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Stop Hunting - Fact or Fiction?
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Stop Hunting - Fact or Fiction?

  #41 (permalink)
Market Wizard
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Reminds me of the first time I got to walk into a London market maker (FTSE250) when he explained that Level II data was a waste of time because his serious trades wouldn't even be on there. What I also find fascinating is that with all the venue changes and hiding and revealing phases the fundamental chart patterns haven't changed.

Cheers and thanks for all the great info.

Travel Well
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  #42 (permalink)
Seth
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choke35 View Post
CME regarding block trades: "Ability to execute a large transaction at a fair and reasonable single price."
You have a single transaction that's more than 75 times the average trade size.

When I see a bird that walks like a duck and swims like a duck and quacks like a duck, I call that bird a duck.

The minimum block trade size for bonds during the RTH timeframe is 3,000. In other words the orders we're talking about aren't big enough to be block trades.

Block Trades

And according to my understanding you can view block trades here, and no such trades occur on that product during that time:

Block Trades - CME Group


Last edited by TWDsje; September 7th, 2017 at 12:55 PM.
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  #43 (permalink)
Market Wizard
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TWDsje View Post
And according to my understanding you can view block trades here, and no such trades occur on that product during that time:

Block Trades - CME Group

For equity futures you will find about 0 trades all the time if you choose that way since virtually all other
Clearport trades use correct rulebook flags so that they can be matched with the order flow at their time
of disclosure.

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  #44 (permalink)
Seth
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choke35 View Post
For equity futures you will find about 0 trades all the time if you choose that way since virtually all other
Clearport trades use correct rulebook flags so that they can be matched with the order flow at their time
of disclosure.

For equity futures (SP) you'll find 0 trades all the time because block trades aren't available in that product.

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  #45 (permalink)
Market Wizard
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TWDsje View Post
For equity futures (SP) you'll find 0 trades all the time because block trades aren't available in that product.

I give it up.

Why do you think a Clearport venue exists for the ES?
Just to have a permanent fallback or treat large trades like retail?

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  #46 (permalink)
Seth
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choke35 View Post
I give it up.

Why do you think a Clearport venue exists for the ES?
Just to have a permanent fallback or treat large trades like retail?

I don't know, but that does not prove that block trades for ES are available.

Why does the Futures Block Threshold for S&P 500 say not available?

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  #47 (permalink)
Sharpening mental edge
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choke35 View Post
I give it up.



Why do you think a Clearport venue exists for the ES?

Just to have a permanent fallback or treat large trades like retail?



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And that's without sigma x etc....


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  #48 (permalink)
Market Wizard
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TWDsje View Post
For equity futures (SP) you'll find 0 trades all the time because block trades aren't available in that product.

Just one example where block trades clear into the ES via Clearport or alternatively via CME Direct -
both times with the well-known report window:

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Basis Trade at Index Close (BTIC) Block Trades - CME Group

And there are several other large trade types like e.g. EFP, EPR, EFS that never show up when
the trade is closed.

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  #49 (permalink)
 Vendor: www.orderflowdashpro.com 
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I have to catch up on everything in this thread but let me provide my perspective on some of the ideas I've seen expressed. First, I think the market as a whole is engaged for stop hunting. Why? If you are on the right side of the market and a stop run occurs then that's the optimal take profit. It gives you liquidity to take profit. Let me say, I do not think it is necessarily an institutional trader but rather every single trader is hunting stops which is why it is virtually impossible to avoid it. If you prefer to take your profit at the optimal point (where it reverses) then you are, in effect, hunting someones stops. Mathematically, it is an anti-optimization feature. The market doesn't like optimization because optimization allows for "cheating" in the sense that if you can optimize your trading you can make an outsize return without risking as much. So, that's a big no-no. In effect, as you seek the optimal stop, your adversary seeks the optimal target which makes it difficult for both of you.

Now, some people have mentioned the vacuum effect. This is not what I will call a stop run. The vacuum effect is real though. Vacuum occurs when aggressive bulls/bears take out a position and the market doesn't move in their favor. The liquidity providers pull the market above/below them to trigger their near to market stops. This does happen. It happens primarily in the overnight. It is often triggered by a resting order imbalance.

A true stop run though is when aggressive buyers/sellers are able to move the market above/below prior swing lows/highs. This happens and is very clear because a ton of orders are executed. Here is the important thing to know about stop runs: while stop runs often will mark the top/bottom -- they are just as likely to keep triggering on a trend day as more and more traders like to call the top/bottom. But, yes it is often very short term traders who trigger the stops because they are only targeting a few ticks. I suspect it is the HFT too and that they create the resting order book imbalances, as well.

One explanation from traditional technical analysis for stop runs is that large traders need to test the market at the extents before placing their large orders. This makes some sense. Before you sell a ton of contracts, it might pay to bid the market up so make sure that nobody else is interested in buying. After you get the confirmation that no one wants to buy, you have confidence to sell. This makes sense but it could also be explained that higher uncertainty is a characteristic of tops/bottoms and so range testing is just a product of that.

However, when trading for a few ticks: I did not observe any stop runs. I think it is because the markets are so efficient that very few retail traders able to scalp. If retailers that are scalping then they are clearly using advanced order types. So, if you get stopped out for a few ticks and it isn't after hours then it is probably not a stop run. I suspect that sometimes stop runs are caused by hedging behavior, as well. This was true a few months back when I suspect the institutions were selling the NASDAQ and buying the S&P for hedging purposes.

I guess there are all kinds of institutions engaged in all kinds of trading. However, what I have seen is that institutions might try to slow down the buying at new highs so they can buy at lower prices. This is most common on strong trend days when you see them getting active in that way.

As for block trades, they are already executed. So, I do not see why they would move the market one way or another.

These are just my 2 cents worth. I do not truly know what any institution is doing. However, market rules do explicitly state that any sort of gaming behavior is not allowed.


Last edited by tpredictor; September 7th, 2017 at 01:57 PM.
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  #50 (permalink)
Seth
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choke35 View Post
Just one example where block trades clear into the ES via Clearport or alternatively via CME Direct -
both times with the well-known report window:

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

Basis Trade at Index Close (BTIC) Block Trades - CME Group

And there are several other large trade types like e.g. EFP, EPR, EFS that never show up when
the trade is closed.

So you are asserting that the 250 lot orders that I see come through on the jigsaw reconstructed tape are one of BTIC, EFP, EPR, or EFS transactions?

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