Question regarding how NT handles stop market orders on Globex

[JS999]

I was just speaking to the tech people over at Globex because I wanted to get a good idea of how stop market orders work. Obviously you guys know that there are no native stop market orders on Globex, rather these are simulated on their end as stop limit orders far out of the market price.

The guy said that if the software (i.e. NinjaTrader) does not send a specific stop limit price with the trade, then they (Globex) automatically set it to some value. In the case of gold, this default value is $5 (or 50 ticks). However, he also said that it is possible for the vendor (i.e. you guys) to send a stop limit order at up to $12 away on gold (120 ticks), if you specify it that way. (This is the maximum that they allow, according to him.)

My question is this:

Since orders marked as "stop market" in NinjaTrader are in fact actually stop limit orders being sent to Globex, are you guys actually specifying the maximum allowable limit ($12 for gold), or are you just sending a "default" value (which they would then set to $5 on their end)? This is actually a serious issue, because gold can spike very far under certain conditions, and a 50 tick stop limit might not be enough to ensure that you actually get out.

I am asking this in the NT 7 beta forum because if you do currently just send the default, perhaps you could consider adding an option for us to specify manually what we want for this setting. If you are already sending the maximum allowable distance away from the market, then that's fine.

[NinjaTrader_Ray]

The CME API is 1 layer of abstraction away from where we program at. We send in stop market orders to the brokerage API that you are using. From what I know, they only provide options for stop market (default) or stop limit orders.

[JS999]

The CME API is 1 layer of abstraction away from where we program at. We send in stop market orders to the brokerage API that you are using. From what I know, they only provide options for stop market (default) or stop limit orders.

Thanks... that's what I suspected might be the case, but the guy told me to start by asking you. If I wanted to just use stop limit orders with NT, I suppose I could also manually set the distance away that I wanted (in the SuperDom properties window, setting "Use stop market for stop loss orders" to False, and then specifying a value for "Stop limit offset").... I assume that this would work just fine. Do you happen to know what would happen if I placed a stop limit order with the offset value set to something really large (like 200 ticks)? Would Globex just set it to their maximum allowable value in that case (120 ticks on Gold), or would they reject it?

[NinjaTrader_Ray]

That is also dependant on brokerage API. I recall from years ago (when I tested this) that some brokers would reject orders outside of about 25 ticks or so (between stop and limit).

[JS999]

That is also dependant on brokerage API. I recall from years ago (when I tested this) that some brokers would reject orders outside of about 25 ticks or so (between stop and limit).

Well, apparently the CME on their end will reject any stop limit orders that have the limit price specified outside of their maximum "banding" limit. I wonder if Zen-Fire manages to translate stop limits from Ninja to simply be the maximum banding value if they are too great, or if they let an invalid order go through to the exchange level. I guess I'll talk to them to find out some more details about how they handle this type of thing...

[JS999]

So I just got this this email from Pat Shaughnessy at Zen-Fire... it might interest some people:

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The tech people at Globex must not have understood your question or they didn't explain themselves clearly.

Globex eliminated pure market orders some time ago. They replaced them with 'Market with Protection' orders. Orders are filled at the best market price up to 50% of the 'no bust' range (the range that exchange sets, per product, that all trades will stand. Trades outside of that range may be busted if they moved too far from the fair market price.) Stop orders are accepted by the exchange and become 'Market with Protection' orders when the trigger price trades.

When we send orders to the exchange, we send a Stop order and the exchange handles the fill according to the policies described above (and in more detail in Sec3, page 12 of http://www.cmegroup.com/globex/files/GlobexRefGd.pdf) The order is a stop market order, not a stop limit order.

The 'no bust' range for Gold (http://www.cmegroup.com/rulebook/CME/I/5/88K.html) IS 10 points (100 ticks). Market orders and stop orders will be filled up to 50 ticks higher or lower. The exchange controls this functionality and it cannot be overridden. The order is not a limit order, it is a 'market with protection' order--the only type of market order the exchange accepts.

If you try and place an order that is outside of the range, the exchange rejects it with the error "Order Price is Outside of Bands". You can place an order that will go 100 ticks higher, more than that and the exchange busts the trades.

For the record, the 'vendor' you are using is NinjaTrader as that is the software that sends us the order. Ninja dictates the price, we just process it and send it to the exchange.

It can be confusing, but hopefully the links to the explanations clears it up a little for you. Some of what Globex told you is accurate, some of it was misleading and some of it was simply incorrect (as verified by their own web page and rule book.)

Pat