Page tree
Skip to end of metadata
Go to start of metadata

Triangulation provides liquidity between premium-quoted options (PQO), volatility-quoted options (VQO), and the related underlying futures market. Liquidity across order books is supported by implied functionality and standard option pricing model calculations.

Contents

Testing and Certification

Certification via AutoCert+ is not required for Triangulation functionality.

CME Group strongly encourages all customers and system providers to test the functionality thoroughly in Certification before using the functionality in production.

Functionality Overview

This diagram provides an overview of Triangulation functionality.

Product Availability

Only European-style (2 PM Fix) CME FX options support Triangulation functionality.

The following CME FX futures, weekly options, serial options, and quarterly options combinations will support Triangulation functionality:

  • Futures: the first two underlying quarterly futures of listed options
  • Weekly Options: all four listed weekly options
  • Serial/Quarterly Options: all three listed serial options (only two serials when the front month is a quarterly).
Product

iLink: tag 1151-Security Group

MDP 3.0: tag 6937-Asset

Japanese Yen

Futures=6J

Premium-Quoted Options=JPU, 1JY-5JY

Volatility-Quoted Options: tag 6937=VXJ, VJA-VJE

 British Pound Futures=6B 

Premium-Quoted Options=GBU, 1BP-5BP 

Volatility-Quoted Options=VXB, VBA-VBE

 Swiss Franc 

Futures=6S 

Premium-Quoted Options=CHU, 1SF-5SF 

Volatility-Quoted Options=VXS, VSA-VSE

 Canadian Dollar

Futures: tag 6937=6C 

Premium-Quoted Options=CAU, 1CD-5CD 

Volatility-Quoted Options=VXC, VCA-VCE

 Euro FX

Futures: tag 6937=6E

Premium-Quoted Options: tag 6937=EUU, 1EU-5EU

Volatility-Quoted Options: tag 6937=VXT, VTA-VTE

 Australian DollarFutures=6A

Premium-Quoted Options=ADU, 1AD-5AD

Volatility-Quoted Options=VXA, VAA-VAE

VQO spreads are not supported. PQO spreads and futures spreads are not included in Triangulation functionality.

Market Data

Triangulation functionality has the following market data considerations.

Security Definition

The market data Security Definition message (tag 35-MsgType=d) will contain tag 872-InstAttribValue bit 19-Implied Matching Eligible=1 for VQO, PQO, and futures products with Triangulation, irrespective of whether a strike is inside or outside the configured Triangulation delta range configuration.

An implied eligible instrument is not necessarily Triangulated; Triangulation is only calculated for strikes within the defined delta range of 10 delta to 70 delta.

Delta Range

At the start of a trading session, the initial Triangulation delta range will be configured to only include strikes from 10 delta to 70 delta. No other strikes will be eligible for Triangulation throughout the trading day.

During the course of the trading day, Triangulation calculation and matching can range from 10 delta to 90 delta as CME Globex dynamically recalculates all option deltas.

Triangulation implied calculations and market data dissemination can activate/deactivate for a given strike during the course of the trading day as CME Globex dynamically recalculates all option deltas.

Beginning of the trading day

Example 1
Australian Dollar European Option (2 PM Fix)

Strike

Delta

Triangulation Eligibility

7900

9

No

7750

20

Yes

7550

55

Yes

7500

71

Yes

Delta value changes during the trading day

Example 2
Australian Dollar European Option (2 PM Fix)

Strike

Delta

Triangulation Matching Eligibility

7900

15

Yes

7750

24

Yes

7550

62

Yes

7500

80

No

Example 3
Australian Dollar European Option (2 PM Fix)

Strike

Delta

Triangulation Eligibility

7900

4

No

7750

9

No

7550

30

Yes

7500

50

Yes

Example 4
Australian Dollar European Option (2 PM Fix)

Strike

Delta

Triangulation Matching Eligibility

7900

15

Yes

7750

43

Yes

7550

91

No

7500

95

No

Market and Instrument States

Implied ON/OFF Security Status messages (tag 35-MsgType=f) WILL NOT be sent for Triangulation products.

Triangulation Book Dissemination

Only top-of-book, best bid, and best offer are disseminated for Triangulation VQO books via the Market Data Incremental (tag 35=X) message with tag 269=E (Implied Bid) or F (Implied Offer) for VQO outrights. VQO Triangulation function implieds will only be published when the related PQO and futures books can both support the VQO 10-lot minimum quantity.

