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Non-Tech : Interactive Brokers / Timberhill
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To: atto who wrote (2460)1/17/2002 11:07:15 PM
From: eriksonc  Read Replies (1) of 9012
 
The best theory to explain this slippage that I've gathered on Silicon Investor boards is the following:

1. IB uses simulated stops on Globex
2. Since they are simulated, all similarly priced native Globex stops have priority over IB stops
3. Globex actually doesn't permit true stops, but permits stop-limit orders only (i.e., Globex does not allow market orders)
4. The limit part of these stop-limit orders has a finite range (a "collar") - you can't enter just any limit - it has to be within a certain number of points from the stop price
5. If there is a price surge, then it could be possible that a simulated market order would have to be cancelled and resent into Globex as another stop-limit order where the limit part of the order is higher (assuming a buy stop). This process repeats until the order is filled.

Given these assumptions, I don't find it hard to believe that IB stops on Globex might be last to get filled in a price surge where there are cascading stops. I.e., IB sends in the simulated stop which is last in line versus Globex stops that have already triggered. By the time IB can execute, the price range is beyond the order's collar so it resends a new limit order with a higher price. But again this resent order is not a native order and thus gets beaten by Globex stops and thus IB needs to resend again. Etc.

Check out this link:

lfgfutures.com

Carl

PS - I have no idea how large the "collar" is on a Globex order nor do I actually trade futures!
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