Stop limits on GLOBEX

stock777

stock777

I'm looking for a reference as to *exactly* how GLOBEX held, stop limits are handled. Can't seem to finds anything with a google search.

In particular, whats the trigger, and what priority is there for existing orders.
 
Obviously, I looked at the globex site already, could not find what I want. Doesn't mean its not there.

And I know its fifo, but how does that relate to STOPS on the books. I have a feeling 99% of the traders don't know and don't know enough to ask, so I'm asking as a public service.
 
Sell stop limit becomes an active sell limit order when the current ask price hits the stop price. Reverse for buy stop limit.
 
Globex only acccepts limit orders. There is no such thing as a market order on globex. If you place a mkt order with your broker for a globex product it has to be converted to a limit order and sent to globex. If you place a stop order it is coverted to a stop limit and sent. Your broker may hold the stop order on thier computer untill the price is reached and then send it as a stop limit. You will be further ahead in the fifo que if you send it as a stop limit order. It can then be sent directly to globex and be resting "native" on their system, good idea in case broker goes down. Globex is purely a matching engine for absolute numbers, it doesn't know from "market" since that is not an absolute number. This is why NQ seemingly stops trading for 30 secs. or so sometimes, there is no automatic moving up or down to the next available market without an absolute # being entered.
Hope that helps,lol.
 
Archangel, are you sure the stop limits on Globex are triggered by bid/ask and not last trade price? You're probably right, but last I looked the site referred to trade price as trigger. Do you have a link to some documentation that supports use of bid/ask?
 
I believe the CME site only mentions vaguely "prices in the Globex system".

As I recall the Globex internal design though, the stops were intended to be triggered by bid/ask (BTW, I think I noted the sell stop was triggered by the ask price - that should have read bid price). But the bid/ask is of course the result of the best available buy/sell order prices currently in the processing queue.

The idea was that stops would be triggered when prices fell to where the stop was immediately marketable - so if you've got a stop set at 980 and the highest available price for a buy order (all orders are limit orders on Globex) is at 980 (i.e., the best bid is at 980) - then your stop will be triggered and your order will become an active sell order.

Unless they subsequently changed the design (or a programmer implemented it different from the design), it doesn't take an actual trade occuring at your stop price to trigger your stop - just the availability of a buy order (in the case of a sell stop) at your stop price becoming the highest priced buy order at that moment. Your sell stop order is then transformed into a sell order and fed into the FIFO queue at the specified price for the match engine to process.
 
I have another question regarding the FIFO que :

Is it somehow possible for a market participant to enter an order
with a better position in the FIFO que. than it would normally
have due to the entry time ?
 
It should NOT be. There was no provision in the Globex design to allow altered priority insertion into the order queue by any subset of participants. Orders enter the order queue of a given contract and are organized in first in, first out sequence at each price level (it of course has to be organized by price level, because a system-wide purely FIFO queue wouldn't be able to properly process orders).

Obviously they could have changed the design or implemented an undocumented backdoor to give certain members a way to trade ahead of everyone else - although if this was discovered by the CFTC it could result in serious problems and the CME's compliance division always used to take their job seriously, so I doubt they'd be complicitous in such a scam.
 
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