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Date/Time: Sat, 02 Jul 2022 23:40:18 +0000



Post From: Now Released: Upcoming CME / EUREX Direct Routing

[2021-02-27 17:51:10]
Sierra Chart Engineering - Posts: 103558
We have communicated with our infrastructure provider, the necessary infrastructure additions/changes to support CME order routing.

We should have this completed by the end of next week. The additions/changes are minor.

We will have two servers, in two different data centers, with two Internet service providers, with A and B connectivity links to the CME. So this is a fully redundant set up. Failover initially will be manually controlled.

We consider a failover event extremely unlikely and something that would occur a potentially once over a period of many years. The most likely failure would be a failure with the Internet Service Provider (ISP) providing external connectivity to a particular server. Each server would use a different ISP.

We expect to complete certification with the CME, by March 5 or March 12.

We have developed the functionality for obtaining and calculating margins, for outright futures and for calendar spreads. And we do have an implementation of applying margin controls In our trade simulator.

We have to do work on this to make sure we have a proper margin control system for live trading.

We have prepared these questions which we will discuss with someone in the industry:

Questions related to margin calculations:

1. There is the initial margin requirement and the maintenance margin requirement. Do clearing firms use these two margins. So when a position is first established, an initial margin is required for the first day and then after that day, the maintenance margin. Using both only complicates things. We know that the initial margin is simply 10% higher than the maintenance.

What happens when the position is increased, in a different day? Do we then have to use a combination of the initial margin and maintenance margin.

It would seem easiest just to simply use the maintenance margin.

2. For daytrading margins, is the rule to use a daytrading margin, based upon if the trader does not carry an overnight position? Therefore, at the end of the day if they are long, then the required margin goes to the normal initial/maintenance margin? And if they do not keep the position at the end of the day, then the daytrading margin applies.

Is the daytrading margin set per user account or globally? Is it a percentage of the maintenance margin?

3. When a clearing firm raises margin requirements, do they do this globally or per user account? Do they do this, through their own systems or do they go through systems like CQG, Rithmic, TT and adjust this requirement globally?

What if we have a global setting to raise margins a certain percentage of above or below where they are set for a particular trader account. Would that be what is needed?

4. The next question, is what happens, when there is insufficient margin.

There are many questions about this.

What would be considered insufficient margin, and at what time would it be considered insufficient.

If the margin requirement is 1000USD for a particular contract and the trader has 1000 in their account, they establish a position of quantity 1, and that position begins to lose money and then their cash balance and open profit/loss, currently has a value of 990, should the position then be closed immediately?

Or would it be closed at the end of the trading day. It would seem logical that it could not wait until the end of the day because what happens if the market is moving enough, to take the account negative. And what would be considered the end of the trading day? Would that be at 5 PM US Eastern time?

Is it considered insufficient margin, when there is merely .01 below the required margin at any point in time based on current cash balance and current open profit/loss. If someone is below margin by merely .01 at any time, that would be a reason to close positions?

Or if the trader is below margin by a certain percentage at any time in the day, would then positions be closed? For example if they are below 25% of the required margin would the positions be closed? And this margin could either be day trade margin or the standard margin depending upon the duration of their position.

And what all positions be closed, or just enough to reduce positions until there is sufficient margin for the remaining positions. Of course, there is risk in this, when there are positions which depend upon each other like with spreads. We have heard about this kind of problem.

5. This brings us to another question. Does manual action when it comes to liquidating positions due to insufficient margin, or when risk limits are met, better, or should this be done automatically?

We have heard that doing this automatically simply does not make sense and has significant risks. We have heard this from a competitor of TT, that it makes no sense to be automatically closing positions. We have observed the problem with automatic liquidation. It is well-known that this is a problem.

For us providing order routing services, we prefer, to provide an easy to use monitoring system with audible and visual alerts, that someone can then look at to then manually react to when it comes to closing positions to minimize or eliminate risk.

This would be a window that shows all accounts that are under margin or have reached a daily loss, it would provide in real time, the current value of the account, the current margin requirement and how much they are below margin or how much they are below the daily loss limit.

When a daily loss limit has been met or there is insufficient margin, our order routing system currently, will not allow any new positions to be entered. The trader can only reduce positions. In other words reduce risk.

6. For a position that is held overnight, that does not cause currently the cash balance to change with the profit/loss based on the settlement price. The cash balance only changes when a position is closed. The open profit/loss will reflect that ongoing position since the date of the position origin.

We wonder how this compares with how the clearing firms generate their statements.

7. File format for end of day account balance updates. What exactly does the file contain.


Sierra Chart Support - Engineering Level

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Date Time Of Last Edit: 2021-03-03 21:02:01