So are they honoring them or not?? According to you they aren't (as per your first quote) until you hit them and then they do (as per your second) Which is it?
The CME Group does impose strict messaging limits on Globex. This is a very real concern for high frequency traders. Not just black boxes but screen traders running too many spread tools off the market often do get fined. http://www.cmegroup.com/globex/files/CMEMessagingPolicy.pdf This is more to do with the prevention of packet storming. The act of maliciously or otherwise degrading the performance of the exchange network infrastructure by sending so many messages that nobody else can get through then it has to do with flipping orders. Flipping does seem to be more en vogue lately probably a result of the media hype. But lets get one thing straight commodity market "flipping" has nothing to do with equity market "flash" orders. What has been a part of the interest rate markets for some time is popping up in other places too! Today I saw some 500 lot bids posting in Dec wheat which made me smile. I get how the tactic works in an interest rate market where you have hundreds of contracts on the bid and offer but wheat? Really? Posting a 500 lot bid and pulling it milliseconds later in a market that is typically 5 by 2 or something like that. I don't see the point. What I do see is that this whole hype about flipping got started when the sheep herd started getting ripped apart in the interest rate markets because they could no longer leech off the banks. Whether you are trading spreads; out rights; futures or equities if you have a reason to take a position does that reason change if someone starts posting 500+ lot orders on one side of the market then pulling them? Perhaps adding a B/O volume consideration to the exchange messaging ratios would be worthwhile. As it is now I don't believe you send any more messages posting a bid for a 1,000 lots vs a 1 lot. I don't know how much overhead this would create for the exchange though. I will say there are more pressing loopholes that need closing...
A market without the black boxes could cause a lack of volume and liquidity. They make up like 80% of the volume