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Agreed, and if you have it setup correctly, you should be able to trade 2 NQ strategies in the same account also. You just trade the net position. That is definitely the cheapest solution. Being long and short is equivalent to being flat.
The problem is not every trading platform works well with this. Tradestation 9.5 had a lot of issues with this, but version 10.0 seems to handle this a ton better.
Thanks again for your support. I wasn't even aware of Rule 534. I think I had a bad interpretation of the Dodd Frank Act which I perceived to be you can't hold a long and short position simultaneously on the same equity. And the only way around it was to use 2 different brokers.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
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I think the perception of wash trading/rule 534 in this thread is wrong.
The wash trading prohibition is intended to stop people washing trades (ie buying and selling at the same time and price) with the intention of giving the appearance of market activity that isn't correct. It is not to stop people hedging or having offsetting positions during the normal course of business. (Although the exchanges don't want you to have offsetting positions because it makes the Open Interest calculations inaccurate.)
In the example given
Assuming the 2 systems are independent systems, and the intent of each individual system is to make money, then the intent of the two systems when combined is obviously not to "negate market risk or price competition". This is the argument @kevinkdog was making in his Tradestation CFO example.
Regarding offsetting positions, large trading entities have lots of traders, trading in multiple accounts, across multiple brokers. Offsetting positions can and do happen.
Simple example a, small oil trading desk.
Trader A is hedging a refinery position and he has sold the June Gasoline Crack Spread. Specifically he has sold RB_M and bought CL_M.
Trader B is a crude oil trader, thinks the market is a little over supplied and is short WTI time spreads. Specifically he has sold CL_M and bought CL_N.
Trader C is buying a North Sea cargo that he is bringing to the States. To lock in the spread he has bought June Brent and sold July WTI (it takes two weeks to get here). Specifically he has sold CL_N and bought BZ_M
The CL_M and CL_N positions theoretically offset and the companies net position is Short RB_M and Long BZ_M but I can tell you from experience that's not what is in the accounts.
Now imagine the same situation, but on the scale of someone like BP, where they have 100s of traders, spread around the world, trading for different entities, with different economic drivers and different profit centers.
I think that the original poster, @tradingraven, had a misunderstanding of the rule against wash trades, which is why he originally titled this thread as "Hedging Question." He has clarified that he had a mistaken interpretation of the issue, after the discussion in the thread.
Wash trades are deliberate attempts to draw other traders to a particular instrument by producing fake trading activity, to give the person doing the wash trades someone to unload their position onto.
Wash trades are not a hedge, nor the result of situations such as @SMCJB outlined, where a firm may have many positions, long or short, due to having many traders pursuing different strategies, nor the one detailed by @kevinkdog, where one trader has two automated systems that happen to have offsetting positions because they are running different logic that may dictate different positions at the same time, which seems to be what @tradingraven had in mind in his original post for the thread.
Because of this, I am changing the thread title from "Hedging Question" to "Wash Trade Question," which more accurately reflects the issue, and which would tell other traders in the future what the thread is about. It actually is something that comes up now and then, and traders may want to know what the actual prohibition is, and the reason for it.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote