Native Orders Accepted by Major Futures Exchanges

Trading and Investing Helping Traders
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A request for Matt! Can you post a list of all the “native” orders that are accepted by the major futures exchanges? What is native on Eurex markets (e.g. DAX) is not 100% the same as CME. For example, a stop-limit order sent to Eurex will get rejected (Eurex takes stops as native not stop-limits) but the same order will be accepted at CME. And a question that’s be good to answer in such a blog post. What is the difference between a native “stop” at CME and a native “stop-limit” at CME? Is the former just the latter with an exchange-coded limit set X points from the stop price? A new blog post explaining the nuances as to which orders are “native” on which exchanges would be great.

Also, I think some of the phraseology confuses some traders. It’s isn’t true to say that bracket orders or OCO orders “reside” on the execution feed’s servers (of certain providers). The orders themselves - if they are native orders - reside on the exchanges. It is only the ‘cancellation logic’ that resides on the execution feed’s servers. If a trader is long the DAX at 11460.00 and has a profit target of 11480.00 (native sell limit) and a stop-loss of 11440.00 (native stop order), set as One Cancels Other, then both these orders will “reside” at Eurex at two stand-alone orders. It is just the logic that knows to cancel one order when the other order gets filled, that is hosted by the execution feed’s server.

And then there’s the difference between a bracket order and an OCO order. Another nuance. These terms are thrown around by technical folk, that to the untrained eye aren’t obvious. A bracket contains the initiating entry order and the OCO. Whereas the OCO is just the profit and stop-loss components. I’m learning that with CQG (via Sierra) a bracket order’s logic resides on my computer (i.e. it is not server-side) whereas the OCO logic resides on CQG’s server.

A lot of talk exists on a lot of bulletin boards about latency but if a trader is using native-held orders for a stop-loss I’m not sure how relevant it is. For traders who trail their stop (which means getting in the queue again with every trail movement) it seems particularly irrelevant.

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@simtrader good points on the topic. Let me explain the orders as permitted by the exchanges.

CME:

Limit Orders are permitted. This is pretty obvious.

Market Orders are permitted. In reality, they are called Market Orders With Protection. Market orders with protection are filled within a pre-defined range of prices referred to as the protected range.

Stop Orders are permitted. In reality, they are called Stop Order with Protection. This becomes a market order when triggered. Stop orders with protection prevent stop orders from being executed at extreme prices. A stop order with protection is activated when the market trades at or through the stop trigger price and can only be executed within the protection range limit. The order enters the order book as a market order with the protection price limit equal to the trigger price plus or minus the pre-defined protection point range.

Stop-Limit Orders are Permitted. Stop-limit orders are activated when an order’s trigger price is traded in the market.

  • For a bid order, the trigger price must be higher than the last traded price.
  • For a sell order, the trigger price must be lower than the last traded price.

After the trigger price is traded in the market, the order enters the order book as a limit order at the order limit price.

There are additional qualifiers such as Day Order, Good-Til-Canceled, Good-Til-Date, Fil and Kill, Fill Or Kill, minimum quantity and display quantity.

As far as Eurex, and to keep it simple, on top of Limits and Stops, they do allow bracket orders. One-Cancels-the-Other order

I hope this helps you. Please let me know if you have any questions.

Matt Z
Optimus Futures

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So the triggered stop limit order which will create a limit order into the limit orders book will get it’s timestamp at the time of conversion which puts the limit order to the very last position in the queue ?

If so then in the situation where you are in the position and some fat ass order will hit the for example YM Equity Index Futures market and the market jumps 50 points into wrong direction your stop loss order will be executed by the huge slippage because your converted stop limit order is sitting behind the fat order and the fat order is filled first because of the FIFO procedure in this particular instrument.

But if the matching engine would use for it’s FIFO operations the timestamp given at the time of the original stop loss order then you would see a lot smaller slippage depending on how much there is other stop loss orders at the given price levels.

