Please respond to: LME Helpdesk. System Operations +44 (0) LMEstage Version

Transcription

1 Please respond to: LME Helpdesk System Operations +44 (0) LMEstage Version

2 Contents: Contents: Purpose Background Availability Who can use LMEstage? Which Licence Agreements need to be signed in order to use LMEstage? The LME deployment LME connectivity Proximity hosting sites connectivity Existing LME connections New connections Market coverage LMEstage characteristics LMEstage algorithms LME member algos Use of LMEstage Costs Using LMEstage... 8 LMEstage Version

3 1 Purpose This document outlines LMEstage what it is, how it works, its features and benefits, how to connect and the agreements that need to be completed in order to be granted access. 2 Background Trading venues have a duty to make best endeavours to provide a well-ordered and stable market. If members of an exchange utilising systematic trading strategies are deploying untested algorithms, this may directly disrupt the live market. Whilst many trading venues deploy test environments, they often test only connectivity or functionality. Market participants require an environment where they can test their trading strategies against competitive algorithms in a simulated live market. This environment needs to be completely anonymous, ensuring that market participants keep their trading strategies private until they are put into the live market. The LME has developed a synthetic test environment, LMEstage, to validate the acceptability of market participants algorithms with a replicated market. The environment features synthetic trading algorithms which replicate market participants. This solution provides exchange clients the anonymity to test and develop without revealing trading strategy types and methods whilst giving the exchange the mechanism to validate the algorithms and preserve the integrity of their market. Furthermore, due to the capability of the synthetic test environment, sophisticated algorithms can be developed that will challenge the market participants algorithms in a stringent manner and also provide the tools for on-going updates of the algorithms, including the ability for the LME to simulate a range of market events (described in the LMEstage algorithms section on p7 of this document). LMEstage Version

4 3 Availability 3.1 Who can use LMEstage? LMEstage is currently available to existing Category 1 and 2 members of the Exchange, clients of these members, and the ISVs providing services to them. Market Data Vendors are currently not permitted. This policy will be reviewed after an initial test period, the duration of which shall be at the discretion of the LME. 3.2 Which licence agreements need to be signed in order to use LMEstage? Users of LMEstage need to have executed two agreements: 1) LMEselect sub-licence agreement; 2) LMEstage Algorithmic Testing Agreement. Both agreements must be executed before access to LMEstage can be granted. The relevant agreements are available from the LME Helpdesk. Existing Category 1 and 2 members and ISVs may already have signed an LMEselect sub-licence agreement. If so, they will only need to execute the LMEstage Algorithmic Testing Agreement. 3.3 The LME deployment Market data is fed from a delayed anonymised historical feed as an input to the market emulator algorithm. LMEstage consists of an appliance housed in LME racks in Interxion and connected to the test environment (Member Test C) via cross-connect. LMEstage Version

5 3.4 LME connectivity The algorithmic testing arena connects to the LME test environment, in this case, Member Test C. SERVICE IP ADDRESS PORT TAX TAX FSOE FSMDF FSDC Table 1 - IP addresses and ports for LMEstage 3.5 Proximity hosting sites connectivity Existing LME connections Existing connection to the LME from one of its proximity hosting sites will need to raise a request via the LME Helpdesk to arrange a cross connect into the LMEstage switch. The LME Helpdesk will invoke an existing process to execute the connection New connections Procedure for new ISV connections to the proximity hosting data centres 1. Contact LME Helpdesk An ISV that is new to the process and is looking for a new connection to LMEselect or the LMEstage system through the proximity hosting data centres should contact the LME Helpdesk to discuss the process. 2. Contracts The LME Helpdesk will provide the contact details for the two proximity hosting data centres and instruct the ISV to contact them direct to negotiate the necessary contract for how they connect to the data centre and the rack space and equipment required. The LME Helpdesk will also send the relevant ISV sub-license agreements if not already signed. 3. Certifix testing In addition, any new FIX application they intend to connect to the LMEselect system will also be required to have passed the Certifix conformance testing process before any connection to the production system is allowed. This process is the same for any Member FIX application. LMEstage Version

6 4. Cross-connect Once the contract has been agreed and implemented with the proximity hosting data centre(s), and the LME Helpdesk has confirmed that all the required license agreements are in place, the ISV may then request a cross-connect to the LME equipment in the meet-me room. LME Helpdesk will then raise a Topdesk ticket. 5. Mapping Xchanging will liaise directly with the ISV to record and map where the ISV is located in the data centre and the equipment being used. Xchanging will send out documentation to the ISV to be completed and returned. 6. Installation Once Xchanging is satisfied that everything it requires is in order, it will contact the LME Helpdesk for permission to install the cross-connect. Once given, Xchanging will liaise directly with the ISV and proximity hosting data centres on this installation process. 7. Monitoring Xchanging will supply the LME Helpdesk with the new IP ranges used by the ISV, for monitoring purposes. 3.6 Market coverage Currently, Ring and telephone data is not available via the production LMEselect 7.3 data feed, so only markets with substantial electronic volume (i.e. AH 3M and CA 3M Aluminium and Copper three month contracts) are simulated. LMEstage Version

7 4 LMEstage characteristics Features of LMEstage: 1. Representative market generally representative of the exchange production market 2. Synthetic market data replicating live data from the matching engine, yet isolated and anonymised for testing purposes and hence not able to execute live trades but still reactive to member algorithm activity 3. Synthetic market participants representing various trading styles of market participants 4. Anonymity to protect the interests of market participants, new and existing, from being observed and exploited by competitors with access to the existing testing arrangements 5. Isolated to protect the exchange live market from algorithms being tested in the live environment that might harm actual trading activity 6. Traceability will be via the member/isv s current processes. LME will not be providing log or performance data/metrics 4.1 LMEstage algorithms LMEstage records the production market data feed and uses a delayed version of this in its Market Emulator algorithms which interact with Market Maker and Trend Follower arena algorithms. Market Overloader algorithms allow exchange staff to stress test all algorithms operating on Member Test C The current LMEstage algos are: 1. Market Emulators which simulate the top of the order book, market depth and market impact response together with controllable convergence to an underlying market in quiescent conditions 2. Market Makers which simulate spread capture strategies 3. Trend Followers which simulate strategies following short-term trends of varying lengths 4. Market Overloaders which under LME control place excessive volumes in the arena market in various ways to test whether member algorithms contribute to a disorderly market. 4.2 LME member algos Exchange members use LMEstage by placing orders as normal in Member Test C where they will interact with LMEstage algos automatically. LMEstage Version

8 4.3 Use of LMEstage The Exchange expects users to demonstrate behaviour consistent with that expected in the live LMEselect market environment. Users should note the ability of the Exchange to cut off the user s access in the event that the user does not behave appropriately or adhere to LME guidance. 4.4 Costs The costs of using LMEstage will be set out in Schedule 2 of the LMEstage Algorithmic Testing Agreement; however fees in respect of this are currently waived during the initial test period. The Exchange reserves the right to introduce a fee in accordance with the terms set out in the LMEstage Algorithmic Testing Agreement. There is also currently no charge in respect of the LMEselect sub-licence agreement. 5 Using LMEstage ISVs and member firms can connect their FIX and GUI accounts to LMEstage. LMEstage can be used to input large volume of trades through the system. It can also be used to test all functionality of the FIX account before a production account is issued. GUI users can access the application to download the order and trade history. LMEstage Version