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[postman]

Absolutely,

In this case the client has a large account balance and often trades in hefty sizes and will skew our book. To negate this we will often hedge a lot of his business, trying to beat him on his entry and exit.

...

So your front running him... is that ethical or even legal?

 

[LLSS]

So your front running him... is that ethical or even legal?

Please, before I respond to your question, explain how you believe hedging business is front running and an illegal practice. If you genuinely don't know then I will be happy to explain the process, but I feel like I was informative enough in the rest of the post, if you read it. Here I have highlighted the most relevant parts for you:

Absolutely,

In this case the client has a large account balance and often trades in hefty sizes and will skew our book. To negate this we will often hedge a lot of his business, trying to beat him on his entry and exit.

The benefit we have is we don't ever have to really speculate or time our entry/exit. The hardest decisions are made for us and this could be considered our edge. It is so rare for someone to pick a bottom or top, all we do is wait a little while until we can get a better price then place our hedge. It's the same with the exit. If we can beat the client on a few cents each side then it makes for some decent earnings. We also do have stops in mind all the time in case they do pick the top/bottom but its rare.

We have a number of large clients who can skew our book so that we are too heavily long/short a certain product. As such we will often monitor them throughout the day and keep an eye on their positions against the book so if they are short and more smaller clients go long we can unwind some hedges etc.

 

[tar]

Im confused.
We agree there is a price for the ftse100 that is calculated by xyz method (the underlying).
But you say that there is no cash market?
Would it be more realistic to say the cash market is provided by the dealers who make prices from the underlying?



Im more confused
You say that the Dow cash feed is derived from the futures, does that mean it isnt calculated in a similar manor to ftse100?
You say that that there is no bank feed for the Dow cash. Couldnt prices quoted by a MM at bank/wherever based on underlying/whatever be counted as a 'DOW cash' feed?

Underlying : Not tradeable at all , calculated every 15 seconds or so , that's the one u see at the trading floor NYSE ... etc , or at the TV .

Futures : Exchange traded ....

Cash index : Its offered by "SB and CFD brokers" , it is not really a market "not exchange traded like the futures" , derived mainly from the futures + fairvalue + maybe other stuff - example : client sentiment - , every broker has its own feed it is nearly identical with other brokers but not all the time -proven- .

This is applicable to FTSE100 , DOW , DAX ... etc "with some minor differences" .

 

[postman]

Please, before I respond to your question, explain how you believe hedging business is front running and an illegal practice. If you genuinely don't know then I will be happy to explain the process, but I feel like I was informative enough in the rest of the post, if you read it. Here I have highlighted the most relevant parts for you:

My understanding of front running is that a clients order is taken and the broker places an order on behalf of the company (the hedge) before the clients order is executed.
Your wording is more precise in the second paragraph and appears to show you take his order, and then try to get a better price from the market, which is Not, as I now see, front running. In this case imbibing alcohol on a Friday night has heightened my awareness rather than dulled it. Though I sometimes wonder if all brokers follow this chain of events.
My pet peeve with SB's or 'some' brokers is that even though my 'bet' is with the SB (not the underlying market) that they will slip a price based on the underlying market, which is like trying to have your cake and eat it. Or, they try to hedge 'the customers' position Before they take the bet (front running), which is why sometimes the 'price no longer valid' message appears if they cant achieve it.
I really dont see why an SB should make a customer wait for a price they have quoted, or even decline the price quoted once the Buy / Sell button is pressed. They are quoting on a 'made up' index which they themselves have conjured out of thin air. (Numerous previous posts explain why this is so).
I'm sure your straight bat response will tell me you cannot speak on behalf of SB's.
Once again thank you for taking the time to post on the site (I, am learning something).

 

[darktone]

Underlying : Not tradeable at all , calculated every 15 seconds or so , that's the one u see at the trading floor NYSE ... etc , or at the TV .

Underlying. Check and agree
Calculated every 15 seconds or so. hmm, Im learning

Futures : Exchange traded ....

Wohoo. I know this one already. Agreed

Cash index : Its offered by "SB and CFD brokers" , it is not really a market "not exchange traded like the futures" , derived mainly from the futures + fairvalue + maybe other stuff - example : client sentiment - , every broker has its own feed it is nearly identical with other brokers but not all the time -proven- .