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You’re mixing apples and oranges in your mind. A stop-limit order is a “native” order on most (but not all) exchanges. FIFO means that it’ll be on the exchanges servers the instant you send it. If your limit price is very far from your stop price and you’re in a liquid market then it’s very unlikely that the market would blast through your (natively resting) stop price and also go beyond your limit price (i.e. leaving you unfilled).

There’s a feature in SierraChart called “triggered” limit order (which acts like a negative stop-limit offset order) which is a different beast altogether, and nothing I would imagine any trader wanting to use for a stop-loss order.

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No I am not mixing apples and oranges. I am very well aware of the native orders and what the FIFO means.

So please read my question (2 first lines) carefully again and think about it.

And what comes to slippage I am talking about the slippage between the stop limit order’s trigger price and the final execution price. Please notice also in my example the instrument was YM Index Future at CME/Globex.

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To clarify my question I will ask it in another way:

Exchange will receive your stop limit order at 12:00:00 and then the market will trade your stop limit’s trigger price at 12:30:00. Which one of these timestamps will be used for the limit order (remember your order is now limit order because of the traded trigger price) if/when the execution engine will go into the FIFO procedure with your limit order ?

It is the timestamp which will give the priority for your order.

This was my question.

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I don’t understand the premise of your question. A native stop order (or native stop-limit order) sits on exchange servers at CME the moment you send it. It is executed FIFO at that price. If your order is on the exchange servers ahead of another order on the servers at the same price then you’ll get filled first. Where you will actually get filled depends on the FIFO principle and how many contracts (supply/demand) exist at the price you hope to get. Slippage is a part of the business and can obviously be influenced by massive orders coming into the market at any given price. Slippage is slippage. If you have a sell-stop order (acting as a stop loss) in the ES at 3092.00 because you are long at 3096.00 and someone else has a sell stop order to go short if the market trades lower to 3096.25, for a million contracts, then I’m pretty sure you won’t get filled at your stop price of 3096.00. But that has nothing to do with “triggered” orders. You are on the exchange servers the at your price the instant you send the order it it’s a native order (which stops and stop-limits are at the CME). The rest is up to the Gods.

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Now it’s my turn to not to understand the examples… :slight_smile:

Lets change your example as follows:

You are long 1 ES contract at 3096 and have “secured” the position with a sell stop limit (stop loss) order at 3092 using a maximum allowed Price Banding (6 points) for the limit order. Every price level between the 3092 down to 3086 has 1 contract at each BID level.

Now the price will trade down through the opening price 3096 and when it’s allmost starting to trade the trigger price at 3092 there will be a new order which will hit the bid by the size of 20.

There is no other orders in the books (except the bids) and no other traders around than just you and the seller.

So what will be your execution price ie. how much will be your slippage between the original stop price (2092) and the realized execution price ?

I see the point here is that is the timestamp for you limit order set at the very beginning when you entered your originial stop limit order or is it set again at the point of triggering (when comes to limit order). This will rule the situation who will be filled first.

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A couple of my numbers were off. To discuss your example. You are long the ES at 3096.00. You decide that if the market trades lower to 3092.00 that you will want to exit the trade for a loss. The first question you need to ask yourself is what type of stop-loss order do you want to send to the exchange? You have two choices for CME:

  1. Plain vanilla sell stop at 3092.00.
  2. A stop-limit order; i.e. sell-stop at 3092.00 limit 3086.00

Both order types will be physically held on the held FIFO (at the CME). The instant that 3092.00 is hit, your order will take priority to be filled ahead of someone else who also wants to be filled on a sell-stop at 3092.00 but who placed the order after you. Likewise all sell orders at 3092.00 that were placed before you sent your order will be filled before you. FIFO is irrelevant to you for any sell orders >3092.00. It’s only relevant at the price you want. I’m assuming that you know the difference between Option 1 and Option 2? Option 1 is a guarantee that you will be taken out of the market at some price. Option 2 is not a guarantee. If George Soros hit the market will a massive sell order such that the market traded down lower like this …3092.50, 3092.25, 3092.00, 3085.75 (i.e. a huge leap in price) then if you had chosen Option 2 for your stop-loss, you’d still be long the market and you’d be freaking out. Only if the market traded up higher again to >=3086.00 would you get a fill. When it’s time to “get out” it’s time to get out. That’s how I see it. I don’t understand traders who would use Option 2. Put your trade on, set a plain vanilla stop-loss as soon as you can, and then hope Soros doesn’t show up right about the time your stop-loss gets hit.

