- pepole tell me that alot of false orders get shown in the order book and removed, but thats only effecting those that trade seconds and minutes. If you remove this from the equation is there anything else that makes it difficult?
you're talking about spoofing/flipping. It only really affects people who trade the book, ie: bund/bobl spread traders. If you trade off a chart directionally, whether somone shows some size on the bid and pulls it or flips it to the ask shouldnt really affect you at all.
Right, fake orders make it really difficult to read the book, a lot have been said before about this flippers. The other thing is that Eurex interest rates products (especially Bund, bobl and Euribor) are used by institutional investors, Investment banks and Hedge funds for hedging and speculation purpose. To cover or cut a huge position, to hedge a credit issue of the same maturity, etc... , this guys don't hesitate to send 10,000+ lots orders at the market, sweeping sometimes the price through 5-10 levels. That's what made me change radically my trading on the bund and reduce the time in trade to the minimum, in order to be less exposed to unexpected moves. You need to be aware of what is going on in other markets, because you're more vulnerable to these moves when there is a major event on the credit market (GM, Ford spread widening for ex), a big downmove on emerging markets, a flight to quality, economic data releases, etc... Some friends, brokers at big institutions tell me that they regularly have orders to buy or sell huge quantities in a matter of seconds... Have fun!
The Bund has no more fake bids/offers than other futures. Defiently no worse than the mini SP, which in my opinion is a joke when looking at bids and offers. Like someone else said, you have to be aware of any news that comes out of Europe. Yesterday they took a 40 tick dump based on a number that came out of Belgium. ALl in all its a great product to trade though....usually trends very well.
the book/tape is hard to read because of the unreliability of orders and the diversity of volume, but as they say, it's good on a chart. not any harder to read than S&P probably. the manipulation is mainly during quiet hours because during peak times the volume is so much that noone can really control it. although the bund is ok with charts you need to take a big stop as they will try and push through levels to stop people out. there are some huge orders come in during rollover and you can get snapped hard. some orders are so big that you can only assume it's a fat finger (eg 35,000 lots in one minute). treasuries are smoother.
One point that I would like to discuss is the difference between exchanges. On Eurex a trader cannot see the counterparty. For example lets say in the Bund is bid for 10000 and the offer has 1000. There is no way for me to prove that that the bid is false quantity. However lets change the market to the S&P(ES). The ES is bid for 2000 and the offer has 400. I could buy one and sell one to find out who is on the bid and offer. Lets say I do this and find out both the bid and offer are 350(Goldman Sachs). Then the 400 on the bid trade and the 2000 on the offer vanishes. Then we rally a few ticks. I would know that Goldman is a buyer. I would conclude that there are spoofers in every market, but it is more difficult at the CME to hide what you are doing.
Excellent post. If you watch any big cme markets you will see guys doing this with one lots all day long, seeing who is on the other side. I had heard a month or so ago they were going to be doing away w/ the broker number, or whatever its called that lets you see who's on the other side...I'm not sure what happened to that. It could actually be good for locals, cause paper knowing when we're long or short is more dangerous than it is helpful for us to know if they're buying or selling. At least in my product. cheers
that's a very interesting point, I was unaware that Eurex offered slightly more anonymity than CME I thought there was an industry standard. I guess anonymity isn't always good. although having said that, every day you hear some guy on squawk gurning about a bluffer in the oil pits so it happens even in a white of their eyes environment.
Mostly yeah, the flipper does his flips across the bund and the bobl (and sometimes the shatz, or all three at once) most spreaders are looking to take 1 tick from either or both of the spread legs - traders (and I am certain its not one guy) who flip are deliberately trying to get spreaders offside on one or both legs so that they have to pay up a tick and fill the flipper on the other side of the bid/ask. Sometimes a flipper will flip several prices one after the other to shake out any traders who can take the pain of a price or two on a spread. Most spreaders are trading hundreds of contracts at a clip, so a price or two paying up the bid/ask spread can be expensive - hence all the complaints.