http://www.cmegroup.com/globex/files/PriceBanding.pdf Note that all of the major CME Globex products are FIFO, which means the earliest timestamp at a given price is filled first - which, of course is NOT algo / HFT / automation friendly (it discourages my design strategies that do not improve price and that are not tagged as 'firm') Algos can, however, quite effectively game Pro-Rata order matching IF they can comply with the price-to-fill ratio messaging policy. However, they all incur risk of ruin. In order to game the Pro-Rata, you have to be capitalized enough to place large order sizes in order to get filled on a much smaller allocation, and when that institutional desk invariably takes out the entire bid or offer you are truly f***** because the world is racing you. In fact, on Eurex for example, a bank desk destroyed (by design and intent, they paid a modest fine for in later on in a disciplinary hearing) all the Pro-Rata gamers with 'nuclear armageddon' strategy - they simulaneously sold off the entire Eurex interest rate complex and made them puke into their bids far below.
Thanks for the color. I guess I'm still unclear what <i>therefore, they are ALWAYS matched last in the order queue compared to other order types</i> means. But, hey, a lot of things are unclear to me.
Early bird gets the worm on FIFO. Earliest timestamps get filled first. If you change your order in any way - like the quantity, for example, it gets bumped back to the queue and you are pushed to the back of the queue. So, if you are getting cute with automation and flooding the marketplace with alot of orders with frequent cancellations and updates, unless you improve the price (like lift an offer or hit a bid) you are not getting better or earlier fills than the good old manual trader who has a resting order (price limit, GTC) placed with an earlier timestamp. In fact, ATS are tagged lowest priority - which means unless you improve the price your fill priority is matched as lowest. ATS orders are tagged as 'contingent'. In other words, since it is part of an ATS that is cancelling and replacing orders on a very frequent basis in the system, the exchange deems it to be the least reliable liquidity to match in the system.
Sorry to be dense -- Suppose (for argument's sake) an ATS-tagged bid or offer makes its way over time to top-of-queue (of course, the order begins its life at end of queue). Now, a non-tagged bid or offer at the same price arrives. Are you saying the ATS-tagged order gets pushed behind the new order in the queue? That's quite a claim.
That would be the first time such an important rule is not clearly written in the exchange regulations. I won't say I took a lot of time this morning but I didn't find it. If someone finds it, please post it here. However, just write your trading system on a front-end in a FIFO friendly manner( one that trades like a manual trader, with low cancel/replace, just faster ) and you are in front of everybody if it is true...
OK, if you want it personal, what do you disagree with? - that by automating on the same frontend as you are doing your manual trading you can submit whatever order you want without being tagged ATS and contingent( a rule that we can't find on CME website, but i still believe you ), and thus losing priority? - that an ATS can submit resting orders like manual traders do, that I can populate all the book with resting orders at , let's say, the exact second of the open of the overnight session, and more importantly repopulate the interesting levels with limits after it traded, and faster than manual traders?
"and more importantly repopulate the interesting levels with limits after it traded, and faster than manual traders?" Chillax. You are answering your own questions. If you are using human discretion and intervention to choose 'interesting levels' to populate, then it is not much of an ATS, agreed? Sounds manual in terms of human logic intervention. The ECN is designed to encourage: 1. price improvement 2. firm, resting orders that the exchange can rely upon to internally cross with other orders in order to fill the BIG money earners for all exchanges, the almighty IMPLIED SPREAD FUNCTIONALITY. (please note where all the Eurodollar and Nymex volume is: that's right, spreads baby) Listen: If you are not constantly cancelling and replacing orders, you can fly below exchange radar. Futures exchanges are in the business of collecting commissions and fees on trades, not on messages. They are configured accordingly.