PQO and futures real orders can be aggregated from multiple price levels to create the VQO Triangulation function best implied price. 

There is no top-of-book Triangulation implied dissemination for the PQO and futures books because aggressing real orders against PQO or futures Triangulation implied orders will not always fulfill a related VQO 10-lot real order minimum match event size. 

 

Real Order Book Publication

Triangulation Book Publication

VQO

3-deep

Top of book

PQO

3-deep

Not applicable but will calculate / match at top of book

Futures

10-deep

Not applicable but will calculate / match at top of book

Trade Summary

When a Triangulation implied order matches, Trade Summary messages will be published on each of the channels for the VQO, the PQO and the futures.

  • The VQO and PQO market data messages will be published on PQO channel.
  • The futures market data messages will be published on the futures channel.
Triangulation market data messages will always be on-tick. 

A client representing a VQO real order, PQO real order or a futures real order will not be able to determine from market data messages whether the orders are matched as part of a Triangulation implied match. There is no market data message value to indicate implied match.

Mass Quote Protections

To prevent over-filling across resting mass quotes in multiple Volatility-Quoted Options (VQO) and Premium-Quoted Options (PQO) strike prices, Mass Quote Protections (MQPs) are evaluated inter-event for a Triangulation implied trade originating from an aggressing futures order.

This feature applies only to Triangulation match events that result from an aggressing order on the futures instrument and protects Market Makers having mass quotes in multiple premium-quoted option (PQO) strikes and volatility-quoted option (VQO) strikes.

Mass Quote Protection Calculation

The following examples illustrate MQP calculations for Triangulation implied trades that occur in the futures order book. 

For information on Triangulation implied trades that occur in the VQO and PQO order book, refer to Mass Quote Protections.

The examples on this page show scenarios in which this feature will apply.

Example 1 – New Quote Fill (X) Protection

Given

  • Assuming new quote fill protection = 2 for Market Maker 1 at the product Level

  • Expiry for VQO + PQO strikes = 24 days

  • Interest Rate = 1.345%

Market Maker 1 has mass quotes in multiple VQO strikes and Market Maker 2 has mass quotes in PQO strikes as shown below:


Strike Price

VQO Bid Book

VQO Ask Book

PQO Bid Book

PQO Ask Book

Call 9050

20@9.70

20@9.80

20@85

20@86

Call 9060

20@10.10

20@10.20

20@83

20@84

Call 9070

20@10.40

20@10.50

20@80

20@81

VQO Asks & PQO Bids generate the following implied futures bids:


Strike Price

Implied bid in Future

Calculated Delta
Implied 1

9050

10@9038

0.4845488
Implied 2

9060

9@9036

0.4650445
Implied 3

9070

9@9033

0.445424

When

A futures Sell aggressing order arrives for Qty 100@9030, the order can trade with all resting implied orders.

Then

CME Globex creates 3 trades:

  • The transaction is stopped after execution of trade 2, since it violated the MQP setting limit for Market Maker 1
  • VQO 9070 MQ (Bid and Ask) is eliminated because of the MQP activation, which also cancels implied 3
  • VQO 9050 and 9060 Bids are cancelled
Trades

Description

MQP count for Market Maker 1 after each trade

Trade 1

With Implied 1 for qty 10@9038

1

Trade 2

With Implied 2 for qty 9@9036

2

Trade 3

With Implied 3 for qty 9@9033

3

Example 2 – Execution (Y) Protection

Given

  • Assuming execution protection = 3 for Market Maker 1 at the product Level

  • Expiry for VQO + PQO strikes = 24 days

  • Interest Rate = 1.345%

Market Maker 1 has mass quotes in multiple VQO strikes & Market Maker 2 has mass quotes in PQO strikes as shown below:

Strike Price

VQO Bid Book

VQO Ask Book

PQO Bid Book

PQO Ask Book

Call 9050

20@9.70

40@9.80

40@85

20@86

Call 9060

20@10.10

40@10.20

20@83 and outright order for 20@83

20@84

Call 9070

20@10.40

20@10.50

20@80

20@81

VQO Asks & PQO Bids generate the following implied futures bids:

 

Strike Price

Implied bid in Future

Calculated Delta
Implied 1

9050

19@9038

0.4845488
Implied 2

9060

19@9036

0.4650445
Implied 3

9070

9@9033

0.445424

When

  • Futures Sell Aggressor 1 arrives for 10@9030 – can trade with implied 1.
  • Futures Sell Aggressor 2 arrives for 50@9030 (within MQP interval).

