Download Program for ranking Market Makers in long

May 2014, Moscow
Viktoriya Gulavskaya
Head of trading technologies and Market Making
Program for ranking
Market Makers in longtenor FX swaps with
maturity in 1W-1Y
currency pair USDRUB,
EURRUB
Goals of the program
 Boosting liquidity for long-tenor swaps with 1W-1Y maturity;
 Creating the competitive environment and effective incentive
system for Market Makers with optimal allocation of Exchange’s
expenses for liquidity support.
Program for ranking market makers
in long-tenor swaps with maturity in 1W-1Y
2
Program novations
 All Market Makers are eligible to participate by using their current Market
Maker agreements;
 By the end of the calendar month Market Makers are ranked by the quality
factors determining their position (N) in the overall rating and remuneration.
Quality factors
Trading volume
Spread maintenance time, %
Quoting terms of
swap deals
Program for ranking market makers
in long-tenor swaps with maturity in 1W-1Y
3
Terms
1. Place of a Market Maker in the ranking (N) is determined by its rating value
(R) assuming that N = 1 for maximum value of 𝐑.
2. Market Makers’ ratings are calculated with the quality factors applied:
 𝑲𝒗,𝒊 - the trading volume quality factor of the Market Maker’s obligation
with regard to the i-th Trading day;
 𝑲𝒕,𝒊 - the quality factor of the Market Maker’s obligation regarding
spread maintenance time on the i-th Trading day;
 𝑲𝒊,𝒔𝒘𝒂𝒑 - the quality factor of the Market Maker’s obligation regarding
swap transactions on the i-th Trading day.
Program for ranking market makers
in long-tenor swaps with maturity in 1W-1Y
4
Calculation of Market Makers ratings per
day
𝑅 = 𝑛 (𝐾 +𝐾 + 𝐾
),
where:
𝑖
𝑖=1
𝑣,𝑖
𝑡,𝑖
𝑖,𝑠𝑤𝑎𝑝
𝒊 – 1,2,3 … ordinal number of the Trading day during the Accounting period;
𝑲𝒗,𝒊 = (7* 𝑉𝑖,1𝑤 +14* 𝑉𝑖,2𝑤 +30* 𝑉𝑖,1𝑚 +60* 𝑉𝑖,2𝑚 +90* 𝑉𝑖,3𝑚 +180* 𝑉𝑖,6𝑚 +
+270*𝑉𝑖,9𝑚 +360*𝑉𝑖,1𝑦 )/(1011*5MM)
• 𝑉𝑖,1𝑤 , 𝑉𝑖,2𝑤 , 𝑉𝑖,1𝑚 , 𝑉𝑖,2𝑚 , 𝑉𝑖,3𝑚 , 𝑉𝑖,6𝑚 , 𝑉𝑖,9𝑚 , 𝑉𝑖,1𝑦 − total values of the first parts of
swap transactions (transactions in instruments with ealier settlemetn date) with
maturity on 1W, 2W, 1М, 2М, 3М, 6М, 9М and 1Y, in the lot currency;
𝑲𝒕,𝒊 = (𝑇𝑖,1𝑤 + 𝑇𝑖,2𝑤 + 𝑇𝑖,1𝑚 + 𝑇𝑖,2𝑚 + 𝑇𝑖,3𝑚 + 𝑇𝑖,6𝑚 + 𝑇𝑖,9𝑚 + 𝑇𝑖,1𝑦 )/ 𝑇𝑐𝑜𝑚𝑚𝑖𝑡𝑡𝑒𝑑.
