Average Price System

The Average Price System (APS) is a system which offers a way for clearing firms to group trades of different prices on the CME, CBOT, ICE, ME and HKFE. This system is quite similar to the give-up system. Indeed, as for give-up groups, trades need to be of the same characteristics to be added to the same group. However, the fact that the price of the trades is not necessarily the same, we need to know when a group is complete so that the exchange can calculate the average price. Thus, we will see below the notion of completing and un-completing a group, which are not relevant for give-up groups.

Overview

The Diagram below shows the APS workflow. In this example, we chose to put some trades in the firm group “TEST”. As we put trades of different market side in the same Firm group, two generic groups were created. The exchange will automatically gather trades with the same side together. That is what we call “generic grouping”.

There are three specific groups in each generic group so we can tell that trades differ in their specific values. Here, the order number or the broker is different from one group to another. That is what we call “specific grouping”.

For example, from the below scheme, we could randomly say that:

• Trades from the generic group 1 also share the same trade date
• Trades from the generic group 2 also share the same contract
• Trades from the specific group 1 share the same type
• Trades from the specific group 3 share the same origin code

Note There is currently no limitation in terms of number of specific groups in generic groups and number of generic groups in Firm groups.

Creation of APS Group

The only choice you get when you create an APS group, is the value of the Firm ID. The Firm ID is the name of the superset containing all the generic/specific groups the exchange will create. To protect against abnormal associations of trades, the exchange will be in charge of group creation in this superset. You will then receive the structure of the Firm group from the exchange and with be able to modify the group appropriately.

• Firm ID (column Order Number): this ID is the one you choose on your side. It helps you remember which group is used for. It will be used complementary to the IDs of the exchange. It contains 1 to N generic groups.
• Generic group ID (not visible in LISA): this ID is the one of the generic group. A generic group contains 1 to N specific groups and is contained in one Firm group.
• Specific group ID (column Trade ID): this ID is the one of the specific group. It is contained in one generic group which is contains is one Firm group.

Grouping Criteria	Generic Grouping	Specific Grouping
Product	X	X
Contract Details	X	X
Market Side	X	X
Price
Account Number		X
Order Number		X
Trade Type		X
Venue		X
Broker		X
Origin		X
Trade Date	X	X

Table 1 : Grouping Criteria from CME API documentation.

List of fields currently used by the CME for specific grouping:

APS Group ID, Trade Date, Exec. Firm Exchange, Exec. Firm ID, Product Exchange, Market Side, Commodity Code, Contract Period, Put / Call Code, Strike Price, Origin, Customer Account, Venue, TON, Trade Type (O, S), Subtype Code (EFP, DIFF…), Parent Group, Trade Price, Trader Exchange, Trader ID, Pit Hours Indicator, Operator ID, Vol quoted

Note Please note, that generic groups are not visible in LISA. You will only see the specific groups as we think it is more relevant to be able to play with each parts of the main entity. Also, when you put trades into the same Firm group, every specific group that you will receive will have the following status “Group un-completed”.

Completion (“Complete Group”)

APS groups can't be allocated until they are completed. The exchange needs to be in a position to calculate the average price, the rounded price as well as the residual of the generic group so that it is compulsory to do it before clearing Please note, that only generic groups are to be completed. As they are not shown in LISA, you will have to do it from one of his specific groups. Then, LISA will automatically find the corresponding generic group and will complete it. Obviously, when you complete the generic group, all its specific groups are also completed. Once you completed the generic group, the status of each of its specific groups will change to “Uncleared” giving you the possibility to allocate them.

Un-completion (“Un-complete Group”)

In case you forgot to put a trade in the generic group, you have the possibility to re-open it. You just need to click on “Un-complete”. As for completion, the un-completion only involves generic groups. Thus, the same manipulation is to be done for un-completions. You just need to choose one of its specific groups and LISA will automatically find the corresponding generic group and make it un-completed. Once you un-completed the generic group, the status of each of its specific groups will become “Group un-completed” giving you the possibility to cancel them.

Note To un-complete a group, you must ensure no specific group has been allocated and trades and orders are unmatched. If not, you will have to cancel every allocation that you made for the generic group to become eligible to a un-completion.

Cancellation (“Cancel group”)

Cancellations can be made when the generic group is “un-completed”. You have to check that each of its specific group is un-completed to make it sure. If so, you will get the trades back from your generic group. Please note that Firm group can't be cancelled, you will have to cancel each of the generic groups included in your Firm group.

Deletion (APS Order)

When an APS order is deleted in LISA or Teo, an unmark for allocation trigger is sent to the exchange. The delete clear request received is then translated to clear request Cancel Group, as if the APS group has been cancelled.

Allocation

Once your groups are completed, it will work the exact same way as for give-up groups. You will be able to make a give-up, to allocate on a house account or to split it. The only thing that will differ is the environment which will be “APS” instead of “G”. Also, you will find the following additional information:

• Column Price2: contains the rounded price of the specific group
• Column Price3: contains the residual of the specific group

Detailed Scenario

In this example, we will use the two trades below and see what happens. As you can see, they are quite similar but differ in their customer account (field clear_info1 in LISA).

Screenshot 1 : Trades in their initial state.

We put them in the same Firm group, which we name “TEST”.

Screenshot 2 : LISA APS group creation

We then receive two groups. As LISA doesn't show generic groups, there is no doubt that these two are specific. But how are we supposed to know if they belong to the same generic group? Based on the generic grouping criteria we could easily find out but we will see next how we get quick confirmation of it.

Screenshot 3 : APS specific groups created

Once your group is ready, you just right-click and complete one of the specific groups.

Screenshot 4 : How to complete a group?

Below is the most important step of the APS workflow. The fact that the two specific groups just went completed, means that they belong to the same generic group. Indeed, when you complete one of the specific groups, it automatically completes every specific groups of the generic group.

Screenshot 5 : Specific groups ready to be allocated

Then, it does not differ from usual give-up groups. You can allocate your groups and do everything you could have done with Give-up groups.

Screenshot 6 : Specific groups gave-up

You can also cancel allocations made.

Screenshot 7 : Give-up cancelled

If ever you want to start from scratch because you forgot to add a trade to the group, you can still cancel allocations and un-match orders from trades. Then, just right-click and choose the “Un-complete” button which will make the specific groups return to their initial state.

Screenshot 8 : How to un-complete a group?

Once your group is un-completed, you can cancel it to get your trades back or add some more trades and complete it again.

Screenshot 9 : How to cancel a group?

If you decide to cancel the group, you will receive back the trades you put in the group.

Screenshot 10 : Trades in their initial state