London Stock Exchange Derivatives Market Bulk Quoting Protection

Transcription

1 London Stock Exchange Derivatives Market Bulk Quoting Protection 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 Group plc has made reasonable efforts to ensure that this overview is correct, but shall not be liable for any decisions made in reliance on it. 19 October Version 1.2 London Stock Exchange Group plc, 10 Paternoster Square, London EC4M 7LS. 1

2 Bulk Quoting Protection This document summarises the protections for bulk quotes on the London Stock Exchange Derivatives Market ( LSEDM ), including a description of the mechanism and the functionality offered, how to set-up the protection, the default thresholds set by LSEDM and the user configurable ranges for the protections. 1.0 Introduction Bulk quoting protection on LSEDM allows for the automatic cancellation of all bulk quotes in an underlying instrument group. This feature of LSEDM protects users of bulk quotes, including Market Makers, against any excessive trading (for example, due to technical problems at participant s end, erroneous quoting due to wrong underlying price information or unintentional trading for a whole option range). The protection can be configured for all contracts on LSEDM. 2.0 Description of functionality 2.1 Types of bulk quoting protection offered: Users of bulk quotes on LSEDM may choose one of two types of bulk quoting protections: Standard: If the protection is triggered on an underlying instrument group, all bulk quotes linked to the trader ID in that instrument group will be deleted. Traders will subsequently need to replenish their quotes. The protection counters (detailed below) are reset the next time a bulk quote message is sent on any instrument in the class. Advanced: If the protection is triggered on an underlying instrument group, all bulk quotes linked to the trader ID in that instrument group will be deleted, any subsequent quote update is rejected and quoting can only be resumed after the bulk quote user has sent a new Protection subscription (RP) message and subsequently a bulk quote message (BD), as per section Protection counters and functionality: LSEDM s bulk quoting protection functionality provides for five protection counters, described in table 1 below, which can be set for each underlying. Any number of counters can be activated simultaneously. Once any protection counter is triggered, LSEDM will automatically cancel all bulk quotes posted, send a Notice of cancellation of all quotes (NP) message and reset the protection counters. Protection type Counter change condition (at instrument level) Trigger for bulk quoting protection Trade count (of Min Lot Size) Increases by 1 with each execution of a trade of at least N lots (where N is a user defined number). Max number of trades = Count (Trade where volume Minimum Trade Volume) User defined number of trades of at least N user defined lots in size. Volume count Increases by the traded volume of every execution. User defined volume. Value count Delta volume count Delta value count Increases by the traded value of every execution. Max Value = (Volume x Price x Contract Size x Tick Value) Increases with every bought call option, sold put option and bought future; and decreases with every sold call option, bought put option and sold future. Increases by the traded value of every bought call option, sold put option and bought future; and decreases by the traded value of every sold call option, bought put option and sold future. Table 1: list of protection counters in the Bulk Quoting protection mechanism on LSEDM User defined value. User defined net volume. User defined net value. 2

3 The protection counters are reset in the event that: Every time a quote is updated for Maximum number of trades (i.e. trade count) = Count (Trade where volume Minimum Lot Size) The time elapsed between any two trades is longer than the user defined Time Interval. Bulk quote users must define the Time Interval for each underlying when setting up the bulk quoting protections. 3.0 Setting up bulk quoting protections Bulk quoting protections apply to each trader ID for an underlying instrument group. LSEDM provides for default thresholds for the protection counters within the trading system (see section 4). The protection must be activated as detailed in this section before the start of each trading day. 3.1 Using the BIt Trading Station (BTS): The protection can be activated for each underlying through: Quoting > Quote Protection Data. 3.2 Using any other proprietary software/ ISV: Step 1: The protection must be activated for each trader ID and instrument group by sending an RP message before the start of each trading day to select the type of protection (Standard or Advanced). Step 2: for each trader ID, bulk quote users need to send a bulk quote message (BD) to begin their quoting activity with the user defined thresholds (including the Time Interval, Maximum Volume and Value limits, and Maximum Delta Volume and Value limits). o If the values of the thresholds are not user defined, then the LSEDM default thresholds are selected, as in Section Restarting bulk quoting protections after the protection is triggered: When one of the protection counters is triggered, LSEDM will automatically cancel all bulk quotes linked to that trader ID in that instrument group, send a Notice of cancellation of all quotes (NP) message and reset the protection counters. To restart the bulk quoting protection, the next steps are: Standard: no further action is needed; quoting can be resumed by replenishing bulk quotes. The user defined thresholds chosen at the beginning of the day will continue to be used (Note, if the user did not define the thresholds, the default values will be used). Advanced: quoting can be restarted only after sending a new Protection subscription (RP) message and subsequently a bulk quote message (BD). The new BD message must contain the user defined thresholds; if the new BD message is blank, then the LSEDM default values will be used. 3

4 4.0 Default thresholds and user configurable ranges LSEDM sets the default threshold for the Time Interval and each of the protection counters, to ensure adequate protection for bulk quote users. Bulk quote users may define their own customised thresholds, as described in the procedure in Section 3. When defining their thresholds, users must adhere to the minimum and maximum configuration ranges in the tables below. If a value outside the relevant minimum or maximum is selected, LSEDM will reject the message and users will be unable to set up their customised protection thresholds. 4.1 IOB options (maximum volume protection only): For the IOB options in the list below, the default thresholds/ ranges for the maximum volume protection counter are below. (Note, the default values are the same as the minimum market making size obligations.) Option Default maximum volume threshold Minimum configuration Maximum configuration Gazprom 1,000 Lukoil 150 Norilsk Nickel 500 Novatek 50 Rosneft 1,000 Sberbank 650 Surgutneftegaz 800 Uralkali 100 VTB Bank 2,500 RIOB Index 30 Equal to minimum market making obligation NA For all other protection counters, the values are the same as in table UK stock options (maximum volume protection only): For UK stock options listed on the Order book, the default thresholds/ ranges for the maximum volume protection counter are the five times (5x) the minimum market making size obligations. For all other protection counters, the values are the same as for all instruments other than Norwegian products. 4.3 Norwegian index, options and futures: For all Norwegian products, the following default thresholds/ ranges are used: Protection type Default threshold Minimum configuration Maximum configuration Time Interval 60 seconds NA 1 hour Trade count (of Min Lot size) 5 (10) 3 (5) NA (NA) Volume count NA Value count 9,999,999 10,000 NA Delta volume count 9,999, NA Delta value count 9,999,999 10,000 NA 4

5 4.4 All other instruments: For all other instruments listed on LSEDM, the following default thresholds/ ranges are used: Protection type Default threshold Minimum configuration Maximum configuration Time Interval 60 seconds NA 1 hour Trade count (of Min Lot size) 99 (Equal to minimum 3 (Equal to minimum market NA (NA) market maker obligation) making obligation) Volume count 10,000 Equal to minimum market NA making obligation Value count 99,999,999 1,000 NA Delta volume count 99,999, NA Delta value count 99,999,999 10,000 NA 5.0 For further information contact: For setting up the bulk quoting protections: LSE Derivatives Technical Account Management T: +44 (0) E: londontam@lseg.com For further information on this document: LSE Derivatives Market T: +44 (0) E: LSEDM.sales@lseg.com 5

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