I don't know what Chillax means, but in my mind "interesting levels" are really mechanical/calculated/automated. I don't know why you want every automated trader to have an excessive message/fill ratio. If you are just doing what I described on a deeply liquid instruments( think treasuries with big ticks ), then your message/fill ratio would be quite low.
"I don't know what Chillax means, but in my mind "interesting levels" are really mechanical/calculated/automated. I don't know why you want every mechanical trader to have an excessive message/fill ratio." But the entire thread, and everything I have been referring to, regards an ATS registered with the exchange. You are either changing the topic, or don't understand the topic matter. Again, if you are not messaging the ECN, nobody cares.
You can actually decrease the quantity and not get re-queued. And your assertion regarding ATS being tagged with the lowest priority is simply not true. http://www.cftc.gov/files/submissions/rules/selfcertifications/2005/rul061305cme001.pdf In the initial regulatory advisory for adding fix tag 50 to identify ATS's it says "Accurate data in this FIX tag is necessary for regulatory purposes, and in some circumstances is required for the proper fees to be applied" There is nothing about the tag helping determine priority in the book. https://www.cmegroup.com/globex/int...nctionality/elements/matching-algorithms.html FIFO is on strict price and time priority and it says nothing of having lower priority for any reason other than being re-queued if quantity is increased (quantity can be decreased without losing ones place), change the price (makes sense cause every price level is a separate queue), or change the account number. The purpose of the tag does appear to be for regulatory purposes as the CME has regular updates on amount of algo trading. Can find the latest here: http://www.cmegroup.com/education/files/Algo-Trading-Update.pdf And as far as messaging, there is a policy that applies to everyone http://www.cmegroup.com/globex/files/CMEMessagingPolicy.pdf You get charged 2k if you send too many messages per their policy but there is no impact on one's priority in the book. So the following simply isn't done: "the exchange deems it to be the least reliable liquidity to match in the system" Basically there is no difference between how an ATS orders are treated and someone entering in orders manually.
If you leave a standing price limit GTC order at every price in the order book as part of your "Automated Trading System" and never cancel it until it gets filled, then I cede your point. You win. But what automated trading system does that? Please elaborate. And that is the entire point of the conversation and thread that you ignore time and again.
I think you are forgetting that as the price moves new queues are being created so it is not necessary nor feasible to send a limit order at every price in the order book to get priority. Low latency strategies are able to process changes in price levels faster than others and so are able to send orders that are first in line and thus highest priority. They then get exposure to the first marketable orders that come through (these would be classified as the good fills) HFT's in particular are very good at detecting short term price moves so are able to cancel orders prior to adverse price movements thus leaving manual traders and others with the 'bad' fills. And thus why there is a race for speed which if what you claim is true would not be happening. As evidence for the race for speed there is this: http://www.forbes.com/forbes/2010/0...dale-daniel-spivey-wall-street-speed-war.html If what you assert is true then they just wasted an estimated 300 million building out the network. Actual studies that support my assertions: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1686004 From the CFTC using data which actually shows which trades are from HFT http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1641387 using a data set provided from the Nasdaq which also shows which trades are from HFT
"Low latency strategies are able to process changes in price levels faster than others and so are able to send orders that are first in line and thus highest priority" Completely untrue for any FIFO market where there are already price limit GTC orders resting with an earlier timestamp at that price level you are trying to populate. In a 'gappy' market like RBOB gasoline or Gold where there are always some price levels away from the currently traded price with no working orders your assertion has merit. From a practical application standpoint in ANY market that trades any substantial volume like ES, ZN, or the Bund you are flat wrong with the only possible exception being an incredibly short time period lasting maybe about five seconds or so immediately after the open. Even in the market pre-open that order book is getting populated. No order placement system in the FIFO world will allow you to "budge" in line in front of other resting GTC price limit orders with an earlier timestamp - and any claim otherwise is just flat out wrong.
As another poster mentioned, queues are cleared and repopulated all day, as the market moves from level to level. I believe he was referring to position in these newly-forming queues. That's exactly what I and others had (mis?)understood you to have claimed earlier in the thread, that retail traders could jump the queue, ahead of "lower priority" ATS-tagged orders.
"I believe he was referring to position in these newly-forming queues" True, but they never completely clear ahead of you in any FIFO market that trades substantial volume to the point where you are really up front in the queue - in fact, the queues will always remain SUBSTANTIALLY populated with orders timestamped ahead of you - literally for 2% of a market's price range in the ES, TY, and many others. I have used software plug-ins that estimate your queue position and contract count ahead of you, and can attest first-hand to the difficulties associated with gaining early queue position in the larger volume FIFO markets. The bottom line is that if you are trading with an ATS the market will almost certainly trade through your price in order to get filled. For you to populate enough price levels for early queue position on a scale sufficient enough to really make it worth your while would require substantial capitalization, since FCMs assign risk (margin) to open working orders - even on an intraday basis. Some platforms like CTS let you see the margin assignments in real time.