Overview
A set of messages allow for the automation of program trading. While it is hoped that the message set is comprehensive enough, to automate the complete cycle, it is expected that not all messages will be used in all transactions. Although the message set may appear to be quite complex at first glance, most of the complexity arises from developing one message set that can be used to support two different business models for list trading. The two models, the "Disclosed" and "Non Disclosed" models, are described in the next two sections. The "Disclosed" model is commonly used in Japan while the "Non Disclosed" model is commonly used in Europe and America.
"Non Disclosed" model (e.g. US/European)
The buy-side details to the sell-side information about the sector, country and potential market impact of the stocks to be bought or sold. Using this information the sell-side firms bid for the trade. If successful the buy-side firm gives the sell-side firm a detailed list of the stocks to be traded and the sell-side firm executes the trades.
The important point in the "Non Disclosed" model is that the stocks in the list are not disclosed until a particular sell-side firm has won the portfolio.
"Disclosed" model (e.g. Japanese)
The buy-side details the exact stocks and sizes to be traded and the sell-side firm offers the buy-side firm a two-way price, to buy or to sell the indicated stocks. The buy-side firm then tells the successful sell-side firm to buy or sell on its behalf.
The important point in the "Disclosed" model is that all sell-side firms see all of the stocks and quantities in the portfolio during the bidding phase regardless of whether or not they win the business.
The New Order - List message can be used, with the side omitted as part of the bidding process, as is the practice in "Disclosed" model or once the bidding has been completed to exchange the list of stocks that make up the program to be traded. Pre-trade allocation is handled via a repeating group within the repeating order block.
Order modification and cancelation of a portfolio is a major change to the agreement between the buy-side and sell-side firms and as such this change should be conducted by telephone. If an automated route for dealing with amendment/cancelation is required then the existing messages can be used – List Cancel, Order Cancel/Replace Request.
The New Order - List message is based on the single order message and message flows for canceling a single stock line within a program trade should be those used to support order cancelation in the single order model (e.g. Order Cancel/Replace Request, etc). The ListID in those systems should be used to assist in identifying the order as part of a list trade. Similarly, the Order Status Request message can be used to request the status of a single order in a portfolio trade.
The List Strike Price Message details the prices that a principal trade is being executed at. In some transactions this appears to be generated by the sell side and checked by the buy-side, in others the reverse is true, and in other cases this information is not passed until the final execution reports
Pre-trade allocation is much more common place in the program trading community than it is in block trading. For the purposes of pre-trade allocation, a repeating group covering account and number of shares has been added to the order message. It is assumed that participants will use the either FIX allocation messages and message flows for post trade allocation or their existing allocation systems. (e.g. in the event of a pre-allocation basket trade).
At any stage in the processing of a list message the buy-side may request the status of the list from the sell-side using the List Status Request message. The sell-side responds with a List Status Response message. The sell-side can also send the List Status Response message in an unsolicited fashion according to the requirements passed in the bidding phase or in the List message. The List Status Response message provides summary detail about each of the orders in the List. The sell-side should acknowledge any list request from the buy-side with a List Status Response message providing the current state.
Once the portfolio has been executed by the sell-side and a List Status Response message has been sent to the buy-side indicating "DONE" for each of the orders in the List, the list can be allocated. If pre-allocation information was provided with the original orders and the orders were fully executed then the allocation information is already known to the sell-side. If the pre-trade allocations are no longer appropriate post trade allocation may be preformed either using FIX Allocation messages or existing allocation systems.
Message Flow Diagrams
The diagram above shows the logical stages involved in the execution of a program trade.
| Transition |
Description |
| 1->2 |
This transition can occur in the following ways :
- Buy-side has preferred list which means the business will be directed to a specific Sell-Side
- Buy-Side provides details of the program to a number of sell-sides. This can be achieved using a mixture of telephone, fax, modem links, and FIX Bid messages.
|
| 2->3 |
Details of the program are transmitted to the chosen Sell-side using telephone, fax, modem links, or FIX New Order - List message. |
| 3->4 |
This transition can occur in the following ways :
- Buy-Side and Sell-Side communicate by telephone to confirm content of the program and the Buy-Side instructs the Sell-Side to begin execution.
- Buy-Side sends a List Execute FIX message to instruct Sell-Side to begin execution
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| 4 |
Once the list is being executed the FIX List status messages may be used to notify/request status of the list |
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Order Details sent via FIX (Bidding Outside of FIX)
| Buy Side Institution |
|
New Order - List Message (1 broker) |
 |
Sell Side Broker Dealer |
 |
2) List Order Status (ACK) |
|
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"Disclosed" Bid and Program Trade
| Buy Side Institution |
|
1) New Order - List Message (N brokers) |
|
Sell Side Broker Dealer |
|
2) List Order Status (ACK) (1 per broker) |
|
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3) Bid Request Message (N brokers) |
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4) Bid Response (1 per broker) |
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5) Cancel bid sent to (N – 1) brokers |
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"Non Disclosed" Bid and Program Trade
Message Flows once a buy-side has chosen a single sell-side and transmitted New Order – List messages
The following message flows can occur in any order relative to each other and some may occur many times.
