Interest Rate Derivatives

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1

Imported from previous forum

2

In FIX 4.2, which value should be used in tag# 167 for interest rate derivatives w.r.t. Indian Derivatives Market?

Thanks in advance.
Sachin.

3

[ original email was from Bivas Mishra - bivas.mishra@wipro.com ]
I Think the values ‘FUT’, ‘OPT’ can be used for Exchange Traded Derivatives like Interest Rate Futures/Options.

Regards,
Bivas

In FIX 4.2, which value should be used in tag# 167 for interest rate
derivatives w.r.t. Indian Derivatives Market?

Thanks in advance. Sachin.

4

How will I differentiate instrument name as FUTSTK, FUTIDX, FUTINT. As the buy side will request tag# 167 = FUT.

Thanks.
Sachin.

I Think the values ‘FUT’, ‘OPT’ can be used for Exchange Traded
Derivatives like Interest Rate Futures/Options.

Regards, Bivas

In FIX 4.2, which value should be used in tag# 167 for interest rate
derivatives w.r.t. Indian Derivatives Market?

Thanks in advance. Sachin.

5

[ original email was from Bivas Mishra - bivas.mishra@wipro.com ]
Hi,

In FIX 4.2, a combination of Tag 55 (Symbol), Tag 48 (Security ID) and Tag 167 (SecurityType), Tag 200 (MaturityMonthYear) will identify the derivative instrument. For Options, additionally, Tag 201 (PutOrCall) & Tag 202 (StrikePrice) would be required.

Regards,
Bivas

How will I differentiate instrument name as FUTSTK, FUTIDX, FUTINT. As
the buy side will request tag# 167 = FUT.

Thanks. Sachin.

I Think the values ‘FUT’, ‘OPT’ can be used for Exchange Traded
Derivatives like Interest Rate Futures/Options.

Regards, Bivas

In FIX 4.2, which value should be used in tag# 167 for interest rate
derivatives w.r.t. Indian Derivatives Market?

Thanks in advance. Sachin.

6

There is a relevant discussion on this at http://www.fixprotocol.org/discuss/read/19f5aae5

However, one issue that does not seem to be addressed is how do you specify that the underlying of the derivative is an interest rate rather than anything else?

CFICode(461) addresses this issue (but it was only introduced in FIX4.3). For example, the code for a call option on interest rates would be OCXDXX. The O indicates option, the C indicates call and the D indicates interest rate. Similarly, a call option on an index would be OCXIXX. A call option on a stock would be OCXSXX. See appendix D of Volume 6 of the spec.

In his typically thorough response in the link quoted above, Jim Northey notes that “We have however, moved away from the use of CFICode for identification of derivatives”.
However, the latest spec still says in Appendix 6D “It is recommended that CFICode be used instead of SecurityType for non-Fixed Income instruments”.

It seems to me that without CFICode we do not have a means of indentifying the type of the underlying associated with a derivative instrument - which appears to be important to Sachin in his question.

In FIX 4.2, a combination of Tag 55 (Symbol), Tag 48 (Security ID) and
Tag 167 (SecurityType), Tag 200 (MaturityMonthYear) will identify the
derivative instrument. For Options, additionally, Tag 201 (PutOrCall) &
Tag 202 (StrikePrice) would be required.

Regards, Bivas

How will I differentiate instrument name as FUTSTK, FUTIDX, FUTINT. As
the buy side will request tag# 167 = FUT.

Thanks. Sachin.

I Think the values ‘FUT’, ‘OPT’ can be used for Exchange Traded
Derivatives like Interest Rate Futures/Options.

Regards, Bivas

In FIX 4.2, which value should be used in tag# 167 for interest
rate derivatives w.r.t. Indian Derivatives Market?

Thanks in advance. Sachin.

7

As of FIX 4.4 we have tag SecuritySubType (762) to further qualify the type of security. It is tough to keep the entire text of the spec up to date and comments pointing out such inconsistencies are welcome.

The CFI Code has the disadvantage that it needs to be parsed. Processing is easier (and probably faster) if one has explicit fields. For that reason PutOrCall was reintroduced.

For FIX versions below 4.4, CFICode (461) is probably the best way to go (only if SecurityType is insuffcient) unless you can pull in tags from higher versions. With FIX 4.4 and above I would opt for SecurityType (167) and SecuritySubType (762).

