Must Be Filled Order Type

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1

Imported from previous forum

2

One of our markets here in Canada support MBF order types. The following is a description:

A must be filled (MBF) order is a trade that must be executed due to expiring options or futures contracts on those exchanges. MBF orders are filled on the third Friday of each month because index options expire on those days each month. MBF orders are entered during the extended hours trading session on the Thursday preceding the third Friday of each month. On the expiry day (Friday) all the MBF orders are treated like pre-open market orders and are thus guaranteed a fill at the market’s calculated opening price.

I am curious if anyone has had experience with these orders and specifically how they are represented in FIX. (OrdType (40) currently does not have an enumerator for MBF orders. Nor does ExecInst (18))

Thanks

3

The market FIX spec specifies to use 40=X for MBF. I tried send an order with 40=X couple months ago, the order was rejected. At the moment, the market said MBF order was not supported via FIX (eventhough it was in their spec).

One of our markets here in Canada support MBF order types. The following
is a description:

A must be filled (MBF) order is a trade that must be executed due to
expiring options or futures contracts on those exchanges. MBF orders are
filled on the third Friday of each month because index options expire on
those days each month. MBF orders are entered during the extended hours
trading session on the Thursday preceding the third Friday of each
month. On the expiry day (Friday) all the MBF orders are treated like
pre-open market orders and are thus guaranteed a fill at the market’s
calculated opening price.

I am curious if anyone has had experience with these orders and
specifically how they are represented in FIX. (OrdType (40) currently
does not have an enumerator for MBF orders. Nor does ExecInst (18))

Thanks

4

Hi Cindy

X must have been a custom enumerator that the market added to their spec in the OrdType field. Thanks for the feedback.

Paul

The market FIX spec specifies to use 40=X for MBF. I tried send an order
with 40=X couple months ago, the order was rejected. At the moment, the
market said MBF order was not supported via FIX (eventhough it was in
their spec).

One of our markets here in Canada support MBF order types. The
following is a description:

A must be filled (MBF) order is a trade that must be executed due to
expiring options or futures contracts on those exchanges. MBF orders
are filled on the third Friday of each month because index options
expire on those days each month. MBF orders are entered during the
extended hours trading session on the Thursday preceding the third
Friday of each month. On the expiry day (Friday) all the MBF orders
are treated like pre-open market orders and are thus guaranteed a fill
at the market’s calculated opening price.

I am curious if anyone has had experience with these orders and
specifically how they are represented in FIX. (OrdType (40) currently
does not have an enumerator for MBF orders. Nor does ExecInst (18))

Thanks

5

Paul,

sounds a bit similar to cabinet orders (PriceType 10 or 11) where one uses a price that would normally be deemed as an error, e.g. 0.01. The purpose is to ensure that the order gets executed due to an upcoming expiry. The background could be tax purposes, i.e. without getting out of the position the tax loss is not deemed to be realized and cannot be offset against profits.

Market orders basically fulfill the same purpose, i.e. one does not care about the price. However, normally controls at an exchange would prevent such orders to be filled at an unreasonable price. As you say, they would be filled at the calculated opening price.

What does “Must be filled” really mean? If there is no one willing to take the other side, who guarantees the fill? The pre-open market order sounds like a best effort approach to get it filled but there could be an illiquid market failing to establish an opening price.

Where is the difference to a market order that is entered with an EffectiveTime (168) of the next day or a TradingSessionID (336) (assuming current extended trading session to be different, e.g. 5=Evening)? In other words, where would the system behave differently on the expiry day when dealing with MBF vs. market orders?

Regards,
Hanno.

One of our markets here in Canada support MBF order types. The following
is a description:

A must be filled (MBF) order is a trade that must be executed due to
expiring options or futures contracts on those exchanges. MBF orders are
filled on the third Friday of each month because index options expire on
those days each month. MBF orders are entered during the extended hours
trading session on the Thursday preceding the third Friday of each
month. On the expiry day (Friday) all the MBF orders are treated like
pre-open market orders and are thus guaranteed a fill at the market’s
calculated opening price.

I am curious if anyone has had experience with these orders and
specifically how they are represented in FIX. (OrdType (40) currently
does not have an enumerator for MBF orders. Nor does ExecInst (18))

Thanks

6

Hi Hanno

Thanks for the response. You are right in that the “guarantee” is really a best effort during the pre-open. If liquidity does not exist at the opening and the orders cannot be filled the stock will not open.

In order for the markets to indicate this order type on the regulatory feed to us, we’ve also talked about using the combination of 40=1, 168=(following day 7am), and Text=MBF to indicate these orders. That seems to be the best option.

Thanks again Hanno

Paul

Paul,

sounds a bit similar to cabinet orders (PriceType 10 or 11) where one
uses a price that would normally be deemed as an error, e.g. 0.01. The
purpose is to ensure that the order gets executed due to an upcoming
expiry. The background could be tax purposes, i.e. without getting out
of the position the tax loss is not deemed to be realized and cannot be
offset against profits.

Market orders basically fulfill the same purpose, i.e. one does not care
about the price. However, normally controls at an exchange would prevent
such orders to be filled at an unreasonable price. As you say, they
would be filled at the calculated opening price.

What does “Must be filled” really mean? If there is no one willing to
take the other side, who guarantees the fill? The pre-open market order
sounds like a best effort approach to get it filled but there could be
an illiquid market failing to establish an opening price.

Where is the difference to a market order that is entered with an
EffectiveTime (168) of the next day or a TradingSessionID (336)
(assuming current extended trading session to be different, e.g.
5=Evening)? In other words, where would the system behave differently on
the expiry day when dealing with MBF vs. market orders?

Regards, Hanno.

One of our markets here in Canada support MBF order types. The
following is a description:

A must be filled (MBF) order is a trade that must be executed due to
expiring options or futures contracts on those exchanges. MBF orders
are filled on the third Friday of each month because index options
expire on those days each month. MBF orders are entered during the
extended hours trading session on the Thursday preceding the third
Friday of each month. On the expiry day (Friday) all the MBF orders
are treated like pre-open market orders and are thus guaranteed a fill
at the market’s calculated opening price.

I am curious if anyone has had experience with these orders and
specifically how they are represented in FIX. (OrdType (40) currently
does not have an enumerator for MBF orders. Nor does ExecInst (18))

Thanks