Optional notification to begin execution (may occur zero or one times)
| Buy Side Institution |
|
1) List Execute message (1 sell-side) |
|
Sell Side Broker Dealer |
|
2) List Order Status (Ack) Response |
|
|
Optional transfer of Principal Portfolio Trade prices from buy-side to sell-side (may occur zero or one times)
| Buy Side Institution |
|
1) List Strike Price message |
|
Sell Side Broker Dealer |
|
2) List Status message |
|
|
Optional transfer of Principal Portfolio Trade prices from sell-side to buy-side (may occur zero or one times)
| Buy Side Institution |
|
1) List Strike Price message |
|
Sell Side Broker Dealer |
| |
2) List Status message |
|
|
Optional Execution Report status update (may occur zero or N times)
| Buy Side Institution |
|
1) Execution Reports (if requested) |
 |
Sell Side Broker Dealer |
|
Optional List Status Request (may occur zero or N times)
| Buy Side Institution |
|
1) List Status Request message |
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Sell Side Broker Dealer |
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2) List Status message |
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Optional Sell-Side unsolicited Status update (may occur zero or N times)
| Buy Side Institution |
|
2) List Status message |
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Sell Side Broker Dealer |
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Scenario 1. Bidding performed by Telephone and List provided via FIX
| Message |
Description |
Purpose |
|
New Order – List Message from B/S to S/S |
Details the list of stocks that an institution wishes to trade. Normally side is omitted and an indicator is set to show that this message is part of a bid |
|
List Status Response (Acknowledgement) |
List status response indicates that the sell-side has received the New Order – List message. The status of each order in the list should indicate a status of bid or rejected. The former if the stock is recognised and the latter if the stock is not recognised. |
| may be omitted |
List Execute Message |
Details the specific bid that has been accepted.
The specific bid indicates the direction of the list to be executed. |
| Required if previous provided |
List Status Response |
Details the status of each order in the list. The status should be executing for each order. |
|
Status updates may optionally follow |
|
|
Scenario 2. Fully Disclosed Program Trade – with bidding stage through FIX
| Message |
Description |
Purpose |
|
New Order – List Message from B/S to S/S |
Details the list of stocks that an institution wishes to trade. Normally side is omitted and an indicator is set to show that this message is part of a bid |
|
List Status Response (Acknowledgement) |
List status response indicates that the sell-side has received the New Order – List message. The status of each order in the list should indicate a status of bid or rejected. The former if the stock is recognised and the latter if the stock is not recognised. |
|
Bid Request Message from B/S to S/S |
Details the types of bids required, eg Side, Execution Type etc |
| may be omitted |
Bid Response Message |
Details the bid response for a program |
| may be omitted |
List Execute Message |
Details the specific bid that has been accepted.
The specific bid indicates the direction of the list to be executed. |
| Required if previous provided |
List Status Response |
Details the status of each order in the list. The status should be executing for each order. |
|
Status updates may optionally follow |
|
|
Scenario 3. Non-Disclosed Program Trade – with bidding stage through FIX
| Message |
Description |
Purpose |
| may be omitted done by phone |
Bid Request from B/S to S/S |
Details the liquidity information about the stocks that an institution wishes to trade. It does not identify the stocks in the program. |
| may be omitted done by phone |
Bid Response Message from S/S to B/S |
Details the bid response for a program |
|
List Message Detail Message from B/S to S/S |
Details the list of stocks that an institution wishes to trade including the stock, quantity, and direction for each order. |
| Required if previous provided |
List Status Response |
Details the status of each order in the list. The status should be awaiting execution, executing or rejected for each order. |
| may be omitted done by phone |
List Execute Message from B/S to S/S |
Details the bid for a program |
| required if previous provided |
List Status Response |
Details the status of each order in the list. The status should be executing for each order. |
|
Illustration of liquidity indicator fields usage
Normally details, by country and by sector, as number at <5%, no in 5-10%, no in 10-30% and number at > 30% eg 1@ 70%, 1 @ 600% For example
| Country |
<5% |
5 – 10% |
10 - 30% |
> 30% |
| DEM |
1 Sec $1000000 |
4 Sec $2000000 |
7 Sec $1500000 |
1 Sec @60%, $3000000
1 Sec @300%
$8000000 |
| ESP |
4 Sec $3000000 |
5 Sec $3000000 |
3 Sec $3500000 |
|
| UK |
3 Sec $4500000 |
6 Sec $3600000 |
2 Sec $5000000 |
1 Sec @450%
$9000000 |
|
| Sector |
<5% |
5 – 10% |
10 - 30% |
> 30% |
| Industrails |
2 Sec $1500000 |
5 |
4 |
1 Sec @300%, $8000000 |
| Parmacetical |
4 Sec |
3 |
3 |
1 Sec @450%, $9000000 |
| Hotels |
2 |
7 |
5 |
1 Sec @60%, $3000000 |
|
X1.. 9 and Y1 .. 9 simply represent the numbers of stocks in each category.
