After spending about 5 hours searching, closest information that I can find is here: http://www.cmegroup.com/market-data/distributor/market-data-platform.html I want to know how CME reports activity to bid/ask as well as how they match up trades and report updates to bid/ask after a trade has occurred. For example, I was asked this question and I don't know the answer: Say some instrument listed on CME is trading and the best bid price is 17 1/4 while the best ask price is 17 3/4. 2 new limit orders come arrive. One is a sell limit order at 17 1/2 and the other is a buy limit order at the same price. Obviously, the two limit orders will execute against each other, but will there be any updates to the bid / ask offers? It seems that the two limit orders coming in should cause 5 ticks of market updates all sharing the same time stamp: 1. 1 bid at 17 1/2, 1 ask at 17 1/2 (2 ticks) 2. 1 trade at 17 1/2 (1 tick) 3. 0 bid at 17 1/2, 0 ask at 17 1/2 (2 ticks) But is this what happens or is only item number 2 printed to the tape? I have many other questions similar to this. Can someone please point me to a document which describes the reporting and trade execution algorithm used for futures and possibly the equities markets if that information is available.
Give this a read: http://www.cmegroup.com/globex/files/PriceBanding.pdf The algo keys are: CME Globex Matching Algorithms Algorithm FIX tag 1142-MatchAlgorithm First In, First Out (FIFO) F Split FIFO/Pro-Rata K Pro-Rata C NYMEX FIFO with Lead Market Maker (LMM) N Allocation A FIFO with LMM T Threshold Pro-Rata O FIFO with TOP and LMM S Threshold Pro-Rata with LMM Q Eurodollar Options Y Checkout the drop down choices at: http://www.cmegroup.com/globex/introduction/ Keep in mind: A Price Band Variation (PBV) is a static value that varies by product. It is symmetrically applied to both the upside (for bids) and downside (for offers) to determine the Price Band Variation Range (PBVR). With each price change the PBVR is recalculated and the new range is applied. The CME Globex platform rejects all bids and offers outside the PBVR. Applying the PBV to a reference price determines the PBVR. The reference price depends on the market state and trading activity: * During the Pre-Open and the Pre-Open/Non-Cancel period, the contract's Settlement Price is the reference price. * Once the first Indicative Opening Price (IOP) is calculated, it becomes the reference price. * During trading hours, the Last Price is the reference price. * If no IOP or Last Price is established, the Settlement Price remains the reference price until a Last Price is established. * In the event of a market emergency, when a market is placed in a non-trading mode during trading hours, the IOP serves as the reference price during the non-regular Pre-Open and Pre-Open/Non Cancel Period. If no IOP is available, the Last Price is the reference price.
I've just been researching this myself and thought I'd post some updated links to CME documentation: matching algorithm details: http://ftp.cmegroup.com/globex/intr...nctionality/elements/matching-algorithms.html list of products and what matching algo they use (pdf): http://www.cmegroup.com/globex/files/PriceBanding.pdf