If we have market order and market with protection order, how could we indicate in our protocol?
I have checked FIX protocol in other exchanges. ex. CME, BM&FBOVESPA…
Most of exchanges only provide one option. Market order or Market with protection order.
Could Order Type have two options for them? Then client can decide which one they want to use.
Can you please explain the concept of “market with protection order”? Some exchanges like Eurex or Xetra have sophisticated protection rules for all market orders as they can rest on the book. Those exchanges protect all market orders against bad prices.
When investor places a market with protection order, it will not be completed at a price that is too far off from the market price at the time of the order. Market order with protection are filled within a pre-defined range of prices.
For example.
Stock A has basis price 100 today.
At 11:00 a.m., Stock A rises to 105.
We define a price range, maybe 3%.
When investor place a market with protection order, filled price is between prices of $101.85(105*1.03%) and $108.15
We also have a price variation limit in our market, maybe 15%.
If investor place a normal market order, filled price is between prices of $115 and $85.
Thank you for the background information. I do not believe this is an order type, it is rather an instruction going along with a given order, regardless of its type. For example, FIX has execution/peg/discretion instructions, many of which are related to the price range that is allowed.
Your business requirement has been covered in principle with EP223. See Section 2.4 Market Order Protection. This is an excerpt from there:
There are a number of options to protect (market) orders, e.g. MaxPriceLevels(1090) to limit the number of price levels to trade through or MaxPriceVariation(1143) to define the maximum price variation of an execution from one event to the next. A new requirement is to be able to express a maximum deviation in terms of a percentage from a reference price such as the initial price of a match event to protect market orders from unfair execution.
The field MaximumPriceDeviation(2676) was added for this purpose. Your Rules of Engagement document needs to define what the reference price is, e.g. basis price of the day. It is not a Y/N flag, i.e. you need to define a semantic that works with your specific rules. For example, you could define 3% as the only valid value for this field or you could allow values in a specific range that you then dynamically apply to the match event (maybe a new feature in your system 
).
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