Software
Certification
The Boston Options Exchange maximizes performance, reliability and scalability using SOLA®, a leading edge proprietary trading technology developed by the Montréal Exchange. Boston Option Exchange completed the technological overhaul of its trading platform with the implementation of the SOLA® Trading Engine in September 2006 and the SOLA® Routing Engine in June 2007.
To accommodate independent software vendors (ISVs) and approved participants who want to connect their own front-end trading applications to BOX we offer an open platform. For order management applications, the following options are available:
- SAIL - SOLA® Access Information Language is the native protocol for SOLA®, offering functionalities required by both order flow providers and market makers.
- Industry Standard Protocol - FIX is available for connection of order flow providers.
Participants who will be connecting via CMS protocol
are not covered in this section. To determine which of the BOX functionalities
are required for certification of a particular software application,
the user's business/trading profile must be taken into account.
This evaluation is described in the following table.
|
Agency
|
Application
supports agency trading (i.e. execution of orders on behalf
of customer accounts, including those accounts of other broker/dealers
as clients of a BOX participant) |
|
Proprietary
|
Application
supports proprietary trading (i.e. execution of orders on
behalf of propietary accounts of the BOX Participant)
|
|
Market
Making
|
Application
supports market making (i.e. has been allocated one or more
market making appointments by BOX) |
ISV
or Participants with a proprietary system planning to access
BOX must successfully complete all "mandatory" test cases
associated with their business profile for each of the three "categories"
above and may elect to complete those marked "optional".
|
N
|
The
feature is optional |
|
H/R
|
Although
optional, provides a functional advantage to the user
|
|
N/A
|
The
feature is prohibited (non-certifiable) if the application to
be certified is limited to the associated trading activity |
|
Y
|
The
feature is mandatory |
In order to
determine the certification requirement of each feature, look
up the requirement in the table below under each of the columns
(MM, Prop and Agency) for which a "yes" answer was
previously given and note the most stringent requirement; this
will be the certification requirement.
For example,
an application qualified as "agency, proprietary
and market making", will be required to certify simple order
functionality (in spite of it being "not available" for
strictly market making applications).
The table below provides an inventory of the BOX functionalities
with an indication of which are obligatory for the certification
of trading software. Click on the title of each for a more detailed
description of the functionality and its interest to the various
user profiles.
| Simple
order creation, modification & cancellation |
N/A
|
N
|
Y
|
| |
|
|
|
| -
Send directed order |
N/A |
N |
H/R |
| -
Receive and process directed order |
H/R |
N |
N |
| Flash
Message |
Y |
Y |
N/A |
| |
|
|
|
| -
Create, modify, cancel with "bulk quote" |
Y |
N/A |
N/A |
| -
Cancel with "panic quote" |
N |
N |
N/A |
| |
|
|
|
| -
Send RFQ |
N |
N |
H/R |
| - "Read" RFQ |
Y |
N |
N |
| Strategies
("UDS") |
|
| -
Create strategy |
N |
H/R |
H/R |
| - "Read" message for strategy creation |
H/R |
N |
N |
| -
Trade a strateg |
N/A |
N |
Y |
| |
|
|
|
| -
Send PIP Initial Order |
H/R |
H/R |
Y |
| - "Read" PIP Initial Order |
Y |
N |
N |
| -
Send PIP Improvement Order |
Y |
N |
N |
| - "Build" PIP orders market sheet |
Y |
N |
N |
| |
|
|
|
| -
Send "P Orders" to "away" market |
Y |
N |
N |
| - "View" & react to IML exposure orders |
Y |
N |
N |
| -
Send "S Orders" to BOX |
N |
N |
Y |
| -
Read "S Execution" advisory from BOX |
Y |
Y |
Y |
| -
Read "PA Execution" advisory from BOX |
Y |
N |
N |
| -
Receive OPRA NBBO broadcast |
Y |
N |
N |
| |
|
|
|
| -
Establish, terminate & restart |
Y |
Y |
Y |
| -
Trader connection message |
N |
N |
N |
| Unsollicited
status messages |
Y |
Y |
Y |
| Trade
management |
Y |
Y |
Y |
| Additional
HSVF messages |
N |
N |
N |
| |
|
|
|
Simple Order
Simple
orders are basic order messages used to submit Public Customer
orders to BOX; certification for this function also requires the
management (modification, cancellation) of these orders once accepted
by the BOX trading engine and the ability
to process the messages (acknowledgement, full or partial executions)
sent by the BOX trading engine to the Participant. Generally speaking,
this message is not used for proprietary trading except where
the BOX Participant is submitting the order as agent on behalf
of a client who is in turn a broker/dealer trading his proprietary
account. This message is forbidden from BOX Market Makers except
where they may be acting as Agent on behalf of an OFP in certain
particular cases relating to the PIP.
