Greg:
Every few months I need to make a post like this, because every few months I get a question like yours. (It is a good question, though; and I’m glad you ask it.)
There are two things going on here:
1) Conversion of limit orders with insufficient liquidity to market orders
2) C2 displays your trade results so that they reflect actual real-life results of AutoTraders
Let’s look at each point, in turn.
Often, system vendors at C2 will submit a limit order at a price that is not “market clearing.” This means that the limit price just gets touched briefly, but does not trade through. Certain lucky people get filled at the price, but other people do not. Then the price moves away from the limit price.
When this occurs – that is, when there is insufficient market liquidity to fill the entire order for all your subscribers – C2 will wait a few seconds for your order to fill at your specified limit price, but - if it doesn’t fill in a customer’s account - we will convert the order to a market order for those unlucky traders who did not receive your limit price. In these cases, therefore, it is possible to be filled at a price that is less favorable than the limit you specified.
Welcome to the world of managing other people’s money… and the world of trading large enough quantities in which you can’t count on an entire order being filled all at once. If you were running a large hedge fund in a single trading account, and if you submitted a limit order to trade a large quantity, something very similar would happen. You might get filled for some portion of your order, but not the rest. Then you would have a decision to make. Move your limit? Wait and pray that the market moves back to your limit? It might move back to your limit price, but then again, it might not.
At C2, it’s vital that we keep all your subscribers in sync with your system’s intentions. When you are long, they should be long. When you’re short, they should be short. That’s what they are paying you for, after all.
This is the reason why we convert certain orders to market orders – but this only happens if you choose a limit price that is not “market clearing.” Most limit orders do “trade through” and thus it is not an issue. This really only affects scalping systems, which generally are not appropriate for AutoTrading.
Now, regarding point 2, above – Why do we change the results on your system page so that they show the results real traders actually achieve?
To scrupulously follow U.S. financial regulations, C2 changes your trading results to reflect what actual real-life subscribers achieve in their AutoTrade accounts (we show the volume-weighted average price, or VWAP, of fills that occur in real broker accounts).
A few things to keep in perspective:
One: the ability to AutoTrade your system using the cool C2 AutoTrade technology makes your system more attractive to subscribers, and thus in the long run, is a good thing for you. Second, our insistence that we make C2 completely transparent and that we follow U.S. financial regulations make the site more attractive to subscribers (which benefits you). More important, this protects you from any regulatory concerns.
Greg:
Every few months I need to make a post like this, because every few months I get a question like yours. (It is a good question, though; and I’m glad you ask it.)
There are two things going on here:
1) Conversion of limit orders with insufficient liquidity to market orders
2) C2 displays your trade results so that they reflect actual real-life results of AutoTraders
Let’s look at each point, in turn.
Often, system vendors at C2 will submit a limit order at a price that is not “market clearing.” This means that the limit price just gets touched briefly, but does not trade through. Certain lucky people get filled at the price, but other people do not. Then the price moves away from the limit price.
When this occurs – that is, when there is insufficient market liquidity to fill the entire order for all your subscribers – C2 will wait a few seconds for your order to fill at your specified limit price, but - if it doesn’t fill in a customer’s account - we will convert the order to a market order for those unlucky traders who did not receive your limit price. In these cases, therefore, it is possible to be filled at a price that is less favorable than the limit you specified.
Welcome to the world of managing other people’s money… and the world of trading large enough quantities in which you can’t count on an entire order being filled all at once. If you were running a large hedge fund in a single trading account, and if you submitted a limit order to trade a large quantity, something very similar would happen. You might get filled for some portion of your order, but not the rest. Then you would have a decision to make. Move your limit? Wait and pray that the market moves back to your limit? It might move back to your limit price, but then again, it might not.
At C2, it’s vital that we keep all your subscribers in sync with your system’s intentions. When you are long, they should be long. When you’re short, they should be short. That’s what they are paying you for, after all.
This is the reason why we convert certain orders to market orders – but this only happens if you choose a limit price that is not “market clearing.” Most limit orders do “trade through” and thus it is not an issue. This really only affects scalping systems, which generally are not appropriate for AutoTrading.
Now, regarding point 2, above – Why do we change the results on your system page so that they show the results real traders actually achieve?
To scrupulously follow U.S. financial regulations, C2 changes your trading results to reflect what actual real-life subscribers achieve in their AutoTrade accounts (we show the volume-weighted average price, or VWAP, of fills that occur in real broker accounts).
A few things to keep in perspective:
One: the ability to AutoTrade your system using the cool C2 AutoTrade technology makes your system more attractive to subscribers, and thus in the long run, is a good thing for you. Second, our insistence that we make C2 completely transparent and that we follow U.S. financial regulations make the site more attractive to subscribers (which benefits you). More important, this protects you from any regulatory concerns.
Hi Matthew,
Re: Conversion of limit orders with insufficient liquidity to market orders
Would it be possible please to add an option for the system creator to specify if an unfilled order is converted to a market order or canceled?
I think subscribers would be much happier to stay out of a trade if they knew they would be getting an unfavorable fill !
To submit a market order for the sake of getting in the action goes against basic successful trading philosophy, and can be quite damaging to performance.
A feature like this would add to the sophistication of collective2, make systems perform better, and improve the attractiveness for potential subscribers.
Yes, please! Getting fills at any price is the worst part about autotrading, first you hire somebody really smart to trade for you, then they do their research and get the trade right…then it fails in your account because of various limit order refill problems…grrr!
