Wed. 7/06 CME K Algo

1:45pm CDT - I'm realizing I need names for my ZS systems. Going forward, my original core ZS system which I've been posting about for awhile now, will be known as ZSRO. My 2 new systems will be known as ZSMAG and ZSDOE. These are abbreviations that don't really mean anything but will allow me to keep them straight when I report on results. Ironically, since I reduced size in ZSRO, I've had 3 winners in a row. So although I'm not missing all the equity curve bounce back as I have in past when I quit trading after a drawdown, I'm still missing some of it. But I'm okay with this as it frees up some risk for the other systems. Also had a winner in ZSDOE and a loser in ZSMAG today.

Net breakdown (contracts traded):

ZS $439(7)

RESULTS FOR DAY
Contracts:	7
Net $P/L:	439
Wins:	2
Losses:	1
Win%:	67
Avg$Win:	362
Avg$Loss:	-285

You learn something everyday. CME was able to enlighten me regarding my slow fill on Friday. Turns out, grains do not operate under the F algorithm (FIFO) but under K instead. F seems to be the rule for everything else I’ve traded: ES, CL, 6E, etc.

CME’s response:
-----------------------
Grains operate on the K algorithm, which has multiple steps. All three of your orders were resting when acted upon, and due to their small size they were most likely not eligible for the Pro Rata portion of the match. They may have been filled in FIFO (either the initial portion of the algorithm or the last step of the algorithm), or they may have been filled during the Pro Rata Leveling step (just before the last FIFO step in the algorithm). What step your orders were filled in is not publicly or privately disseminated.

Orders entered after you do not jump ahead of you in terms of time, however they may get filled during the Pro Rata portion of the algorithm if they are of sufficient size and percentage participation. Orders entered at a different price likewise do not affect your match.

Split FIFO/Pro-Rata Algo:
The Split FIFO/Pro-Rata algorithm (K) is a hybrid which integrates a percent-based allocation on both a FIFO and Pro-Rata formula to the resting order book. This algorithm has been developed with the flexibility to calibrate the level of tradable quantity that is allocated on a FIFO and pro-rata basis (X% FIFO, Y% pro-rata for every tradable quantity).

Additionally, an order that does not receive an allocation during the Pro-Rata stage is eligible for a one lot fill through pro-rata leveling. The allocations for this component are prioritized for orders with the largest remaining quantity. If multiple orders have the same remaining quantity time priority will be the determining factor.

This algorithm can also incorporate a TOP order and LMM components before the FIFO and pro-rata allocations are calculated.

The Split FIFO/Pro-Rata algorithm follows these stages to match trades:
- Assigns a TOP order percent allocation (with min and/or max)
- LMM may be applied
- FIFO percent may be configured from 0 to 100%
- Pro-rata with min may be configured from 0 to 100%
- Pro-rata leveling
- FIFO for any residual quantity

You can find quite a bit of information on our website under the header: Electronic Trading, then click Introduction to CME Globex. http://www.cmegroup.com/globex/introduction/
At the drop-down menu underneath the heading "Platform Overview" please look for the menu item called "Matching Algorithms." At that section the various algos are described.

If you choose the drop-down menu item “Price Banding”, you'll see the highlighted link for the price banding document: http://www.cmegroup.com/globex/files/PriceBanding.pdf. Matching algorithms are available on this document.