There is a relevant discussion on this at
http://www.fixprotocol.org/discuss/read/19f5aae5

However, one issue that does not seem to be addressed is how do you
specify that the underlying of the derivative is an interest rate rather
than anything else?

CFICode(461) addresses this issue (but it was only introduced in
FIX4.3). For example, the code for a call option on interest rates would
be OCXDXX. The O indicates option, the C indicates call and the D
indicates interest rate. Similarly, a call option on an index would be
OCXIXX. A call option on a stock would be OCXSXX. See appendix D of
Volume 6 of the spec.

In his typically thorough response in the link quoted above, Jim Northey
notes that “We have however, moved away from the use of CFICode for
identification of derivatives”. However, the latest spec still says in
Appendix 6D “It is recommended that CFICode be used instead of
SecurityType for non-Fixed Income instruments”.

It seems to me that without CFICode we do not have a means of
indentifying the type of the underlying associated with a derivative
instrument - which appears to be important to Sachin in his question.

In FIX 4.2, a combination of Tag 55 (Symbol), Tag 48 (Security ID) and
Tag 167 (SecurityType), Tag 200 (MaturityMonthYear) will identify the
derivative instrument. For Options, additionally, Tag 201 (PutOrCall)
& Tag 202 (StrikePrice) would be required.

Regards, Bivas

How will I differentiate instrument name as FUTSTK, FUTIDX, FUTINT.
As the buy side will request tag# 167 = FUT.

Thanks. Sachin.

I Think the values ‘FUT’, ‘OPT’ can be used for Exchange Traded
Derivatives like Interest Rate Futures/Options.

Regards, Bivas

In FIX 4.2, which value should be used in tag# 167 for interest
rate derivatives w.r.t. Indian Derivatives Market?

Thanks in advance. Sachin.

8

I agree that we don’t want to be parsing values of fields like CFICode.

However, I still think that CFICode is worth keeping simply because it has a logical convention for assigning values to it, rather than just making up values as we need them. For example the SecurityType value for options on futures is OOF. CFICode would use OXXFXX. It would seem better to me to choose values that adhered to an existing standard.

Note that I think we can and should still have clearly defined separate fields which specify call/put, underlying asset type etc.

SecuritySubType is just an unstructured String which can contain anything which I think will become a problem in future.

I am sure that there a lots of people who know more about this than I do and have thought about it a lot more than I have. But it does seem odd to be reverting on this previous decision to adopt a standard with CFICode. Maybe there is a good compromise position - use CFICode standard values but do not require the values to be parsed. Instead add the specialized fields, like PutOrCall as needed.

As of FIX 4.4 we have tag SecuritySubType (762) to further qualify the
type of security. It is tough to keep the entire text of the spec up to
date and comments pointing out such inconsistencies are welcome.

The CFI Code has the disadvantage that it needs to be parsed. Processing
is easier (and probably faster) if one has explicit fields. For that
reason PutOrCall was reintroduced.

For FIX versions below 4.4, CFICode (461) is probably the best way to go
(only if SecurityType is insuffcient) unless you can pull in tags from
higher versions. With FIX 4.4 and above I would opt for SecurityType
(167) and SecuritySubType (762).

There is a relevant discussion on this at
http://www.fixprotocol.org/discuss/read/19f5aae5

However, one issue that does not seem to be addressed is how do you
specify that the underlying of the derivative is an interest rate
rather than anything else?

CFICode(461) addresses this issue (but it was only introduced in
FIX4.3). For example, the code for a call option on interest rates
would be OCXDXX. The O indicates option, the C indicates call and the
D indicates interest rate. Similarly, a call option on an index would
be OCXIXX. A call option on a stock would be OCXSXX. See appendix D of
Volume 6 of the spec.

In his typically thorough response in the link quoted above, Jim
Northey notes that “We have however, moved away from the use of
CFICode for identification of derivatives”. However, the latest spec
still says in Appendix 6D “It is recommended that CFICode be used
instead of SecurityType for non-Fixed Income instruments”.

It seems to me that without CFICode we do not have a means of
indentifying the type of the underlying associated with a derivative
instrument - which appears to be important to Sachin in his question.

