Some Industry Members have systems that allow for the entry of algorithmic strategy trading instructions with parameters that do not include all material terms of a CAT reportable order for any component security, such as quantity. If an Industry Member has given instructions for such a strategy and no further action is required on the Industry Member’s part to generate an order for a particular component security, the Industry Member is required to report a new order event (MONO or MENO) and an order route event (MOOR or MEOR) for each component security included in the strategy as eligible to trade, even though all the material terms for an order in a given component security may not be known at the time. The Industry Member receiving such instructions is required to report order accepted events for each component security included in the strategy, again, even though all the material terms for an order in a given component security may not be known at the time. Although all material terms may not be known, both Industry Members are to report those material terms discernable from the strategy instructions.
Example 1
Broker 1 uses a Vega algorithm provided by Broker 2 and within Broker 2’s system stipulates a list of 10 option series that are eligible for Broker 2 to generate orders to trade on Broker 1’s behalf. No further action is required on Broker 1’s part to generate any order for a particular series. Broker 1 would report a MONO and a MOOR for each option series provided in the list of eligible securities within the algorithmic parameters, even though all material terms for an order in a given component security may not be known at the time.
Broker 2 will report a corresponding order accepted event (MOOA) for each of the 10 option series provided as eligible component securities, again, even though all material terms for an order in a given component security may not be known at the time.
Each order event above must be marked as follows:
|
Field |
Value |
|
Quantity |
Maximum Quantity if specified on the algo parameters; or Zero quantity (if no maximum quantity is explicitly specified) indicates that there is no set quantity stipulated |
|
priceType |
Limit |
|
Price |
0 |
|
handlingInstructions |
‘ALGS’ indicates that the event is part of an algorithmic strategy where the specific quantity may not be explicitly provided |
When Broker 2’s algorithm generates specific orders for any of the eligible securities and routes those orders to an exchange or another Industry Member, Broker 2 must report an order route event (MOOR) related to the order accepted event (MOOA) for the specific eligible security reported to reflect receipt of the order from Broker 1.
If Broker 2’s algorithm does not ultimately generate any specific order(s) in an eligible option series, no further reporting is required by either Broker 1 or Broker 2 for that series. If Broker 1 or Broker 2 cancels or modifies the trading instruction, then a cancel or modify event would be required for each applicable component option series following existing guidance for the reporting of cancel events.
Example 2
A non-broker-dealer customer uses a Vega algorithm provided by Broker 2 and within Broker 2’s system stipulates a list of 10 option series that are eligible for Broker 2 to generate orders to trade on the non-broker-dealer customer’s behalf. No further action is required on the customer’s part to generate any order for a particular series. Broker 2 would report a MONO for each option series provided in the list of eligible securities within the algorithmic parameters, even though all material terms for an order in a given component security may not be known at the time. The MONO event must be marked as noted in the table above.
When Broker 2’s algorithm generates specific orders for any of the eligible securities and routes those orders to an exchange or another Industry Member, Broker 2 must report an order route event (MOOR) related to the new order event (MONO) for the specific eligible security reported to reflect receipt of the order from the non-broker-dealer customer.
If Broker 2’s algorithm does not ultimately generate any specific order(s) in an eligible option series, no further reporting is required by Broker 2 for that series. If the non-broker-dealer customer or Broker 2 cancels or modifies the trading instruction, then a cancel or modify event would be required for each applicable component option series following existing guidance for the reporting of cancel events.
At this time, the above-described algorithmic strategy trading instructions are reportable to CAT. Should the Participants determine in the future that such instructions are not reportable to CAT, the reporting guidance may change.