Lease seat / Co-locate

Discussion in 'Order Execution' started by trader07, Feb 24, 2012.

  1. MRE

    MRE

    #11     Feb 24, 2012
  2. gmst

    gmst

    Bone, what you do mean by guys in the CME building getting picked off?

    Can you please explain. Seems like something weird is going on there, that you are hinting upon. Thanks.
     
    #12     Feb 24, 2012
  3. bone

    bone

    I know of two trading groups located within the CME building who get picked off on Nymex and CBOT and CME arbitrage on a regular basis. There appears to be a bit more complexity to the HFT game than first blush appearances.

    In 2008, I saw an ICE to Nymex Arb group get picked apart - and they were located in the Fed Reserve building kitty corner from the CBOT building and just across the street from the ICE server farm.
     
    #13     Feb 24, 2012
  4. gmst

    gmst

    Thanks very much for the color!!! Appreciated.

    If I understand correctly - by being picked off you mean either their prices moved so that their stops were run or someone traded in front of their orders in their direction - so if they wanted to buy 100 contracts, someone bought 30 contracts or maybe even more in front of them.

    If my understanding is correct, it means that something fishy is going on. Because futures are not susceptible to sub-penny and no payment for order-flow is given, it means that somehow their algos have been compromised (by virtue of being located inside CME building, maybe some insider employee doing some illegal stuff). This seems a very very serious issue or maybe my understanding is completely off. Will be great if you can throw some more light.
     
    #14     Feb 24, 2012
  5. ixus

    ixus

    MRE is on the mark here.
     
    #15     Feb 25, 2012
  6. TraDaToR

    TraDaToR

    I think "being picked off " means your passive orders to provide liquidity( most likely on the illiquid leg of a spread ) are getting arbed by a faster algo when the market moves. Nothing shady here. You are just slower than someone else.
     
    #16     Feb 27, 2012
  7. If a passive order creates an implied price that causes a potential backwardation between the implied price and real prices greater than the cost of executing all the legs, you can be sure they will be picked off.

    I've seen an algorithm calculate and execute a 32 legged spread in Nymex that encompassed spreads and outrights all along the delivery curve.
     
    #17     Feb 27, 2012
  8. TraDaToR

    TraDaToR

    Nice.
    :)
     
    #18     Feb 27, 2012
  9. bone

    bone

    I just got serious wood reading that gem ! Wow. That's the cat's ass.
     
    #19     Feb 27, 2012