Then

CME Globex creates 5 trades

  • Implied 1 trades with multiple aggressors within MQP interval
  • Each aggressor fill is counted in execution protection
  • Implied 2 trades with the same aggressor for qty 20 and 20, but execution protection is counted as 1 and not 2
  • Will stop the execution after Implied 2 trade, since it violated MQP
  • MQP activates after implied 2 is completely traded
  • VQO 9070 MQ is cancelled, so implied 3 is cancelled
  • VQO 9050 bid and VQO 9060 bid are cancelled
  • The changes related to per aggressor count are applicable only for the triangulation implied futures
Trades
Description
MQP count after each trade
Trade 1With Implied1 for qty 10@90381
Trade 2With Implied1 for qty 9@90382
Trade 3With Implied2 for qty 10@90363
Trade 4With Implied2 for qty 9@90363 (Count not incremented since same aggressor is trading with Implied2)
Trade 5With Implied3 for qty 9@90334

Example 3 – Traded Quantity (Z) Protection

Given

  • Assuming traded quantity protection = 40 for Market Maker 1 at product level
  • Expiry for VQO + PQO strikes = 24 days
  • Interest Rate = 1.345%

Market Maker 1 has mass quotes in multiple VQO and Market Maker 2 has mass quotes in PQO strikes as shown below:

Strike Price

VQO Bid Book

VQO Ask Book
PQO Bid Book
PQO Ask Book

Call 9050

20@9.70

20@9.8020@8520@86

Call 9060

40@10.10

40@10.2020@83 (also a limit buy order for 20@83)20@84

Call 9070

20@10.40

20@10.5020@8020@81



VQO Asks & PQO Bids generate the following implied futures bids:

 

Strike Price

Implied bid in Future

Calculated Delta
Implied 1

9050

10@9038

0.4845488
Implied 2

9060  (VQO of 40, PQO MQ of 20 and PQO limit of 20)

19@9036

0.4650445
Implied 3

9070

9@9033

0.445424

When

Futures Sell aggressor arrives for qty 50@9030 and can trade with all resting implieds.

Then 

CME Globex creates 4 trades:

  • Implied 1 fully trades
  • Implied 2 has multiple fills – trade 2 and trade 3
  • Though MQP is violated after trade 2, trade 3 also goes through since the implied order from the same MQ is traded
  • Will stop the execution after trade 3 since it violated MQP
  • MQP activates after implied 2 is completely traded
  • VQO 9070 MQ is eliminated, so implied 3 is cancelled
  • VQO 9050 Bid and VQO 9060 Bid are cancelled
Trades
Description
MQP count after each trade
How is the count calculated?
Trade 1With Implied 1 for qty 10@903820VQO1 MQ qty 20
Trade 2With Implied 2 for qty 10@903640VQO2 MQ qty 20 + the previous counter value of 20
Trade 3With Implied 2 for qty 9@903660VQO2 MQ remaining qty of 20 + the previous counter value of 40
Trade 4With Implied 3 for qty 9@903380VQO3 MQ of 20 + the previous counter value of 60

Example 4 – Buy/Sell Protection

Given

  • Assuming buy/sell protection = +- 20 for Market Maker 1 at product level
  • With interest rate = 1.345%
  • Expiry = 24 days


Market Maker 1 has mass quotes in multiple VQO strikes & Market Maker 2 has mass quotes in PQO strikes as shown below:

Strike Price

VQO Bid Book

VQO Ask Book
PQO Bid Book
PQO Ask Book

Call 9050

20@9.70

20@9.80 (and VQO sell limit for 20@9.80)40@8540@86

Put 9060

40@8.60

40@8.7020@9120@92 (and PQO sell limit order for 20@92)

Call 9070

40@10.40

40@10.5020@80 (and PQO bid limit order for 20@80)20@81


VQO Asks & PQO Bids generate the following implied futures bids:

 

Strike Price

Implied bid in Future

Calculated Delta
Implied 1

9050

19@9038

0.4845488
Implied 2

9060 Put (VQO bid of 8.6 and PQO ask of 92)

22@9036

0.5426779
Implied 3

9070

18@9033

0.445424

When

Futures Sell aggressor arrives for qty 100@9030 which can trade with all the resting implied orders.


