The EBS Size Priority match algorithm is an enhanced matching logic that prioritizes orders with shown quantities above a defined size priority threshold for matching ahead of smaller orders at a given price level.

Potential benefits and considerations include:

• Increased crossing of the spread due to greater TOB inventory and more probable higher fill rates, in turn attracting more latent interest

• Improved market data via the increased inventory, improved inputs, and expected increased trade events

• Limited risk of increased price signaling if adopted in scale by a cross-section of counterparties

• Increased Top of Book (TOB) inventory and overall book depth can support a lower minimum price increment with inventory available at additional price points

This matching algorithm supports TOP order allocation, where priority is first given to the TOP order regardless of whether its remaining quantity is greater than the size priority minimum quantity or not.

Contents

The Size Priority matching algorithm prioritizes orders with shown quantities above a defined size priority threshold for matching ahead of smaller orders at a given price level.

• The code ‘P’ for the Size Priority matching algorithm is sent via the existing tag 1142-MatchAlgorithm of the MDP 3.0 - Security Definition (tag 35-MsgType=d) message and CME Reference Data API Version 3

• The TOP parameter (topEligible) is available in CME Reference Data API for the Size Priority matching algorithm with TOP.

• The size priority threshold (sizePriorityQuantity) is included in the Security Definition (35=d) message CME Reference Data API

• The iLink tag 638-Priority Indicator indicates if the order qualifies for Large Order Size (LOS) prioritization when it rests on the book

Product Availability

The Size Priority matching algorithm is available for the following EBS products:

*Orders qualify for Size Priority matching when they are greater than or equal to the value set; e.g. for a value of 3M, an order of 3M or above would qualify.

**Regardless of the order quantity, a priority (TOP order) is given to the first incoming order that betters the market. If priority is established, the aggressor orders are first allocated to the TOP order until the order's quantity is exhausted.

Supported Order Types/Order Qualifiers

1. Size Priority Matching only applies to resting orders. 

2. Size Priority Matching only applies to the Good For Session (GFS) order type.

3. Fill and Kill (FAK) / Fill or Kill (FOK) orders are impacted only in terms of the priority of the resting orders which they match against.  

4. Size Priority Matching is applicable to Price Discretion orders, as described below

5. Size Priority Matching is available for Display Quantity orders, as described below

Size Priority Match Algorithm Process

To qualify for Large Order Size prioritization, the original resting quantity of each order must be greater than or equal to the Large Order Size minimum quantity (configured by product). Orders fill in the following order: 

• by price

  • within each price

    • TOP orders fill (ascending), then

    • LOS orders fill in FIFO order by timestamp (ascending), then

    • Standard orders fill in FIFO order by timestamp (ascending)

Size Priority Retention

Resting Orders

Following a size priority match, if a resting order initially received Size Prioritization and then receives a partial fill that brings it below the threshold, that order retains the LOS prioritization, as it is based on the original resting quantity, and not on the current order size. Therefore, the Priority Indicator will remain for the life of the order unless the quantity of the order is modified.

Order modifications must be re-assessed for LOS Prioritization based on the new resting shown quantity in the order book after any new matches that occur after the modification is applied.

Aggressing Orders 

If an aggressing order initially received LOS prioritization and then receives a partial fill that brings it below the threshold, that order loses LOS prioritization.

Example: Size Priority - Order Matching

Large Order Size Min Qty = 7M

EBS Size Priority Matching Attributes

This table lists all the new size priority fields:

iLink 3 Order Entry

• A FIX tag 638-PriorityIndicator has been added to the Execution Reports to indicate whether an incoming New Order/Cancel-Replace entered the book or subsequently rests on the book with:

  • Tag 638=100 (Large Order Size Priority)

  • Tag 638=101 (Standard Order Size Priority)

• A Fill Reason ‘24’ has been added to the existing tag 1622-FillYieldType to represent the new Size Priority match algorithm in the ExecutionReportTradeOutright message.

MDP 3.0 Market Data

• A matching algorithm value 'P=Size Priority' is added to the existing tag 1142-MatchAlgorithm of the EBS Security Definition (35=d) message

• Values added to the existing repeating group in the Security Definition (35=D) message include:

  • Tag 1093-LotType=6

  • Tag 1231-MinLotSize - with LotType=6 will contain the minimum order size quantity that improves order priority for execution

EBS Size Priority Matching Examples

This section contains examples that illustrate EBS LOS matching scenarios.

Size Priority without TOP

An aggressing order is submitted. There is enough available quantity to match the orders so they fill by price first, large orders in FIFO sequence are matched, then standard orders in FIFO sequence.  The orders fill in the following book level order: 2, 5, 1, 3, 4

Size Priority with TOP

Partial Fills 

Example: Resting Partial Fill

Example: Incoming Order resting after Partial Fill on Aggression

Display Quantity Orders

Incoming Iceberg orders are assessed based on the Original Resting Shown Quantity (tag 1138-DisplayQty), as opposed to the total order quantity 

• Large Order Size Min Qty = 3M

• New Order received and rests with Total order qty = 20M, Display Quantity = 2M

• Since Display qty of 2M is less than the Large Order Size Min Qty, the order does not receive prioritization (Priority Indicator = 101 - Standard Order)

An incoming iceberg order which aggresses against opposite side orders in the order book before resting, such that the remaining Resting Shown Quantity is less than the Display Quantity on the order, has the Large Order Size Priority based on that remaining Shown Quantity instead of the Display Quantity

• Large Order Size Min Qty = 10M

• Incoming order for 25M, Display Quantity = 10M. The order aggresses against resting order(s) and matches for 18M before it hits the order book, leaving a remainder of 7M on the incoming order. 

• Although the DQ of 10M would satisfy the Large Order Size Min Qty, the initial resting shown quantity of 7M sits in the order book (<10M), the order will not have Large Order Size Prioritization 

Example: Display Quantity Order with Size Priority and TOP

Price Discretion (PD)

Determination of original resting order quantity must occur before any PD aggressions against the incoming order. 

For example, Larger Order Size Min Qty of 5MM. 

• Incoming order quantity of 10 MM, matches for 3MM, leaving resting order quantity of 7MM.  However, this order then has a PD order match against it for another 3MM, leaving a remaining order quantity of 4MM.

• Since the order quantity before the PD aggression against the incoming order was 7MM, the order would still qualify for Large Order Prioritization.

Price Discretion Order Aggression

Price Discretion orders are not eligible for LOS matching in the Price Discretion matching phase. Price Discretion matching continues to occur in FIFO order and does not include Large/Standard order prioritization. 

Aggressing Order Matches Resting Price Discretion Order  

Resting Price Discretion orders with Large Order Prioritization receive large order prioritization during the normal matching phase based on the limit price.

Contact Information

For technical development support, contact Certification Support for Electronic Trading (CSET).

For all other inquiries, please contact Global Account Management (GAM).