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To further elaborate with the above example. Suppose there was a bid for 1 contract at every price level if there was a bid for 1 contract of at every price level inbetween 3092.00 and 3086.00. You obviously want to hit one of those bids with your sell-stop at 3092.00. But if Soros had a sell order for 1 million contracts the second that 3092.25 was hit, his order takes precedence over yours. Not because of the FIFO principle but simply because his order is activated by a price of 3092.25 whereas yours isn’t activated unless the price went a tick lower. Meaning in the space of nano-seconds all those bids will get gobbled up by Soros’ orders. Your order would be like a beggar asking for a crumb. On the screen you’d see the market trade at these prices in milliseconds and you might not get a fill if you had used a stop-limit order as opposed to a stop order. In the real world, ES is very liquid and most of the time this will not happen. Slippage is a factor of the liquidity of the market at nay given moment and the size of the trade you are making. There is no way to know with certainty how much slippage you will get on any given stop-loss order. It’s why many traders only trade very liquid markets. If you want to trade less liquid markets that’s OK it just means you’d need to be ready to accept slippage, particularly true when trading size.

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Thank you very much for your time and patience.

You are saying that when my stop limit order is converted into a limit order and put into a limit order book it will use timestamp which is generated at the time of conversion. This makes sense.

So in our example when the original stop limit order (stop loss) was triggered it started also to hit the bids BUT Soros will get the fills because he has a better timestamp. Now his 20 contracts starts to get fills immediately from the 92. My stop loss order will be postponed until executed at the 87 with a 5 point slippage.

I was after these timestamps because the “rule book” says if there is orders at the same level those who have older timestamp (FIFO procedure) will be executed first.

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It’s not that Soros has a better timestamp than you (in the above example), it’s that his order is activated before yours is, because the market touches his sell stop before it touches yours. maybe he places a massive market order before your price was touched. Timestamp (FIFO) is only applicable to orders placed at the exact same price. I don’t think it’s that relevant to analyze how stop-limit orders work as a stop-loss. Just use a plain vanilla stop order. Why take the risk of not getting a full?

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In CME there is no such a thing like a vanilla market order. Their market orders are with protection or limit which only protects the price but doesn’t quarantee your fill. The order or part of it can end up as a limit order sitting in the book.

Timestamps matter allways when the engine fills the limit orders on the same price levels. Because our limit order gets it’s time at the conversion (which makes sense) this is why it is executed later.

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I think worrying about a very far away limit order on either a market order or a stop-loss order is misguided worry. I’ve never heard of a situation where a very far away limit order makes any difference in terms of slippage. The issue of slippage has to do primarily with liquidity of the market and the size you are trading. Most traders trade with stop losses that reside on exchange servers on the FIFO principle at that price. The fact that CME might execute the stop loss via a triggered limit order is just the mechanics of what happens. I don’t see how such mechanics would play a role in any trading decision. Nor do I see it being relevant re: slippage.

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@simtrader Thank you so much for your efforts to share your knowledge. This type of knowledge comes from many years of trading, trial/error and diving into the small details of Futures trading. Again, we appreciate the input and the specifics!

Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

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My comment was because you criticized the use of the stop limit orders in stoploss management. In practice a stop limit order with a wide limit setting equals the stop market with protection orders.

Also readers should keep in mind that pure market orders are always simulated on the broker’s servers and market with protection orders are those which will be sent directly to the exchange.

This coversation has been very informative so thank you. Peace.

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How is a Stop order at CME triggered?
Only when the Stop price is traded?
I have seen a couple of times in the Gold futures that the bid/ask is mostly 1Pip but it can move a couple of Pips without any trades so meaning it could move through a Stop price without getting triggered?