Simple question:
I'm trying to clarify my understanding of how the CME limit order book works (particularly their eMini Equity futures range). I am interested in the execution of marketable limit orders with respect to price improvement.
My understanding from simmering down the sparse literature on marketable limit order rules I have come across is that a MARKETABLE limit order could be concisely defined as being a limit order that crosses with a PREVIOUSLY EXISTING and previously non marketable limit order. Assuming there are no orders on the book and a limit order to buy at 100 arrives followed by a limit order to sell at 50. The 1st order (buy at 100) is considered non marketable and the 2nd order (sell at 50) is considered marketable purely by virtue of its later arrival. Crucially, this latter order receives the ENTIRE price improvement from 50 to 100 again simply by virtue of its later arrival.
Is this how T2W members understand it? Happy to hear comments from people with experience of other limit order books than those for the CME's eMinis
Where I am going with this is that clearly, as submitting your order after others have submitted theirs carries this price improvement advantage, execution algorithms will need to play with this to attempt to gain this advantage over other algorithms. Spoof cancel and agress could be a useful sequence if your algo is faster than your competitors coz you are collocated etc...
Anyone have any experience of this or care to make any comments?
I'm trying to clarify my understanding of how the CME limit order book works (particularly their eMini Equity futures range). I am interested in the execution of marketable limit orders with respect to price improvement.
My understanding from simmering down the sparse literature on marketable limit order rules I have come across is that a MARKETABLE limit order could be concisely defined as being a limit order that crosses with a PREVIOUSLY EXISTING and previously non marketable limit order. Assuming there are no orders on the book and a limit order to buy at 100 arrives followed by a limit order to sell at 50. The 1st order (buy at 100) is considered non marketable and the 2nd order (sell at 50) is considered marketable purely by virtue of its later arrival. Crucially, this latter order receives the ENTIRE price improvement from 50 to 100 again simply by virtue of its later arrival.
Is this how T2W members understand it? Happy to hear comments from people with experience of other limit order books than those for the CME's eMinis
Where I am going with this is that clearly, as submitting your order after others have submitted theirs carries this price improvement advantage, execution algorithms will need to play with this to attempt to gain this advantage over other algorithms. Spoof cancel and agress could be a useful sequence if your algo is faster than your competitors coz you are collocated etc...
Anyone have any experience of this or care to make any comments?
