Velocity Logic is designed to detect market movement of a predefined number of ticks either up or down within a predefined time. Velocity Logic introduces a momentary suspension in matching by transitioning the futures instrument(s) and related options as follows:
WHEN a lead month futures instrument triggers an event:
- IF the lead month futures instrument belongs to an equities, metals, or FX instrument group, THEN the entire group will transition into the Pre-Open state; ELSE
- the instrument will transition into the Reserved/Pause state
the following actions occur in the corresponding options markets:
- options auto-reserve functionality automatically pauses matching in the associated options and options spread and combination markets
- all resting mass quotes are canceled when the auto-reserve functionality is initiated.
This Reserved State is maintained for a few seconds after the futures instrument has resumed trading. During the reserved period, customers can submit, modify and cancel orders. Mass quotes are rejected.
Allowing the user community this momentary opportunity to enter, modify, or cancel orders in this situation provides the ability to re-establish the proper market prices. The market data Security Status (tag 35-MsgType=f) message is used to communicate the instrument status during the Velocity Logic event.
In the event that a Fill and Kill, Minimum Quantity, or Market order is determined by CME Globex to trigger Velocity Logic:
- an Execution Report - Order Acknowledgment is sent
- an Execution Report - Order Cancel is sent (tag 35-MsgType=8, tag 39-OrdStatus=4); Fill and Kill and Minimum Quantity order eliminated (tag 35-MsgType=8, tag 39-OrdStatus=C)
- The market will remain open
Video overview of Velocity Logic:
The following examples describe the Velocity Logic event and the use of the Security Status message.
Market Is Open
When a price moves the market up or down through a predefined number of ticks within a predefined time period, the Velocity Logic event is triggered. If the order is a Minimum Quantity, FAK or Market order, it is rejected via an Execution Report-Reject message (tag 35-MsgType=8, tag 39-OrdStatus=8), and tag 58-Text=Order price submitted/derived violates Velocity Logic Threshold, and the market remains open.
Market Is Reserved
If the execution price has moved the market up or down outside a predefined tick value within a predefined time period, the Velocity Logic functionality is triggered and the instrument is placed in reserved state for a predetermined amount of time. A Security Status (tag 35-MsgType=f) message is generated to notify the market of this state.
When the market is in a reserved state, any external event, such as a market close or manual market intervention, will cause the market to transition from the reserved state and proceed with processing of the external event.
Market Reserved Activities
While the market is in a reserved state:
The Security Status (tag 35-MsgType=f) message is generated.