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Just a couple of comments to clarify or confuse below.
In a message dated 5/2/03 11:23:03 AM Central Daylight Time, earl.a@xxxxxxxxxx writes:
Dan,
a) Market orders are pseudo orders and are translated to limit orders using
an offset from the current bid/ask. I can't swear to this, but I believe
that it is the broker's computer which does this translation.
******* It all depends. In the old days there was an Order Manager server at the CME that held stops and translated market orders to big "or better" limit orders. There were/are also systems that translated market orders to limit orders right on the client's computers. It is certainly possible that this translation could occur on some systems at the broker level, but I don't know of any.
b) The Limit order is native to Globex and is hosted on Globex servers.
******* This is true, unless you include limit orders with a twist. For example, on PATS there is functionality call Price Injector Gun, or PIG. PIG will inject limit orders into a matching engine depending on criteria you set. Thus, in this case the original limit orders are held on an external computer much like some stops are. Additionally, some systems have Iceberg functionality. This is where there is a large order, but it is only displayed at some increment. Say you have 1000 lots to buy, but you only show 100 at a time. As the first 100 is filled, another 100 lot is sent to the exchange and so on until the whole 1000 lot is filled.
c) Stop orders are pseudo orders ... they are held on the broker computer
until the stop price is hit in the broker's data stream, then released as a
Limit order to Globex with an offset from the current bid/ask.
******* Some stop orders on Globex are held locally on the traders own computer. It all depends on which brokerage and which system you are using.
d) Stop Limit orders are native to Globex and are hosted on Globex servers.
******** There are some systems, like PATS, which will give you the option of using an exchange stop limit or a locally held stop limit. It is important to know which one is which.
Please note that the order types and handling vary from one exchange to
another so what is true for Globex should not be assumed to apply to other
exchanges.
Earl
******** This is so true. It will and does vary from exchange to exchange, platform to platform, brokerage firm to brokerage firm. It is hard to keep it all straight. For example on Liffe Connect if the brokers connection goes down, all orders are canceled. That is going to be something to deal with when the CBOT moves or if you trade on NQLX.
******** The CME has spent a lot of effort to lower the average response time for Globex. It is now on average somewhere near .3 seconds. To get that speed that had to rip a lot of pieces in front of Globex out, including the Order Manager server that handled stops. Now it is up to brokerage firms or ISVs to handle them for you. But stop limits were always the best order anyway because the stops in the OM server were just stop limits anyway, with the limit set by the FCM. Stop limits allow the individual trader to set their own limits and they are held directly in the Globex matching engine.
Regards,
John J. Lothian
Disclosure: Futures trading involves significant risk, lots of it!
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