With this circular, Eurex Deutschland (Eurex) announces the launch of our new client flow facilitation service: Eurex Improve.
Eurex Improve provides our Trading Participants with a tool, suitable to guarantee their customers full execution of their orders below minimum block trade sizes at the best price available at Eurex. Execution at the best available price is ensured as Eurex Improve is fully integrated in Eurex’s orderbook and benefits from the orderbook’s pricing competition.
The goal of Eurex Improve is to generate additional trading volumes by providing advantages to all involved stakeholders:
Eurex Improve will be launched for all equity options and all equity index options on 3 February 2020. Already today, Eurex Improve is available for testing in the Eurex T7 simulation environment. In addition, Eurex intends to offer a dedicated Eurex Improve simulation exercise on 20 January 2020. Details of this exercise will be published in a separate Eurex circular in due time.
The parameters used in the simulation environment are, with one exemption, identical to the parameters that Eurex will apply in production. Different to the parametrisation in production, the price improvement periods in the simulation environment will be set to five seconds. This deviation aims to better visualise the functioning of Eurex Improve.
Eurex Improve is a voluntary service offered by Eurex. Any Trading Participant who facilitates customer flow can initiate an Improve request. Any Trading Participant, independent of whether they facilitate customer flow, can react to an Improve request.
Production start: 3 February 2020
2. Action required
No additional contractual agreements or applications are required for Trading Participants to use Eurex Improve.
Eurex Improve is readily available in the T7 GUI or can be accessed via ETI. For further details regarding the functional implementation, please refer to the final Release Notes of T7 Release 7.0 which can be found on the Eurex website www.eurex.com under the following link:
3. Details of the initiative
Eurex Improve match events are executed in a three-step process, consisting of initiation, price improvement and execution:
Eurex Improve will be launched with the following parameters:
Disclosure of quantity of Improve request
Quantity will be disclosed mandatorily.
Disclosure of price of Improve request
Price will be disclosed mandatorily.
Disclosure of side of Improve request
Side will not be disclosed mandatorily but can be disclosed voluntarily.
Minimum quantity of Improve request
Minimum quantity will be 1 lot for all products.
Maximum quantity of Improve request
Maximum quantity will equal minimum block trade size for each respective product.
Duration of price improvement period
Price improvement period will be set to be 150 milliseconds.
Share for Trading Participant who initiated Improve request, on tolerable price levels
On each tolerable price level, initiating Trading Participant will receive 40% of the volume executed on this price level.
Maximum tolerable price distance
|Will be set to 25% of the standard price range1.|
Improve allocation scheme will be the same as the allocation scheme in the orderbook for each product.
1 The standard price range is derived from the quote spread table (e.g. used by Eurex for price reasonability checks), which is defined for each product and can be retrieved via ETI.
While it is Eurex Improve’s goal to generate additional trading volumes, Eurex is aware that the service’s full integration in the orderbook could also potentially risk a cannibalisation of existent orderbook flow. To address this risk, Eurex has implemented dedicated thresholds to monitor the extent to which existing orderbook flow may be diverted via Eurex Improve.
In particular, Eurex defined the following thresholds for all products belonging to liquidity classes 1 and 2:
2 If additional customer flow is observed, these thresholds may be increased to 13 percent and 6 percent, respectively.
Based on this monitoring, Eurex will decide on a potential re-calibration of Eurex Improve if necessary.
Eurex Improve is addressed in a newly introduced Section 2.7 of the Trading Conditions of Eurex Deutschland. For further information, please refer to the 19th Amendment Ordinance to the Conditions for Trading at Eurex Deutschland, which can be found on the Eurex website www.eurex.com under the following link:
All Trading Participants of Eurex Deutschland and Vendors
Front Office/Trading, Middle + Backoffice
Kirstin Meissner, Market Structure & Regulation, tel. +44-207 8 62-72 55, email@example.com
|Eurex circular 036/18|
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