Home » gratis dating » Matching Algorithms – Electronic Platform Information Console

Matching Algorithms – Electronic Platform Information Console

Matching Algorithms - Electronic Platform Information Console

This topic explains the different matching algorithms supported on the CME Globex Platform. These matching algorithms support order management functionalities suggested to market participants and ensure that each market participant is given the best possible execution at the fairest price.

A matching algorithm is a technology to allocate matched quantities, used when an aggressor order matches with one or numerous resting orders. Algorithms apply to both outright and implied matching .

Order matching goes after three steps:

  1. Determine the current prices opposite of the aggressor order, outright and implied prices
  2. Determine quantity at best price opposite the aggressor order, based on business rule priorities
  3. Allocate resting quantity at best price to trade with aggressor order using the market algorithm

The following are the supported matching algorithms:

Matching Algorithms Overview Movie

The following movie provides an overview and examples of the matching algorithms available on the CME Globex platform.

Allocation

The Allocation algorithm is an enhanced pro-rata algorithm that incorporates a priority (top order) to the very first incoming order that betters the market. If priority is established, the aggressor orders are very first allocated to the top order until the order’s quantity is weakened.

Additionally, there is a minimum pro-rata allocation parameter of two lots. All fills are rounded down to the nearest integer and if an allocated trade quantity is less than two lots, it is rounded down to zero. Excess lots are allocated FIFO.

The Allocation algorithm goes after these stages to match trades:

  • Assigns a top order percent allocation
  • Pro-rata with minimum allocation of two lots
  • FIFO for any residual quantity

For information on allocation for Covered instruments, refer to Covered UDS Trade Futures Allocation

The FIFO algorithm uses price and time as the only criteria for packing an order. In this algorithm, all orders at the same price level are packed according to time priority, the very first order at a price level is the very first order matched.

It is significant to note that an order loses order priority and is re-queued when switched in any of the following ways:

  • Increase the quantity
  • Switch the price
  • Switch the account number
FIFO for Implied Orders

When trades are matched using the FIFO method, outright orders at the same price level are packed according to time priority. After all possible matches have been made for the outright orders, the implied orders will trade using the rules based system mentioned under the Priority Rules section:

  • All implied IN orders are aggregated together at their respective prices.
  • When aggregating implied OUT orders, there can be several aggregates for each price. This is due to the fact that only one aggregate per spread is used to generate implied orders.
  • Within each price aggregate, the earlier maturity will trade very first (i.e., for Calendars, CONTRACT A-CONTRACT B will trade before CONTRACT A-CONTRACT C).
FIFO Matching Example

Using the FIFO match algorithm:

  1. Orders at the same price are prioritized by their entry times, with the oldest order having the highest priority.
  2. The aggregated implied order has the lowest priority within its price level.

In the example, if any orders on the suggest side were to come in at the corresponding price of 9330, then the 3-lot and 5-lot would match very first (in that order), with the 2-lot implied order packed last because it has the lowest priority.

If implied spreading was turned off and the 2-lot in the example was a real outright order, then the order would have an actual timestamp and prioritized accordingly.

FIFO with LMM

The FIFO with LMM algorithm is an enhanced FIFO algorithm that permits for LMM allocations prior to the FIFO allocations. LMMs are each allocated a configurable percentage of an aggressor order before the remaining quantity is allocated FIFO.

The FIFO with LMM algorithm goes after these stages to match trades:

  • LMM set to configurable percent
  • FIFO allocation

FIFO with Top Order and LMM

The FIFO with LMM algorithm is an enhanced FIFO algorithm that permits for LMM allocations prior to the FIFO allocations. Additionally, this algorithm incorporates a priority (top order) to the very first incoming order that betters the market. If priority is established, the aggressor orders are very first allocated to the top order until the order’s quantity is weakened.

The FIFO with LMM algorithm goes after these stages to match trades:

  • Assigns a top order percent allocation that betters the market
  • LMM set to configurable percent
  • FIFO allocation

Pro-Rata

The FX Calendar algorithm fills orders according to price, order lot size and time. An incoming aggressor order’s quantity is multiplied by each resting order’s pro-rated percentage to calculate allocated trade quantity. All fills are rounded down to the nearest integer, if an allocated trade quantity is less than two , it is rounded down to zero.

An order’s pro-rata percentage is calculated by taking order quantity divided by total quantity at a certain price. Excess lots, which occur as a result of the rounding down of the original allocated trade quantity, may be allocated FIFO.

The FX Calendar algorithm goes after these stages to match trades:

  • Pro-rata with a minimum allocation
  • FIFO for any residual quantity

Products that have a pro-rata component to their matching process are detailed in the GCC Product Resources.

Pro-Rata Allocation Matching Examples

Pro Rata with TOP

Allocation Matching Calculation

The matching allocation is performed for the remaining orders using the following formula:

  • 50/85 x 50 = 29 – Matched 2nd, after top order is entirely packed.
  • 25/85 x 50 = 14 – Matched 3rd.
  • Ten/85 x 50 = Five – Matched 4th.

Order 1 (Top order) is packed entirely.

  • FIFO – the 2-lot is assigned to the order with the highest priority, which is Order Two.

The following table shows the order in which the matching takes place.

Pro Rata Allocation Matching with Displayed Quantity

In this example, any of the orders involved could be either outright or implied. As timestamp is not taken into account, the outcome is the same.

In this example, Order 1 has a total quantity of 100, but only displays Ten (Max display).

Allocation Matching Calculation

*Rounded down to 0 due to quantity calculated = 1.

For the 2nd allocation, allocation is on a FIFO basis and order Two is ended.

The following table shows the order in which the matching takes place.

