S&P 500 Options LOX Orders

About Large Order Execution Transactions ("LOX" Orders") for S&P 500 Options

LOX Orders FAQs

1. What is a LOX order?

LOX orders are matched, large-size S&P 500 options orders, presented to the trading pit, which support pre- execution discussions and offer a contingent cross-guarantee for brokers.

2. What is the definition of “large-size”?

The order size must be equal to or greater than the minimum quantity threshold. For S&P 500 options, the minimum quantity threshold is 125 contracts.

3. In which products are LOX orders allowed?

LOX orders are allowed for S&P 500 option orders traded during regular trading hours on the trading floor.

4. What qualifies an order to be a LOX order?

LOX orders are floor-traded S&P 500 option orders that meet specific requirements, including:

  • A LOX order must improve the existing market in the pit at the time it is presented. In order to be eligible for execution as a LOX order, the designated LOX limit price must be above the existing bid (in the case of a buy order) or below the existing offer (in the case of a sell order) in the pit at the time the LOX order is bid or offered.
  • LOX transactions must be brought to the crowd as simultaneous buy and a sell orders, guaranteeing that the initiating order will be completed in full at the LOX limit price, or better.
  • The order size must be equal or greater than the minimum quantity threshold. For S&P 500 options, this threshold is 125 contracts.

5. What happens if the LOX price is not better than the market, when the order hits the pit?

The order is then invalid.

Members are prohibited from facilitating the execution of a LOX order if the designated LOX limit price of the order is not above the existing bid (in the case of a buy order) or below the existing offer (in the case of a sell order) at the time the LOX order is announced to the pit.

6. How does the pit know that a LOX order is in the crowd?

Provided that the order is eligible for execution as a LOX Order, the member executing the order must clearly announce to the pit:

  1. That the order is a LOX order, and
  2. The full quantity of the LOX Order.

Additionally, when announced, a trade indicator light will be turned on by exchange staff to indicate that a LOX order is in the crowd.

7. Does LOX support pre-execution discussions, which may result in a crossed trade?

Yes. Prior to bidding or offering, a member or member firm that receives a LOX Order must solicit a contra party to take the opposite side of the order or agree to act as the contra party to the order. Parties involved in such solicitations shall not disclose the details of such communications to other persons or enter an order to take advantage of information conveyed during such solicitations except in accordance with this Rule.

8. Is there a minimum size for a LOX order?

Yes. LOX orders must be for a quantity that is at or in excess of the applicable minimum quantity threshold, such as 125 contracts. Orders may not be aggregated in order to achieve the minimum quantity necessary for execution as a LOX order.

9. Is a client’s consent to using a LOX order required?

Yes. A member shall not execute a LOX order for a customer unless such customer has specified that the order be executed as a LOX order and the order ticket includes specific instructions to execute a LOX order and the LOX limit price.

10. When would a LOX order result in a crossed-trade?

The contra-party may initiate a cross trade on a LOX order when the LOX designated limit price is reached, after trading against any bids or offers in the crowd that better the price requirements of the initiating LOX order, and after trading against any bids or offers in the crowd that match the price requirements of the initiating LOX order.

11. Is the broker required to trade with others in the pit?

Yes. The member executing the LOX order must lift any existing offers (in the case of a buy order) or hit any existing bids (in the case of a sell order) that better the price requirements of the LOX Order until the designated LOX limit price is reached.

Once the designated LOX limit price is reached, any remaining quantity of the LOX Order up to one-fifth (20%) of  the original full quantity of the LOX Order may be executed by the member opposite the solicited contra party at the designated LOX limit price.

The member shall then bid or offer any quantity that remains and shall immediately cross any quantity not immediately taken by another member in the pit.

12. Are Exchange officials involved in this trade?

Yes. Members must notify the designated Exchange official of any portion of the LOX order that is crossed at the designated LOX limit price.

Members must notify the designated Exchange official of any portion of the LOX order that is crossed at the designated LOX limit price.

13. Are LOX trades tracked in Time and Sales?

Yes. If the trade has resulted in a cross, there will be a cross-trade identifier, “Y,” next to the price in time and sales.

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More about LOX

View LOX Orders MRAN for additional information.

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