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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, VJ1-VJ5

 British Pound Futures=6B 

Premium-Quoted Options=GBU, 1BP-5BP 

Volatility-Quoted Options=VXB, VBA-VBE, VG1-VG5

 Swiss Franc 

Futures=6S 

Premium-Quoted Options=CHU, 1SF-5SF 

Volatility-Quoted Options=VXS, VSA-VSE, VE1-VE5

 Canadian Dollar

Futures: tag 6937=6C 

Premium-Quoted Options=CAU, 1CD-5CD 

Volatility-Quoted Options=VXC, VCA-VCE, VC1-VC5

 Euro FX

Futures: tag 6937=6E

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

Volatility-Quoted Options: tag 6937=VXT, VTA-VTE, VE1-VE5

 Australian DollarFutures=6A

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

Volatility-Quoted Options=VXA, VAA-VAE, VA1-VA5

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

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Info

An implied eligible instrument is not necessarily Triangulated; Triangulation is only calculated for strikes within the defined delta range of 10 delta to 70 90 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 80 delta for Triangulation VQO books. No other strikes will be eligible for Triangulation throughout the trading day.

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Australian Dollar European Option (2 PM Fix)

Strike

Delta

Triangulation Eligibility

7900

9

No

7750

20

Yes

7550

55

Yes

7500

71

NoYes

Delta value changes during the trading day

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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 105-lot minimum quantity.

Info
PQO and futures customer 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 customer orders against PQO or futures Triangulation implied orders will not always fulfill a related VQO 105-lot customer order minimum match event size. 

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  • 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 quote 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

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  • 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

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  • 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

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Info
  • A minimum quantity of 10 5 lots is required for Triangulation execution.
  • If the VQO customer order 105-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 customer order—into either order book—allows at least one related VQO customer order to match a 105-lot minimum.

 All All Volatility-Quoted Options have a 105-lot minimum order size. These minimums are designed to mitigate the risk of a VQO or Triangulated execution without an assigned future.

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Only the following combinations will be are supported:

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

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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 customer order entering its book or any of the related Triangulation books in the following scenario:

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  1. Starting VQO book with a customer bid of 20@15.98 and an implied bid of 20@15.98 (implied order has second priority).
  2. Aggressing Ask for 25 24 at 15.98 hits VQO order book.
  3. Aggressing Ask matches for 20 with customer order for 20 at 15.98.
  4. Since the remaining Ask quantity of 5 4 does not meet the minimum VQO order quantity of 105, the remaining order quantity is cancelled.

Gliffy Diagram
namePartial VQO Fill Cancel Remaining
pagePin1114

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  24 at .0142 hits PQO order book.
  3. Aggressing Bid matches for 20 with customer Ask order. The minimum Triangulation function match quantity is not met. 
  4. Remaining Bid quantity of 5 4 rests at .0142 price level on the PQO book.

Gliffy Diagram
namePQO Bid partial fill
pagePin1517

Example 3 - Triangulation Implied Match Occurs in VQO Order Book

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  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 minimum quantity and matching at improved price of 0.0139.
  3. Resting order fills:

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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).

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

  • PQO goes 42 Bid (94-lot); this calculates to a VQO implied Bid of 10.15% (94-lot)
  • However, because the VQO implied does not meet the 105-lot minimum, no implied is created and no matching occurs.

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