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Richard:
The Mercs orders are great for flexibility. And sometimes, the CBOT can seem
very archaic. However, some brokers do a great job with basically the same
orders that you would use on the Merc. I DO use MIT orders on the CBOT, because
my broker does take them. Is he held? No. First, I don't hold my brokers in the
sense that I would make them eat a one or two tick bad fill. But then, I think
of my relationship with my brokers as a partnership. usually, I'll tell my
broker [yes, I deal directly to the floor when I trade in all markets], 'look, I
am short 10 bonds and I want to get out when it touches 120 03 here today. So
buy 10 120 03 MIT.' And usually, he'll be the bid when it gets there and is
moving down fast. If it looks bottom-ish, he'll take the 04 offer right away or
maybe for half. Another way to accomplish this is to tell him to be a 120 03 bid
for 10 with a tick. Again, if I give him a bid for 10 and gets down there and
starts to sit, I always call back and give him a tick. And if he sees it's quite
bid, he'll call me right away and tell me it's bid...do I want him to take the
offer?
Does it sometimes cost me an extra tick or so? Yes. But do I get my fills? Yes.
Once in a great while, the phone will ring and he'll say the 04's got away from
him, it's my bid, what do I want him to do [other than get em at 03]. I always
tell him to just get them. I hang up and scream at my desk and then remind
myself all the times he sold the high or bought the low for me...
By the way, I always end my day by checking out with the pit and thanking the
people that check my trades out and asking them to please tell everyone I
appreciate the work they did for me. And I usually tell everyone in all the pits
I am trading regularly to have a great weekend, or have a nice Easter, etc. I
treat them as people and friends. They treat me as a person and a friend. And
yes, I do send holiday gifts to my brokers. Without them, I don't make a living.
They don't have to take the orders they take from me. I know they are giving me
a little extra.
Tim Morge
Richard Josslin wrote:
>
> Dear Group,
>
> Most of my experience is derived from trading the S&P, at the CME. I use
> price orders practically exclusively, both on entry (a Limit order) and exit
> (an MIT order). By using an MIT order on exit, I may sacrifice a few points
> of profit that I might otherwise receive by using a Limit order in order to
> obtain the certainty that my order will be filled and I have exited the
> trade, regardless of what the market may do thereafter. The problem I
> intend to avoid is where the market approaches and hits my Limit price to
> the tick and then retraces --- Have I been filled or not? I buying
> certainty and sacrificing profit.
>
> Recently, I've gotten interested in trading the Dow and Bonds, on the CBOT.
> The problem is that MIT orders are not accepted at the CBOT, as they are at
> the CME. Some brokers will accept them on a "Not Held" basis, meaning that
> one must accept the brokers' results regardless of outcome, and they
> encourage the use of Limit orders instead. I've asked brokers "How many
> points off my target must I allow in order to guarantee a fill?" They
> usually say "One, maybe two." (Example: Market at even. I am long and want
> to exit by selling at 20. Usually, I would use: S at 20 MIT. Here, giving
> up one point: S at 19 Limit.) Having problems with that little fudge word
> "usually", I thought that I would consult the Board's official rules and
> regulations.
>
> I looked for the rules and regs on the Board's web site (www.cbot.com), but
> they are not there.
>
> I telephoned the Board and asked to speak to someone about the rules and
> regs regarding order fills. They transferred me to their Office of
> Investigation and Orders. I told them my concern and they said that someone
> would call me back and answer my questions. Shortly thereafter, I received
> a call from Dean Payton, in that office (312 435-3658), who patiently and
> cordially spent considerable time with me, for which I am grateful. What I
> got was as follows:
>
> 1. Is there any difference between a Limit order and an Or Better order?
>
> Payton: No, they are identical for purposes of the Board.
>
> 2. Are there any conditions under which a fill is guaranteed upon use of a
> Limit order?
>
> Payton: No. You misunderstand the rules and regulations. They
> provide only a standard of "Due Diligence." What that means is that a
> broker's actions regarding filling an order is considered in light of all
> the facts and circumstances or the situation on the floor at the relevant
> time. Therefore, while giving up a point or two off your target price with
> a Limit order will probably 99% of the time result in your being filled,
> there are a number of circumstances that could obtain which would result in
> your not being filled even if the market went through your price by a tick
> or two or more, and the broker could not reasonably have been expected to
> have filled your order. For example, he said, fast markets, high
> volatility, multi-tick price jumps, as well as the execution at the prices
> past your Limit price being for small volume, for example, one or two contracts.
>
> 3. Assume a market that trades in one point ticks, the market is at even,
> and an order of S at 9 Limit:
>
> a) Market trades 6,7,8,9,8,7, and lower.
>
> b) Market trades 6,7,8,9,8,9,8,9,8,7 and lower.
>
> Payton: These two situations are alike --- you are unlikely to be
> filled.
>
> c) Market trades 6,7,8,9,10,9,8 and lower.
>
> d) Market trades 6,8,10,8, and lower.
>
> Payton: These two situations are alike --- you will likely be
> filled, but you can't be sure.
>
> 4. So what I'm hearing is that there is no rigid rule, that the rules are
> flexible.
>
> Payton: That's right. There's no rule that guarantees you a fill
> under all circumstances, even during a "non-fast" market.
>
> Old presumptions die hard. Ouch!
>
> Sincerely,
>
> Richard Josslin
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