Atomic Order Execution Tactics in Futures Markets

Abstract

This research investigates a better way to execute buy or sell orders in the futures markets than using instant market orders. Every trader faces an execution cost which comes from the difference in observed price and executed price. The goal of this paper is to optimize orders execution to make it cheaper. We investigate 35 most liquid futures, over 1 trillion ticks of real market data and 20000 simulated orders per futures. For most futures our proposed methods have given significantly better order execution costs than executing with widely used execution method - market orders. The improvement is obtained over big number of trades and may not hold for individual order. We can achieve this by placing a limit order of the desired price and waiting for definite amount of time and converting this order to market order if it was not filled in time. For some futures even better results can be obtained by improving limit order price by one or two ticks. The proposed order execution method can be attractive for any futures market practitioners whose orders are small or medium size.

DOI: http://dx.doi.org/10.5755/j01.itc.46.1.15413