In FIX 4.2, a combination of Tag 55 (Symbol), Tag 48 (Security ID)
and Tag 167 (SecurityType), Tag 200 (MaturityMonthYear) will
identify the derivative instrument. For Options, additionally, Tag
201 (PutOrCall) & Tag 202 (StrikePrice) would be required.

Regards, Bivas

How will I differentiate instrument name as FUTSTK, FUTIDX,
FUTINT. As the buy side will request tag# 167 = FUT.

Thanks. Sachin.

I Think the values ‘FUT’, ‘OPT’ can be used for Exchange Traded
Derivatives like Interest Rate Futures/Options.

Regards, Bivas

In FIX 4.2, which value should be used in tag# 167 for
interest rate derivatives w.r.t. Indian Derivatives Market?

Thanks in advance. Sachin.

9

CFICode is a simple and useful way for identifying the underlying of an option. For example, sometimes one needs to differentiate between Single stock and Index options (for example), for which we can use the 4th character in CFICode. Would an alternative way be to send (462) UnderlyingProduct? I have not seen this widely used in FIX 4.4 Futures/Options (nor Product for that matter).

With regard to SecuritySubType, are there any proposals for enumerating this field? For reasons mentioned above, it is not ideal to be parsing this text field.

I agree that we don’t want to be parsing values of fields like CFICode.

However, I still think that CFICode is worth keeping simply because it
has a logical convention for assigning values to it, rather than just
making up values as we need them. For example the SecurityType value for
options on futures is OOF. CFICode would use OXXFXX. It would seem
better to me to choose values that adhered to an existing standard.

Note that I think we can and should still have clearly defined separate
fields which specify call/put, underlying asset type etc.

SecuritySubType is just an unstructured String which can contain
anything which I think will become a problem in future.

I am sure that there a lots of people who know more about this than I do
and have thought about it a lot more than I have. But it does seem odd
to be reverting on this previous decision to adopt a standard with
CFICode. Maybe there is a good compromise position - use CFICode
standard values but do not require the values to be parsed. Instead add
the specialized fields, like PutOrCall as needed.

As of FIX 4.4 we have tag SecuritySubType (762) to further qualify the
type of security. It is tough to keep the entire text of the spec up
to date and comments pointing out such inconsistencies are welcome.

The CFI Code has the disadvantage that it needs to be parsed.
Processing is easier (and probably faster) if one has explicit fields.
For that reason PutOrCall was reintroduced.

For FIX versions below 4.4, CFICode (461) is probably the best way to
go (only if SecurityType is insuffcient) unless you can pull in tags
from higher versions. With FIX 4.4 and above I would opt for
SecurityType
(167) and SecuritySubType (762).

There is a relevant discussion on this at
http://www.fixprotocol.org/discuss/read/19f5aae5

However, one issue that does not seem to be addressed is how do you
specify that the underlying of the derivative is an interest rate
rather than anything else?

CFICode(461) addresses this issue (but it was only introduced in
FIX4.3). For example, the code for a call option on interest rates
would be OCXDXX. The O indicates option, the C indicates call and
the D indicates interest rate. Similarly, a call option on an index
would be OCXIXX. A call option on a stock would be OCXSXX. See
appendix D of Volume 6 of the spec.

In his typically thorough response in the link quoted above, Jim
Northey notes that “We have however, moved away from the use of
CFICode for identification of derivatives”. However, the latest spec
still says in Appendix 6D “It is recommended that CFICode be used
instead of SecurityType for non-Fixed Income instruments”.

It seems to me that without CFICode we do not have a means of
indentifying the type of the underlying associated with a derivative
instrument - which appears to be important to Sachin in his
question.

In FIX 4.2, a combination of Tag 55 (Symbol), Tag 48 (Security ID)
and Tag 167 (SecurityType), Tag 200 (MaturityMonthYear) will
identify the derivative instrument. For Options, additionally, Tag
201 (PutOrCall) & Tag 202 (StrikePrice) would be required.

Regards, Bivas

How will I differentiate instrument name as FUTSTK, FUTIDX,
FUTINT. As the buy side will request tag# 167 = FUT.

Thanks. Sachin.

I Think the values ‘FUT’, ‘OPT’ can be used for Exchange
Traded Derivatives like Interest Rate Futures/Options.

Regards, Bivas

In FIX 4.2, which value should be used in tag# 167 for
interest rate derivatives w.r.t. Indian Derivatives Market?

Thanks in advance. Sachin.