.0)  wPI: 0.00 qty: 0.01m @ prc: 185.27 ask: 185.27 LMAXoid: AAGJJQAAAAJl30ZA
11-20 18:14:36.033 GBPJPY SEL *S (0.0)  wPI: 0.00 qty: 0.01m @ prc: 185.258 bid: 185.258 LMAXoid: AAGJJQAAAAJl30aP
11-20 18:17:15.000 GBPJPY BUY B<<<<<* (6.0)  wPI: 6.00 qty: 0.01m @ prc: 185.231 ask: 185.237 LMAXoid: AAGJJQAAAAJl30id
11-20 18:17:15.202 GBPJPY BUY B<<<<<<<<* (9.0)  wPI: 9.00 qty: 0.01m @ prc: 185.215 ask: 185.224 LMAXoid: AAGJJQAAAAJl30uI
11-20 18:18:36.986 GBPJPY BUY B* (1.0)  wPI: 1.00 qty: 0.01m @ prc: 185.177 ask: 185.178 LMAXoid: AAGJJQAAAAJl31qP
11-20 18:39:57.819 GBPJPY BUY B* (0.0)  wPI: 0.00 qty: 0.01m @ prc: 185.11 ask: 185.111 LMAXoid: AAGJJQAAAAJl37dX
11-20 18:41:46.078 GBPJPY SEL *>>>>S (5.0)  wPI: 5.00 qty: 0.01m @ prc: 185.2 bid: 185.195 LMAXoid: AAGJJQAAAAJl37+u
11-20 18:54:26.121 GBPJPY SEL *>>>>S (5.0)  wPI: 5.00 qty: 0.001m @ prc: 185.235 bid: 185.23 LMAXoid: AAGJJQAAAAJl3+Js
11-20 18:54:30.134 GBPJPY SEL *>>>>>>S (7.0)  wPI: 7.00 qty: 0.001m @ prc: 185.235 bid: 185.228 LMAXoid: AAGJJQAAAAJl3+Js
11-20 19:06:25.631 GBPJPY SEL *>S (2.0)  wPI: 2.00 qty: 0.008m @ prc: 185.235 bid: 185.233 LMAXoid: AAGJJQAAAAJl3+Js
11-20 19:07:17.985 GBPJPY SEL *S (1.0)  wPI: 1.00 qty: 0.01m @ prc: 185.252 bid: 185.251 LMAXoid: AAGJJQAAAAJl4Avm
11-20 19:07:19.633 GBPJPY SEL *>>>S (4.0)  wPI: 4.00 qty: 0.01m @ prc: 185.266 bid: 185.262 LMAXoid: AAGJJQAAAAJl32M9

LMAX-First-Testing-Trade-Annotated4.PNG


HyperScalper
 
Nice thread... but remember that LMAX ask 25$/M trades on standard account and i think that marjor key it's >>right direction trades<< !! :) because trade inside price without trade direction .... be careful !
 
Surfeur said:
Nice thread... but remember that LMAX ask 25$/M trades on standard account and i think that marjor key it's >>right direction trades<< !! :) because trade inside price without trade direction .... be careful !
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Good point, trades cost commission and there's always an "opportunity cost" just to enter the market. So "over trading" without good "analytics", just "randomly" is a big big mistake for any trader. Analytics for micro scalping are very different from those in other styles of trading, just as order entry technique is very different.

Avoiding over-trading is true for micro scalping (with micro trend analytics), as much as other styles of trading. So my approach is always to trade in the direction which my Technical Analytics determine, and not just "flip a coin" !! Each entry is taken on a slight pullback to maximize micro price improvement, but the most important part is to be trading "in the right direction" or you will be Toast ! Very good observation. HyperScalper
 
I wanted to show that there are really two ways of using a "fast" exchange, such as LMAX to obtain a "price advantage". We've been discussing placement of limit orders outside the market, below the Ask/Offer to Buy and above the Bid to Sell. This approach requires the trader to "wait" for liquidity inside the spread, and if price is moving in trend direction, often there are more Buyers than Sellers, so if you are chasing a Long entry, then often you are not filled if you just move to "Best Bid".

