Imported from previous forum
On a strategy order, each leg may open or close the customer’s option position. Similarly, each leg may create a covered or uncovered position.
In FIX, the firm first sends in a security definition request that defines the strategy legs, then follows with a “flat” order for the synthetic security. They can’t specify OPEN/CLOSE of COVERED/UNCOVERED in the security definition request, since those attributes apply to a customer’s intended position, not the security itself (and these tags are not defined by FIX for the message type). They can’t specify the attributes in the order, since the order format doesn’t have a repeating group for legs.
Any ideas on how to handle this?
[ original email was from Jim Northey - jnorthey@lasalletech.com ]
Good question. Especially for existing markets. With electronic markets, strategies are viewed as products - so the Open/Close, Covered/Uncovered would apply to the entire strategy, which may be difficult to accept in current markets. Delegating O/C, C/U to post trade transactions seems to be a very bad thing as this would increase back office maintenance and expense - making it less likely firms will use the feature.
We may need to look at providing an additional approach for exchange listed strategies, that was already proposed by someone a PSE, that is the inclusion of the Underlying Security repeating group to the New Order - Single Message as optional fields (Note: When we were developing FIX 4.2 - we tried to do everything we could to minimize impact on the Order message - as it was so widely implemented).
The OM System permits the exchange to define standard strategies that can be traded as products, they also have a multi-leg order message for non-standard strategies. Using Security Definition for the productized strategies and using the Underlying Security block in the New Order would solve several problems, including the Open/Close, Covered/Uncovered issue you raised, and should encompass the majority of requirements we have heard of thus far.
LIFFE in their electronic system has productized all strategies.
The Eurex system, the last time I checked used a multi-legged order approach.
I will try and schedule a teleconference of the F&O working group to discuss this issue soon. I will try to have participation by some of the Technical Committee - so they can be apprised of the issue at hand.
> On a strategy order, each leg may open or close the customer’s option position. Similarly, each leg may create a covered or uncovered position.
>
> In FIX, the firm first sends in a security definition request that defines the strategy legs, then follows with a “flat” order for the synthetic security. They can’t specify OPEN/CLOSE of COVERED/UNCOVERED in the security definition request, since those attributes apply to a customer’s intended position, not the security itself (and these tags are not defined by FIX for the message type). They can’t specify the attributes in the order, since the order format doesn’t have a repeating group for legs.
>
> Any ideas on how to handle this?
>
>