MB Trading Futures - Introduction

I'm sorry. I have had many fewer problems over the past years.

The Pay for Limits payout (or lack of) of less than $.01 is probably an unintended consequence
of them lowering the payouts by 75%.

Before at $1.95 per 100,000, even a 1000 lot would get a few cents.
Now they have to deal with fractions of a cent at $0.50 per $100,000.

Good Luck to you.

When I had an account with MB, there were a few instances where my stops were not executed for more than 20 seconds, which would suggest that their LPs have last look provision.

Suprasense,

No, none of our liquidity providers are allowed any Last Look.

Do you have this in writing somewhere under your conditions ?

So you are saying that the order matching is made on your servers and the orders are not sent to the LPs to be filled and LPs can not refuse to honor their quoted price?

I would say to those who have delayed execution if you live overseas or even on the east coast it's best to look into a vps package because I used to have delayed execution and thought it was MB but I failed to understand that the servers are based in California and a click on my screen being routed oversease then hitting their servers is not going to be instant so I set up a vps in California. Now when I go overseas for travel and place a trade I receive faster execution than I would have had I been using the wifi spots

As for last look not certain if I can contribute on this as I see this term really as a requote and I always if I ever have execution issues request mbtrading to send me or tell me what my connection status is and the last several trades to review the time of execution which they can produce.

Forexeurusd,

I don’t know what exactly we would or could (or have) in our Conditions on something like this. You can read through them and let me know. What I’m telling you right here in public for all to see is that all of our trades are handled the same and no LP is given a Last Look.

RoBiK,

No idea where you got that. If you have read through these forums, you should know in detail how our executions work. We are an EXN/STP broker. “Order matching” is between customers and handled on our EXN servers. If that is the best pricing for an order, then that is how the execution occurs because it is the fastest and in-house. If that is not the best price available, then the order is routed out to whichever bank or LP has the best price at the time via a Fill or Kill option with no chance to hold the order. If they fill, the execution occurs. If they send back a Kill, then our Order Server re-snapshots and makes a new decision about where to route the trade.

Or, let’s do this in a little more detail. Your order comes into us. It can come from the system itself (if you are trading on Desktop or Desktop Pro) or it can come from a separate system (like a Third Party), i.e. MT4 or Ninjatrader or our SDK/API or FIX or any other connected software that routes to our order servers.

The order server looks at the trade and looks at the raw quote at the time. So for example, if you are placing a Limit order to buy below the current price, the Order server recognizes that this is not a trade that is executable and puts it on the correct EXN (either PFL or FREE EXN). If that Limit price ever becomes the best bid in the quote, then another customer’s sell order would match off against your order first versus another bank or LP that is at the same price.

If you are placing a stop order (let’s say to buy above the market), the order server holds that until that price hits and then goes and routes the trade as a market order. We have 28 different order types (in Desktop or Desktop Pro, not in MT4, which can’t handle them) that give you a variety of options on how your trades are handled.

If your order is a market order (or becomes a marketable order, such as a stop hitting the stop price), the order server simply does the following (let’s assume you are buying and let’s assume 10 lots). It looks at your size and it looks at the current offer. There might be customers on the EXN selling at your price AND banks/Liquidity providers at your price (or there might not be, there might just be one or the other…keep in mind that banks don’t typically display pricing at sub-pip increments, they just care about whole pips). So let’s assume that there is another customer wanting to sell 20 lots at the current offer. Boom, your order routes to the EXN and matches off against them, and they are still sitting there waiting to sell 10 more lots. Done. Now, instead, let’s assume that there is a customer at the current offer waiting to sell 5 lots. The order server will split your order, send the trade for 5 to the EXN to match off against that customer, and at the same time, route the other 5 out to a bank or LP that was at that price. We either get a Fill (done) back from the LP, or a Kill (already moved). If we get a Kill, then the order server looks again at the current offer (even in milliseconds, the price may have moved while this is happening), and starts again. Final case. Let’s say there are no customers with Limit orders at the best price showing (the ask of the quote). Then the whole trade is routed to a bank/LP. Same deal with the Fill or Kill.

