Sanity check. Can CME fill stop market at better price.

Discussion in 'Order Execution' started by maxima120, Apr 3, 2012.

  1. Now the main question here what is better price. I am talking here opening stop market order. NOT stop loss.

    Hence opening buy stop market better price would be price below the trigger price.

    here is an example and you tell me if i am wrong. consider following

    best ask 100
    best bid 99

    buy stop at 100 size 1.

    trade occurs at 100 size 1
    buy stop triggered

    a. best ask had size 2
    buy stop was converted to limit order at 100 and filled at 100 (because remaining qty at best ask was 1 at the moment of the triggering (considering there were no other stops at that level)

    b. best ask had size 1
    buy stop was converted to limit at 101 (next available ask, because 100 was just bought out) and filled at 101.

    is this correct way of thinking stop market?

    if yes then for entry purpose the stop can be filled at trigger or worse (instead of 100 I opened long position at 101).. right?

    now the real question - could be there circumstances when such an order be filled at 99 or lower?
     
  2. You should get less slippage with a native stop.

    Not sure you'll end up bettering the trigger price though.. :p
     
  3. oraclewizard77

    oraclewizard77 Moderator

    This is my understanding on futures.

    1) Market orders are filled 1st, but you can get more slippage during low volume times, news events, and you will get the worst price since its not a limit order.

    2) A buy or sell stop order to get you into a trade is the same as a market order.

    3) A limit order is different. You are getting in at that price only. Also, from what I know it depends who places the order 1st as the first orders get filled before later orders. Sometimes for limit orders, price does need to move through the number you want to get filled at that price.
     
  4. Being someone who trades on CME everyday(6E and ES), I have( less than 5% of the time) been filled at a better price than the market stop price.
     
  5. dom993

    dom993

    I only trade CL, which also runs on CME globex servers.

    On this product it happens sometimes to get filled on a STOP with positive slippage (latest example, got 2-ticks positive slippage on a STOP yesterday).

    But to be honest, it happens more often to get filled on a STOP with negative slippage.

    The thinner the order-book, the more likely you get slippage ... negative slippage when price pushes through your stop level & stays beyond it (sustained move), positive slippage when price spikes through the stop limit on a large market order while the current bid (or ask, depending on your STOP direction) remains in place, possibly a few ticks before your stop level.

    Also, your example b) & c) are wrong ... a STOP order is converted to MARKET order once it is triggered.

    If you want your stop to be converted into a LIMIT ordern you have to use a STOP-LIMIT order
     
  6. Thanks! That what I was asking. It is surprising how could it possibly get positive slippage... According to the rules the stop should be converted to limit at first tick at that price. how the market can get through the limit order not filling it at that particular price I dont get it... I mean it is cool to get positive slippage but I just want to find out how exactly...

    I mean - either I am missing something or CL matching engine has a bug (because I was talking about CL too).

    CL matching algorithm isnt FIFO.. May be thats the cause.... Damn I cant find PDF I had couple of years ago with detailed description of CME matching rules step by step....
     
  7. dom993

    dom993

    I just edited my prior post, see last couple lines
     
  8. Ok. CME doesnt have market orders intrinsically. Any market order (stop market or market) is converted to limit order first and then placed into the book. thats the CME difference from other exchanges.
     
  9. 1) FWIW, there may have been a "big" MIT order at your stop-price that could have created the positive slippage or price improvement, especially if your order was placed at "even", "half" or a significant level that may have been a prior high or low price on the intra-day chart. :eek:
    2) The quantity on the MIT had to have been substantial enough to prevent the market from trading through the stop-price and reverse it momentarily. :cool:
     
  10. in the CME rule book I didnt see any MITs. I think that exacly Stop Market is analogue of a MIT. once tick printed at the trigger level it becomes 'market'. makes sense?
     
    #10     Apr 4, 2012