All stock trading uses the same order placement. NYSE and AMEX were using this procedure long before ECN's were even started. Off-exchange trading can be at any price regardless of order placement since there is no 'official' NBBO.
Globex, which the ES trades on, does not deal with stocks and has a unique order matching algorithm whose prirotity can be summed up as FIFO (first in first out). Here's CME's Globex reference guide which explains a great deal of what Globex is and has to offer: http://www.cmegroup.com/globex/files/GlobexRefGd.pdf
DmanX wrote: Globex, which the ES trades on, does not deal with stocks and has a unique order matching algorithm whose prirotity can be summed up as FIFO (first in first out). ------------------------------------------------------------------------- I have more experience in commodities than stocks since I first started as a member of the Chicago Open Board of Trade (MidAmerican Exchange) in 1970. I became a member of the first electronic exchange in either futures or securities in about 1980 with the International Futures Exchange (INTEX). The LIFFE started at about the same time as a pit exchange and readily gained support from the industry. They would not support INTEX. CBOT, CME and all the others said electronic trading would never survive. INTEX did not mainly because people from the academic world started it without any commodity business experience. They finally placed an order/quote machine on every Merrill Lynch broker's desk but they did not provide for any "floor" traders or scaplers to provide liquidity. They started with a gold futures contract and added a couple others later but never built up any volume. I finally got an agreement with Paine Webber to clear my trades at $29 per RT. Poor management and the pit exchanges, in my opinion, was the dismise of the first electronic venture including the high cost of connection. But INTEX had the first true FIFO order management system. That was their primary selling point since pit trading may have a dozen different prices at the same time in active pit sessions. The electronic stock trading systems available today could offer FIFO for securities but I doubt it will ever happen due to the fact the current order management has been in effect so long. Also, all of the exchanges and ECN's would have to agree to the change. That probably will not happen.
So big players get the advantage in order matching. 1000 ES contracts sent in by big money would have to fill before Mr Retail gets his 1 ES contract filled , assuming big money is a millisecond faster. Milliseconds must actually mean alot when it comes to your place in queue. Some guy in chicago with a FIOS connection would have a huge advantage over someone in China on a high speed connection trying to trade the CBOT. In today's fast moving markets, the advantage of you order arriving 100 milliseconds faster or less than the next guy could mean a real difference in how much you make. Even a guy trading in china on a T3 connection would still be disadvantaged. Electronic order's can't go faster than the speed of light; from china that is a significant number of milliseconds.
In essence you're right. However, it's a bit more involved than that. Likely, a big player will iceberg(max show) - Min fill(min show) his order or break it up knowing a 1000 es market order will suffer a bit of slippage due to the matching algorithm. 1000 on a limit would have to be placed above the market or @ the ask if buying and vice versa for selling. Likely it would take anywhere from 5 secs to 20 secs to completely fill that order at limit, less for market but with slippage. What's more, you lose time priority when you change price or quantity of an order. Something a big player would do as he got his partial fill reports in. So pragmatically speaking, given the nature of the average size of an order (which is under 50 contracts and generally is between 1 - 10 contracts), a guy with a 1000 lot ES order, while technically if he's at the front of the cue would get his order filled before anyone else behind him in the cue, wouldn't be dumb enough to try it all in one shot (MRK or LMT w/o AON, FOK) unless he had to or fat fingered without the usual platform safeguards against it.
You are still speaking as if ES was a stock trading on an ECN... ES is trading on GLOBEX, and afaik FOK, or iceberg or any other travesties from the stock trading world are not available.
No one precludes little china guy to rent a server at one of numerous US data centers and run his black boxes from there.
chartman, your info is helpful.. Could you take a look of my question that is related to your points? thanks. http://www.elitetrader.com/vb/showthread.php?s=&threadid=159451