Complex Match Example

The diagram shows the order book sources used in this example. SR1 products (SOFR) are on the A (Pro Rata) algorithm and have a Pro Rata minimum of 2.

The steps are:

• TOP
• Pro Rata
• FIFO

Scenario

In this example, the total SR1U3 bid size is 2000, 1000 of which is real resting quantity. The other 1000 lots are implied from four other sources.

Sources are:

1. SR1U3 resting, 1000 lots
2. SR1U3 and SR1G4, 200 lots
3. SR1U3-SR1H4 and SR1H4, 300 lots
4. SR1U3-SR1M4 and SR1M4, 400 lots
5. SR1U3-SR1N4 and SR1N4, 100 lots

TOP orders are present in SR1U3, SR1H4, and SR1U3-SR1N4.

Sequence

Given the above, when an aggressing order for 501 arrives in SR1U3, the following steps occur:

1. Check the aggressed resting source for a TOP.  If TRUE (as in this example), add quantity to the aggressed source and subtract the same quantity from the aggressing quantity.
   • Source #1 receives 100 lots.
   • Sources #2 through #5 receive no lots in this step.
   • The aggressing quantity is reduced from 501 to 401 from the 100 lot distribution for TOP.
2. Aggressing quantity remains, so proceed to next step of the algorithm with 401 aggressing.
3. The next step is Pro-Rata. Distribute quantity to sources using this formula: (resting remaining source quantity)/(total available quantity from all sources)*aggressing quantity ≥ 2 = allocation to source

• • Source #1 = 900/1900*401>=2 = 189
  • Source #2 = 200/1900*401>=2 = 42
  • Source #3 = 300/1900*401>=2 = 63
  • Source #4 = 400/1900*401>=2 = 84
  • Source #5 = 100/1900*401>=2 = 21

4. Total allocated during Pro-Rata is 189+42+63+84+21 = 399. There are two lots left over due to rounding. These are distributed to the aggressed instrument. In the event that the resting book is filled or missing at this point, these lots would go to the earliest expiry source. From the above example, this would be the source containing the spread SR1U3-SR1G4 since U3 is the earliest expiry available.

5. Final source distribution from predetermination:

1. • Source #1 = 100+189+2 = 291
   • Source #2 = 42
   • Source #3 = 63
   • Source #4 = 84
   • Source #5 = 21

6. Since each source (except for the resting source) is composed of two instruments, CME Globex assigns like quantities to each component of the source. Final breakdown of aggressing quantities for each instrument is:

1. • SR1U3 = 291
   • SR1U3-SR1G4 = 42
   • SR1G4 = 42
   • SR1U3-SR1H4 = 63
   • SR1H4 = 63
   • SR1U3-SR1M4 = 84
   • SR1M4 = 84
   • SR1U3-SR1N4 = 21
   • SR1N4 = 21

7. With all instrument quantity allocation accounted for, CME Globex resolves a match for each instrument using the appropriate algorithm for each instrument with the quantities determined in step 6.

Source Allocations

Source #1: SR1U3= 291 aggress

TOP order gets 100 and is filled. 191 left to match.

Pro Rata now matches with this formula (display order qty)/(total qty) * (match qty) >=2 = allocation

Order 2 = 200/900*191 = 42

Order 3 = 300/900*191 = 63

Order 4 = 400/900*191 = 84

42+63+84 = 189, 2 lots left for next step which is FIFO. This goes to Order 2.

Final Resting Book SR1U3

Source #2: SR1U3-SR1G4 spread = 42 aggress

No TOP.

Pro Rata

Order 1 = 50/200*42 = 10

Order 2 = 25/200*42 = 5

Order 3 = 75/200*42 = 15

Order 4 = 50/200*42 = 10

10+5+15+10 = 40, 2 lots left over for FIFO which goes to Order 1.

Final Resting Book SR1U3-SR1G4

Source #2: SR1G4 = 42 aggress 

No TOP.

Pro Rata

Order 1 = 20/200*42 = 4

Order 2 = 60/200*42 = 12

Order 3 = 80/200*42 = 16

Order 4 = 40/200*42 = 8

4+12+16+8 = 40, 2 lots left over for FIFO which goes to Order 1.

Final Resting Book SR1G4

Source #3: SR1U3-SR1H4 = 63 aggress

No TOP.

Pro Rata:

Order 1 = 90/300*63 = 18

Order 2 = 80/300*63 = 16

Order 3 = 70/300*63 = 14

Order 4 = 60/300*63 = 12

18+16+14+12=60, 3 lots left over which goes to order 1.

Final resting book after all allocations:

Source #3: SR1H4 = 63 aggress

TOP order gets the first 50 lots, leaving 13 for the next step.

Pro Rata:

Order 2 = 75/250*13 = 3

Order 3 = 75/250*13 = 3

Order 4 = 100/250*13 = 5

3+3+5=11, 2 lots left over which goes to order 2.

Final resting book after all allocations

Source #4: SR1U3-SR1M4 = 84 aggress

No TOP.

Pro Rata:

Order 1 = 75/400*84 = 15

Order 2 = 150/400*84 = 31

Order 3 = 50/400*84 = 10

Order 4 = 125/400*84 = 26

15+31+10+26=82, 1 lot left over which goes to order 1.

Final resting book after all allocations:

SR1M4 = 84

No TOP.

Pro Rata:

Order 1 = 130/400*84 = 27

Order 2 = 125/400*84 = 26

Order 3 = 70/400*84 = 14

Order 4 = 75/400*84 = 15

27+26+14+15=82, 1 lot left over which goes to order 1.

Final resting book after all allocations:

Source #5: SR1U3-SR1N4 = 21 aggress

TOP order gets the first 10 lots, with 11 remaining going to the next step.

Pro Rata:

Order 2 = 40/90*11 = 4

Order 3 = 20/90*11 = 2

Order 4 = 30/90*11 = 3

4+2+3=9, 2 lots left over which goes to order 2.

Final resting book after all allocations:

Source #5: SR1N4 = 21

No TOP.

Pro Rata:

Order 1 = 20/100*21 = 4

Order 2 = 10/100*21 = 2

Order 3 = 5/100*21 = 1 which becomes 0 due to the Pro Rata Min for this product.

Order 4 = 65/100*21 = 13

4+2+1+13=20, 1 lot left over which goes to order 1.

Final resting book after all allocations: