GLOBEX Explanation of Market Protection and Stop Market Protection Orders
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Market with Protection
Unlike traditional market orders, a "Market with Protection" order ensures execution within a predetermined price range (the protection range) to avoid the risk of extreme price execution for customers. The protection range is based on the best bid or offer at the time, plus or minus the product's Protection Point (typically 50% of the Non-Reviewable Range (NRR)). If the order cannot be fully filled within the protection range, the remaining unfilled quantity will be converted to a limit order at the protection price. For example, if the NRR for JY is 80 ticks (40.0), and the current bid/ask is 11128 vs 11130, placing a market buy order would result in a protection price of 11150 (11130 + 40/2). If the full order cannot be filled below 11150, the remaining unfilled quantity will be placed as a limit order at 11150 (or a better price close to 11150).
Since the remaining unfilled quantity converts to a limit order, it is possible for a "Market with Protection" order not to be fully executed.
When the remaining unfilled quantity is converted to a limit order, the exchange will check the "Price Banding." If the limit price exceeds the "Price Banding" during inactive market conditions, the order may be rejected by the exchange. -
Stop with Protection
CME Group (CME, CBOT, NYMEX) uses "Stop with Protection." Unlike a traditional stop market order, a stop with protection order, when triggered, becomes a limit order at the stop price plus or minus the product’s Protection Point (typically 50% of the NRR). For stop market buy orders, the trigger price must be higher than the previous trade price, while for sell orders, the trigger price must be lower than the previous trade price.For example, if the NRR for JY is 80 ticks (40.0), placing a stop market buy at 11190 will trigger a limit order at 11210 (11190 + 40/2) when the stop price is reached. If the full order cannot be filled, the remaining unfilled quantity will be placed as a limit order at 11210.
Since the order is converted to a limit order with a better price upon triggering, it is possible for a "Stop with Protection" order to not be fully executed in fast-moving markets. -
Price Banding
To ensure fairness and order in the market, CME Group (CME, CBOT, NYMEX) has established a price banding mechanism to check the appropriateness of all entered order prices, rejecting any orders with obvious pricing errors. The price band range is determined by adding or subtracting the Price Band Variation (PBV) from the Banding Reference Price (BRP). Limit buy orders cannot exceed the upper PBV range, and limit sell orders cannot be below the lower PBV range. The difference between the trigger price and the limit price for stop-limit orders must also not exceed the RBV.
If a limit price exceeds the "Price Banding," the order will be rejected by the exchange.
For example, if the PBV for JY is 60 and the current reference price is 9606, the price band range would be 9546 to 9666. The lowest limit sell order can be 9546, and the highest limit buy order can be 9666, with a maximum difference of 60 between the stop price and the limit price. When market conditions dictate a wider price range (e.g., in volatile markets), CME Group may choose to temporarily relax or suspend price band limits.
For detailed information, please refer to the respective exchange websites. This document is for reference only. Any losses incurred based on this document are the responsibility of the user.