Pro-Rata Allocation for Eurodollar Futures

This match algorithm known as Pro Rata or Allocation Algorithm is applied only to the Eurodollar futures at CME Group (Eurodollar packs and Bundles match via FIFO).

Pro Rata Allocation matches orders based on price, TOP orders, and size.

  • A TOP order is an order having a price that betters the market at the time the order is received and which is therefore designated as having time priority. Only a single buy order and a single sell order can have time priority at any given moment. Orders having time priority match very first regardless of size.

The Pro Rata Allocation algorithm goes after these rules:

Orders placed during the ",pre-opening", or at the Indicative Opening Price will be matched on a price and time priority basis.

Implied orders are not taken into consideration, because these orders are only active during the continuous trading session.

  • Outright orders will have priority over implied orders and will be allocated the remaining quantity according to their timestamps.
  • Implied orders will be then allocated by maturity, with the earliest expiration receiving the allocation before the later expiring contracts. If spread contracts have the same expiration (i.e., CONTRACT A-CONTRACT B and CONTRACT A-CONTRACT C), then the quantity will be allocated to the earliest maturing contracts making up that spread (i.e., the CONTRACT A-CONTRACT B will get the allocation before the CONTRACT A-CONTRACT C because the CONTRACT B expires before the CONTRACT C).

Split FIFO and Pro-Rata

The Split FIFO/Pro-Rata algorithm is a hybrid which integrates a percent-based allocation on both a FIFO and Pro-Rata formula to the resting order book. This algorithm has been developed with the plasticity to calibrate the level of tradable quantity that is allocated on a FIFO and pro-rata basis (X% FIFO, Y% pro-rata for every tradable quantity).

Additionally, an order that does not receive an allocation during the Pro-Rata stage is eligible for a one lot pack through pro-rata leveling. The allocations for this component are prioritized for orders with the largest remaining quantity. If numerous orders have the same remaining quantity time priority will be the determining factor.

This algorithm can also incorporate a top order and LMM components before the FIFO and pro-rata allocations are calculated.

The Split FIFO/Pro-Rata algorithm goes after these stages to match trades:

  • Assigns a top order percent allocation (with min and/or max)
  • LMM may be applied
  • FIFO percent may be configured from 0 to 100%
  • Pro-rata with min may be configured from 0 to 100%
  • Pro-rata leveling
  • FIFO for any residual quantity

Threshold Pro-Rata

The Threshold Pro-Rata algorithm is an enhanced pro-rata algorithm that incorporates a priority (top order) to the very first incoming order that betters the market. If priority is established, aggressor orders are very first allocated to the top order up to the maximum configured priority allocation (volume cap). A minimum order size may also be set, whereas if an order does not meet that minimum level, it does not qualify for top order. Additionally, there is a minimum configurable allocation parameter (pro-rata mini), which is set to a quantity that can be allocated due to the results from the initial pro-rated allocation. All fills are rounded down to the nearest integer and if an allocated trade quantity is less than the pro-rata min it is rounded down to zero. Excess lots are allocated FIFO.

The Threshold Pro-Rata algorithm goes after these stages to match trades:

  • Assigns a top order percent allocation (with min and/or max)
  • Pro-rata with configurable minimum allocation
  • FIFO for any residual quantity

Threshold Pro-Rata with LMM

The Threshold Pro-Rata with LMM algorithm is an enhanced pro-rata algorithm that incorporates a Lead Market Maker (LMM) allocation after top order and before the pro-rata allocation.

LMM permits CME Group-designated customers to receive a designated allocation percentage of aggressor orders. The allocated quantity will not exceed the incoming order’s quantity. Numerous LMM orders are matched based on FIFO rules until the incoming order’s quantity is fulfilled or all LMM orders have received their allocated quantity.

Any remaining quantity is allocated pro-rata with configurable minimum allocation.

The Threshold Pro-Rata with LMM algorithm goes after these stages to match trades:

  • Assigns a top order percent allocation (with min and/or max)
  • LMM set to configurable percent
  • Pro-rata with configurable minimum allocation
  • FIFO for any residual quantity

Lead Market Maker (LMM) Matching Algorithm

Lead Market Maker (LMM) is a designation given to CME Group authorized market makers. The LMM status provides special consideration in order matching.

An LMM order at the same price level as the top order will receive the LMM match percentage allocation before the top order allocation. LMM matching rules apply very first and top order matching rules apply thereafter. An LMM order can also be a top order.

A top order that belongs to an LMM will be matched very first and will not be included in the following calculations:

  • If the LMM has a single order at an elected price level it will match N% of the remaining incoming order quantity, with N equal to the LMM’s allocation percentage. However, the matched quantity will not exceed the LMM’s order quantity.
  • If the LMM has numerous orders at an elected price level, then the LMM quantity is aggregated and will match N% of the remaining incoming order quantity. Numerous LMM orders are matched on Time Priority basis until N% quantity allocation is fulfilled.

All remaining resting orders at an elected price level (including LMM orders) are matched according to FIFO rules.

If the LMM has a single order at an elected price level it will match N% of the remaining incoming order quantity, with N equal to the LMM’s allocation percentage. However, the matched quantity will not exceed the LMM order quantity. If the LMM has numerous orders at an elected price level, then the LMM quantity is aggregated and will match N% of the remaining incoming order quantity. Numerous LMM orders are matched on Time Priority basis until N% quantity allocation is fulfilled. All remaining resting orders at an elected price level (including LMM orders) are matched according to FIFO rules.

Related movie: A Winning Strategy for Online Dating


, ,

Leave a Reply

Your email address will not be published. Required fields are marked *

*
*