CME threatens to fine me $2000

ES limits are 4-1

 

I understand this point for high volume instruments like ES( unbelievable we haven't heard of ES traders getting fined on ET??? ), but if you take a look at ZQ back months, you will know that Daal didn't made the whole ZQ complex freeze with 13 cancels in 30 min or so...LOL

 

Are you improving the [NB] BO when you place these orders?

 

This all sounds a little suspicious. Anyone using auto trading apps would run into this ratio VERY quickly and I have a hard time believing the exchange would employ a ratio that restrictive. Everyone in my group has a seat so that may be factor but none of us have bumped into this and there is no question we all exceed at 10:1 ratio a times.

Excessive quoting is problematic for the exchanges, I understand that, but it is something that has to be dealt with by using ever increasing bandwidth or superior compression for the messaging. Limiting the quoting capabilities of traders electronically is like telling floor trader to shut-up because he’s yelling out too many bids and offers. If those are live quotes baby, let ‘em rip.

 

most of the changes I became the best bidder

 

I don't disagree with the principle of policing bandwidth hogs, but slapping a $2000 fine on a small trader who exceeds a quota by 10 lots is bullshit when the same fine would be applied to a 100mm account that spoofs all day.

Obviously (as a small trader) if you know you're on the watch list and exceed the quota you'd be better off washing a lot or two for a one tick loss vs. paying the fine.

The fair thing to do would be pro-rate the fine based on volume or charge a nominal fee per "message" if you exceed quotas.

 

The CME messageing policy isn't that new.
What is new is that IB has started automatically notifying all customers of any daily breach on a per customer basis.

It's IB that gets fined $2000 but only if the aggregate message/vol ratio for all it's customers exceeds the limit on a particular market.

If that happens it's at IB's discretion how it distributes the fine amongst it's clients.
I wouldn't expect a small trader doing < 3000 messages a day to get hit with the full $2000. THe CME provides IB with reports so anyone fined should be able to get an explanation as to why and how it has been calculated.

 

Yes, it seems that on the instrument I trade ( and for which I had the same warning from IB ), the main liquidity provider( quite sure it's all the same guy or institution ) leaves a small part of limit orders really close to fair value just to generate volume and generate real money with far away orders...

 

That means that if/when the retail trader is eventually able to get an edge on the book, he's forced to give up it, paying the spread... and that's what they call 'leveling the access to the mkt'...

 

I agree with you Bernard. This is a bad policy and will limit the ability of a small 'local' trader from effectively marking markets. This in itself could help explain why options on futures are struggling in the electronic market place. Not enough participants with an uneven playing field.