Market order protection (protection points)

What CME documents

CME's client documentation for futures describes market orders with protection as orders that are filled within a pre-defined range of prices, the protected range, so that they cannot trade at extreme prices. The limit of that range is computed by adding protection points to the best offer for a buy, or subtracting them from the best bid for a sell. If the entire order cannot be filled within the range immediately, the unfilled quantity remains in the order book as a limit order at the limit of the protected range. The stop with protection applies the same idea to a stop once it is triggered.

Protection values are product-specific and published by the exchange; they are not a setting of the trading platform.

A worked example

Imagine a contract whose protection is 10 points and whose best offer is 5,000.00, figures chosen for illustration. A market buy of 50 contracts can then execute up to 5,010.00. If only 30 contracts are offered between 5,000.00 and 5,010.00, the trader receives 30 and the other 20 rest as a bid at 5,010.00. The position is 30 contracts, not 50, and a working buy order is left in the book. If sellers later come back to 5,010.00, the remainder may fill there, at a moment the trader did not choose.

Why it matters to an order flow trader

• A 'market order' on CME is bounded. In a thin book, around a release or overnight, the full quantity is not guaranteed.
• A protective stop sent as a stop with protection can exit only part of the position if the book is empty beyond the range.
• The resting remainder is visible to everyone as displayed size at the edge of the range, and it can later fill against the move.
• Protection bounds slippage; it does not remove it. Every level inside the range can still be taken.

In Senzoukria

The order ticket's MKT type is described in the app as 'Market — fills at the next available price', and STP as 'Stop — becomes a market order at the trigger'. The application sends these orders through the broker connection; how the broker's gateway and the exchange apply protection to them is decided outside the application. What the application does show is the result: the Working Orders table lists any order still working, with the filled quantity in parentheses next to the order quantity, and the positions table shows the size actually held. After a market entry, the autopilot waits a few seconds for a complete fill and, if it does not see one, stops and asks for the account to be verified rather than attaching exits to a size it does not have.

Common mistakes

• Assuming a market order always fills completely and immediately.
• Not checking working orders after a fast fill, and leaving a protection remainder in the book.
• Treating the protection range as a price the order will reach; it is a ceiling, not a target.