The Dreaded NY Markets

Discussion in 'Index Futures' started by Hofferino, Jun 30, 2002.

  1. I'd always heard about the "dreaded New York futures markets." Yet I have to be honest that I had a hard time understanding: What could be so terrible? Always trade limit orders, and you'll do OK.

    I'd like to share two recent experiences that have changed my mind.

    1) I was long Cotton about 2 wks. ago, on the day when Cotton flew up about 250 pts. I had a limit order to sell 1 contract @4484. This was a profit taking sell -- I figured it seemed like a good profit for the day, after which I could perhaps hope for a pullback, and get back on long.

    Well -- what happened was cotton flew right past 4480, all the way up to 4720, which was it's daily limit. (Of course, in hindsight, I wish I never had that limit order in -- but that's the nature of the game.)

    All day I waited for confirmation of that order -- but it never came. My account kept showing me still long. Perhaps, I hoped, the floor broker had miraculously lost my order.

    Confirmation never came.

    The next morning, I get a phone call: hofferino, we have a delayed fill for you on yesterday's cotton order. You were filled @4470. Since you were on a limit @4484, we'll make up the extra 14 points for you out of our account.

    Now, I ask you: Was anything illegal done here? No -- I had the order in, and they filled it. On the other hand, what do you actually think happened here? Since when are the brokers in the habit of filling limit orders at WORSE prices, and then making up the difference?

    My take: The broker misplaced my order. He was short 1 for his own account @4470. The next morning (or the afternoon before)he finds my unfilled order, and, presto -- 200+ points for free!!

    Farfetched? Perhaps. But does anyone have any other plausible explanation for this? (I asked my (phone) broker, and while not wanting to admit I was right, he couldn't say I was wrong either.)

    2) I was long Crude Oil. Had a limit to sell 1 @2690. I see the price trade up to 2690 three times, but never past. Hard to know if I've been filled or not.

    After not receiving notification for a while, I call up my broker, who places a query to the floor broker. Says it should take a few minutes to get back to me.

    I call him back an hour later. He says he never received response from the floor. Now it's too late. They've all gone home. We'll know for sure by tomorrow morning b4 markets open.

    Overnight, the market comes down to, say 2650, or something. Next morning I get a phone call -- Limit @2690 --- Unable!

    I know this is speculation, but, say the market had traded up to 2750 overnight -- how much you want to bet I'd have got a confirmation in the morning!?

    My take: Floor sells contract @2690 and sits and waits till tomorrow morning. If price is down ---> unable. If price is up ---> fill. It's a no risk trade for him knowing he can always dump it on me.

    Am I being too closed minded? Am I finding demons where they don't exist?

    I realize that in neither case has anything illegal been done (at least not that I can pinpoint). All the same, I smell a fish.

    Interested to hear others' opinions and experiences.

  2. I would also be interested to hear what other futures traders have to say about this. I have only traded index futs so far, but I plan on trading other contracts soon. One thing I can say, Hofferino, is that you wouldn't have such experiences if you stick to the purely electronic markets, the minis @ cbot / cme for example.
  3. jem


    hofferino- I have limited experience with futures besides the electronic ones. But I remember how my stock discount brokers use to come up with excuses every once in a while to excuse a theft. As I made a transition to trading professionally I remember how my discount brokers would back down immediately whenever I pressed them ( Since I was looking at the market real time and understood how things worked I knew when I was getting worked.) Now I think of all the money I let them gip me out of.

    Even specialists will still try to screw a trader out of a few cents now and then. So I am sure at least a few futures brokers are going to look for their own profit over yours. I can not imagine that they did not know whether you were filled or not. What a crime.

    I suggest you quickly learn the order handling rules inside out and then ask in the most official terms for the transaction record. However, an even better move would be to find out from someone who knows how you would be screwed by something like this and exactly how to have that record preserved and then investigate the circumstances. Basically, you know you were screwed and you have to catch them thinking that you will let it drop. But then you go in and get the records and then hammer them if they cheated you. Of course it may be too late, but give it a shot anyway.
  4. sure, why not. in 'crisis' markets, anything goes.
  5. Your post jogged my memory, unfortunately it was 20 years ago and I don't remember some specifics, but I damn sure remember results.

    At the time I had real time quotes and would phone in orders. I was short gold and the market gapped down, like a stone this day, $3.00 a contract when the range was $.80, and I had a limit order to buy resting at $1.50 lower. During the day I got no confirmation but near the close I got a confirmation at $1.60. New to trading I excepted the profit and didn't question it but always thought the floor held the order, got filled much closer to $3.00 and picked up the difference.

    A pork bellies trade I did register a complaint to the CFTC was an options trade of puts. At the hearing, which I lost, a print out of the transaction was supplied to me. It was plain to see that it was an illiquid market and 2 brokers bid/asked the contract down from $1.20 to $.60 in the space of 1 minute at the close.

    These are actual trades but the facts are sketchy from time, however it taught me why brokers fight for......order flow.
  6. Marty Schwartz talks about 'whistling out' trades at the Merc. As cute as it is scary.
  7. and come in contact with many floor brokers and locals on the exchanges there. It is much more difficult than you can imagine being upstairs looking and a price on your screen to fill orders
    and trade in the pits

    I think it is much more honest now than yrs ago actually.

    I would suggest that if you think in the future you are getting ripped off in the NY markets you can either:

    stop trading those markets

    become a member of the exchange and trade on the floor.

    good luck!
  8. yes because it's obviously asking too much to get a fill at or near the quote under certain circumstances.
  9. I was a floor trader in the NY futures market-coffee and sugar to be exact and what you described could be attributalbe to cheating or just plain oldrecklessness on the brokers part. The 1st is pretty obvious to spot but if you want to give the broker benefit of the doubt picture the 2nd scenario. Small floor broker used by your FCM employs 2 phone clerks with about 6 tel on the booth. They have 1 runner-some nice looking chick who needs experience for the summer. Cotton goes ballistic, all 6 phones ring at the same time, runner does'nt know what to do since all she's ever done so far was fetch lunch now she has 15 mkt order in her hand , drops one- they then review the tapes when YOUR broker compains-you get the picture.

    My advise- get a broker who can give you direct flash fills from the floor-you might have to show some $ to start to get the flash fills. Forget about using FCMs. Go the exchanges get their list of clearing firms and open one directly with the clearing firm instead of giving your Series 3 broker extra commish $. Then you get flash fills.

    Good luck.
    #10     Jun 30, 2002