Then

CME Globex creates 6 trades:

  • Implied 1 fully trades – trade 1 and 2
  • MQP protection value after implied 1 trade is -20
  • MQP activates after trade 2 and stops the execution after trade 2
  • VQO Put 9060 and VQO Call 9070 MQs are cancelled, so implied 2 and 3 are cancelled
  • VQO Call 9050 Bid side MQ is also cancelled
Trades
Description
MQP count after each trade
How is the count calculated?
Trade 1With Implied 1 for qty 10@9038-20VQO1 sell = -20,
Trade 2

With Implied 1 for qty 9@9038

-20Same as previous value since there is no trade from VQO MQ
Trade 3

With Implied 2 for qty 10@9036

0

VQO2 Bid= +20 , previous counter value =-20, net = 0

Trade 4

With Implied 2 for qty 9@9036

20

VQO2 Bid = 20, previous counter value =0, net= +20

Trade 5

With Implied 3 for qty 9@9033

0

VQO3 sell = -20, previous counter value =+20, net = 0

Trade 6

With Implied 3 for qty 9@9033

-20

VQO3 sell= -20, previous counter value=0, net = -20

Self Match Prevention

Self Match Prevention is not available for Triangulation.

Triangulation Implied Functionality

Triangulation only functions when the PQO quantity is at least a minimum quantity and sufficient futures hedge quantity is available.

  • A minimum quantity of 10 lots is required for Triangulation execution.
  • If the VQO real order 10-lot minimum cannot be satisfied, then the related Triangulation implied match in the PQO or futures will not occur.
  • The Triangulation implied for the PQO or futures order books will not be published, but will match, provided an aggressing real order—into either order book—allows at least one related VQO real order to match a 10-lot minimum.

 All Volatility-Quoted Options have a 10-lot minimum order size. These minimums are designed to mitigate the risk of a VQO or Triangulated execution without an assigned future.

The maximum number of deltas that a VQO order can be out due to a Triangulation match is 99 deltas per volatility match level basis.

A Triangulated price is calculated and published as a single price value, but the real order sources to create a triangulated price can be created from multiple orders and/or multiple prices levels.

Only the following combinations will be supported:

  1. VQO implied order = PQO real order + futures real order
  2. PQO implied order = VQO real order + futures real order
  3. Futures implied order = VQO real order + PQO real order

When futures real order(s) are the limiting factor to create an implied VQO or implied PQO then the following formula will be used to create the implied quantity: 

Implied VQO quantity = Minimum of (PQO Quantity, Calculated Options Quantity*)

Implied PQO quantity = Minimum of (VQO Quantity, Calculated Options Quantity*)

        *Calculated Options Quantity =  Round Down ((Future Quantity + 0.50) / Delta)

Note: If the calculated options quantity results in a positive integer, subtract 1 from calculated options quantity (see Example A below).

When a new real order enters the futures, PQO, or VQO book, CME Globex first determines:

  1. if there are opposite side resting real order(s) to match against the incoming order, and
  2. if Triangulation implied order(s) can match against the incoming real order.

This table shows all Triangulation implied order matching combinations:

Real Order+Real Order=Triangulation Function Implied

PQO Call Bid

+

Futures Ask

=Implied VQO Call Bid

PQO Call Ask

+

Futures Bid 

=Implied VQO Call Ask

PQO Put Bid

+

Futures Bid

=Implied VQO Put Bid

PQO Put Ask

+

Futures Ask 

=Implied VQO Put Ask

VQO Call Bid

+

Futures Bid

=Implied PQO Call Bid
VQO Call Ask+Futures Ask=Implied PQO Call Ask
VQO Put Bid+Futures Ask=Implied PQO Put Bid
VQO Put Ask+Futures Bid=Implied PQO Put Ask
VQO Call Ask+PQO Call Bid=Implied Futures Bid
VQO Call Bid+PQO Call Ask=Implied Futures Ask
VQO Put Bid+PQO Put Ask=Implied Futures Bid

VQO Put Ask

+

PQO Put Bid

=Implied Futures Ask

Option Pricing Inputs

Triangulation is only available to European-style options and will use the Black 76 model. Please see Volatility-Quoted Options for more details about the CME Globex option pricing model. 

