Resting bids above market or offers below market? | Traders Hideout - futures trading strategies, market news, trading charts and platforms

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Resting bids above market or offers below market?

  #14 (permalink)

North Carolina
Trading Experience: Beginner
Platform: NinjaTrader, Tradestation
Favorite Futures: es
Posts: 644 since Nov 2011

Sorry randbots. I'm not giving priority to a market order. Based on everything everyone has said, you can't submit a limit order on a level offside from the market. We also know that (for the most part) that the first limit orders submitted will obtain the best position.

We know that if an HFT system is at the exchange and submits the limit orders then they are likely to get top of book. However, what we don't know is how the queue for the stop limit orders are processed for the limit order side.

There are two possibilities: the offer clears and replenishes before an order can hit the next level in the book or a market order hits the next level in the book first. If that's the case there is a race between the stop limits and the HFT. The architecture of the system determines what happens. It is somewhat obvious nobody here knows the answer or would have provided it already.

It probably can also vary. What probably happens because I have been able to watch other markets like BTC extremely closely is the following...

1. The offer is cleared and liquidity is pulled above the market.
2. The spread will widen.
3. There is a race to narrow the spread. The less aggressive HFT will fill the first levels and then more aggressive HFT detect this will jump the price to fill above them.
4. Finally the spread narrows.

If I submit enough orders to take out more then a single level on the book then it is logical to assume it will trigger the stop limits before the HFT can respond. On the other hand, if I clear a level normally then the HFT will probably be able to fill before the stop limits.

Last edited by tpredictor; October 28th, 2017 at 04:05 PM.
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