messages/volume ratio...

TraDaToR

TraDaToR

Hello,

Yesterday, I went live with my new system... Everything worked fine and I made profits. Today, I get a message from IB relating that I made too much cancel/replace...The CBOT message/volume ratio is 50/1 and I made 132/1...A fine will incur if I continue...

My question is: What are the different M/V ratios on CME? ICE? NYMEX?

Are there exchange that are free of limitations?

What is the amount of the fine?


Thanks a lot for your help.
 
Each FCM will get fined for their total trader cancel if he ratio is over their limit.
IB decided to not bundle that and make it the direct trader problem. Each account stands by itself.

Go with a larger FCM that has lots of market or limit traders and they will allow you to trade with their firm ratio not a single trader ratio.
 
Thank you Wyckofftrader,

I am a little pissed about it. I really didn't know they were that low. I was thinking about 500 or 1000/1

Yesterday, I was watching how one algo was placing bids and offers on this particular market and I didn't understand why he was placing them that close to the market. I think it's just to generate volume at losses to satisfy those benchmarks...Money is made on the further limit orders.

Whatever... I found the globex policy:

http://www.cmegroup.com/globex/files/benchmarks.pdf

and the fine is 2000$.

:(
 
please excuse my ignorance on this subject, but i noticed the bench mark on ES is only 4:1

can i be effected by the m/v ratio if i am trading ES manually through tws? maybe this is an api-only issue?
 
I really don't know for ES. I'm sure there are a lot of traders doing a lot more cancels than that, of course... If you got no warning from the broker, you must be fine.
 
Yes, there are systems that do a lot of cancels (say 10k cancels a day), but these systems also trade a fair bit of volume.

The reality is that the ratio is applied at FCM level, so the FCMs can choose to apply the ratios at an account level or not. It all comes down to revenue, let's say a system that has been generating $10k / month in commissions for the FCM, then the FCM is much more likely to "forgive" a few days where the system exceeded the ratio, than a system that barely generates $500 / month, right?

Sure, ppl can claim this is not "fair", but FCM is not in business to be "fair", they are in business to make money.
 
OK Thanks Burnbabyburn,

It was the first time I was trying to do this with a bot and I just figured it 's really hard to meet those benchmarks on almost any market. Are LMMs exempted? Just another "screw the little guy" type of regulation...

Are there markets that don't have those ratios in Europe, Asia...?
 
The msg / volume ratio applies to MM as well, except some "new" products the exchanges are trying to get off the ground. But MMs, if they are sanctioned by exchange as such (not running a "pseudo MM algo", say), need to do a minimum volume as % of the total product vol daily, so almost by definition, they would have no problem with the msg / vol ratio.

Take a simple example, even if a algorithm only does 2000 contracts / day, we are looking at a limit of 8000 cancels, that's a fair bit. And most MMs do far more than 2k contracts / day. I know of MMs that do 1-200k contracts / day.
 
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