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Order routing and execution during high impact news releases

Discussion in 'General Forex Talk' started by Arpad75, Jun 28, 2014.

  1. Arpad75

    Arpad75 Recruit

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    Hello Everybody,

    I don’t have extensive experience about news trading, but even if I would have, I would ask these same questions.
    If anyone has anything to say, please don’t hesitate to tell it.
    :)
    Thanks.

    I have the following concerns regarding the execution during high impact news releases.


    1) Broker’s server (matching engine) location vs. LPs’ server location
    There are two popular and reasonable places for brokers to place their servers: London and New York.
    But even if the broker co-locates his server in Equinix NY4 or LD4, there might be some of their LPs who have their server in the other metropolis.
    And even if I get a VPS at the same location where my broker’s server is, and would run my trading algorithm from there, there could be situations for excessive delays in the matching process according to the following:
    Let’s say the broker’s server and my VPS are in LD4. My order gets to the broker server instantaneously – for me as a retail trader, 2 ms would be instantaneous.
    Then my broker sends my order to LP1, but maybe there is a fast moving market, the price does no longer exists at LP1, so LP1 rejects. This is ‘last look’.
    If this liquidity provider is in New York, then my order will get at least 70 ms delay, since this is the round-turn time it takes for the message to travel through the Atlantic there and back. And we even didn’t take into account the last look delay during which some LPs dare to hold the trade for 100-200 milliseconds or even more, before they finally reject it.

    If the order is then rejected by another LP, and then maybe several other LPs (before it is finally matched), then this could happen: 35 ms LD-NY, rejection 35 ms NY-LD, new order 35 ms LD-NY, rejection 35 ms NY-LD, new order 35 ms… etc.
    Essentially, each rejection by an LP means at least 70 ms additional time.
    If there are several consecutive rejections from LPs in a fast moving market (e.g. news release), then the total time could be above 1000 ms for the execution.
    It would be detrimental if the message would have to travel through the Atlantic several times before filling.

    Anyway, I intend to use the cTrader platform from Spotware, which is an independent technology provider for retail brokers. I don’t yet have the technical knowledge or monetary resources to deal directly with FIX-API or any proprietary sophisticated software. This is the reason why I have to use cTrader as my trading platform. Spotware has its trading servers in LD5, but the liquidity is up to the broker’s choice, so if the broker has LPs in NY then my concern is grounded.

    And even worse; what if the broker uses Integral (or other U.S. liquidity aggregator) for cTrader? Then ALL of the orders have to travel through the Atlantic, even if the LP is also in London?


    2) With liquidity aggregator vs. without liquidity aggregator
    Does a liquidity aggregator add an additional layer of latency to the total matching time in every case?
    So if a broker has its server at the same place where his liquidity aggregator, is this setup slower for sure compared to if the broker would have direct LP connections without the service of an aggregator?
    So using a liquidity aggregator is good for execution time, bad, or neutral?
    Would I be better off choosing a broker that employs a liquidity aggregator; or it would be a better idea to find a broker that implements direct connections to its LPs, i.e. applies a proprietary bridging solution?


    3) Futures vs. OTC forex
    Would it be better for me to trade high impact news releases on CME/Globex, i.e. currency futures?
    Is there enough liquidity there (during high impact news releases) or even more liquidity compared to retail forex venues or even HotSpotFX/Currenex?


    Many thanks,
    Arpad
     
  2. ilearn2t

    ilearn2t Sergeant Major

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    Hello Arpad75

    Excluding the "scam" brokers out there, many traders assume they have a direct connection to the currency markets etc, but sadly this is not the case. When you execute your order, the information is sent over the Internet to your broker, who in turn passes it on to a "liquidity provider/s" for execution, so prices can change quickly, especially during high impact news releases, because price quotes are only for a specific currency amount, traders may not always receive the price they saw on their screen.

    By the time your order reaches the market, the price of the currency pair might have moved slightly or more seriously against the trader.

    So speed shouldn't effect your order price much with an honest brokers server or their "providers" server, providing your server/connection is not lagging. ;)

    Good luck
    Liz
     
  3. Pharaoh

    Pharaoh Colonel

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    Intriging technical point. A super fast connection to your broker won't help much of your broker's connection to LPs is slow. This is one more thing to consider when selecting a broker if near instantaneous execution is important to you.

    Another one is that cTrader may prevent brokers from doing cheats by delaying your order, but they failed completely to assist a trader who was accused of lag trading. All the profits were confiscated by the broker, and Spotware's representative refused to publicly state if there was any sign of abusive trading practices or not. Evidently, Spotware considers that to be an issue between the trader and the broker, even if Spotware is the only source of reliable information about whether the broker really owes the trader money or not. :(
     
  4. bigdolly

    bigdolly Sergeant Major

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    If you hadn't worked for a broker, you would never know the process of filling an order. Transferring, rejection, Atlantic ocean - these are just your guesses..;) For example, my broker doesn't have servers overseas, thus, according to your case, they allegedly have faster execution? It is fast enough for my trading and maybe execute it with less slippage in faster-moving market, but not considerably faster than others. You may opt for an ECN broker to get your orders executed faster, but there are no guarantees that the broker will not play against you. Try to get any broker's support for discussion, and they probably won't go beyond the basic concepts of STP and ECN...
     
  5. fxdaemon

    fxdaemon Recruit

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    This is an excellent topic worth more inputs and discussion at least for relevance to my own situation and experience.
    I have been slipped big time through EA trading and the reason is almost aways consistently that of fast moving market, news time
    etc etc.

    The fall out of which that impacts my trades directly are:
    - consistently slipped to put my order in disadvantageous position
    - 50% of trades are so bad slipped that they are filled with TP on the wrong side of the trades

    What I am not convinced about specific to my situation is a classic example of what you see is NOT what you get, ie the price quote
    I am looking at is NOT what my order is filled at and I am not talking about misunderstand of Bid vs Ask. And I am not talking about
    occasional or one off occurrence but repeated and consistent incidents of the like.

    What really got me suspicious is as soon as my order gets filled, the price quote update reverts to the favourable price level my order
    is supposed to be filled at, and this could be up to 8 consecutive price/tick update within the same second. To attribute my order be
    filled at less favourable price to fast moving market/new release just doesn't wash with me. It just feels exactly like price manipulation.


    Does anyone have similar experience and a more valid explanation to this???

    Thanks,
    FXD
     
  6. bigdolly

    bigdolly Sergeant Major

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    What I can definitely say is you won't face with such issues with Stp broker. Somebody can blame them, accuse in dealing desk practices, but execution there still scores over significantly ecn brokers. I tried both that's why there is so much confidence in my words.
     
  7. fxdaemon

    fxdaemon Recruit

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    Wish I can concur with your experience. The broker in question for me is an STP one.
     
  8. Pharaoh

    Pharaoh Colonel

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    Is this around big news events or during normal market conditions?
     
  9. fxdaemon

    fxdaemon Recruit

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    Both situations actually.
     

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