Native calendar spreads vs autospreader replication

[TraDaToR]

Hello guys and gals ,

I have a question for people who understand matching algorithms and CME market microstructure : Why are there so many people replicating calendar spreads with TT autospreader( or CQG or whatever ) when they could simply provide size on the native spread?... Using implieds, their native spread would appear( and match ) as real size posted on the working leg...No need to use a spreader and they would have no legging risk( filled on first leg but not second)...So why?

I think people replicating would have priority on implieds if orders are at the same level."Direct" orders always have priority on implieds( except undisclosed size in icebergs if I am right ) but IMO it is not enough to cover the risk of getting "picked up" and having to chase the second leg...

Thoughts?...I might learn something today I guess.

 

[Maverick74]

Hello guys and gals ,

I have a question for people who understand matching algorithms and CME market microstructure : Why are there so many people replicating calendar spreads with TT autospreader( or CQG or whatever ) when they could simply provide size on the native spread?... Using implieds, their native spread would appear( and match ) as real size posted on the working leg...No need to use a spreader and they would have no legging risk( filled on first leg but not second)...So why?

I think people replicating would have priority on implieds if orders are at the same level."Direct" orders always have priority on implieds( except undisclosed size in icebergs if I am right ) but IMO it is not enough to cover the risk of getting "picked up" and having to chase the second leg...

Thoughts?...I might learn something today I guess.

Akin goes over this in detail on his Stirs book but the goal with "implieds", and the implied spread is the replication vs the quoted exchange traded spread, is to capture the tick ahead of the exchange traded market. Most guys doing that simply want to earn that tick or in most cases, half a tick. They usually only do this in VERY deep and liquid markets where it's not going to run away from them.

 

[TraDaToR]

Thanks Maverick,

You mean at the same level, right? In between 2 guys bidding at -0.25 for example on the spread, one natively and one replicating, the replicating one will get the fill before the other?