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Market-Making Options

Market-Making in Options

Any Trading Participant can act as a Market Maker for options and benefit from reduced fees. All trading members are automatically checked to evaluate whether they fulfill Market Maker obligations and are able to take part in the Market-Making programs and packages that are offered. Only quotes and mass quotes traded via the M-account are taken into consideration.

For selected futures products, so-called "Designated" Market-Making is available. Market Makers take on defined obligations to increase liquidity in their chosen product. Subject to their performance in fulfilling their obligations, members are rewarded with a reduction in their fee levels.

 

Market-Making (options)

Market Makers for options are authorized to enter quotes in all option contracts and may choose between the following three models:

Regular Market-Making (RMM) applies only to less liquid options. The obligations are:

  • Response to quote requests in all exercise prices and all expirations
  • Products in which participants would like to act as Regular Market Makers can be selected where available

Permanent Market-Making (PMM) is available for all options. The obligations are:

  • Continuous quotation for a set of exercise prices for a pre-defined number of expirations
  • Products in which participants would like to act as Permanent Market Makers can be selected individually

Advanced Market-Making (AMM) is available for pre-defined packages of equity and/or equity index options as well as options on fixed income futures. The obligations are:

  • Continuous quotation for a set of exercise prices for a pre-defined number of expirations and options
  • Participants can act as Advanced Market Makers in any package offered by Eurex

Good quotes

Quotes are double-sided and must have a bid/ask spread equal to or narrower than the maximum quote spread. Quotes entered by Market Makers are binding, and orders can be matched at these prices. All quotes that fulfill the Market-Making obligations have to be entered on the Market-Making accounts (M-accounts). Only trades posted to the M-accounts are eligible for refunds of transaction and clearing fees.


Wide quotes

Market Maker can also enter quotes with an arbitrary bid/-ask spread that exceed the maximum spread. Wide quotes will not:

  • Define a price at which market orders may be matched
  • Interfere with the protection of market orders
  • Be considered in Market Maker performance measurement
  • Flow into the best quote price and quantity calculations in inside market

Quotes that have lost one side via complete matching will also be flagged as "Wide Quotes". That is, a "good quote" may turn "wide" if one side is fully matched.

Risk protection for Market Maker

The Eurex® system provides Market Makers in PMM and AMM with various features for system-based risk protection. With these tools Market Makers can significantly constrain operational and market risks.


Market Maker protection tool
The Market Maker protection tool is aimed at preventing too many simultaneous trade executions on quotes provided by a Market Maker, offering additional control of the market risk.


The basic principle can be envisioned as a counter, counting the number of traded contracts per product on Market Maker's quotes within a time frame of some seconds that the Market Maker can define.


Once the time has elapsed the counter is set to zero and restarted. If the counter reaches or exceeds a threshold level defined by the Market Maker, all remaining quotes are put on hold. Market Makers can define three threshold values in the counter:

  • Volume: total number of contracts
  • Vega: absolute number of contracts purchased reduced by the number of contracts sold
  • Delta: absolute number of (long calls + short puts) - (short calls + long puts)

Market Maker obligations

 
      • 02 Feb 2017
    • Market Maker requirements at Eurex Exchange

      Download
      • 24 Sep 2015
    • Market-Making schemes at Eurex Exchange

      Download
 
 
 

Market-Making quote parameters

 
      • 23 Feb 2017
    • Market Making Quote Parameters

      Download
      • 23 Feb 2017
    • Market Making Quote Parameters Delta Version

      Download
      • 24 May 2016
    • File description - MMPM Paramters on Common Report Engine

      Download
 
 
 
 
 
 
 

Market Status

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