London Stock Exchange Derivatives Market Bundled Orders in SOLA

Transcription

1 London Stock Exchange Derivatives Market Bundled Orders in SOLA This document is an overview only. Interested parties should consult the Trading Services Description for additional information regarding trading services and risk controls. London Stock Exchange plc has made reasonable efforts to ensure that this overview is correct at the time of writing, but does not guarantee its accuracy, timeliness, completeness, performance or fitness for a particular purpose, and shall not be liable for any errors, omissions, or inaccurate information in this overview, or any decisions made in reliance on it. March 2015 Version 1.0 [APPLICABLE FROM 30 March 2015] London Stock Exchange Group plc, 10 Paternoster Square, London EC4M 7LS. 1

2 Bundled Orders in SOLA This document summarises the Bundled Order functionality on the London Stock Exchange Derivatives Market (LSEDM) trading platform (SOLA), including a description of bundled orders, the functionality and the workflow, using the example of the LSEDM front-end BTS. 1.0 Introduction London Stock Exchange Derivatives Market (LSEDM) trading platform (SOLA) facilitates the grouping of multiple Committed/Cross trades into one unique window through the Bundled Order functionality. This functionality offers certainty of simultaneous execution of all the individual legs included in the Bundled Order, or no execution at all. The functionality is highly customisable, allowing market participants to create their Bundled Orders in up to four legs with the same or different counterparty in each leg, and to specify the price for each individual leg. LSEDM s front-end solution, BTS, allows users to use its Bundled Order Manager to create and manage such trades. The Bundled Order functionality offers an alternative to the Strategy functionality available on the LSEDM platform, when market participants wish to execute trades as Block trades. Traders can use this functionality to execute strategies involving both futures and options as Blocks. 2.0 Description of functionality Traders can enter a Bundled Order in up to four legs; Traders can independently specify for each leg of the Bundled order: o The financial instrument (e.g. Option or Future), including standard and/or flex series; o The price and size; o The counterparty 1 ; o Buy or Sell. The same Trader ID must be used for each leg of the Bundled Order. Once the Bundled Order is entered, each counterparty will receive a notification message. At reception of such message, the counterparties will be able to submit acceptance of its Leg of the Bundled Order, or reject it. In case of rejection from one of the counterparties, acceptance by any other counterparty of the Bundled Order will be inhibited. Pending legs will remain in the system till the end of the trading day until they are all accepted. The Bundled Order will be registered and sent to clearing only on acceptance of all of the counterparties. Bundled Orders will be available for Committed/Cross trades i.e pre-agreed trades. The market model applied to this functionality will mirror for each leg the one for standard Block trades, such as price and quantity validation. Bundled Orders with legs involving standard series will always be published. Currently, all Bundle Order legs in Tailor-made (Flex) instruments will be Hidden. 1 The Bundled Order initiator is required to be one of the counterparties in each leg of the Bundled Order. If a market participant wishes to register a trade between two or more counterparties but not including itself, it should use the Third Party Execution functionality in SOLA. Please refer to the LSEDM Trading Services Description for further information. 2

3 3.0 FOR TRADERS AND DEVELOPERS: Workflow for Bundled Orders, using the example of a Volatility trade on the BTS LSEDM s SOLA API allows market participants to send Bundled Orders through their FIX/ SAIL protocols, and front-end developers to build their own Bundled Order Entry and Monitoring modules. Traders and developers need to make use of the Bundle Order message, for further details, please see the LSEDM Technical Documentation (SAIL Specification and the FIX Specification.) 3.1 Using the Bundled Order functionality on BTS: Say Trader A is executing a Covered Call through the Bundled Order functionality in two trades Long RIOB March 15 Future with Trader B, and Short RIOB March 15 Call Options with strike USD 500 with Trader C. Trader B SELL RIOB FUT MAR 15 BUY RIOB FUT MAR 15 Trader A SELL RIOB MAR 15 USD 500 Trader C BUY RIOB MAR 15 USD 500 Step 1: Trader A enters a Bundled Order with the Buy leg (RIOB Fut MAR 15 with Trader B) and Sell leg RIOB MAR ) and submits. TRADERID TRADERID TRADERID Step 2: Trader A receives notification that the Bundled Order is sent on the Bundled Order Manager; its legs appear with the status A or accepted. Trader B receives a notification of its leg (SELL RIOB FUT MAR 15) of the Bundled Order on the Bundled Order Manager. Its leg is shown with the status WFA or waiting for acceptance (NB: the BTS shows both Third Party Orders and Bundled Orders on the same screen). 3

4 TRAD X Trader C receives a notification of its leg (BUY RIOB MAR 15 20) of the Bundled Order on the Bundled Order Manager, with WFA status. Step 3: Trader B and C can either accept or reject their leg. In this case, for example, Trader B accepts, by entering the necessary order details and submitting TRAD X When entering the order details, Trader B cannot modify the counterparty, instrument, price or size. It can only specify trader ID and clearing details. 4

5 Once submitted, the leg shows with the status A or accepted. Trader C also accepts its leg, by entering in all order details and submitting. NB - If Trader A cancels the trade before both Trader B or C accept, then the trade will be cancelled. If any counterparty rejects the trade, the Bundle Order will remain in the system till the end of the trading day (execution will be unfeasible). Step 4: Once Traders B and C accept their leg, then the Bundled Order is accepted and sent to clearing. The trade is now observable on each traders Bundled Order Manager as accepted (for example, see for Trader A below) and shown on the trade ticker (if published). 5

6 4.0 For further information contact: For technical enquiries: LSE Derivatives Technical Account Management T: +44 (0) E: For further information on this document: LSE Derivatives Market T: +44 (0) E: 6