ZN ten year note market maker status priority

August 1st, 2018, 11:03 PM

Hi all,

Apologies if this has been discussed before (is so feel free to direct me).

My understanding is products like the 2yr are pro rata, the bigger size you want to better priority you get on the book.

10 yr is first in first out.

I also belive CME offer market maker status.

My question is do market maker status firms still get priority over non market makers in fifo market like ZN?

I could understand if it was the case in pro rata markets like 2yr but surely not the 10yr

Thanks

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August 2nd, 2018, 05:32 AM

Quoting

The CME’s matching engine operates 10 different algorithms for electronic orders. Like any algorithm, these are a set of computerized and automated directions or rules. And, in this case, the algorithms dictate how resting orders – orders on the order book that have not yet been matched – are matched with aggressor orders – orders that are willing to ‘cross the spread’ in order to execute immediately. ‘Crossing the spread’ with an aggressor order, such as a market order, generates more slippage than getting filled on a resting order.

Not all orders are treated the same in all cases. Sometimes, the Top Order is given priority, sometimes the First Order In, and so forth. The following are the basic priority settings within the matching engine, which are then used in different ways depending on the market:

Top Order – Priority for an order which establishes a new price level

First In First Out (FIFO)- Priority for orders based on time, which resets at any price change, increase in quantity, or change in account number; with specific handling applied to outright vs. implied matches as well as matching a single leg against multiple spreads

Pro Rate – Priority for orders based on their percentage of the total size available at the price level, with fractional amounts, rounded down to the nearest whole contract; orders must meet a minimum pro rata allocation depending on the product

Lead Market Maker (LMM) – Priority for orders submitted by exchange designated LMMs, configured as a set percentage per product when present

https://rcm-x.com/

More info at https://www.cmegroup.com/education/matching-algorithm-overview.html

August 2nd, 2018, 10:49 AM

Kuuluud

More info at https://www.cmegroup.com/education/matching-algorithm-overview.html

Thanks @Kuuluud I was aware of a lot of CME Matching engine information but had never seen that video.

I know it's mentioned in the video but the matching engine definitions can be found here and the Globex Product Reference Sheet is here.

Jking556

My understanding is products like the 2yr are pro rata, the bigger size you want to better priority you get on the book.

10 yr is first in first out.

Globex Product Reference Sheets shows that 5yr, 10yr, Ultra 10yr, Ultra 30 and 30's all use FIFO. (Algorithm F - FIFO)
2yr & 3yr though are configurable so only way to know for sure would be to contact GCC/Global Command Center and Ask. (Algorithm K - Configurable)

Jking556

I also belive CME offer market maker status.

My question is do market maker status firms still get priority over non market makers in fifo market like ZN?

Based upon this information. No. In order for that to be the case they would need to be using (Algorithm T - FIFO with LMM)

August 2nd, 2018, 11:34 AM

Hi thanks for the replies @Kuuluud @SMCJB.

Very nice info there much appreciated.

Quoting

Based upon this information. No. In order for that to be the case they would need to be using (Algorithm T - FIFO with LMM)

I would have to agree with you there according to the information.

It would make sense, ZN is such a liquid product i shouldn't think they would need to encourage market maker participation in it.

ZN ten year note market maker status priority

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ZN ten year note market maker status priority