Click here to load reader
Upload
others
View
0
Download
0
Embed Size (px)
Citation preview
EDGX Options Complex Order Book LaunchMay 4, 2017
• Chris Isaacson, EVP, Chief Information Officer • Andy Lowenthal, SVP, Head of Global Derivatives• Kapil Rathi, SVP, Options Business Development
Customer Conference Call
2CBOE HOLDINGS
Agenda
Chris Isaacson, EVP, Chief Information OfficerOverview
Key dates
Order types and order entry
Andy Lowenthal, SVP, Head of Global Derivatives
Integration update
Kapil Rathi, SVP, Options Business DevelopmentMatching model
Auctions
Market data
Risk protections
Questions & Answers
3CBOE HOLDINGS
Cautionary Statements Regarding Forward-Looking InformationThis presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve a number of risks and uncertainties. You can identify these statements by forward-looking words such as “may,” “might,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” and the negative of these terms and other comparable terminology. All statements that reflect our expectations, assumptions or projections about the future other than statements of historical fact are forward-looking statements. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from those expressed or implied by the forward-looking statements.
We operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Some factors that could cause actual results to differ include: the loss of our right to exclusively list and trade certain index options and futures products; economic, political and market conditions; compliance with legal and regulatory obligations; increasing price competition in our industry; decreases in trading volumes or a shift in the mix of products traded on our exchanges; legislative or regulatory changes; increasing competition by foreign and domestic entities; our dependence on third party service providers; our index providers’ ability to maintain the quality and integrity of their indexes and to perform under our agreements; our ability to operate our business without violating the intellectual property rights of others and the costs associated with protecting our intellectual property rights; our ability to accommodate trading volume and transaction traffic, including significant increases, without failure or degradation of performance of our systems; our ability to protect our systems and communication networks from security risks, including cyber-attacks; the accuracy of our estimates and expectations; our ability to maintain access fee revenues; our ability to meet our compliance obligations, including managing potential conflicts between our regulatory responsibilities and our for-profit status; the ability of our compliance and risk management methods to effectively monitor and manage our risks; our ability to attract and retain skilled management and other personnel; our ability to manage our growth and strategic acquisitions or alliances effectively; restrictions imposed by our debt obligations; unanticipated difficulties or expenditures relating to the recently-completed acquisition of Bats Global Markets, Inc. (“Bats”), including, without limitation, difficulties that result in the failure to realize expected synergies, efficiencies and cost savings from the acquisition within the expected time period (if at all), whether in connection with integration, combining trading platforms, broadening distribution of product offerings or otherwise; our ability to maintain an investment grade credit rating; disruptions of our current plans, operations and relationships with market participants caused by the Bats acquisition; and potential difficulties in our ability to retain employees as a result of the Bats acquisition.
We do not undertake, and we expressly disclaim, any duty to update any forward-looking statement whether as a result of new information, future events or otherwise, except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.
4CBOE HOLDINGS
Overview
Why we’re launching
Longstanding ambition of ours to launch an electronic complex order bookAdds to our leading position in the U.S. options marketIncludes new order handling, risk management and trade-through protections for the best complex order book yetWe encourage your feedback
5CBOE HOLDINGS
Integration Update
How this fits in our broader integration efforts
Functionality will be the foundation for all complex orders on the CBOE markets currently migrating to Bats technology Planned new capabilities arrive only eight months after the acquisition of Bats closedDemonstrates our goal to operate one of the foremost derivatives trading businesses globally
6CBOE HOLDINGS
Schedule*
May 11: Technical specifications available
August 1: Certification available for testing
September 16: First optional weekend test
October 21: Second optional weekend test
October 23: Go live
Planned Dates
Microsite
www.bats.com/COB
*Subject to regulatory approval
7CBOE HOLDINGS
Initial functionality from October 23, 2017*, further to follow
Available immediately:
Options only complex orders
Complex order auctions
In due course:
Crossing orders
Stock/option orders
Implied orders
Staggered Launch
*Subject to regulatory approval
8CBOE HOLDINGS
All complex orders will trade in penny increments
Time in force
Day, IOC, FOK, GTD, GTC, Opening Only
PriceLimit, Market
AuctionsComplex Auctions, Complex Auctions Only (CAO)
Order types
All customers can trade all complex order types
Supported origin types
Customer, Firm, Market Maker, JBO, BD, Away Market Maker, Professional Customer
9CBOE HOLDINGS
Complex Strategies
Complex strategies up to 12 legs supported
Maximum and minimum ratio between the largest and smallest leg must be 3:1
All legs must be based on the same underlying symbol
All legs must deliver same number of shares
E.g. Can enter a complex order in series that are corporate adjusted, provided all legs are delivering the same number of shares.
