TakeTheMarket’s Substack
ESMA even asked trading firms and exchanges about their thoughts on private fill information, and summarized its findings starting on page 106 of this document. It makes for a fun read.
Still, the full importance of this mechanism is vastly underappreciated and understated even by many industry professionals, which makes this a good starting point for this little space.
"Private" channels: users send commands and the exchange sends replies to those commands and updates to any ensuing orders.
And here is the crucial bit: there is nothing, at least in principle, that requires that updates corresponding to the same event to be disseminated across the two types of channel at the same time.
For a long time, people have talked about the "race to zero" in HFT when referring about latency reacting to events. For many years, however, one exchange operator has systematically and deliberately taken that race to negative. The exchange in question is no less than the CME Group.
For the casual reader, the CME Group operates venues where many of the most liquid and consequential futures (and options, and more) trade massive volumes every day. That on this venue private fills are not a matter of chance or casual approach to technology, but rather a deliberate effort that CME monitors and refers to publicly under the umbrella term "market dynamics", suggests that they and some of their customers consider the issue to be quite important. It is worth spending some thought on why, which can be done through some links and some contrasts.
