Complex instruments are an extended combination trading functionality enabling market participants to create an individual combination of single leg instruments, and to announce this strategy to the entire market. There are four kinds of strategy types:
Complex instruments created and published by market participants are visible to the whole market and are traded via separate public order books distinct from the regular option and futures order books. The matching algorithm for orders in complex instruments is based on the principle of price/time priority. Limit orders (including immediate or cancel orders) and quotes are supported for complex instruments. Apart from the mentioned order types any other order type is not allowed for trading in complex instruments.
In terms of Liquidity Provisioning in Options, the following obligation is effective since August 2013. Liquidity Providers have to respond to quote requests in options strategies. For detailed information and the pricing, please refer to the circular below.
Although futures combinations have their own order books, for time spreads these books are integrated in the order books for the individual 'legs'. Market orders and stop orders are not permitted for futures combinations. A validity date may also be specified.
Several types of futures combinations are permitted on the T7 system:
Time spreads combine two different maturities for futures on the same underlying. At any time, three time spreads are supported for products subject to price/time matching:
The purchase of a combination means you buy the first (nearer to expiration) leg and sell the later leg, with the price limit reflecting the net price of the purchase and sale. For example, "Buy 5 MAR/JUN FDAX spreads at -25" represents an order to buy 5 March contracts and simultaneously sell 5 June contracts of the DAX® Futures. The prices of the purchase and the sale are individually unspecified, but the net of the price on the buy trade must be no greater than the price of the sell trade minus 25 points. The trader is not concerned with the price level of the contracts, but with the relationship between the two prices. If the order is filled, the trader is long the combination, i.e. he is long the nearby contract, but short the later contract.
Futures time spread combinations are fully integrated with the order books for the individual legs. Orders will automatically be matched against either the outright order books for the individual legs (sometimes called an 'implied-in' price) or the separate combination order book, depending on which book will yield the better price. For time spreads, it is possible to enter prices with an increment smaller than the tick size for single leg orders in the same product.
If the order is not immediately executed or cancelled, it enters the combination order book. Due to the integration of the combination book and the books for the individual legs, the open combination order will generate a synthetic price in the later leg.
The counterparties for the two legs may not be the same. Individual legs are treated as separate trades for position and transaction management purposes, although they are related to each other through their single order number.
If the conditions of the order book change, the synthetic prices will change accordingly.
A standard futures strategy consists of two or more leg instruments that belong to the same futures product. The signature of a standard futures strategy complies with a strategy type template that is defined by the exchange.
The exchange does not create standard futures strategy instruments. Standard futures strategy instruments are created by users. When creating a standard futures strategy instrument, the user must indicate its instrument subtype and adhere strictly to all the rules as given in the corresponding template, including the sequence of legs, their ratios and their sides. Failure to do so will result in a rejection of the creation request.
T7 supports no synthetic matching for standard futures strategies, i.e. standard futures strategy orders and quotes match only against orders and quotes of the same instrument.
Packs & Bundles are complex instruments, the signatures of which comply with the following rules:
The leg instruments with their quarterly expirations cover a time-span of one year in the case of packs or several years in the case of bundles, meaning that all quarterly expirations of the respective time span are represented without any gaps. As a consequence, packs always have four legs, and bundles have an integer multiple of four legs, i.e. 8 legs for a 2-year bundle, 12 legs for a 3-year bundle etc..
Packs & Bundles instruments have an instrument subtype, which defines the number of legs and thus the length of the covered time span. Since the instrument subtype of a pack typically indicates how distant the covered time period is from today, a pack instrument may change its instrument subtype during its lifetime.
A strip is a complex instrument similar to packs and bundles. Its signature must comply with the following rules:
Note that contrary to Packs & Bundles, there are no further restrictions concerning the selection of leg instruments. Specifically they do not need to represent quarterly expirations and they do not need to represent a gap-free sequence of expirations.
An inter-product spread is a complex instrument that consists of two or more leg instruments belonging to different futures products of the same market.
As an inter-product spread instrument cannot be attributed to one specific product, it belongs instead to a product pool. A product pool is simply a grouping of products that has been formed for the purpose of supporting and configuring inter-product spread instruments on this group of products.
The characteristics of inter-product spread instruments in T7 are
An inter-product spread instrument has an instrument subtype, which is however for informational purposes only, i.e. there are no templates defined for specific instrument subtypes of inter-product spreads.
There are no restrictions concerning the futures products that can be combined to form inter-product spreads other than that they have to belong to the same market. T7 supports specifically inter-product spreads with leg instruments that have strongly differing contract values.
At present, inter-product spreads are not set up for trading at Eurex.
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