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Dear Pompatis,
POMPATIS@xxxxxxx wrote:
> Greetings:
>
> I have a couple of questions to put to the group regarding the entry and fill
> of orders.
>
> 1) Is an order "time stamped" at the time of entry or at the time it reaches
> the floor?
In July, I spent a week or so on the CBOT and CME floors, including many hours
standing next to numerous phone clerks taking & reporting orders. What I observed
throughout was that as they picked up the phone with one hand, they would grab an
order form from the top of their stack, stick it into their time stamper, and then
lay it down on their desk and write the order on it --- occasionally, the writing
and time stamping would be reversed. When the phones were ringing off the hook,
they would forbear from time stamping, allowing written unstamped orders to
accumulate, until the phonecalls let up, and then they would run the unstamped
orders through the time stamper as a batch. I know that everyone would like
clarity, certainly, and consistency. From what I saw, however, while taking and
stamping were coincidental as long as the order flow allowed, when the flow
increased, taking orders seemed more important than stamping them, so the stamping
was done when the flow subsided.
> In other words, if I place a market if touched order - and by the
> time the floor gets the order the market has passed through the price, does
> this order become a market order or is it then moot, unless or until the price
> pullsback and retouches the price?
If it goes to the pit, it will be filled as long as the contingency has been met
--- in my experience, the fillers don't think, just execute.. The filling is
almost simultaneous --- a few seconds. The clerks that I saw continuously knew
the bids and offers (by following the hand signals in the pit), and if they
received a contingent order over the phone where the contingency had already been
met, they would tell the client, eg, "Your MIT order is now a market order.
Either change your order to market or change your contingent price."
>
>
> Or another exapmle: suppose I place a MIT order and by the time the order
> reaches the floor the market has already touched the price and then pulled
> back. Is the order dead until the market touches again, or is the order
> stamped with the time of entry and filled at market?
The filling brokers (in the pit) don't know when your order was taken --- all they
know is that the filling clerk (the guy standing next to them in the pit and who
is in constant communication by hand signals with the phone clerk) has shouted an
order in their ear. If the operation is fancier, there will be standing next to
the filling clerk a second clerk with a deck of contingent orders whose prices are
away from the market. If your MIT order is close to the market, it will go
directly to from the filling clerk to the filling broker. If it is away from the
market, if will go from the filling clerk to the clerk with the deck, to add to
his deck (which is arranged in order of price) until the market catches up to the
prices in the deck, at which time the deck clerk will give the closely priced
contingent orders to the filling clerk to shout to the filling broker. As I've
said, filling brokers don't think --- they execute. If the filling clerk gives
the order filler a contingent order and the contingency is then met, that order
will be active. If the contingency was met before the filler gets the order but
is not now met, the contingency is unmet, so the order remains contingent.
>
>
> The same type of questions can be asked of limit orders. I think you guys get
> the drift of my questions. Any assistance is greatly appreciated.
>
> 2) Regarding the intra-day futures quotes shown on (for example) Signal: Are
> these the bid, the ask or what?
They are the price of the last trade that was observed by the electronic price
entry personnel and punched into the system. They could be the price at which a
bid was taken or an offer was hit. There is no way of knowing from the Signal
data. Also, you should know that some pits, particularly the S&P and US, are
huge, with several hundred players all trading simultaneously. Consequently,
there is not just "one" market, but many markets all co-existing. Usually, the
prices around the pit are similar; however, when the market goes crazy, there will
be substantially different prices at different places around the pit, which will
very quickly coincide. The problem, however, is the data enterers are all
together on one side of the pit and are only entering one set of data (they have
spotters standing by their side, feeding them current prices). Furthermore, when
the market goes crazy, nobody can enter the data fast enough, so even the prices
posted electronically by the side of the pit fall behind, and those transmitted by
the data companies often lag substantially. When I was on the floor, I saw the
side of the pit prices lag the floor by 10-15 seconds, and I have seen the
electronic data.(I use BMI satellite) lag by as much as 90 seconds.
> Related to this: suppose I place a limit
> order or an MIT order and the quote shows the market trading at or through my
> price. Isn't it true that just because the quote shows the market trading (or
> traded) at my price does not mean that I got filled right?
Assuming no "fast market" condiitons, if it trades at your price with a MIT order
or through your price with a Limit order, then you "should" be filled. You will
undoubtedly be filled with the MIT because the meeting of your contingency turns
your order into a market order, which will be filled no matter where the market
goes. You may not be filled with the Limit order, because that doesn't tun your
order into a market order --- only one that is to be filled at your price or
better. If the price that your Limit price traded thorough did so, for example,
only by one tick and only with one contract (say, because a local gunned for stops
and none were there) and then immediately reversed, no broker in the world could
fill your Limit order even though the market traded through your price, and you
will most likely get a report of "Unable".
At the risk of sounding like a total asshole, I would like to suggest that it
sounds to me as if you are trying to find more certainty than is there to be had
with the pits and with the rules and procedures for orders and filling them. The
pits are inherently very human and messy; therefore, the process is messy and
inexact --- much more messy and inexact than, to me, your questions presume. (I
don't fault you for this - before I saw the process with my own eyes, I thought
the process was more neat and tidy, too.) With all the people that are involved
in taking, filling, and reporting back orders, it's a wonder that the process
works at all; it's amazing to me that it works as well as it does. In my opinion,
such is the reason why electronic trading has become so popular --- it attempts to
eliminate all this messiness and room for ambiguity, doubt and error. I know that
for years, I thought that, come on fellows, this process is not that complicated
--- why are there any screw-ups at all. I believe that you would do yourself a
world of benefit to yourself and to your trading by taking a few days off, going
to Chicago, standing next to your broker on the floor while he takes orders all
day, and watching what happens, particularly in the midst on constant
pandemonium. I learned more than I ever thought that I would by doing so, and I
am very very sorry that it took me almost 20 years after I first began trading
(1979) before I went to Chicago and saw for myself what really goes on. It
changed my whole perpective on trading.
I hope that my comments have been of some help. I wish you the best with your
trading.
Sincerely,
Richard
> I am not talking
> about a situation where the floor broker just did not have time to fill the
> order, I am asking about any difference between what the quote is and what is
> happening on the floor regarding the reality of bid/ask fills. Does this
> quesion make sense? I hope I am clear enough here.
>
> Thank you all.
>
> Sincerely,
>
> Pompatis
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