The following option pricing model’s inputs are consistent regardless of whether the Triangulation implied match occurred in the VQO, PQO or futures book.

Interest Rate

The daily interest rate will be based on the settlement price of the previous day's Eurodollar futures front month quarterly. If the front month Eurodollar futures is the quarterly month then the next quarterly futures settlement price will be used as the interest rate. Clients will be informed as to the exact interest rate value on www.cmegroup.com.

Time Decay

  • Time decay will be expressed in daily terms or "calendar days to expiration". Calendar days to expiration will be divided by 365 days to equate to a decimal equivalent value.
  • Calendar days to expiration will be defined in CME Globex trade date terms; the CME Globex trade date changes with the 5 pm Central Time opening.
  • The calendar days to expiration will be an integer value - there will be no fractional calendar days to expiration (e.g. decay not based on hours/minutes).
  • Days to Expiry(DTE) = 1 on VQO Last Trading Day (LTD) - usually a Thursday, which is 1 day prior to the underlying option's expiration - usually a Friday.

Strike Price

Based on the VQO strike price.

Aggregated Price-Time Priority

Order Priority

Among Triangulation implied orders, the order priority is based on Aggregated Price-Time, i.e., the implied order priority will be determined using the last timestamp of the real orders used to generate the implied.

For example, if a VQO real order was entered at 12:00:00 p.m. CT and a PQO real order entered at 12:00:01 p.m. CT, and those orders create an implied futures order, then the related timestamp for the implied futures order would be 12:00:01 p.m. CT, and that implied order would have priority over any implied order with a later timestamp.

Matching Priority

1. Within the VQO order book, at a given price level, if there are both customer orders and Triangulation implied orders, then an aggressing VQO order will match against those orders in the following sequence: 

    • VQO customer orders or VQO Triangulation implied  orders based on the Aggregated Price-Time.

2. Within the PQO order book, at a given price level, if there are both customer orders and implied orders (i.e. RFQ-triggered implied orders and Triangulation implied orders), then an aggressing PQO order will match against those orders in the following sequence: 

    •  PQO customer orders, PQO implied orders,  or PQO Triangulation implied  orders  based on the Aggregated Price-Time. 

A resting order can match without an incoming (aggressing) opposite side real order entering its book or any of the related Triangulation books in the following scenario:

  • at a new Trading Day's market opening, due to a new option pricing model calculation triggered by time decay and/or a new interest rate.

Matching Algorithm

Triangulation products will utilize the match algorithm that they currently employ.

CME Globex Processing Overview

Order entry and market data messaging for Triangulation products are standard CME Globex except where noted.

In this example, the bid in the volatility quoted book and ask in the premium quoted book create an undisseminated implied order in the underlying futures 6AH7 bid, which is matched when the client system submits a Sell 10 order in 6AH7.

Implied ADZ7 Bid

Triangulation Implied Matching Examples

The following examples show matching behavior for various Triangulation implied scenarios.

Example 1 - Partial VQO Fill, Cancel Remaining VQO Quantity

  1. Starting VQO book with a real bid of 20@15.98 and an implied bid of 20@15.98 (implied order has second priority).
  2. Aggressing Ask for 25 at 15.98 hits VQO order book.
  3. Aggressing Ask matches for 20 with real order for 20 at 15.98.
  4. Since the remaining Ask quantity of 5 does not meet the minimum VQO order quantity of 10, the remaining order quantity is cancelled.

Partial VQO Fill Cancel Remaining

Example 2 - Partial PQO Fill, Remaining PQO Quantity Rests on Book

  1. Starting books with implied Ask order in the PQO book.
  2. Aggressing Bid for 25 at .0142 hits PQO order book.
  3. Aggressing Bid matches for 20 with real Ask order. The minimum Triangulation function match quantity is not met. 
  4. Remaining Bid quantity of 5 rests at .0142 price level on the PQO book.

PQO Bid partial fill

Example 3 - Triangulation Implied Match Occurs in VQO Order Book

In this example the available PQO orders and futures order generate an implied Bid order for 22 @ 13.21 in the VQO order book.

