Hi, I was wondering if anyone could comment on which type of tick data feed is the best to use for back-testing algorithmic DMA trading strategies? Take for example, Nymex Crude Oil which trades in the pit sessions for certain hours of the day but also on Globex almost 24/7. The vast majority of volume is now via Globex. Is it better to use the pure globex tick data or the pit/globex combined data? Anyone know how the combining process works? Is this an exchange-level process or does it depend on the data vendor? Clearly the answer will depend on the trading frequency and strategy, but I am interested to hear any thoughts on the pros/cons of different approaches. thanks
There is no justifiable reason to include pit trade tics if a product trades over 75% of it's volume electronically. Besides, pit tic prints are notoriously late and are frequently 'gamed' by the pit traders who are also using hand-helds.
Is there any reason why using the combined data (pit + globex) is better/worse than using just globex? (for backtesting purposes) does the pit data corrupt or add information?
The worst part is "pit" prices include trades done outside the exchange at a price that may substantially differ from the prevailing "market" price at the time of the timestamp. Also "pit" prices may not have volume where it's not reported at the time of the trade.
Just out of interest, if Crude or Gold does most of its volume on Globex why are there still so many traders in the pit? Are the pit guys trading/broking open outcry along with Globex at the same time via the handhelds one of the posters mentioned?
That is a biased and inaccurate (IMO) presupposition. Most of those guys are arb clerks who have enough space these days to stand in closer proximity to their floor broker.
The pit is comprised of option traders and locals now. They still move size in options down there, but the vast majority of futures trade electronically.
Additionally, locals are still providing liquidity on the spreads - especially in the less liquid deferred months - giving a tick or so better than the screen and/or all one price on the fill is convenient for some participants. Also, the ag markets still have organizations who price physical contracts based on "market on close," and route orders to the pit because there is no official exchange-sanctioned moc order type on globex. It's supreme idiocy because these orders get arb'd instantly on the screen, but its $$ enough to keep some locals around.