Warning to those who trade CME electronic products.

[leapfrog]

I'll post a situation that happened to me last night in the hope that it will give a heads up to others...

The CME states that the Globex system doesn't support real market orders. In the case of the emNY Natural Gas contract for September at the open on Sunday night (8/28/06), if a stop market was entered at a price 7.045 the CME applied at the opening a 5 tick price range to this order, as the stop price was triggered at the opening print of 6.905 . The price of 7.045 was changed into a limit order at a price of 7.020. As the market was trading below this, the order kept working in the system. The range of 5 ticks is product specific and is determined by the error trade range which is 10 ticks, divided by 2.


What this effectively means is that a stop market order is not necessarily a stop market order on the CME Globex system - traders be warned.

 

[OnlyIf]

So we should use stop limits with a wide limit?

 

[ddunbar]

Yes, using a wide stop limit range (between stop trigger price and limit) for such a volatile instrument as Nat Gas would be prudent.

OR...

Understanding beforehand how orders are handled on Globex.

http://www.cme.com/trading/get/abt/enterorder987.html

So it's not so much that traders should be warned as it is traders should be informed. (hey, that rhymes.)

 

[chlawfirm]

Quote from ddunbar:[/i

Yes, using a wide stop limit range (between stop trigger price and limit) for such a volatile instrument as Nat Gas would be prudent.

OR...

Understanding beforehand how orders are handled on Globex.

http://www.cme.com/trading/get/abt/enterorder987.html

So it's not so much that traders should be warned as it is traders should be informed. (hey, that rhymes.)

`I HAVE SAID THIS BEFORE THESE TRADING COMPANIES ARE FRAUDS. THEY DELIBERATELY TRIGGER STOPS AND THEN HAVE THE PRICE RETURN TO NORMAL. ITS ALL A SHAM.

 

[scalper21]

Quote from OnlyIf:

So we should use stop limits with a wide limit?

08-12-06 10:41 AM



CME/Globex does not support the typical market order. They only support "market with protection". Market with protection is a limit order with a price of 50% of the no bust range. The "No Bust Range" in ES is 6 points so a "market with protection order" would be a limit order 3 points off the market. This is not an issue in ES however because the market is so deep.

Everyone who trades CME products should read the attachments below!! It is in your best interest to study the NO BUST RANGE of any product you trade. Also if you use market orders understand the CME is really accepting that order as a limit order with a price of 50% of the No Bust Range.






http://www.cme.com/trading/get/abt/enterorder987.html

http://rulebook.cme.com/rulebook10884.html

In the rulebook look for 588.K. GLOBEX No Bust Range

 

[Bitstream]

Quote from chlawfirm:

`I HAVE SAID THIS BEFORE THESE TRADING COMPANIES ARE FRAUDS. THEY DELIBERATELY TRIGGER STOPS AND THEN HAVE THE PRICE RETURN TO NORMAL. ITS ALL A SHAM.

yeah, like if globex gives much of a shit about your 1/2lot order. at least blame the competition not the freakin' exch.

 

[SethArb]

the ECBOT also on occasion has problems with stops etc.

the same thing can happen in the pits via open outcry
slippage esp during "fast markets"

 

[Pabst]

Quote from SethArb:

the ECBOT also on occasion has problems with stops etc.

the same thing can happen in the pits via open outcry
slippage esp during "fast markets"

Cascading stops (often erroneously blamed as "fat fingers") have been an acute problem in electronic futures trading. In the pit a broker wouldn't bid to infinity trying to fill a buy stop. He'd use common sense and know that sellers/arbs would emerge at higher prices so he'd wait.

The computer though has no brain. It merely matches buyers to the corresponding offers. Prior to the exchange mandated price limits on stops, it took just the smallest imbalance of stops versus resting bids/offers to seriously move these index markets. I can think of a half dozen times up to a few years ago when there'd be a 70pt NQ spike on a cascading stop situation and NDX and QQQ would barely budge. Having a clue as to what the "bust range" would be was getting to be an important technical indicator, lol. If left unchecked cascading stops would have ruined the integrity of these products.

I see nothing onerous to the trader about these new limitations caused by unfilled stops. If you aren't available to monitor your own stop then perhaps "give up" the execution to an upstairs broker who will change your stop to a more "fillable" price in the aftermath of major news such as a surprise Fed move or a dramatic geopolitical event.