10CBOE HOLDINGS
Customers have real time control on what instruments can be traded
BOE and FIX
Enter an order as a package
Looks like an order entered for a regular series
Complex strategy delineated by strategy instrument I.D., which must be referenced
FIXEnter an order by buying or selling individual legs
Order must include series, side, ratio
Exchange will create a new instrument
An existing I.D. does not need to be referenced
Complex Order Entry
11CBOE HOLDINGS
Key elements
Matching will be continuous
Complex orders can trade with other complex orders or orders on ‘regular’ book
Resting orders in the complex order book will be traded price/time
Priority model operates in case of price confluence
LeggingLogic for complex vs. ‘regular’
Deterministic – no best effort or delay
Matching Model
12CBOE HOLDINGS
OrdersComplex Order Auctions last 50 milliseconds
Customers have full control over whether orders are auctioned or not
Auction messagesDisseminated on auction feed only
Messages indicate price, size, side, customer or non customer, auction I.D.
Responses only trade against corresponding I.D.
Auction period end
Unexecuted response portions are cancelled back
Unexecuted auction orders placed on complex book unless marked IOC, FOK or Complex Auction only
Orders can trade with counter-side complex orders, responses or individual legs
Complex Order Auctions
13CBOE HOLDINGS
Top Of BookAggregated size on the bid and ask side of a complex order at the top price level
Complex Depth FeedSimilar to current depth of book feed and shows order by order information as they are entered, cancelled or traded
Complex Auction Feed
Auction messages only
Only complex auctions included at this time, future price improvements and crossing mechanisms to come
Common to all three:Strategy definitions as they are created, and members can request these on demand
Whether complex order was entered for a priority customer or non-customer
Market Data Feeds
14CBOE HOLDINGS
NBBO protectionsSpecify your appetite to trade outside the NBBO by adding a buffer
Can stipulate the buffer yourself, or rely on exchange defaults
Upon entry, complex orders will be capped at the buffer level
If capped orders are not traded in 2 seconds, they are cancelled back
Fat fingersExchange or member defined port setting for maximum order size
Intrinsic value
Debit strategies
Minimum price
Risk Protections I
Introducing the most holistic complex options solution around
15CBOE HOLDINGS
Quote Risk Management tracks risk threshold for resting orders
Complex trades will be included in the these calculations
Any trade (‘regular’ or complex) that triggers a risk control will result in all other orders getting removed
Complex order legging will be limited to prevent risk threshold. Not permitted:
Complex orders with greater than 4 legs;
Complex orders with 3 or 4 legs when all legs are buying or selling;
Complex orders with 2 legs where both legs are buying or selling unless that order is entered by a priority customer and goes through an auction.
Pegging
Match Trade PreventionSupported: Cancel Newest, Cancel Oldest, Cancel Both
Risk Protections II
16CBOE HOLDINGS
Planned dates*:
May 11: Technical specifications available
August 1: Certification available for testing
September 16: First optional weekend test
October 21: Second optional weekend test
October 23: Go live
Key resources:
Microsite: www.bats.com/COB
Summary
*Subject to regulatory approval
17CBOE HOLDINGS
Questions & Answers
CBOE Holdings 400 South LaSalle StreetChicago, Illinois 60605www.cboe.com