All trades for all accounts are handled the same. We don’t check off certain accounts and handle them differently because they are winning or losing traders. Your order is just as likely to go to any of the dozen or so LPs that we have. We don’t route all orders to one LP and let them choose first or last. When we talk about Pay for Limits and having customers ADD liquidity for other customers, what that means is that any Limit order that someone puts up on the EXN provides a fast execution to another customer coming the other direction and means that we don’t have to go out to an external bank/LP.

Final note. Remember that just about four years ago when we launched sub-pip increments and Limit order posting for customer order crossing purposes (all things that other brokers weren’t doing), the industry was largely still a deal desk/fixed spread world. Everyone said that banks didn’t trade less than full lots and that subpips were a dream. Well, banks do take orders at any size now because they figured out that over the course of a day, a lot of micros still adds up. But, it remains true that most of the bigger banks and LPs only show their liquidity at the even pip increments. So just remember that if you buy 10 EURUSD at the market and you get the order broken up into pieces and let’s say a few small fills at sub-pip increments and then the last piece of the trade right on the main pip, all of those pieces that you got are money saved versus what you would have paid if you only dealt with LPs. I agree that seeing your trade split up can be annoying, but in most cases, it results in savings that wouldn’t occur if we didn’t have customer liquidity and if we didn’t allow your trades to be broken.

In other words, I’d rather get 1 lot at 1.30006, another at 1.30007, another at 1.30008, one more at 1.30009, and the last 6 at 1.3001 (the even pip, just making up an example) than just get 10 at 1.3001. Those savings really add up over time.

Yes, but how much time do you grant a counterparty to send a fill or a kill back? Obviously you need to account for latency between the MBT Servers and the bank server, and probably some time on top of that too. 300ms? 500ms?

I dont think 'last look' makes a big difference in normal markets, LPs want to capture flow and fill orders after all. The problem are consecutive kills under fast market conditions - because the 300ms, or whatever it is, just doesnt cut it, and a subsequent fill on the top/low of the spike. I believe it has already been discussed and described by yourself somewhere in this thread.

Justin,

thank you for your thorough answer.

That is why i was asking. I am familiar with how your system worked in the past and was wondering if something changed. Your statement that your LPs do not have the "last look" option was and still is in contradiction with my understanding of your system.

Well, the fact that the LP has no obligation to fill the order at the price he quoted and can send a "kill" is exactly what "last look" is all about.
Obviously your definition of "last look" must be quite different from mine if you claim that your LPs do not have "last look" option.

It would be also interesting to know what happens if the counterparty does not answer in the allotted amount of time. My guess would be, that that would mean an automatic Kill.
Anyway, what ever the time value is, it will be dominated by the network latency. A good trading engine is able to make a decision whether to fill or kill in sub-microseconds time so the LP will always have "plenty" of time to make a decision and can even delay the answer to see if the market moves in the meantime and in case it does, to change it's decision before the answer is sent.

I agree with this statement.

Justin's explanation is consistent with my understanding of how MB Trading spot FX works from prior Justin comments going back years.

This is the norm for spot FX industry wide..... hopefully it will become an area of improvement that companies will exploit by changing this "last look" slant against the individual trader to garner business.

I know of one outfit that looks interesting and claims to have eliminated this, but I have not investigated enough to know if their claims are true or just hype. So far I am happy enough with MB to stay, but hope MB yet again levels the table a little more than it already has and eliminates this.

Ideally the LP should have to honor any price they post until it is filled, or their offer to us gets killed with a new price from them. This would eliminate the ping pong searching for a best price that is the drawback to MB's model in a fast moving market.

AFAIK, you need to switch to the futures contract if you want to avoid this.... you won't have to deal with it if you trade futures.

EXACTLY.

Some very intelligents posts above. My reading of it is then that MB Trading does have last look. jleblang, may want to clarify, but from what he has said, the liquidity providers don't have to honour what they post on the bid-ask, which means the visible spread isn't really the tradeable spread. And unless MB Trading's clients are very active, and you can trade against them directly, (which in my experience is not that likely and only occasional), then you will be going to the liquidity provider and having orders rejected. As mentioned this becomes a bigger problem in fast moving markets, but is still a problem in normal markets. I've witnessed this strange behaviour, and pauses while orders are 'deliberated' on/killed, and that is why I asked about last look.

Thanks jleblang for at least making the process more transparent.

