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Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,388
Thanks Received: 10,208
Large orders can and do move markets on exchange, as all the Algo's and scalpers try and get in front of it. Over-the-Counter ("OTC") somebody might ask for a market, without indicating direction. ie
Trader: "Looking for March a thousand up"
Broker: "I have a market maker that will show 2.832/2.835 a thousand up"
Trader: "Thanks I'll buy a 1000 at 2.835"
This does happen. What confuses me is why a market maker would ever want to do that, but they do!
It differs product to product (and I'm only talking energy). In Natural Gas I would say it's predominatly options, strips and strip spreads and even then volume is normally larger than many orders executed on exchange. A Typical example would be a winter 100/month $4/$5 Call Spread with delta hedge. In this case winter means its the Nov-Mar strip. Hence with one order your buying 100 calls, selling 100 calls and selling a delta hedge, all in 5 different months at the same time. In addition in Oil there are a lot of products that just don't trade electronically, but are cleared on the exchanges. These are probably products you have never heard of and not your basic WTI, HO, RB, Brent, Gasoil. But yes you are probably right, the large outright orders are probably the rarer of the orders.
When looking at block trades you need to be careful as you may not know what you are looking at. For example you might see 1000 lots of NGH7 block cleared. What does this mean? Did a large trader just buy or sell 1000 lots? Or is there a 1000 lot trade on ICE as well and this is just a NYMEX-ICE margin reducing trade? Or is that 100 lot/month Cal 2019 trade, cleared two minutes later, the other side of a H7/Cal19 spread?
I can think of only 2 reasons (Backed by a whole month of futures experience):
1. They have another buyer that will take the other side of the trade and the market maker is picking up the spread on this order? Basically a glorified middleman.
2. They know something the trader doesn't and is looking to capitalise on their poor decision?
You will see the order being executed on the exchange wouldn't you? This raises another question, do they show the block trade on the website prior to executing it on the exchange? I suppose either way there still is no edge because algos will front run it quicker than any trader although if its big enough it will have some impact on direction that can be capitalised on (Im rambling. Sorry). Also, does it matter if it is a spread trade? Its size should still be seen by other traders and algos and cause some disturbance and possible trend move regardless of the reason behind it?
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,388
Thanks Received: 10,208
If the question was, "I'm looking for an offer for 1000 March" then that would be more likely to apply, but if somebody is making the quote without knowing the directional interest they can't have matching orders and/or better information for both sides of the trade.
I guess that depends upon what you mean by "the exchange". If your watching the block trade feed then yes. But if your trading and watching your trading software then no. Block trades are not printed as a trade on the normal data feed.
No everything is post trade. I know there are rules on how quickly the trades have to be entered into the system but by the time anybody can see it, it is at least minutes old.