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So, I've seen some threads talking about specific brokers/fcms, but it's usually the "i haven't had an issues" kind of review.
Does the FCM play any role in order speed? I ask, because from poking around, it seems that the order routing firm (TT for example) has to check with the FCM before placing orders to make sure balances/margins are good (and to update balances after a trade is done?). How much extra time does that add to order sending?
It looks like Sierra Chart is working on a direct connection to CME, but in their thread about this, they seem to mention all the order checking they have to do before the trade goes out.
This is probably a non-issue in practice, but I'm curious how this works.
Thanks!
Can you help answer these questions from other members on NexusFi?
Yes, the order goes from your trading software to the order routing network (which could be TT or someone else), which then has to make sure that there is enough money in your account to send it to the exchange, which means a check with the FCM, and then it sends it off. Plus, the FCM has to be updated about the trade so they know it's outstanding. The FCM is, in fact, your broker and nothing is going to happen that does not involve them.
Which is why SC is going to be doing the exact same thing with whatever they come up with. Sure, they will have a "direct" connection to CME, but that just means that they will not be working with TT (or CQG or Rithmic or whoever), but will be doing the order routing without that particular middleman. But your account is with the FCM, not with Sierra Chart or anyone else.
In a more integrated world, you might expect all this to be internal to the broker, and in that case the question of whether the FCM has to be checked would be impossible, because the FCM is your broker. But with futures, some of these roles are often split out into different companies.
From some of your questions, I gather you are familiar with the world of stock trading. If so, you would probably expect all this to be done internally within your brokerage firm. With futures, generally different companies have different pieces of it. So you may have an IB, which is sort of like a stock broker's front office (sales, customer service, sometimes trading software), then you have an FCM, which is more like a stock broker's back office (except that FCM's generally have their own sales/service departments also, so they don't always need an IB), then you have a company that routes the orders and interacts with the exchange, which would be like part of the stock broker's back office also. Separately, you have a company like Sierra Chart, which provides the desktop software you trade with, under agreements with the FCM and trade routing services (and some companies roll their own trading software, like Interactive Brokers or TOS or TradeStation or Tradovate or NinjaTrader.... and to make matters more complicated, Tradovate and NinjaTrader are both IB's and rely on FCM's to manage customer accounts that they have opened with them. )
All these separate functions are going to have to be done by somebody. In the stock world they would be done by your broker. In the futures world, they are parceled out. But they have to be done.
Does all this add to transaction times? Sure. But we're dealing literally with milliseconds. If you're designing an automated high-frequency trading system with its own high-speed optical fiber connection to the exchange servers and with its servers in the same building as the exchange, where milliseconds can be too long, then it matters. But you're not, right? Don't sweat it. Besides, as a retail trader you can't get around it anyway.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
With my FCM, Rithmic seems to download the risk data once per 24 hours or at login. For example, if I add funds to my FCM and they show as cleared with my FCM, I can't use those funds unless I log out and log back into Rithmic. Similarly, I can exceed my agreed margin during a drawdown until I log-out and log back in. So I doubt my FCM is being polled before every transaction. Other FCMs may vary.
In the case of IBKR, risk does seem to be polled before every transaction, and during a drawdown it will auto-liquidate.
If you speak to an IB, they should be sympathetic to the information you require and give you an accurate technical answer after liaising with the FCM and Rithmic/CQG. If they don't, you can cross that IB off your list.
I was not aware of this, and it seems like an odd way for them to do business, since you could easily blow out your account and go negative, which the FCM will be on the hook for if they can't get it back from you. But I certainly don't know how everything is done by everyone.
I agree that you need to know the ins and outs of your particular situation.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
I'm speculating, but I guess (hope) the FCM also provides at login a minimum account threshold required to maintain an open position. If calculated correctly, this should protect the FCM from a zero balance, but not the trader from having too much leverage.
A risk to the FCM is if the trader withdraws funds and Rithmic is not updated. But this shouldn't happen if the FCM processes withdrawals the following day.
Rithmic has a number of risk-related settings on the admin side, and since I can't speak for your FCM (unless it is us) I don't know which they have enabled for your account. But yes, there is a setting for minimum balance to trade among many others. Rithmic does everything in real-time, the risk definitely does not refresh only once every 24 hours, so maybe your account is not enabled for the correct risk monitoring settings.
The reason that you are having to log in/out of Rithmic when you deposit a wire is because new funds must be manually punched by the FCM into the Rithmic environment to be tradable. Rithmic will not automatically recognize new funds until overnight processing occurs.
Use Promo Code FUTURES.IO for $0.45 futures commissions, $0.19 micro commissions HERE. *Promotion only available to new customers. Other fees such as exchange and NFA still apply*
Mike Murphy | Director of Trading
Ironbeam Futures
Phone: 312-765-7228 | [email protected]
Thanks. Does Rithmic/CQG check with yourselves before each transaction, or does it load the risk parameters once and then continue to use those until a set time?
I would imagine if your systems are involved in approving every order, that would require some low latency, high-availability systems. If you're only required to push risk parameters once per login, that is still important but less time sensitive.
Thanks for the info Ironbeam. Interesting to see some of these details.
I wonder if order-routers like Rithmic have leeway to cache account info so they don't have to check with the FCM on every order. As long as they can model the FCM-risk-model correctly, they theoretically would be able to keep balances in memory or a similar cache mechanism.
For example, Sierra Chart with TT as order-router claims they can route orders in less than 1millisecond if you select SCs Aurora server. There is no way they could make that time claim if TT had to contact any of the supported FCMs on each order (without some exotic colocation/machine-to-machine-stuff going on). I doubt that TT would even have time to hit an internal database for cached info. TT would have to keep that info in a HOT cache, probably in memory. The first order might take longer than 1ms, but subsequent orders would be fast. The hot-cache would get cleared or reconciled periodically. This is a guess, but it's one way to architect a time critical order request.
There is still latency from SC client to their server. Hopefully SC maintains a TCP connection continuously from client to server and doesn't have to establish a new connection on every order (I'm not sure who is managing the server side orders SC or TT?). If so, they could theoretically get orders to the exchange in less than 10ms for most clients in the US.
I'm definitely not trying to compete with HFT traders, but the difference from 10ms to let's say 100ms in a worse system could make the occasional fill difference of a tick in the ES? That's a pure guess. I have no idea what an extra 100ms would do to slippage, but logically it should have some consequence. You're going to get a different spot in the trade queue.
I apologize in advance if I don't explain this too eloquently as it's a little hard to describe, but...
They do not check with the FCM before each transaction. The way it works with both is they get account info from the FCM once per day during overnight processing and then operate off that info until the next processing session. When you trade on Rithmic or CQG, your orders and fills go through their respective data feeds and since CQG/Rithmic received your starting day balance, they know how much money is in your account at all times without the need for having to check with the FCM before every order/transaction. They simply take the balance they received during processing then include any fills afterwards and calculate the balance for your account.
The FCM sets the risk parameters within the admin side of CQG / Rithmic so all that really happens when you place an order in either is it goes through some checks on the Rithmic/CQG side then is either approved or rejected. I am not sure what latency is there but I would imagine that it is very quick. One or two lines of code maybe. If available margin > potential order margin then the order is approved. If available margin < potential order margin then rejected.
Use Promo Code FUTURES.IO for $0.45 futures commissions, $0.19 micro commissions HERE. *Promotion only available to new customers. Other fees such as exchange and NFA still apply*
Mike Murphy | Director of Trading
Ironbeam Futures
Phone: 312-765-7228 | [email protected]
Very clear, and thanks for explaining this. It makes perfect sense now. They don't need to go to the FCM more often than when you log in, and each time you log in (and at the start of the processing session), because they have processed all your transactions since then. Simple enough.
Your previous explanation of how deposits/withdrawals are processed completes the picture:
So that wraps it up. Appreciate the clarity.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
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