IT – Genium INET 4.0201 Project Update for Nordic Derivatives (106/13)

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This message contains important information regarding the Genium INET upgrade to 4.0201 which includes the new functionalities and enhancements going live March 17th, 2014.

Genium INET Infrastructure Changes
NASDAQ OMX is upgrading to a faster infrastructure which will reduce the latency of all broadcast including BO5 and BD70. To this, the structure of the Match ID and the maximum size of the OMnet API broadcasts will change as described in the Changes to NASDAQ OMX Infrastructure document attached.

It is of great importance that members, 3rd party application developers and ITCH users review the attached document which contains the full description of the changes.

In connection to the changes on MatchID, members are recommended to upgrade their Trading Workstations in order to still be able to reconcile leg trades in the outright symbols from matched combination orders with the combination order book symbol, as well as with each other.

Improvements for Tailor Made Combinations
The Tailor Made Combination (TMC) functionality already today supports the creation of user-defined combination order books in the central trading architecture.

With the 4.0201 release, the TMC functionality is improved in the way that the central system will now always sort the legs of a new equity derivatives TMC according to market practice, and also always define the first leg’s side as defined (i.e. as a buy when buying the combination and vice versa). Following the upgrade, the central system will evaluate a TMC creation request and either create the order book according to the market standard, which might involve re-sorting of the legs compared to what was submitted in the request, or simply communicate back an already existing order book, pre-defined or user-defined, meeting the submitted criteria.

The market practice for Nordic equity derivatives sorting will be accordingly:

  1. Product type (forward before future before call option before put option)
  2. Maturity (longer lifetime before shorter)
  3. Most expensive (Call: lower strike before higher, Put: higher strike before lower, Equity/ Forward/Future: N/A)

An important aspect for the end-user to consider for order-entry it that a TMC order book can be created reversed compared to the submitted request since the first leg’s side now always will be created as defined.

In relation to this improvement the window for TMCs, in the Genium INET Trading Workstation for equity derivatives users, is re-designed to support order entry according to the pay/receive principle. The end-user will be able to only specify the leg symbols to include, their ratios and side, the total quantity and whether it wants to receive or pay the net premium per combination unit. The front-end will submit the create TMC request accordingly and then consider the reply from the central system on how the order book is actually created before entering the order. This leaves to the trading front-end to conclude whether a combination bid or ask should finally be entered, whether the combination order price should be positive or negative and also whether an existing combination order book already exists meeting the end-user’s criteria.

Improvement to Pre-trade Risk Management Tools for combination orders
The Pre-trade Risk Management (PRM) Tools service already today supports monitoring of combination orders. Such orders are validated by comparing the net value for a specific instrument (e.g. OMXS30 call options or OMXS30 futures), when considering all traded legs, to the relevant instrument’s individual risk limit. As an example this means that since the OMXS30 futures roll order book is always simultaneously buying and selling the same amount of futures contracts, the current functionality will always have the maximum PRM Tools order size as unlimited regardless of the individual max size in the outright OMXS30 futures (the central matching engine however always apply a market wide maximum number of lots/order).

With the 4.0201 release, the PRM Tools service is improved to now provide end-users with the possibility to set explicit limits for a certain type of combination. E.g. it will be possible to set a user-defined maximum order size level for combination orders in the OMXS30 futures roll independent of the configured limits in outright OMXS30 futures.

Intra-day funding of ICA Accounts
For members who act as a clearing broker, it will be possible to post excess collateral into a specific account in the member´s name. This account is segregated from the house business and can only be used to cover client´s intraday margin requirement. The collateral on this account can be used to cover several ICA-accounts exposure, for example if the member funds 100 million intraday all ICA accounts linked to the intraday funding account can take on an aggregated margin requirement of 100 million.

  • Changes to Clearing Workstation 1
    • New column in Clearing Workstation 1 in Account Details window: Intraday Funding Account.
       
    • New propagation Types: Intraday Funding, and Base Collateral in Account Propagation window.  
       
    • The Interface file for account will include new information about “Intraday Funding” propagation.
       
    • New Column to show Collateral information.       
  • Changes to Clearing Workstation 2
    • New column in Clearing Workstation 1 in Account Details window: Intraday Funding Account.
       
    • New propagation Types: Intraday Funding, and Base Collateral in Account Propagation window.    
  • OMnet Impact
    Changes to external OMnet transactions, CQ128 and FQ16, were implemented in Genium INET 3.0201:
    • CQ128 – Changes in Answer CA128:
      New struct: cl_account_intraday_funding_api

       
    • FQ16 – Changes in answer FA1:
      New struct: deficit_to_cover

Technical Documentation and Test System
New Genium INET front-ends and the Genium INET OMnet API header file will be released in mid-January 2014 together with additional documentation. The new functionalities and enhancements will be available in the Genium INET 4.0201 External Test System 4 as of January 29th, 2014.

For questions or comments, please contact:
Technical Support technicalsupport@nasdaqomx.com
+46 8 405 6944