Most futures contracts trade online (electronically) during some part of the day, in contrast to the traditional
open outcry on the exchange floor, and for some contracts such as the E-mini® S&P 500® futures, online trading is the only way.
On CME Group which is comprised of four Designated Contract Markets (CME, CBOT, NYMEX and COMEX), electronic trading is
done on the CME® Globex® trading platform. This platform is an open access marketplace that allows the futures day trader to
participate directly in the trading process, view the book of orders and prices for the contract
and enter their own buy and sell orders globally nearly 24 hours a day.
Products of IntercontinentalExchange® (ICE®) trade on the ICE online platform. The latter includes
the U.S. regulated subsidiary, ICE Futures U.S.®, that trades the softs such as coffee, sugar, cotton, cocoa and
frozen concentrated orange juice.
Speed of execution and confirmation (typically measured in milliseconds), transparency, anonymity and
reliability of electronic trading platforms have all been instrumental in making online trading a success.
In fact, online trading has become the execution of choice among futures traders.
According to CME Group, electronically executed trading accounted for 89% of its total volume in 2011,
up from 88% in 2010. (Total volume includes both futures and options contracts.)
TYPES OF ORDERS
For the online futures day trader, there are a range of order types that are available on Globex and the ICE platforms.
Some order types, such as the
market order,
limit order and
stop order, are simple
enough to understand. But there has been a
protection feature added
to some of these orders to better mimic what had been manually done by the floor broker when executing in the traditional trading pit.
The protection feature is designed to prevent fills at extreme prices and would be used for a large quantity order say, for example, a market
order to buy 50 crude oil contracts. In filling the order,
offers will be sequentially lifted but only up to a maximum acceptable price that is predetermined based on a dynamic price range
set by the exchange for that commodity market. Rather than continuing to fill the remainder of the order and accept even
higher offer prices, the system will store the remaining, unfilled quantity as a limit order at the highest acceptable price.
As more offers enter the system, prices may decline and the remainder of the order can then be filled.
The protection feature is needed in part because of the speed measured in milliseconds in which an order is typically filled electronically.
This lightning-fast mechanism can cascade through a significant number of bids or offers before other players even have a chance to react.
In contrast, the painfully slow, by comparison, procedure of filling large orders via open outcry did at least provide enough time
for more bids and offers to enter the trading pit thereby reducing the likelihood of an extreme price movement.
The market-limit order
and stop-limit,
like the protection feature, also enable the day trader to avoid extreme fill prices on orders. However, in return, the likelihood of the
order not being filled in its entirety rises.
Among order qualifiers, most traders are familiar with the
GTC, FAK and FOK orders.
CME Globex also allows a "Good-till-Date" (GTD) order. GTD orders remain active on the order book until they are
completely executed, expire at the date specified by the trader, are cancelled, or when the instrument expires. Say that you want to
place an open limit order to buy 10 Euro FX contracts but don't want to trade during the release of upcoming employment data
several days hence, expecting volatility to be severe. You might, then, place a GTD limit buy order to expire the day before the data's release.
During the trading session, all of these orders can be entered and, if not filled, modified or canceled.
Neither Globex nor the ICE platform permit "Market-on-Open" orders (MOO), "Market-on-Close" orders (MOC) or "Market-if-Touched" orders (MIT).
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