As futures is centralized around a single venue (very different from stocks and other securities), HFT actually has a fairly good impact on the liquidity that you can find. What you call HFT in futures is simply market makers, but because you don't aggregate prices from different dark pools, you can't really spoof the order book, meaning if you see 1000 lots and go market for 1000 lots, you'll get filled at the price you see. There are certainly less market makers on Cocoa futures, where you can see single-digit contracts order depth (e.g. 5-10 contracts). Knowing that 4 Cocoa contracts equal 1 Crude Oil contract, the lack of market maker makes it very unattractive if you're looking for liquidity.
Somebody said that ES is fully automated. So I was trying to find out relatively which futures market is not. Guess it's a ranking of how fully automated a particular market is.
Question for you. Do you feel that the ES being fully automated is a bad thing? Or is it just something you want to avoid in general?
Depends on the definition for "fully automated" means to that somebody that you're referencing. I read about 2 years ago in a financial magazine that 65% of the trades in Emini ES futures were via "algorithms". Therefore, lets talk percentage. What's the percentage needed to be for it to qualify as "fully automated" ??? Regardless, I suspect the percentage I see in magazines because of the low volatility tight trading range that shows up in the Emini futures whenever Europe is closed or some of the key exchanges are closed for the trading day (e.g. Eurex)...its as if a majority of the algorithms in the U.S. Emini futures markets are out of Europe...strange. I know the markets are globally connected but I'm now curious about how much of the algorithms in the U.S. markets are actually out of Europe.
If you buy an ETF of SPY. You take a discretionary decision to buy the SPY etf. However, I am pretty sure that Spider will then use systems to automatically buy - this is likely accounted as computer flow even tho it's not.
All regulated electronic markets are automated. And that is a simple truth about modern markets and it's not going to change. Exchanges and brokers make money on fills, and automated trading increases fill volume. If it's electronically available there's going to be automation trading it. Since you cannot change that universal truism then you have to deal with it or find something else to do. IMO it's only a problem for manual traders with very short trade duration holding time frames, and it's only a problem for automated traders who want to compete in the same space as HFT but don't have the ECN resources to match.
Unless I'm missing something here, what is the difference where are the algos (servers) located? Whether executed from here or there... Location could be due to tax rates.
Yes but I was curious because other world markets have exchange rules in place that put limits on algorithms. Thus, due to the fact that foreign markets are big players in the U.S. markets...I'm curious how much foreign algorithms are involved in U.S. markets. This is similar to foreign investors in the Canadian markets (e.g. Vancouver and Toronto) that have encourage the crazy sky rocketing home prices. Now the government, after many years, are getting more involved to identify the foreign investors along with putting limits. Now these particular markets are starting to show signs of "cooling". Just curious about where these magazines gets their sources from about the % numbers of algorithms involved in the U.S. markets and if they had % numbers foreign algorithms involved in the U.S. markets.