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In a message dated 12/30/1999 9:48:58 AM Central Standard Time,
eadamy@xxxxxxxxxx writes:
<< I note your reference to a dual feed into the stop mechanism at EDF Man.
***** This is not an ED&F Man stop mechanism. It is a CME product that is
available to member firms to use. Not all firms use it, but ED&F Man does.
Will this mechanism eliminate the spurious running of stops in the
e-mini?
***** As I said, the Order Management Stop Server will allow firms to
individual set the distance between the stop price and the limit price. It
varies from firm to firm. This stop server has nothing to do with the series
of electable stops that might set of a chain reaction when certain price
levels are hit. That has everything to do with traders putting their stops
in at similar levels and not enough opposite limit orders or arb orders to
match up at similar price levels.
As I posted earlier, early this morning the e-mini spiked about
a dozen points above the SP for a couple of ticks and returned to the
trading level of the SP. This not an every day occurrence but it does
seem to occur with great regularity just ahead of a price reversal in
the direction opposite to the spike and I used this for entries when I
was day trading. This behavior is frequent enough that anyone using
stops for loss protection runs a significant risk of those stops being
run.
Earl >>
***** Many traders are on the sideline because of year end or Y2K issues.
All 4 CTAs I work with are flat right now. I just talked a client out of
trading today because of the thinness and the higher probability of air
pockets appearing. Any trader trading today should be aware of this
probability and should either stay out or try to take advantage of it.
***** If people are taking my advice (or thought of if themselves) and are
using Aggressive Limit orders, then these types of spikes become possible as
well. It is a tradeoff people have to make up their own minds about.
Regards,
John J. Lothian
Disclosure: Futures trading involves financial risk, lots of it!
Disclosure: John J. Lothian is the President of the Electronic Trading
Division of The Price Futures Group, Inc., an Introducing Broker.
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