• 𝑇𝑖,1𝑤 , 𝑇𝑖,2𝑤 , 𝑇𝑖,1𝑚 , 𝑇𝑖,2𝑚 , 𝑇𝑖,3𝑚 , 𝑇𝑖,6𝑚 , 𝑇𝑖,9𝑚 , 𝑇𝑖,1𝑦 - the overall spread maintenance
time on the corresponding swap transactions;
• 𝑇𝑐𝑜𝑚𝑚𝑖𝑡𝑡𝑒𝑑. - the period of time during the main session when Market Maker has
to perform its obligations regarding swap transactions;
𝑲𝒊,𝒔𝒘𝒂𝒑 = (7 ∗ 𝑘𝑖,1𝑤 +14*𝑘𝑖,2𝑤 +30*𝑘𝑖,1𝑚 +60*𝑘𝑖,2𝑚 +90*𝑘𝑖,3𝑚 +180* 𝑘𝑖,6𝑚 +
+270*𝑘𝑖,9𝑚 +360*𝑘𝑖,1𝑦 ) / 1011
• 𝑘𝑖,1𝑤 , 𝑘𝑖,2𝑤 , 𝑘𝑖,1𝑚 , 𝑘𝑖,2𝑚 , 𝑘𝑖,3𝑚 , 𝑘𝑖,6𝑚 , 𝑘𝑖,9𝑚 , 𝑘𝑖,1𝑦 - coefficients witch possess the
value 1 or 0 in case of performing/non-performing the obligations regarding the
corresponding swap transaction.
Program for ranking market makers
in long-tenor swaps with maturity in 1W-1Y
5
Calculation of Market Makers ratings per
month
R=k*
𝑛
𝑖=1 𝑅𝑖 ,
R – Market Maker’s rating for the complete calendar month
𝒌 – the coefficient with values determined by the minimum number of the
month’s Trading days on which the Market Maker performs its obligations:
 0.5, if the minimum number of such days accounts for 40-80 percent of
the total number of Trading days;
 1.0, if the minimum number of such days accounts for 80 and more
percent of the total number of Trading days.
Program for ranking market makers
in long-tenor swaps with maturity in 1W-1Y
6
Calculation of Market Makers remunerations
РВ = 𝑭𝑰𝑿𝒏 ,
where:
РВ – Market Maker’s remuneration in rubles;
𝑭𝑰𝑿𝒏 – the fixed remuneration, determined by the ranking place number N in the overall
Market Maker rating, assuming that N=1 if 𝑹𝒎𝒂𝒙
𝐅𝐈𝐗 𝟏 = RUB 600,000 (six hundred thousand) rubles, if N=1
𝑭𝑰𝑿𝒏 =
𝐅𝐈𝐗 𝟐 = RUB 300,000 (three hundred thousand) rubles, if N=2
𝐅𝐈𝐗 𝟑 = RUB 150,000 (one hundred fifty thousand) rubles, if N=3
0, otherwise
Program for ranking market makers
in long-tenor swaps with maturity in 1W-1Y
7
Outcomes expected from the program
1. Boosting liquidity for long-tenor swaps with maturity on 1W-1Y;
2. Reaching the principle “high efficiency is the best result”;
3. Openness of the program to all market participants;
4. Flexibility of the remuneration formula with the quality criteria
determined.
Program for ranking market makers
in long-tenor swaps with maturity in 1W-1Y
8
Appendix No 1
Market Makers obligations
№
Parameters
1W
2W
1M
2M
3M
6M
9M
1Y
1.
Two-sided quote spread calculated by
yield in % per annum
0,5
0,5
0,5
0,35
0,25
0,25
0,2
0,2
2.
Minimum order size
(in $ for currency pair USDRUB, in
5
mio
5
mio
5
mio
5
mio
5
mio
5
mio
5
mio
5
mio
EURO for currency pair EURRUB)
3.
Period during the Main session of
every Trading day* of the Accounting
period when the Market Maker has to
fulfil it’s obligations towards the
instrument
65%
Market Maker is considered to fulfil it’s obligations during the Trading day only if the
following conditions are performed:
 Obligations parameters in points 1 and 2 of the Table are fulfilled for at least 3 swap
deals during the period stated in the third line of the Table
* - calendar day on witch trades are conducted on the Exchange
Program for ranking market makers
in long-tenor swaps with maturity in 1W-1Y
9
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Program for ranking market makers
in long-tenor swaps with maturity in 1W-1Y
10