calendar & butterfly spreads

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1

Imported from previous forum

2

Hi.

Can someone tell me does 4.2 support calendar and butterfly spreads?

Best wishes,
Sava

3

I think you should send a single order by specifying the symbol of the strategy.

Hi.

Can someone tell me does 4.2 support calendar and butterfly spreads?

Best wishes, Sava

4

[ original email was from Greg Wood - gregjwood@hotmail.com ]
Hi Sava,

The challenge with sending multileg derivatives orders such as calendar spreads or butterflies via 4.2 is not so much how you submit the order but how you report the individual legs. You can send a composite symbol such as ESM0-U0 (Emini Jun-Sep spread)or GEM0U0Z0 (Eurodollar Jun-Sep-Dec butterfly) on a MsgType D but then people need to see the individual fills for each maturity, not just the traded price of the spread. Multileg derivatives settle based on the legs not the spread, so you must report the fills on the legs in real-time.

In 4.2 to do this you either need to add custom or non-4.2 tags into the execution report, or you need to send multiple execution reports, 1 for the spread and 1 for each leg, so that’s 3 execution reports for a calandar spread and 4 for a butterfly. Then you’ve got to find a way of linking those executions neatly together. For multileg options strategies that starts getting even more complex.

That’s not nice, nor is there a standard across the street.

Much better to move to at least 4.4 or later and make use of the repeating groups available in both the MsgType AB and MsgType 8 so that you can cleanly specify the components of the spread, and then the individual executions of those components in one tidy composite message.

Regards,

  • Greg

I think you should send a single order by specifying the symbol of
the strategy.

Hi.

Can someone tell me does 4.2 support calendar and butterfly spreads?

Best wishes, Sava

5

Thank you Greg!

4.4 is better, but a customer wish is the customer wish :))

Best wishes,
Sava

Hi Sava,

The challenge with sending multileg derivatives orders such as calendar
spreads or butterflies via 4.2 is not so much how you submit the order
but how you report the individual legs. You can send a composite symbol
such as ESM0-U0 (Emini Jun-Sep spread)or GEM0U0Z0 (Eurodollar Jun-Sep-
Dec butterfly) on a MsgType D but then people need to see the individual
fills for each maturity, not just the traded price of the spread.
Multileg derivatives settle based on the legs not the spread, so you
must report the fills on the legs in real-time.

In 4.2 to do this you either need to add custom or non-4.2 tags into the
execution report, or you need to send multiple execution reports, 1 for
the spread and 1 for each leg, so that’s 3 execution reports for a
calandar spread and 4 for a butterfly. Then you’ve got to find a way of
linking those executions neatly together. For multileg options
strategies that starts getting even more complex.

That’s not nice, nor is there a standard across the street.

Much better to move to at least 4.4 or later and make use of the
repeating groups available in both the MsgType AB and MsgType 8 so that
you can cleanly specify the components of the spread, and then the
individual executions of those components in one tidy composite message.

Regards,

  • Greg

I think you should send a single order by specifying the symbol of the
strategy.

Hi.

Can someone tell me does 4.2 support calendar and butterfly spreads?

Best wishes, Sava

6

The approach created in FIX.4.2 is to use the SecurityDefinitionRequest to define a multileg instrument (in this case an options strategy). A Security Definition message is returned with the identifier of the instrument which can be then traded using the New Order Single message as Xavier has recommended.

Counterparties can define standard strategies out of band (outside of the FIX session) and then use that symbology to trade via the New Order Single. You can transmit a list of predefined option strategies (multileg instruments) via the Security Definition message.

We modeled this after the LIFFE system back in 1998. This was not deemed sufficient by the market place so in FIX.4.3 the Multileg Order was added (do not use FIX.4.3 - FIX.4.4 is recommended instead).

I think you should send a single order by specifying the symbol of
the strategy.

Hi.

Can someone tell me does 4.2 support calendar and butterfly spreads?

Best wishes, Sava

7

Thank you!

Best wishes,
Sava

The approach created in FIX.4.2 is to use the SecurityDefinitionRequest
to define a multileg instrument (in this case an options strategy). A
Security Definition message is returned with the identifier of the
instrument which can be then traded using the New Order Single message
as Xavier has recommended.

Counterparties can define standard strategies out of band (outside of
the FIX session) and then use that symbology to trade via the New Order
Single. You can transmit a list of predefined option strategies
(multileg instruments) via the Security Definition message.

We modeled this after the LIFFE system back in 1998. This was not deemed
sufficient by the market place so in FIX.4.3 the Multileg Order was
added (do not use FIX.4.3 - FIX.4.4 is recommended instead).

I think you should send a single order by specifying the symbol of the
strategy.

Hi.

Can someone tell me does 4.2 support calendar and butterfly spreads?

Best wishes, Sava