This is applicable to FTSE100 , DOW , DAX ... etc "with some minor differences" .

Im gona take that as much more realistic view of what is than "there is no FTSE cash".
Clearly there are OTC markets in Dow, Dax, Ftse, referred to by some as 'cash markets' which are called whatever by the sb / brokers that offer them. Im guessing they are priced on the underlying +/- whatever else by MMs on some sort of dealer network.
Id like to know a bit more about the 'feed/s'

 

[darktone]

LLSS
Can you elaborate a bit more on the 'feed/s' that come to your terminal re the OTC stuff. Ie
1) are they separately sourced, multiple bids/offers from different MMs or smthing else?
2) do you act as an MM per say or just offer the clients closest prices you have?
Sorry for the vaguery, its just that ive no real idea of the systems.

Also, on a related note how do you deal with a fixed spread instruments (if you offer any) in a fast market? I guess in a sense, as most participants are losers anyway, its all a bit moot.

Any other related points youd care to mention id be glad to hear.

Cheers
D

 

[tar]

LLSS
Can you elaborate a bit more on the 'feed/s' that come to your terminal re the OTC stuff. Ie
1) are they separately sourced, multiple bids/offers from different MMs or smthing else?
2) do you act as an MM per say or just offer the clients closest prices you have?
Sorry for the vaguery, its just that ive no real idea of the systems.

Also, on a related note how do you deal with a fixed spread instruments (if you offer any) in a fast market? I guess in a sense, as most participants are losers anyway, its all a bit moot.

Any other related points youd care to mention id be glad to hear.

Cheers
D

>>>

As I also mentioned, we do not offer cash products, so my knowledge of how it's priced by each broker is different but the way I was told was it was simply the future price - fair value, or just the combined price of each share in that index evenly weighted.

 

[tar]

Underlying. Check and agree
Calculated every 15 seconds or so. hmm, Im learning


Wohoo. I know this one already. Agreed


Im gona take that as much more realistic view of what is than "there is no FTSE cash".
Clearly there are OTC markets in Dow, Dax, Ftse, referred to by some as 'cash markets' which are called whatever by the sb / brokers that offer them. Im guessing they are priced on the underlying +/- whatever else by MMs on some sort of dealer network.
Id like to know a bit more about the 'feed/s'

There is no market for this nor a dealer network , IG is the MM , they just take the Futures feed and add the FV .. etc , if for some reason IG or City index wants to hedge they do that in the futures market .
Example : Germany 30 ! they mean by that the DAX 30 , the underlying closes around 16:30 and the Futures around 21:00 but with IG you can bet on it all day long , when the futures are close they make their own version of the DAX from other futures : SP500 ... etc and they add FV or client sentiment ...

 

[darktone]

Originally Posted by darktone
LLSS
Can you elaborate a bit more on the 'feed/s' that come to your terminal re the OTC stuff.

Originally Posted by LLSS
As I also mentioned, we do not offer cash products, so my knowledge of how it's priced by each broker is different but the way I was told was it was simply the future price - fair value, or just the combined price of each share in that index evenly weighted.

Understood. However LLSS also said the following.

"I don't think thats totally true , its not illegal to quote the price you want on a SB market , after all we're trading your market not the DOW cash , there is no such market as DOW cash anyway , not to mention the after-hours markets quoted by SB brokers like the DAX and FTSE , i have seen questionable moves in the FTSE after the futures close while there was no such move in the US futures" - Tar

Well it depends on what would call 'real' I suppose, but the DOW Cash market is a legitimate and recognised product sold OTC that is priced on the future - fair value. Sure it is not on exchange but it is offered by market makers of all sizes, from your local bucket shop to a multinational bank. You are also right that the price is 'created' by the person offering the product, but what I meant in my original post was that we could not get away with price manipulation in the sense that we could push price above where the 'market' is.

To further explain. When pricing any of our products, we receive a feed from several banks, large brokerages and other market makers. The prices are then averaged out across them all to give smoother price feeds. This service is provided by a specialist company and any investigation into our pricing strategies would be easily traceable. How could we explain to the FCA a spike in our prices and charts that is not coherent with our feed?

