Introduction of a framework to confine Speculative Triggering and recalibration of the ESU Fee Limits

1.    Introduction

During recent months, Eurex Exchange has observed an increase in received messages. Some of these messages are triggered in anticipation of certain market data signals (so-called Speculative Triggering). 

It is in the interest of all its Market Participants, that Eurex Exchange is therefore taking further steps to disincentive behaviour that may be detrimental for market and system structure at a cost of excessive system usage. In order to provide technical guidance and further strengthen market integrity, Eurex Exchange decided to introduce a new technical framework to confine Speculative Triggering.

This framework consists of the following changes: 

A.    Introduction of a market data packet classification in the IP protocol layer,
B.    Introduction of discard IP addresses,
C.    Limiting the amount of ethernet frames sent per connection,
D.    Recalibration of the ESU “noMarketData Impact" limits for options.

These amendments will come into effect on 30 March 2020.

2.    Required action

For Trading Participants sending many transactions over single order entry lines, we recommend analysing previous behavior, to check whether they are within the new limits.

3.    Details of the initiative

Eurex Exchange decided to introduce a new technical framework to confine Speculative Triggering. The target is to ensure market and technical integrity, as well as a level playing field for Trading Participants reacting to market data signals.

Therefore, the following Rules and Regulations

• General Terms and Conditions to the Agreement on the technical connection and the utilization of the Exchange-EDP of Eurex Deutschland (Connection Agreement) shall be amended according to Attachment 2,
• General Terms and Conditions to the Agreement on the technical connection of a Multi-Member-System Provider to the Exchange-EDP Eurex^® (Provider Connection Agreement) shall be amended according to Attachment 3,
• Price List to the Agreement on the technical connection and the utilization of the Trading System of Eurex Deutschland (Connection Agreement) and to the Agreement on the technical connection to the Electronic Trading EDP Eurex for a Provider of the Multi-Member-System (Provider Connection Agreement) shall be amended according to Attachment 4.

The amendments above will become effective on 30 March 2020. As of the effective date, the full version of the amended documents will be available for download on the Eurex website www.eurexchange.com under the following link: 

Resources > Forms 

The amendments to the Rules and Regulations above shall be deemed to have been approved, if the respective contractual partner does not lodge written objections with Eurex Frankfurt AG within six weeks of this notification. Any ordinary right of Eurex Frankfurt AG to terminate the respective contract shall remain unaffected.

A.    Introduction of a market data packet classification in the IP protocol layer

The EOBI market data feed will be enhanced with packet classification in the IP protocol layer. This will ensure that every Market Participant can clearly identify certain events and react appropriately. The DSCP (Differentiated Services) field in the IP header will be used to signal that a market data packet contains the following:

• Execution summary 
• Orders which improve the spread 
• Orders that widen the spread

The actual values for the DSCP field will be chosen from the Pool 2 of 16 codepoints reserved for experimental or local use (EXP/LU) as defined in RFC 2474. For the current implementation of T7, the values as in the table in Attachment 1 will be used.

B.    Introduction of discard IP addresses

To further provide a framework for Trading Participants who apply speculative techniques to trigger messages, Eurex Exchange will also introduce discard IP addresses in order to monitor such patterns, and prevent detrimental effects on market integrity. All packets sent to the 172.16.0.0/16 network will be discarded by the first device in the T7 network.

Packets sent to this network will therefore not reach any T7 gateway and do not count against any ETI session limit. They do count against the limit by co-location line (see section C).

All packets, including packets sent to the discard IP address, shall be well-formed IP packets, i.e. all applicable protocols must be adhered to, checksums must be correct, and so on. Packets sent to the discard IP network may contain an arbitrary payload under those conditions. There is one discard IP address per T7 PS gateway that will lead to the same IP header checksum as the gateway’s actual IP address. 

Details can be found in the Network Access Guide available on the Eurex website www.eurexchange.com under the following link: 

Technology > T7 Trading architecture > System documentation

C.    Limiting the amount of ethernet frames sent per connection

Eurex Exchange introduces limits per connections. It will be allowed to send up to 25,000 ethernet frames per second and 300,000 ethernet frames per minute to the Exchange-EDP per Order Entry connection. Violations of these limits may lead to a disconnection.

D.    Recalibration of the ESU Fee “noMarketData Impact" limits for options

To give Participants more headroom, Eurex has decided to recalibrate the ESU Limit for the limit type “Transactions, which do not lead to a market data update, and for order modification which will lead to an order deletion without a contract traded” for options products.

A concept paper describing the ESU fee concept in detail, including the various parameters that are considered for the calculation of the ESU fee, and an example showing a step-by-step calculation is available on the Eurex website www.eurexchange.com under the following link:

Technology > Excessive System Usage Fee

The table in Attachment 1 shows the parameters used to calculate the ESU limit for the limit type ”Transactions, which do not lead to a market data update, and for order modification which will lead to an order deletion without a contract traded”. The parameters for calculating the limits for the limit type “All transactions” and “Standard Orders” remain in place unchanged.

Please note: The limit is based on the product type of the product.

A list of all products including their product types is published on the Eurex website www.eurexchange.com and can be downloaded under the following link:

Products > Product overview > Complete list of all Eurex products in csv format
 

Attachments:

1. Tables: Referring to 3.A.: DSCP values for market data packet classification, Referring to 3.D.: Updated ESU Parameters for “noMarketData Impact" limits
2. Amendments to the General Terms and Conditions to the Agreement on the technical connection and the utilization of the Exchange-EDP of Eurex Deutschland (Connection Agreement)
3. Amendments to the General Terms and Conditions to the Agreement on the technical connection of a Multi-Member-System Provider to the Exchange-EDP Eurex^® (Provider Connection Agreement)
4. Price List to the Agreement on the technical connection and the utilization of the Trading System of Eurex Deutschland (Connection Agreement) and to the Agreement on the technical connection to the Electronic Trading EDP Eurex for a Provider of the Multi-Member-System (Provider Connection Agreement)
    

Further information