  1. Starting books with implied Bid order in the VQO book.
  2. Aggressing Ask for 22 @ 13.21 hits VQO order book
  3. All VQO, PQO, and futures order fill completely in the following sequence:

iLink Messages for Triangulation Match

  • VQO Fill: 8 @ 13.21% (ask)
  • Premium Fill: 8 @ $0.0142 (ask)
    • tag31-LastPX=$0.0142 | tag 810-UnderlyingPx=$0.7640 | tag811-OptionDelta=0.1132 | tag1188-Volatility=13.21% | tag1189-ExpiraitonTimeValue=x.x | tag1190-RiskFreeRate=x.x%
  • Premium Fill: 8 @ $0.0142 (bid)
  • Future Fill: 1 @ $0.7639 (bid)
  • Future Fill: 1$0.7639 (ask)
  • VQO Fill: 3 @ 13.21% (ask)
  • Premium Fill: 3 @ $0.0141 (ask)
    • tag31-LastPX=$0.0141 | tag 810-UnderlyingPx=$0.7640 | tag811-OptionDelta=0.1132 | tag1188-Volatility=13.21% | tag1189-ExpiraitonTimeValue=x.x | tag1190-RiskFreeRate=x.x%
  • Premium Fill: 3 @ $0.0141 (bid)
  • VQO Fill: 11 @ 13.21% (ask)
  • Premium Fill: 11 @$0.0140 (ask)
    • tag31-LastPX=$0.0140 | tag 810-UnderlyingPx=$0.7640 | tag811-OptionDelta=0.1132 | tag1188-Volatility=13.21% | tag1189-ExpiraitonTimeValue=x.x | tag1190-RiskFreeRate=x.x%
  • Premium Fill: 11 @ $0.0140 (bid)
  • Future Fill: 1 @ $0.7640 (bid)
  • Future Fill: 1 @ $0.7640 (ask)

Price Aggregationa nd Delta Recalculation due to price improvements

Example 4 - Triangulation Implied Match Occurs in PQO Order Book

In this example the available VQO, PQO, and futures orders generate an implied Ask order for 20 @ 0.0139 in the PQO order book.

  1. Starting books with implied Ask in PQO book.
  2. Aggressing PQO bid for 11 @ 0.0141 hits the order book, satisfying the implied minimum matching quantity of 10 and matching at improved price of 0.0139.
  3. Resting order fills:
    • PQO bid for 9 @ 0.0142 matches completely at 0.0142.
    • Resting VQO ask for 20@13.21 fills completely.
    • Resting Futures ask for 2 @ 0.7640 fills completely.

     iLink Messages for Triangulation Match

    • VQO Fill: 9 @ 13.21% (ask)
    • Premium Fill: 9 @ $0.0142 (ask)
      • tag31-LastPX=$0.0141 | tag 810-UnderlyingPx=$0.7640 | tag811-OptionDelta=0.1132 | tag1188-Volatility=13.21% | tag1189-ExpiraitonTimeValue=x.x | tag1190-RiskFreeRate=x.x%
    • Premium Fill: 9 @ $0.0142 (bid)
    • Future Fill: 1 @ $0.7640 (bid)
    • Future Fill: 1 @ $0.7640 (ask)
    • VQO Fill: 11 @ 13.21% (ask)
    • Premium Fill: 11 @$0.0139 (ask) 
      • tag31-LastPX=$0.0140 | tag 810-UnderlyingPx=$0.7640 | tag811-OptionDelta=0.1132 | tag1188-Volatility=13.21% | tag1189-ExpiraitonTimeValue=x.x | tag1190-RiskFreeRate=x.x%
    • Premium Fill: 11 @$0.0139 (bid) 
    • Future Fill: 1 @ $0.7640 (bid)
    • Future Fill: 1 @ $0.7640 (ask)

Implied match in PQO book

Additional Implied Order Scenarios

The following examples show scenarios in which Triangulation provides implied order quantity in the VQO, PQO, and Futures order book, depending upon book dynamics.

Example A - VQO implied bid

If the delta is 50 then the VQO Put implied bid will be published as a 24-lot: (12-lot futures  + 0.50) / 50 deltas = 2500 deltas (subtract 100 from 2500 deltas or VQO 24-lot implied order).