Your reading of his comments is that MBT has last look? They are NEVER the contra party, thus they never have last look. Maybe an LP has last look, but I don't think so. Seriously, how far off base can you be?

Yes the liquidity provider has last look. Which means that by proxy, MB as a broker has last look. They're an ECN, so of course they aren't taking the opposite side or the counter party, but that's irrelevant. If they were, they'd be a market maker/bucketshop. It's clear that they're an ECN. But that doesn't mean they don't give liquiduty providers an advantage of last look.

He said liquidity providers can reject the order. This is key. This is not allowed on an exchange. You should know this. I believe several ECNs also have last look. Perhaps for some (I should ask for interactive brokers too) it doesn't matter as much, because customer liquidity is much higher, but it is still undesirable (and slightly unfair to the customer) behaviour.

MB Trading offers an a true ECN (even if legally they must call it EXN), where they bring market participants together,
I have seen no evidence of "backing away" from quoted markets. I have done over 1000 trades, very short-term,
on Pay for Limits and Free EXN accounts over the past year and a half.

Many traders perceptions of "last look" or "backing away" are often misunderstandings of actual liquidity at certain times.
The second most popular misunderstanding of 'mispricings' are connection problems, server problems, and MT4 slowness.

I scalp, most trades open/closed within 4-5 minutes. I also predominantly use limit orders. My entries are extremely precise.
My target profits are mostly less than 3 pips. Finally, I get price improvements on my limits often.

Just my thoughts...

1000 trades...I've done more than 100 trades in a single day, and have been trading for years. Look, don't assume people don't know what they're talking about, just because you don't. Most people just assume that orders would be filled, but I asked about it, and now you see that orders can be rejected.

Yes, they give price improvement (by the way, if they are found to only give negative slippage and not positive too, or even if that is found to be havily weighted to negative slippage, they will receive a heavy fine for that, other brokers have - look at FXCM 2million fine).

yes, MB Trading, is better than many other brokers. Some brokers charge a 3 pip spread on EURUSD! Of course MB trading is not the worst, and have many good sides, paying for limit orders, tighter spreads etc.

But when one really gets down to this activity as a profession, and not just as part-time fun, one wants a broker that is clear, fair as possible, quickly fills orders with reliability and reduces trading costs as much as possible. With last look, that is never the case. With orders being displayed that aren't 'real', that aren't tradeable, with stops which being slipped simply because a liquidity provider is allowed to reject it, that is not the case.

I doubt you will find any solution open to a retail trader that does not operate this way for spot FX on close examination. I am not aware of any.

The futures contact trades the way you wish, but has a much wider spread. I suspect the wider spread exists in part because there is no "last look" or what ever term one wants to use.

If a real no deal desk, no "last look" at similar spreads as offered by MB Trading exits for retail spot FX, I would like to know about it.

It isn't a problem for me with my trade style.... except in a very fast moving market.... which can happen any time of day in an unforeseen event, even if only rarely. In a very fast moving market the cascade of continuous "kills" on the part of the LPs leads to an order ping ponging around from LP to LP as the price keeps moving.

I have come to look at these conditions... and the big slippage ping pong hell can generate... as one of the costs of trading spot FX. Over the course of a year I figure I still save money taking a kick in the teeth on slippage once or twice, over paying the wider spread of the futures contract on every single trade of the year.

Each of us has a different style of trading and different requirements and will have to seek out the best solution the marketplace offers. MB Trading has never made a secret of its execution algorithm, although the best such posts are hard to find they do exist in this thread. This isn't the first time this has been discussed in great detail.

It is my hope that over time with the increased customer base and order activity this market's growth has enjoyed over the last few years, spot FX will eliminate "last look", just as most of MB's (and Dukas') competition had to cave on deal desks.

Good post Crassius, I have heard of LMAX which is supposed (I haven't traded with them to be honest so I don't know) to have no last look.

Yes I have considered futures. Perhaps that is the best option. The spread is only 1 usually, but you also have costs on top of that.

Like you I hope this last look disappears one day. But part of getting there means we should bring it to the attention of the brokers and make it clear we want something better.

I find it worrying when my order should have been filled, and several seconds later I'm still watching it, wondering what price it will be filled at.

jleblang, would MB Trading consider removing this 'last look' for liquidity providers? Personally, it would be a bigger selling point than the pay for limit orders.