Imported from previous forum
[ original email was from Ryan Pierce - rpierce@taltrade.com ]
In FIX 4.3, if I send a multileg order with:
Side=Sell
LegSymbol=X
LegSide=Buy
LegSymbol=Y
LegSide=Sell
Is LegSide absolute, i.e. I’m selling the spread, and I will buy X and sell Y to do so? (And if I were buying the spread, LegSide for X would be Sell and LegSide for Y would be Buy?)
Or is LegSide relative to Side, i.e. the spread itself involves buying X and selling Y, so since I’m selling the spread, I need to sell X and buy Y?
Has this behavior been well-defined? A quick glance through the 4.3 spec left me concerned that this might be ambiguous.
[ original email was from Jim Northey - jnorthey@jandj.com ]
I would say that it has not been well documented and probably not that well defined.
The original concept was to define the spreads from a natural long position - should one exist - for many strategies a natural long position does occur and this would equate to buying the spread.
Let’s take the case of a Butterfly - which is buying a call at the lowest strike, selling two puts at a mid strike, and buying a call at an upper strike. This is a neutral strategy which allows the person “buying” the butterfly to appreciate a return if the underlying of the options does not move much above or below the mid strike.
To go long the butterfly the following would be specified
Side=Buy
OrderQty=50
LegSymbol=IBM Oct 90 Call
LegSide=Buy
LegQty=1
LegSymbol=IBM Oct 95 Put
LegSide=Sell
LegQty=2
LegSymbol IBM Oct 100 Call
LegSide=Buy
LegQty=1
For the above example you would multiple the OrderQty by each leg quantity to determine the overall quanity.
Some markets have implemented this as follows - which I think is not a good way to do it but it follows the rules
Side=Buy
OrderQty=1
LegSymbol=IBM Oct 90 Call
LegSide=Buy
LegQty50
LegSymbol=IBM Oct 95 Put
LegSide=Sell
LegQty=100
LegSymbol IBM Oct 100 Call
LegSide=Buy
LegQty=50
Now if someone were to go short the butterfly - it would cause you to reverse the legSides:
Side=Sell
OrderQty=50
LegSymbol=IBM Oct 90 Call
LegSide=Buy
LegQty=1
LegSymbol=IBM Oct 95 Put
LegSide=Sell
LegQty=2
LegSymbol IBM Oct 100 Call
LegSide=Buy
LegQty=1
Which would mean selling 50 of the low strike calls, buying 100 of the mid strike puts, and selling 50 of the upper strike calls.
However, since a natural long position does not make sense for all spreads - and since market makers often will do spreads for a positive or negative dollar amount the terminology used especially in options pits are to do the deal for a debit or credit. This didn’t make it through the GTC so we introduced two new Side enumerations:
B = “As Defined” (for use with multileg instruments)
C = “Opposite” (for use with multileg instruments)
As Defined means that do the deal as defined in the legs. Opposite means do the opposite of what is defined in the legs. This provides support for markets (of which there are many and more coming on board every day) where spreads can be defined and traded as a discrete product in their own book. There are different rules for defining spread instruments - I believe CBOEs is the near term, lowest strike option is set to Buy and the rest of the strategy emanates from that first leg.
What we should probably do to address the lack of documentation on usage is ask the GDC Business Practices Group that is starting up and being driven by the FIA Order Routing Subcommittee, chaired by Bill Herder of Rolf & Nolan and Leslie Sutphen of Financial Markets Consulting.
We should also ask markets like CBOE, ISE, CME to provide us with their usage so we can include that on the website.
Let me know what questions this explanation causes 
In FIX 4.3, if I send a multileg order with:
Side=Sell LegSymbol=X LegSide=Buy LegSymbol=Y LegSide=Sell
Is LegSide absolute, i.e. I’m selling the spread, and I will buy X and
sell Y to do so? (And if I were buying the spread, LegSide for X would
be Sell and LegSide for Y would be Buy?)Or is LegSide relative to Side, i.e. the spread itself involves
buying X and selling Y, so since I’m selling the spread, I need to
sell X and buy Y?Has this behavior been well-defined? A quick glance through the 4.3 spec
left me concerned that this might be ambiguous.