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DaKine

6e Slippage

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I've been watching the Oracle news trading room recently. They have people trading news releases using futures, but most have spot FX accounts. They reckon spot FX spread widening 5-10 pips on major news releases is workable, but some of the reports from the spot FX account holders are scary - dealing desks holding their 'market' order back to enter them 30 seconds later at the extreme of a spike, then slipping them again when they exit that, spreads widening to 30 pips, and all kinds of 'no we won't let you trade news' shennanigans from requotes to refusal to accept entry orders at news times. Many of the traders in that room have entries open on multiple spot FX accounts simultaneously just so they get a fill from somebody.

 

I'm interested in finding out more about news trading the futures, because if the liquidity is OK, at least it gets the wild card of the dealing desk out of the equation. Watching CME FX futures time & sales at news times, it seems like the spread widens nothing like as much as spot FX broker quotes - of course, that's OK only if you get a fill. Does liquidity dry up at news times on the major CME FX full futures (like 6E, 6B etc), or is it OK?

 

Max

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I'll let some others hopefully answer since I'm not a big fan of trading right at the news announcement time or just after for the reasons you describe.

 

However, years ago the forex dealing desks figured out how to "break" the news trade strategies -- used to be you were always guaranteed a fill at your stop price so people would simply bracket a buy and a sell, take the first to go and have an incredibly effective strategy - until the forex brokers figured it out and basically disabled it. The fact is you're dealing with a desk and trades that know what people try to do around news and can manipulate things.

 

I believe you'll find less of that with the futures -- though clearly it can leapfrog prices as well but you benefit from one, centralized datafeed and stream of trades -- instead of forex that really is at the discretion of each individual broker.

 

MMS

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