An example of this might be an index option strategy where a particular option series is to be traded with a “delta hedge” combination where the specific option contracts that constitute the delta hedge are not predetermined. Net price and full leg details are known for at least one leg of the strategy (e.g., B/S, quantity, contract, open/close) when the sending Industry Member communicates the instruction to the receiving Industry Member and no further action is required on the sending Industry Member’s part to generate any order for the options series that make up the combination. Instead, the receiving Industry Member must determine the remaining legs (e.g., for the specific combination). 

Although this strategy does not contain the specific contracts used to form the delta hedge combination, the Industry Members must report the leg(s) that are known at the time the strategy is given. Once the receiving Industry Member selects the specific contracts that will make up the combination, the receiver must report a full multi-leg order with all leg details.

Example
Broker 1 calls Floor Broker 2 with a strategy to sell 200 INDX March 4250 calls along with a delta hedge. The delta hedge portion of the strategy has not been defined by Broker 1, and would instead be identified by Floor Broker 2 based on market conditions (e.g., after getting indications from the trading floor) using two option contract series - sometimes referred to as a “combo order” – buying a call and selling a put with the same expiration date and strike price, and having the same underlying index as the primary order.

At the time Broker 1 provides Floor Broker 2 with a firm authorization to trade, Broker 1 must report a Multi-Leg New Order (MLNO) event and a Multi-Leg Order Route (MLOR) event. Both events must be marked with the ‘SLL’ (Strategy Legs Later) value in the handlingInstructions field and the eventTimestamp of the MLOR event must represent the time Broker 1 instructed Floor Broker 2 to trade on its behalf.

When reporting the MLNO and MLOR events, Broker 1 must include the full details of the leg(s) that are known at the time the instruction to trade is given. In the example above Broker 1 would report multi-leg order events that includes one leg – selling 200 INDX March 4250 calls.

Floor Broker 2 reports a Multi-Leg Order Accepted (MLOA) event that includes the leg that is known at the time Broker 1 provided authorization to trade. The MLOA event must be marked with the handlingInstructions value of ‘SLL’ (Strategy Legs Later) to indicate that the original instruction to trade was provided without all leg instruments specified and the eventTimestamp of the MLOR event must represent the time Broker 1 instructs Floor Broker 2 to trade on its behalf.

Upon determining the specific contracts that would make up the combo, Floor Broker 2 systematizes the receipt of an order for the entire strategy (i.e., the primary series and the two series that make up the combo). Floor Broker 2 then trades the order and reports any activity according to existing guidance.

At this time, the above-described multi-leg strategy is to have a CAT reportable event at the time the known legs are first communicated from Broker 1 and received by Floor Broker 2 and before Floor Broker 2 determines all legs of the strategy. Should the Participants determine in the future that such instruction is not reportable to CAT, the reporting guidance may change.