[JohnBly]

This thread is concerned with understanding how large players break-up or "shred" market orders in the futs mkts.The reason I am trying to understand better how this is done is part of my methodology is concerned with tracking institutional vs retail activity.

In their effort to (sometimes) camouflage their activities we all know that large players are able to bleed-in markets orders very rapidly in small lots using algos. One trader I know mentioned that "up to 1000 single lot orders can be entered per second" on the Globex for example. If anyone has first hand experience with this I would be grateful to know:
1) Under what conditions will large mkt orders likely be shredded (ei entries, profitable exits, losing exits etc)?
2) We all see large block orders passing T&S. Under what conditions will a large player not be concerned with hiding his tracks?
3) If a 3000-lot order was shredded into 1000 3-lot trades in 1 second, there would be a way to spot that. Does anyone know of tools that are of use in this regard?

Any comments on this practice in the futs mkts would be welcome.

Thanks
John Bly

[jdevron]

Regarding point number 3, I'm not sure if this is done in futures but in equities large orders are often broken up with "baskets" which essentially means to send fractions of the same order to a number of different exchanges simultaneously. I'm not sure how this would apply to futures because I don't think you would be able to find 1000 exchanges to send a 3 lot order.

[JohnBly]

Originally Posted by jdevron »

Regarding point number 3, I'm not sure if this is done in futures but in equities large orders are often broken up with "baskets" which essentially means to send fractions of the same order to a number of different exchanges simultaneously. I'm not sure how this would apply to futures because I don't think you would be able to find 1000 exchanges to send a 3 lot order.

Thanks jdevron,

Any given Fut contract is traded on only one exchange, which in theory should make things easier to track?!

[tucciotrader]

I'd like to know if the CME accounts for the 100% of the market share for futures like ES / NQ / YM. I mean, if I place a BUY order to long a ES future do you think I might be executed by the broker (playing the market maker) first, thus without showing up in the book nor in the T&S?

I think the Nasdaq market works like that.

Thanks

[JohnBly]

Originally Posted by tucciotrader »

I'd like to know if the CME accounts for the 100% of the market share for futures like ES / NQ / YM. I mean, if I place a BUY order to long a ES future do you think I might be executed by the broker (playing the market maker) first, thus without showing up in the book nor in the T&S?

I think the Nasdaq market works like that.

Thanks

No Sir Futs don't work that way.
All trades are cleared directly on an exchange as far as I know.

[packrat]

Originally Posted by JohnBly »

This thread is concerned with understanding how large players break-up or "shred" market orders in the futs mkts.The reason I am trying to understand better how this is done is part of my methodology is concerned with tracking institutional vs retail activity.

In their effort to (sometimes) camouflage their activities we all know that large players are able to bleed-in markets orders very rapidly in small lots using algos. One trader I know mentioned that "up to 1000 single lot orders can be entered per second" on the Globex for example. If anyone has first hand experience with this I would be grateful to know:
1) Under what conditions will large mkt orders likely be shredded (ei entries, profitable exits, losing exits etc)?
2) We all see large block orders passing T&S. Under what conditions will a large player not be concerned with hiding his tracks?
3) If a 3000-lot order was shredded into 1000 3-lot trades in 1 second, there would be a way to spot that. Does anyone know of tools that are of use in this regard?

JohnBly,
There is not really a need for futures traders using large market orders to try to camouflage the size of their orders. This has been the case since the market open on Sunday, October 4, 2009. At this time, the CME changed its tick reporting on the ES, NQ, and YM, which were the last commonly traded instruments where this would be beneficial to a large trader.

What you see now on the T&S which looks like bot entries is not usually a shredded order - it is simply the way the exchange now presents the actual executions that occur as a result of matching market orders with the queue. I am posting a link to an informative video which explains the why's and how's of what changed at that time and what we see now. There was an in-depth discussion of this on another forum, and a very experienced tape reader provided a fine explanation for us here: http://www.screencast.com/t/MZC6QytRnY

Just a thought on your comment regarding orders per second: Leading HFT's have the capability to submit over 60 million orders per second, although the exchange is unlikely to be able to process the flow if that were to occur. Goldman (far cry from the largest HFT out there) is reputed to average over 1000 orders per second the entire trading day. Some of the big firms are trading 2-3 times Goldman's daily volume.

Regarding your question #2: On the majority of commonly traded futures, there is no longer a real need to break market orders up. Also explained in the video above.

Regarding your question #3: skilled tape readers understand how to do it, and there is some software available to reconstruct the large order from the tape, but that would require promoting a commercial enterprise to post info here, if you know what I mean. Don't think that's accepted here, although many do try...

Hope it helps!

[JohnBly]

PackRat,

Thanks very much for your reply.
That video was exactly what I needed to clarify much of this issue.
I appreciate that, you saved me time and brain cells.

In the vid he mentioned that the CME may revert back to the old style (reporting "Intent").
Do you know if this is planned for?

As far as pasting T&S back together, it would easy to code a tool which which groups all trades of any given time stamp together. This would give a good picture of what size mkt order really hit the book at any given moment right?

Thanks Again,
John Bly

[packrat]

Originally Posted by JohnBly »

PackRat,

In the vid he mentioned that the CME may revert back to the old style (reporting "Intent").
Do you know if this is planned for?

As far as pasting T&S back together, it would easy to code a tool which which groups all trades of any given time stamp together. This would give a good picture of what size mkt order really hit the book at any given moment right?

Thanks Again,
John Bly

John,
I haven't heard anything about it reverting back, could probably ask the video author or the CME. Can't imagine them doing it anytime soon given how long it took them to change it the first time.

Regarding your second question, it would give a reasonable estimation of the actual order - close enough for govt work but no way to prove it was right on. When I went through his tape reading workshop, he showed screenshots of an altered T&S which went far beyond simply putting the order back together, but I believe it is in beta testing right now. It definitely made a lot of sense as he explained it.

Glad the video helped - really allowed me to make sense of what was going on after a couple years of wondering about it.