Trading » Trading at MEX

MEX provides an extensive range of products, including some of the world's most heavily traded derivative contracts. Our aim is simple - to make trading, hedging and risk management easier for anyone with exposure to the markets.

• Market Model & Functionalities
  Is one who has the right to execute transactions in addition to a right to clear its transactions in contracts executed at MEX either on his own behalf or on behalf of other Trading Brokers.
• Matching Principles
  

  When orders and quotes are entered into the central order book, they are sorted by type, price and entry time. Market orders are always given the highest priority for matching purposes. Limit orders and quotes are sorted together; there is no special consideration given to Market Maker quotes.
  
  Orders and quotes in the central order book are anonymous: A trader never knows the opposite side on a trade executed through the exchange. MEX Trading-Cum-Clearing Brokers are always the counterparty, which is managed and monitored by clearing and settlement department of MEX. Orders and quotes at a given price level are aggregated, although the number of orders and quotes making up the total remains unknown. Participants only see the specific details of their own orders.
  
  For all products, the best bid and ask prices, as well as their respective aggregated bid and offer sizes, are always available in real time. In many cases, these bid and ask prices are derived synthetically. For highly liquid futures, the depth of the order book is updated dynamically for the ten best price levels, with sizes, on both sides. For less liquid futures, market depth can be accessed as a "snapshot".
  
  Most products at MEX follow the matching principle known as price/time priority. Order matching in the Trading Period will follow either price/time priority or pro rata matching, a different process, called the auction principle, is used to determine the opening price of products traded at MEX.

• Price/Time Priority
  

  The principle of price/time priority refers to both orders and quotes. When an order (or quote) is entered into the order book, it is assigned a timestamp. This timestamp is used to prioritize orders in the book with the same price - the order entered earliest at a given price limit gets executed first. When a new order (or quote) is entered, the MEX system first checks the limits of all orders contained in the central order book. If the incoming order is immediately executable, meaning it is capable of being matched against an existing order or orders; one or more transactions are generated. To be immediately executable, the order must be:

  • A market order, where opposite already exist in the central order book;
  • An order to buy at a price at or above the lowest offer in the central order book;
  • Ao An order to sell at a price at or below the highest bid in the book

  Orders may not necessarily be executed at a single price, but may generate several partial transactions at different prices. When a large order executes against the total available quantity at a given price level, the next best price level becomes best. This process continues as long as the incoming order remains executable. If not executed upon entry, an order is held in the central order book.
  
  Also, it is possible for a single order to generate multiple executions at different points in time. For example, an order may generate a partial execution upon entry, while the remaining open order remains in the order book. The open portion may get executed a minute later, an hour later, or even a day later, if its validity extends beyond the current trading day.
  
  All executions are subject to the restrictions of the Market Order Matching Range.
  
  Market orders have the highest priority for matching. Since the purpose of the market order is to be executed as quickly as possible at the best possible price, it must be entered without execution restrictions. If several market orders are booked in the order book, the MEX system takes into account the timestamp of the orders to establish matching priority. The earliest market order entered receives the highest priority.
  
  In the case of limit orders, orders with the best possible prices (highest price limit for buy orders, lowest price limit for sell orders) always take precedence in the matching process over other orders with worse prices. Again, if the limit orders have the same price limit, the criterion used for establishing matching priority is the order timestamp.

  The orders already present in the order book are always executed at their specified limit price. Price improvements for orders in the order book are only possible during a process of opening or closing. Orders going into the order book are always matched at the appropriate prices available in the order book, up to the specified limit price.
• Trading Phases
  
  The trading day at MEX normally runs from 08:30 to 23:30 NST. It consists of three phases:
  
  
  • Pre-Trading
  • Trading
  • Post-Trading.
  All products are subject to these periods, although product-specific schedules apply for each period - for instance, due to different conventions in the underlying market.
  
  
  
• Pre-Trading
  The Pre-Trading Period begins at 08:30 NST, and allows participants to prepare for the opening of trading. Quotes and orders can be entered, changed or deleted, and participants can make data inquiries, but no "inside market" (the best bid and ask prices, as well as their respective aggregated bid and offer sizes) information is available.
• Opening
  

  The Opening Period consists of several steps taken to uncross the order books and to start the continuous trading phase. Uncrossing is performed through quote driven process during which matchable orders are executed, thereby creating an opening price for those contracts where a "crossed book" situation exists at the time of netting. It is not necessary, however, to actually determine opening prices for every product. The Pre-Opening Period is characterized by the availability of potential opening prices, allowing traders to assess supply and demand. As in Pre-Trading Period, quotes and orders can be entered, changed or deleted, although only individually.
  
  During the Pre-Opening Period, MEX can freeze the market for a particular product, allowing final review of potential opening prices by MEX Clearing and settlement (which controls all trading activities at MEX) before initiating the opening auction during the Netting Period. Freezing a product prevents orders or quotes from being entered, changed or deleted.

  The Netting process refers to the calculation of opening prices and transactions for all products, if possible. The basis for price determination is the price level that results in the maximum executable order volume. Existing orders and quotes are matched at that price to the extent possible. The Netting Period for a given product can end without an opening price being established. Once Netting ends for a product, it automatically enters the Trading Period.
• Trading
  

  During the Trading Period, open orders and quotes are compared continuously. All orders and quotes entered during this time that are equal to or better than existing orders and quotes on the corresponding contra-side of the order book are immediately matched. If not immediately matched, quotes are held in the central order book, if appropriate. Transactions are confirmed in real time.

  MEX Clearing and settlement has the option of implementing a "Fast Market" on a per-product basis in unusual circumstances, such as times of high volatility. The difference between a "Fast Market" and the normal Trading Period is that the parameters for maximum quote spread and minimum quote size in response to a quote request are more relaxed during a "Fast Market".