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Re: Aggressive/Passive Behaviors
Hanno Klein / Deutsche Börse <>
14 May 2012 4:39AM ET
I am aware of the fee implications of taker vs provider. I am afraid I do not get the concept of a maintaining the notion of a taker on a posted order and the connection with a day TIF. This would result in an order book with some orders marked as takers and others marked as providers and implies that the notion statically applies.
The taker notion can only apply as part of a workflow, i.e. the entry, modification or triggering of an order. If the owner of an order wants to avoid being the taker, he can attach a "post-only" attribute which can be used by the matching engine to determine whether to accept or reject the requested transaction. If an order is not "post-only" then the submitter risks being executed. In the case of not being executed, why would you penalize him by putting his order on the book but mandating that his order must always be a taker? You become a provider by entering the book without execution. The next order from a submitter who is not willing to take the execution risk should be rejected and not executed against the resting order whose submitter originally was willing to take the execution risk. The willingness to take the execution risk is a dynamic element that is expressed at the time of order submission based on the current order book and is limited to that point in time. A resting order is subject to a moving market so that you should not assume that the owner is willing to still be a taker when his order eventually becomes executable (you called this "keep original order behavior intention"). There is no reason not to execute the resting order if another order comes in from someone who is also willing to take the execution risk. For me this is not a "taker to taker" match.
Maybe I am just not familiar with the flow you are describing. Is there an electronic marketplace that maintains the notion of taker for the lifetime of the order if so expressed upon entry?
The attribute driving the fee calculation cannot be statically assigned to an order prior to its execution. It has to be assigned when it is executed and it is specific to the execution, not to the order. An order can be partially filled upon entry as taker and subsequently filled multiple times as provider, hence the order is then both a taker and a provider. The post-only attribute is specific to the order and prevents it from being executed as a taker in general.
> > Hanno,
> Thanks for your reply.
> You answered my 18=6 behavior question and my 'non-display' tag question.
> The nature of the aggressor vs. provider question is with regards to respecting the difference in provide vs. take fees/rebates which would potentially cause clients to want to lock/cross the market. This creates a scenario in which it would be preferable to keep original order behavior intention, encouraging true matches, and not discouraging liquidity.
> It seems that through the use of optional 'non-display' stipulation, liquidity would not be discouraged by allowing orders to rest even if locking/crossing the market.
> The question then remains:
> -How can you respect the notion of 'taker' and still respect the notion of 'day TIF'? If you convert an order from a taker to post-only (ie. provider), then this discourages a true match if a new post-only order from a provider comes in since it will reject the order.
> However, if you maintain the notion of 'taker' on a posted order, then a new order from another 'taker' will not be able to hit it and will be rejected. This is the dilemma. Perhaps a custom 'auto-aggress' tag is the best solution, albeit still imperfect.
Re: Aggressive/Passive Behaviors
Hanno Klein / Deutsche Börse 14 May 2012 4:39AM ET