sweep orders - sweep trades

The art of sweeping is explained here for the benefit of lone-traders. Not to suggest you should, or need to do this. More for the reasons if you see it happening, which you will, you will understand what is happening, and why, and take appropriate action, if necessary.

investopedia
sweep-to-fill orders An at-market-order split into numerous parts for speedier execution when entry speed is more important than price.

camron systems
A sweep order is a single "at market" buy order that exceeds the quantity available at the front of the sell queue, level 1, lifting price and taking some of the volume at level 2. A medium sized "at-market" buy order can sweep price 2 or 3 levels. A large order can sweep price 6+ levels.
A sweep order can refer to an order that is executed, either
• across multiple markets, or
• across multiple levels within a single market.
The following detail examines orders within a single market.

why they happen

The rising incidence of "Sweep Trades" is a byproduct of the increased use of Icebergs.
Sweep trades are not new. They were intermittent, or a precursor to a large move. The prolific use of icebergs has resulted in an upsurge in sweep trades. With opposing robots competing against market-maker robots, the visible order-book has become so thin there is difficulty obtaining supply. Sweep orders come about for two reasons. (a) A single "at market" order that lifts price and raises it multiple levels, to acquire volume while it's available, before it disappears. (b) Iceberg calves released as market orders when there is insufficient volume to satisfy the calf at the front level, lifting price 2, 3 or 4 occasionally 6 levels.

clusters

Sweeps happen in clusters - in the direction of the move.
When the herd is on the move the urgency is to obtain supply quickly.
When the herd stops, the move stops, the sweeps stop.
Direction of sweeps can be mixed. A cluster of up-sweeps followed by a cluster of down-sweeps.
On one-way-days the clusters tend to be one-directional. The odd orphans are usually covering trades.

icebergs

The widespread use of iceberg orders has thinned the visible order-book, making market-depth meaningless.
Iceberg calves can be released as

• limit orders
• at market orders
• above market limit orders
• below market limit orders

iceberg calves

Large icebergs at a limit price, show themselves clearly. When triggered and released on a time basis, the calves usually release as market orders. When released as limit orders, repeatedly replenishing at the same price they are easily seen.

difficulty obtaining supply

The risk for iceberg orders. Because (visible) market depth is so thin, to obtain supply it has become necessary to "sweep" several levels of the order-book with a single order. Moderate sized orders are "sweeping" price 5 and sometimes 6 levels.

at-market order

An "at-market-order" for a quantity exceeding the quantity available at the front of the opposing queue will clean out the front of the queue, lift price 1 point, take what's available at the next level, and keep going until the order is exhausted. If the available market is thin, populated with 1 x lots at each of 5 levels, a 5 x lot market order will lift price 5 levels.

buy - limit above market = market-to-limit

If supply is required, and to overcome the transient** nature of the opposing queue, limit buy orders can be placed x points above the market, in effect a market order with an upper limit. Continuing until satisfied or stop at the limit. Whichever comes first.

sell - limit below market = market-to-limit

If supply is required, and to overcome the transient** nature of the opposing queue, limit sell orders can be placed x points below the market, in effect a market order with a lower limit. Continuing until satisfied or stop at the limit. Whichever comes first.

data feed

requires a straight through unfiltered feed from the exchange

tell-tales

○ 2 points - lift 1 and raise 1 - relative ease - frequent
○ 3 points - lift 1 and raise 2 - relative ease - frequent
○ 4 points - lift 1 and raise 3 - occasional
○ 5 points - lift 1 and raise 4 - approx 3 times per day - infrequent
○ 6 points - lift 1 and raise 5 - approx twice per day - infrequent

order lot sizes

In the year 2000 large orders of 20+ accounted for 33% of total volume. Due to the widespread publication in forums and blogs of the benefit of tracking large trades, prime-broker algorithm trading systems have countered this. In 2008 market-depth has thinned out. Executing large orders to obtain supply is difficult. Small lot trades have increased from 17% to 42%. Larger orders have halved. Large range days usually result in 70% of total volume being done in small lots.

The "Volume by Lot Size" statistics are a composite of large and small range days - therefore an average (observed on the SPI).

one-way-days = large range days

Typical symptoms of one way days, are, large range, slow grind, the occasional fast move, an unusual number small trades and an absence of large orders, resulting in a high number of small "sweep trades".

Probability. When the market presents a high net smalls hit count together with neutral commercial and DGAS activity, probability-risk is (extremely) high it will be a large range uni-directional day.

a sweep trade

One lone sweep trade on its own means little. It simply means someone was (a) impatient to enter or cover, and/or (b) fed up waiting to obtain supply and/or (c) the market-maker was keeping the order-book thin enough to force the traders hand. It becomes meaningful when a series of sweeps occur within minutes of one-another, all in the same direction, telling you the herd is on the move.

don't trade against them

For the short term trader.
It is helpful to be aware when robots are sweeping.
If not to get in with them, then to minimize the risk.
Don't jump in straight away, wait for price to recoil.

how to detect sweep trades

It can be done.
Sweep trades are a characteristic of a "professional" unfiltered data-feed.
Just need to know what to look for.

In the following graphic a simple "o" is used to represent a single sweep trade.
Event sequence is Left to Right.
The grouping or clustering shows itself.

Legend: red = sweep down - green = sweep up.

o oo o o o o ooooooooooooooooooo market in up-sweep mode

o oo o o o o ooooooooooooooooooo market in down-sweep mode

We use the simulator to continuously test if we are reading the market right (tape-reading)
You soon find out if you are reading what you are seeing ok.
Helps the concentration.

The quote screen below shows the market in the last 5 minutes when everyone heads for the exits and sweeping to obtain sufficient supply before the close. One of the sweeps is a single "at-market-order" for 46 lots, lifted price 4 points.

illusion of market depth

Warning : care should be exercised with Market-Depth
The illusory nature of Market-Depth can trap commercial icebergs.
Resulting in unexpected "sweeps" discussed above.

sweeping the market

Back in 22 October 2004 during the evening session the market opened at 3718 and traded down to 3695. A sell order of 40 lots, was executed at market, sweeping the market down to 3642. Later ... SFE "orderly market" rules kicked in and the sale of 2 lots at 3642 was cancelled under the "orderly market" rules on the basis an orderly market did not exist. Three minutes later the market was at 3690. Tough on the buyer. More so if they were not aware of the "orderly market" rules. Interesting there is no US style "limit down" rule that is in the public domain that everybody understands. Trading Rule (TR.23.12) enables the trading manager to cancel any trade which in his opinion, is not in the best interests of a fair and orderly market.

A simple solution is to provide the entire market depth so anyone executing a market order can do so with the full knowledge of the numbers available to meet the order and where they are. caveat emptor. The above self-fulfilling situation only arises because the SFE suppresses the information beyond 5 levels. Maybe that's too simple.

liquidity replenishment points

LRP's are a safety mechanism used by the exchange trading system as an interrupt at pre-determined price levels to break up sweeps, go into temporary auction mode, allow stops to catch up, then continue on. see nyse - lrps. The pre-determined price levels are not disclosed.

LRP's are pre-determined price points at which electronic trading briefly converts to auction market trading.

[author] - In other words - a built-in delay to allow stops to catch up.

stops

Sweeps can also be evidence of "stops" going off.
However the largest group of sweeps occur, consistently after 4:10 pm, when the final cash fix has come through and the institutions head for the exit.