Illustration of liquidity indicator fields usage
The liquidity indicator fields are used to describe the shape of a basket trade in terms of the liquidity and classification of the stocks contained within the list. Thus a list that may be described by the following to tables.
List liquidity information by country.
% columns refer to percentage of average daily volume.
| Country |
<5% |
5 – 10% |
10 - 30% |
> 30% |
| DEM |
1 Security Value $1000000 |
4 Security Value $2000000 |
7 Security Value $1500000 |
1 Security Value $3M @ 60%, 1 Security Value $8M @300% |
| ESP |
4 Security Value $3000000 |
5 Security Value $3000000 |
3 Security Value $3500000 |
|
| UK |
3 Security Value $4500000 |
6 Security Value $3600000 |
2 Security Value $5000000 |
1 Security Value $9M @ 450% |
|
List liquidity information by Security Sector.
% columns refer to percentage of average daily volume.
| Sector |
<5% |
5 – 10% |
10 - 30% |
> 30% |
| Industrials |
2 Security Value $1500000 |
5 Security Value $2600000 |
4 Security Value $3000000 |
1 Security Value $8M @300% |
| Pharmaceutical |
4 Security Value $3000000 |
3 Security Value $3000000 |
3 Security Value $1500000 |
1 Security Value $9M @450% |
| Hotels |
2 Security Value $4000000 |
7 Security Value $3000000 |
5 Security Value $2500000 |
1 Security Value $3M @60% |
|
Would be represented by the following BidRequest Message.
BidRequest Message (Non Disclosed bid, basket of securites, not an exchange for physical trade)
| Client Bid ID |
Bid Request Trans Type |
Total Num Securities |
Bid Type |
Side Value 1 |
Repeating fields |
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|
|
|
Bid Descriptor Type |
Bid Descriptor |
Side Value Ind |
Liquidity Value |
Liquidity Num Securities |
Liquidity Pct Low |
Liquidity Pct High |
| 1001 |
N |
38 |
1 |
37100000 |
2 |
DEM |
1 |
1000000 |
1 |
0.00 |
0.05 |
|
|
|
|
|
2 |
DEM |
1 |
2000000 |
4 |
0.05 |
0.10 |
|
|
|
|
|
2 |
DEM |
1 |
1500000 |
7 |
0.10 |
0.30 |
|
|
|
|
|
2 |
DEM |
1 |
3000000 |
1 |
0.60 |
*- NP |
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|
|
|
2 |
DEM |
1 |
8000000 |
1 |
3.00 |
*- NP |
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|
|
|
|
2 |
ESP |
1 |
3000000 |
4 |
0.00 |
0.05 |
|
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|
|
|
2 |
ESP |
1 |
3000000 |
5 |
0.05 |
0.10 |
|
|
|
|
|
2 |
ESP |
1 |
3500000 |
3 |
0.10 |
0.30 |
|
|
|
|
|
2 |
UK |
1 |
4500000 |
3 |
0.00 |
0.05 |
|
|
|
|
|
2 |
UK |
1 |
3600000 |
6 |
0.05 |
0.10 |
|
|
|
|
|
2 |
UK |
1 |
2000000 |
2 |
0.10 |
0.30 |
|
|
|
|
|
2 |
UK |
1 |
9000000 |
1 |
4.50 |
*- NP |
|
|
|
|
|
1 |
Ind |
1 |
1500000 |
2 |
0.00 |
0.05 |
|
|
|
|
|
1 |
Ind |
1 |
2600000 |
5 |
0.05 |
0.10 |
|
|
|
|
|
1 |
Ind |
1 |
3000000 |
4 |
0.10 |
0.30 |
|
|
|
|
|
1 |
Ind |
1 |
8000000 |
1 |
3.00 |
*- NP |
|
|
|
|
|
1 |
Pharm |
1 |
3000000 |
4 |
0.00 |
0.05 |
|
|
|
|
|
1 |
Pharm |
1 |
3000000 |
3 |
0.05 |
0.10 |
|
|
|
|
|
1 |
Pharm |
1 |
1500000 |
3 |
0.10 |
0.30 |
|
|
|
|
|
1 |
Parm |
1 |
9000000 |
1 |
4.50 |
*- NP |
|
|
|
|
|
1 |
Hotels |
1 |
4000000 |
2 |
0.00 |
0.05 |
|
|
|
|
|
1 |
Hotels |
1 |
3000000 |
7 |
0.05 |
0.10 |
|
|
|
|
|
1 |
Hotels |
1 |
2500000 |
5 |
0.10 |
0.30 |
|
|
|
|
|
1 |
Hotels |
1 |
3000000 |
1 |
0.60 |
*- NP |
|
Notes
- *– NP field not present in repeating group as entry is describing a single stock at a specific liquidity
- Where the BidDescriptorType set to 1 the entry in the BidDescriptor field is free text, the sector names Pharmaceuticals and Industrials have been shorten to make every thing fit.
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