In a sense I think my question might have been answered the second part of this quote but dont ask dont get eh.

There is no market for this nor a dealer network , IG is the MM , they just take the Futures feed and add the FV .. etc , if for some reason IG or City index wants to hedge they do that in the futures market .
Example : Germany 30 ! they mean by that the DAX 30 , the underlying closes around 16:30 and the Futures around 21:00 but with IG you can bet on it all day long , when the futures are close they make their own version of the DAX from other futures : SP500 ... etc and they add FV or client sentiment ...

Are you sure about this? Or is it what you suspect?
I dont want this to turn into a game of 'he quoted she quoted'. Im just trying to clean up my fuzziness on the subject.

 

[tar]

Understood. However LLSS also said the following.


In a sense I think my question might have been answered part of this quote but dont ask dont get eh.



Are you sure about this? Or is it what you suspect?
I dont want this to turn into a game of 'he quoted she quoted'. Im just trying to clean up my fuzziness on the subject.

Then he said :

As I also mentioned, we do not offer cash products, so my knowledge of how it's priced by each broker is different but the way I was told was it was simply the future price - fair value, or just the combined price of each share in that index evenly weighted.

 

[darktone]

I just want to say that im not trying to burn anyone here. I have nothing but respect for BSD and tar (In fact anyone on here how has the balls to try and make a go of trading, with the possible exception of...him!), ive learnt lots from both. Its obvious to me that both of you have deep seated negative beliefs about OTC. In a 'Its not a fair market, there out to get you' kinda way. No doubt these views have been shaped by your personal experiences/what youve read/opinions and experiences of others you hold in high regard etc etc. Also, beyond doubt, theres some truth in those beliefs.
My experience with OTC has been, different, not all negative, in fact in some areas at certain times. I consider you get a better deal trading OTC.

The OP has presented themselves for questioning with regards to their 'job' and we will all have our own beliefs about how genuine this offer may or may not be. The problem, as i see it, is if we allow our beliefs overcome our curiosity, we are at risk of hampering/killing our opportunity to learn something. In turn were in danger of putting ourselves on the wrong side of the Dunning Kruger thingamajig (see 'The illusion of superiority' in sig, cheers again Rob )

iiaaah, just my 2c. I predict a lack of likes.

 

[darktone]

Then he said :

Granted.

With regard to.

Are you sure about this? Or is it what you suspect?
.

Something you know or something you suspect?

 

[wackypete2]

Ah, thanks for the encouragement. It's just tough to be consistent, you know? Up one day, down the next, and life gets in the way too. Been thinking it's not worth the effort. But it feels like I'm on the verge of "getting it", so I'll at least explore that.e it. I wouldn't mind trading the moves before/after or even getting in prior to it if I can see where it's going, but right as the news hits things get too volatile and the spread widens quite a bit. If anyone can trade this, more power to him!

Some time back you were trading the Asian session in the Live Calls thread. We had some nice moves on data announcements. Are you still trading during that time?

Peter

 

[barjon]

There is no market for this nor a dealer network , IG is the MM , they just take the Futures feed and add the FV .. etc , if for some reason IG or City index wants to hedge they do that in the futures market .
Example : Germany 30 ! they mean by that the DAX 30 , the underlying closes around 16:30 and the Futures around 21:00 but with IG you can bet on it all day long , when the futures are close they make their own version of the DAX from other futures : SP500 ... etc and they add FV or client sentiment ...

Yes, I'm not sure why there is any confusion about it. For example, spread betting is tax free because you are betting with a bookmaker, full stop. The clue is in the name - bookmaker means making the book, ie: creating the price for you to bet against.

SB companies are bookmakers and the counterparty to your bet, they are not agents (brokers) who pass on your order to find a counterparty for you in the "real" market.

 

[mike.]

Yes, I'm not sure why there is any confusion about it. For example, spread betting is tax free because you are betting with a bookmaker, full stop. The clue is in the name - bookmaker means making the book, ie: creating the price for you to bet against.