Bid

VQO Put

24-lot Triangulation implied

displayed

PQO Put (50 delta)

45-lot real order

Futures

12-lot real order

Example B - VQO implied bid

If the delta is 55, then the VQO Put implied bid will be published as a 22-lot:  (12-lot futures  + 0.50) / 55 deltas = 2272 deltas (rounded down to 2200 deltas or VQO 22-lot implied order).


Bid

VQO Put

22-lot Triangulation implied

displayed

PQO Put (55 delta)

45-lot real order

Futures

12-lot real order

Example C - Futures implied bid

If the delta is 28 then an 8-lot futures will be implied: VQO 30-lot * 28 delta = 840 deltas (rounded down to 800 deltas or 8 futures).


BidAsk

VQO Put

30-lot real order


PQO Put (28 delta)


100-lot real order

Futures

8-lot Triangulation implied

displayed



Examples D through F
 assume the following book dynamics: 


BidAsk

VQO Put

Implied 10.05% (20-lot)

displayed

10.10% (20-lot)

PQO Put (50 delta)

38 bid (20-lot)

Implied 42 ask (20-lot)

hidden

Futures

1 bid (10-lot)

Implied 2 offer (10-lot)

hidden

Example D - Futures impiled ask

  • VQO Put of 10.10% Ask (20-lot) and PQO Put  of 38 Bid (20-lot) generates Futures Implied Ask of 2 Ask (10-lot)
  • Futures goes 2 Bid (10-lot) – resulting matches and market data:
    • VQO 10.10% (20-lot)
    • PQO 38 (20-lot)
    • Futures 2 (10-lot)

Example E - VQO implied bid does not meet minimum quantity requirement

  • PQO goes 42 Bid (9-lot); this calculates to a VQO implied Bid of 10.15% (9-lot)
  • However, because the VQO implied does not meet the 10-lot minimum, no implied is created and no matching occurs.

Example F - PQO implied ask

  • VQO Put of 10.10% Ask (20-lot) and Futures bid of 1 Bid (20-lot) generates PQO Implied Put of 42 Ask (20-lot)
  • PQO goes goes 42 Bid (20-lot) – resulting matches and market data:
    • VQO 10.10% (20-lot)
    • PQO 42 (20-lot)
    • Futures 1 (10-lot) 

Example G - VQO implied bid, cancel aggressing order remainder


Bid

VQO Put

20-lot real order @ 12.20%

22-lot Triangulation implied @ 12.20%

displayed

PQO Put (55 delta)

45-lot real order

Futures

12-lot real order

If an incoming, aggressing VQO Put Ask 25-lot order enters the CLOB @ 12.20% then:

  • the resting VQO Put 20-lot real order @ 12.20% will fully match
  • CME Globex will cancel the aggressing VQO Put Ask order remaining 5-lot.

Below are the rules for how an incoming order progresses through the Triangulation functionality:

  1. An incoming real order is evaluated to match against opposite side real or triangulation implied order(s) in the same book based on the aggregated price-time.
  2. If the incoming real order has remaining quantity, then it, in turn, is evaluated to create Triangulation implied orders.
  • The incoming real order’s participation as part of the Triangulated implied order action occurs regardless of the real order’s qualifier instructions (e.g. FOK/FAK instructions).

       3. If the incoming real order has remaining quantity, then its order qualifier instructions are applied (e.g. FOK/FAK instructions). 

Comparison of Triangulation and Options Implied Processing

The following table compares the behavior of implied processing of Triangulation and Options:

FeatureTriangulationOptions

Implied Book Levels Disseminated

1 (best implied price only)

Only for the VQO book.

1 (best implied price only)

Frequency / Pace

Streaming

On-Demand driven by RFQs, Configured with Delay + Duration

Implication Direction

Complementary; INs + OUTs

Complementary; INs + OUTs

Spread Scope

Not supported

User Defined, limited to 8 spreads, 1:1 ratio

Order Priority

For the VQO and PQO order books, Aggregated Price-Time with no preferential treatment.

For the futures order book,  futures customer orders first, futures Triangulation implied orders next, and futures traditional implied orders last. 

Aggregated Price-Time with no preferential treatment for real orders.

Price ImprovementAggressor order receives price improvement.Aggressor order receives price improvement.

Implied Resolution

VQO order receives price improvement.

Spread receives price improvement.

  • No labels