Eurex and Montreal Exchange to introduce self-match prevention
Two leading international derivatives exchanges are planning to introduce a new type of risk control later this year to prevent a market participant from inadvertently trading with itself. Similar risk controls have been introduced by CME Group and Intercontinental Exchange to help market participants avoid violating the prohibition on wash trading.
In the case of Montreal Exchange, the new functionality will be introduced in July. According to a technical notice issued in April, the functionality will be applied to orders and quotes that market participants tag with a specific type of “anti-wash” ID. If an incoming order is executable against an order from the same firm that is tagged with the same ID, the exchange will “overstep” the resting order and look for a match at the same price elsewhere in the order book. If the incoming order cannot find a match at the same price, market participants have the option of instructing the exchange to cancel the incoming order, the resting order or both orders. Although the functionality is optional, the exchange said it plans to introduce “a significant fee” for the cancellation of wash trades and encouraged market participants and software vendors to support the new functionality.
Eurex plans to introduce the new functionality in a new release of the exchange’s T7 trading platform this fall. The functionality will be optional for market participants and will be available for all order types and mass quotes. As described in a circular sent to members in April, the functionality will prevent an incoming order or quote from being executed against a resting order or quote tagged with the same ID and submitted by the same business unit. The exchange explained that this will give market participants the flexibility to apply the functionality to different groups of traders within their firms. Eurex plans to begin allowing firms to test the new functionality in a simulation environment in September and go live in late November.
