[cunparis]

I'm hoping someone can give me an explanation for trades that occur outside the bid & ask. How & why do they occur?

As an example, this morning during the London session the Euro currency futures had a massive amount of volume trade in just 2 seconds. The normal trade size was 1-4 contracts, yet 2000 contracts were traded without moving the market one tick.



I'd really like to understand how this can happen. It's not a special case, it happens all the time on all the markets I watch except ES. I assume ES isn't affected because it has more liquidity.

[Tams]

that's what we called the "professionals" or the "commercials".
we use indicators to detect them.

[cunparis]

Originally Posted by Tams »

that's what we called the "professionals" or the "commercials".
we use indicators to detect them.

Can you elaborate? How do they trade without going through the order book?

[uexkuell]

Quote feed is probably not updating bid and ask fast enough while trades are reported (more) completely.

With symbols that move fast (like e.g. EUR, CL, DAX) this can happen more frequently.
ES bid and ask moves slowly. Therefore the feed has a chance to keep the bid and ask values up to date.

(At least that's the way things are working with Zenfire feed. Only suspecting that it applies for TS also)

[cunparis]

Originally Posted by uexkuell »

Quote feed is probably not updating bid and ask fast enough while trades are reported (more) completely.

With symbols that move fast (like e.g. EUR, CL, DAX) this can happen more frequently.
ES bid and ask moves slowly. Therefore the feed has a chance to keep the bid and ask values up to date.

(At least that's the way things are working with Zenfire feed. Only suspecting that it applies for TS also)

I thought it might be the data feed not updating but in the example I posted, the market wasn't moving fast, in fact the price before and after the high volume trades was the same.

Also I get exactly the same data from both tradestation & iqfeed. So it's possible that one might fall behind but the chance of both datafeeds falling behind is much less.

[SIUYA]

completely random guess -
could it be related to a spread of some sort, or a related option trade whereby this it the hedge or the other side of the spread.
In some markets these can be reported at prices that are close to the market, but still outside the market at that time.
The other side of the spread could be anything but likely to be another contract month.

No dig at anyone in particular, or any style - but one of the issues I have always found with people attempting to track or understand every trade often misses the point that so many trades are merely hedges, parts of option spreads or generally unrelated to a directional view in an instrument.

[cunparis]

Originally Posted by SIUYA »

completely random guess -
could it be related to a spread of some sort, or a related option trade whereby this it the hedge or the other side of the spread.
In some markets these can be reported at prices that are close to the market, but still outside the market at that time.
The other side of the spread could be anything but likely to be another contract month.

Great guess. I asked IQFeed and this is what they said:

Implied trades are part of the "Non qualifying last trades" Here is a defenition I got from Market Interity

Implied is a trade condition. Below is an explanation of how implied trades come about.

Implied IN spread orders derive from existing outright orders in individual legs. Implied OUT outright orders are derived from a combination of an existing spread order and an existing outright order in one of the individual underlying legs. Implied functionality fills in “holes” in the market. In other words, it allows both spreads and outright futures traders to participate in a specific contract where there would otherwise have been little or no available bids and asks. Such implied quotes are critical to building volume in new electronic markets like the NYMEX energy contracts.

back to your post:

No dig at anyone in particular, or any style - but one of the issues I have always found with people attempting to track or understand every trade often misses the point that so many trades are merely hedges, parts of option spreads or generally unrelated to a directional view in an instrument.

On the other side of those hedge trades are usually speculators, so I find them useful. In the case of the trades I'm looking at, I'm interested in them because they mess up my volume analysis.

Cheers

[bakrob99]

Have you considered phoning tradestation to see what these trade represent?