Directed Orders
Directed Orders are simple orders that the originating
BOX Participant wishes to direct via the BOX network to another
BOX Participant in the hopes that the latter will provide price
improvement. This is particularly useful where a BOX Participant
is unable himself to provide price improvement and establishes a
relationship with one or more BOX Participants (often, though not
exclusively, BOX Market Makers) to provide this service to his clients. The receiving BOX Participant must immediately do
one of two things:
- convert the simple order into an initial
PIP order with the client from the directed order being the "must be filled
side" of the PIP initial order or
- decline to price improve. In this case, the receiving Participant
refuses the directed order back to the BOX trading engine which
will book the order as a normal order
Flash Message
The flash message may only be
used by
- BOX Market Makers (whether on classes where they hold a market
maker appointment or on other classes where they have not requested
market maker status) and
- BOX Participants for orders on their own
account ("proprietary
trades").
The message allows, for a given option class, the
sending of two orders on that class (two bids, two offers or a bid
and an offer, subject to SEC approval); these behave in virtually
all cases in a manner identical to Bulk Quotes (see next point).
Bulk Quotes
Bulk
Quotes may only be used by BOX Market Makers and then only on
the classes for which they hold a market maker appointment. This
message is used to meet the Market Maker's obligations for continuous
quoting; one Bulk Quote may contain up to 150 separate orders.
However all of the instruments included in a Bulk Quote must belong
to the same options class (ie same underlying equity).
Requests for Quotes
RFQs
are simply messages that may be initiated by one Participant which
are then broadcast to all BOX Participants, signalling a particular
interest on an instrument. It is anonymous, providing only the
instrument subject to the RFQ and the quantity. The RFQ is typically
used by a trader to signal a desire to see a "larger market" for
an instrument or to request prices for a strategy. In some circumstances,
Market Makers may be required to respond to RFQs broadcast on
an instrument belonging to a class for which they hold a market
maker appointment. It should be noted that Participants wishing
to respond to an RFQ do so by using one of the previously described
order messages (simple, flash or bulk); there is no "response
to RFQ" message.
Strategies
The BOX trading engine facilitates
the trading of strategies (often referred to as "complex
orders"). BOX
Participants may submit messages to BOX requesting the creation
of a strategy. Once approved by BOX, a new instrument, the strategy,
is created and opened for trading. Orders are submitted, modified
and cancelled identically to orders for simple options instruments.
Price Improvement
Process
The Price Improvement Process ("PIP")
is an integral part of the BOX market model which allows a BOX
Participant broker to improve the National Best Bid and Offer
("NBBO")
for his client in a short auction where he will compete with BOX
Market Makers. Participants who act as Agent must be able to initiate
a PIP while BOX Market Makers must demonstrate their ability to
compete during a PIP. It is strongly suggested that the Propietary
desk of a Participant also be able to initiate a PIP.
Intermarket Linkage
("Options Linkage Authority")
Intermarket Linkage ("IML",
also referred to as "OLA" for Options Linkage Authority)
is an agreement amongst the US equity options exchanges, including
BOX, to ensure that Public Customer orders receive the best execution
possible. There are a variety of special functions and messages
provided to operate IML; most of them concern Market Makers only
while others use existing BOX trading engine functionalities in
order to minimize the development work required of each Participant
to benefit from IML.
Connection
Managing connectivity to the BOX trading
engine is obligatory for all BOX Participants' trading and order
routing software.
Unsolicited
Status Messages
These are messages sent by the BOX trading engine
to BOX Participants without the Participant having initiated an
action which required a response. Examples would include messages
advising trading users whenever the market changes phases (eg,
opening match, closing).
Trade Management
BOX Market
Operations Centre ("MOC") may
occasionally create or cancel orders or trades to which a Participant
is party without the Participant having requested this electronically.
In this case, BOX will nonetheless confirm such actions via the
usual electronic routing. Examples would include cancellation
messages for orders the Participant has on the BOX Book and for
which the Participant requested the MOC to do a global cancellation
or the cancellation by MOC of a trade due to the "obvious
error rule"..
Additional
HSVF Messages
BOX Participants have the option of receiving
other market data such as summaries and bulletins via the HSVF
gateway. None of this is obligatory for certification but is in
many cases very useful since this is often the means for BOX MOC
to communicate with Participants when there are exceptions to the
usual market procedures (eg, information on the opening of a delayed
class).
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