SB companies are bookmakers and the counterparty to your bet, they are not agents (brokers) who pass on your order to find a counterparty for you in the "real" market.

There is slight confusion Barjon, As with any bookmaker you are not allowed to matchfix, You can not skew the horse race after the results are in, Yet SB firms think they can feed you a price that seem's fit to them, Under the banner "our Pricing is indicative " we just mirror the market. :innocent:

 

[Splitlink]

Jeez dont quit now V, its the only way you can truly fail.

Re dont trade news: Really? Im starting to wonder. what feelings do most traders experience around news time, fear > relief they didnt participate > regret they didnt participate. Well i do anyway
Trading in the zone is a great read if you havent dont so already, link in sig

I have been telling myself that for donkeys! Now, with 82 looming I, just, have to keep going. St. Peter might let me in if I have the Holy Grail tucked under my arm. However, if I do take it with me, how do I tell you lot to stop looking?

I'd like to add, though, that this is one of the best threads that I have come across in a, very, long time.

 

[tar]

I just want to say that im not trying to burn anyone here. I have nothing but respect for BSD and tar (In fact anyone on here how has the balls to try and make a go of trading, with the possible exception of...him!), ive learnt lots from both. Its obvious to me that both of you have deep seated negative beliefs about OTC. In a 'Its not a fair market, there out to get you' kinda way. No doubt these views have been shaped by your personal experiences/what youve read/opinions and experiences of others you hold in high regard etc etc. Also, beyond doubt, theres some truth in those beliefs.
My experience with OTC has been, different, not all negative, in fact in some areas at certain times. I consider you get a better deal trading OTC.

I didn't say i have a real problem with OTC markets , it is a huge market , its not just spread betting or CFD its much bigger , FX itself is considered OTC anyway , there are many sophisticated products traded OTC that we may never heard of like : CDS , CDO ... etc. Just was pointing to the fact that it is a MM market , its their quote their market .

 

[darktone]

Yes, I'm not sure why there is any confusion about it. For example, spread betting is tax free because you are betting with a bookmaker, full stop. The clue is in the name - bookmaker means making the book, ie: creating the price for you to bet against.

SB companies are bookmakers and the counterparty to your bet, they are not agents (brokers) who pass on your order to find a counterparty for you in the "real" market.

Jon its not about it being tax free/dealing with a bookie etc imo. Its more to do with beliefs about what the 'real' market is.
Whether I bet via futures, cfd, sb. It all becomes very 'real' when im taking one.
Im terming everything that isnt exchange traded as OTC/cash, whatever, including sb (please anyone correct me if you think me wrong). The OP iirc says he doesnt work for an sb, he works for a outfit that offers CFDs (OTC) and futures.
Id like to know (because I dont currently know) how the OPs outfit forms their price on anything they offer other than futures. Imo, the most qualified person to answer that question on this thread is the OP, bearing in mind its his job, that he does x days a week, x weeks a year.

 

[tar]

Jon its not about it being tax free/dealing with a bookie etc imo. Its more to do with beliefs about what the 'real' market is.
Whether I bet via futures, cfd, sb. It all becomes very 'real' when im taking one.
Im terming everything that isnt exchange traded as OTC/cash, whatever, including sb (please anyone correct me if you think me wrong). The OP iirc says he doesnt work for an sb, he works for a outfit that offers CFDs (OTC) and futures.
Id like to know (because I dont currently know) how the OPs outfit forms their price on anything they offer other than futures. Imo, the most qualified person to answer that question on this thread is the OP, bearing in mind its his job, that he does x days a week, x weeks a year.

They don't offer futures , they offer CFDs on Futures , and they dont offer CFDs on cash indices , which means they are MM not a broker , thats why they don't hedge every bet and they dont have 2 , nothing wrong with that , it would make more sense if he mentions his firm name

 

[darktone]

I didn't say i have a real problem with OTC markets , it is a huge market , its not just spread betting or CFD its much bigger , FX itself is considered OTC anyway , there are many sophisticated products traded OTC that we may never heard of like : CDS , CDO ... etc. Just was pointing to the fact that it is a MM market , its their quote their market .

LOL, I agree mate.
Right now im gona take this opportunity to Shut The F*** Up!