The reason for this is obvious, that if you are Best Bid, then you need a Seller as a counterparty to your transaction. If the market is rising, most retail players are probably Buying, rather than Selling. So trying to "chase" your way into the market but using Best Bid or "inside the spread" techniques is probably going to result in your getting No Fills, and the market just runs away from you.

With a colocated server, where the delay times from the servers, LMAX servers in this case, it is possible for the software platform to "react" quickly to price changes. Thus, if you do want to Buy but the market is rising, the software can monitor "snap pullbacks" in the Ask/Offer price, and then strike Aggressively to the Ask plus a small delta in price to ensure you get in. Also, a Market order would do the same thing, but if you use the Limit orders to strike at the Ask, then you are somewhat protected against buying at too high a price.

The following graphic illustrates the two techniques, and both techniques are required in a practical trading system. The question is really when to use 1) Bidding inside the spread, versus 2) Aggressively entering the market because you want a Fill ASAP. The sheer speed of the exchange, like LMAX or even Dukascopy, which is quite fast, can allow you to get "price improvement" in a "reactive way" and be sure to get into the market fast, when your analytics anticipate a Breakout or a Breakdown in the market.

WholesaleFillsAndPricing.png


Hope this helps, and Good Trading !
HyperScalper
 
This thread has gotten me interested in LMAX. Could you share what types of commission and data costs you incur using LMAX? I am particularly interested in how much they charge for FIX data, and their website doesn't offer any details on costs.
 
IAS_LLC said:
This thread has gotten me interested in LMAX. Could you share what types of commission and data costs you incur using LMAX? I am particularly interested in how much they charge for FIX data, and their website doesn't offer any details on costs.
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I'll just chime in briefly because these data are using the Java API. LMAX wants a $10k equivalent account if you use them as the broker. Everything is negotiable, however, so we started with only small funding, as we needed to develop S/W and to evaluate the liquidity claims, and also wanted to develop the software against Live data. (they charged us a small amount, pre-funding, but we had access to the Live feed.) There are IB's "introducing brokers" to LMAX which will allow trading with an API platform (devil is in the details) , who accept smaller account balances. But this is a "pro" exchange. There is a reasonable minimum of volume required every month, but it is not that much to avoid the reasonable API fees. I do know the FIX is more complex, and there are others (volpunter maybe?) on this forum who could tell you about that, since I haven't used it yet. I get plenty good enough performance for my needs, multi-threaded with the Java API for right now. Commissions are reasonable, competitive and probably negotiable as well. Executions flawless (it may be my software which has a few bugs, but the LMAX exchange is astounding for a retail venue). I could measure order turn-around latencies but haven't done that yet. Running from a U.S. location has network latencies far slower than our European dedicated server, of course by an order of magnitude. I have said that unless you are a "specialist trader" there may be no particular "edge" provided by LMAX, but if you are a scalper or dependent upon fast executions, tight spreads, ability to strike from both sides of the market simultaneously, without restrictions, then LMAX is most definitely worth the trouble. No real data costs that I can see, given reasonable trading volume, plus disparate geography, multiple simultaneous logins don't seem to have any restrictions at all.

Good Trading !
HyperScalper
 
Here is their live Book, and it is fascinating to see how each participant, no
matter how small their order quantity, is represented on what appears to me
to be a completely transparent and fair level playing field. My tests bear that out
as well. So LMAX has passed our testing requirements with flying colors, now that
I've had this week to thrash it and wring out my bugs.

https://s3-eu-west-1.amazonaws.com/lmax-widget3/website-widget-vwap.html

HyperScalper
 
LMAX has this rule concerning withdrawals :
--Funds can only be sent back to the account that the funds originated from using the same method of
transfer.

That's a deal breaker for me.
 
fxwannaB said:
LMAX has this rule concerning withdrawals :
--Funds can only be sent back to the account that the funds originated from using the same method of
transfer.

That's a deal breaker for me.
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Yeah, well my understanding is that this is AML "Anti-Money Laundering" standard procedure. My guess is that arrangements can be made once you're a "trusted client" to establish other withdrawal methods, but that's only a guess. There's no getting away from this KYC "know your client" and AML stuff, since it's increasingly everywhere. I looked into a Cook Island Trust, and even they are complying with AML and KYC and FATCA and all of those regulations being imposed worldwide... Depressing but then, I'm not doing anything illegal ;-) HyperScalper
 
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