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Matching and Product States

Matching Algorithm

TT SIMTM offers a configuration file that determines which products use Pro-rata matching. Users may add/remove products to configure matching for specific products. Products that are not configured for Pro-rata are matched using First-in, First-out (FIFO) time/priority matching. The matching occurs as configured regardless of the matching engine of the underlying market.

Specific market behavior (e.g., BrokerTec Workup orders) will not be performed.

The matching engine reconciles the bid and offer quantities working in the production market with the activity of the TT SIM trader. However, in certain scenarios, the matching engine may not exactly mimic the results the trader would experience in a production market.

For example, TT SIM does not match orders when the production markets are the following states:

  • Pre-Open
  • Pre-Trading
  • Price Discovery (SFE)

However, TT SIM will match orders when the production market are in all other states.

For information on configuring pro-rata matching, refer to Pro-rata Matching Support.

Matching Behavior

The TT SIM matching engine acts as the “exchange” that the Order Server and Price Server connect to. The following describes the behavior of the TT SIM matching engine:

  • At start up, the matching engine will connect to the TT User Setup production server and download the products that the trader who has logged in is permissioned to trade in TT SIM mode.
  • The full product and contract information for these products is then downloaded from the Gateways in the environment.
  • The product and contract information is then sent to the Price Server, which enables the Price Server to process product and contract download request from client applications on the workstation.
  • At this time, trader risk limits are downloaded from the production TT User Setup database.
  • The trader risk limits are sent to the Price Server to service logins from client applications.

    The matching engine is now active.

While active, the matching engine performs the following tasks:

  • Subscribe to prices for all contracts for which it will perform matching.
  • Forward price updates from the production Price Server to the TT SIM Price Server.
  • Wait for orders submitted by the trader to be forwarded to the matching engine from the TT SIM Order Server.

Upon receiving an order, the matching engine will:

  • Determine if the order should match against any prices received from either the production Price Server or any orders currently working in the matching engine.
  • If the matching engine determines that this is the case, it will generate a fill and send it to the Order Server then send a Last Traded Price/Quantity update to the Price Server.
  • If the matching engine determined that the order should not match against any prices received from either the production Price Server or any orders currently working in the matching engine, it will send a bid/offer market data update to the Price Server that includes this new order.
  • When updates are received from the production Price Server, the TT SIM matching engine will determine if they should be matched against any working orders the trader has submitted. If so, a fill and LTP update will be generated.

Matching in SIM vs Prod

The TT SIM matching engine incorporates production price updates with simulated prices generated by synthetic orders. Position in queue is maintained in a conservative fashion. A simulated order can trade against a production price update only if the Traded Volume from production has increased. This guarantees that position in queue can advance, possibly generating a simulated trade, only if production orders with a higher priority traded out.

Simple reductions in quoting quantity, or even increases not accompanied by a change in Volume, do not result in trades, as the production orders could merely have had their quantities reduced, maintaining position ahead of simulated orders. In this way, conservatively interpreting production price updates, TT SIM maintains a simulated order's position in queue in as realistic a way as it is able.

Product States

TT SIM utilizes a smaller subset of product states than those found in production trading. TT SIM maps the various product states as listed in the table below:

Product State Mapping

Product State in Simulation

Product State in Production

Pre-Trading

Pre-Open

Pre-Trading

Price Discovery

Open

Trading

Fast-Market

Auction

Open Auction

Close Auction

Reserve

Leveling

Closed

Closed

Post-trading

Freeze

Expired

Circuit-breaker

Not-Tradeable

Not-Tradeable

Unknown

Unknown

Note: The Open state is not available in the Market State Block in ADL™; for this Block, the Trading state is used instead.