1.   Introduction

FairX is a Designated Contract Market registered with the CFTC, operating a Futures exchange that offers products on a broad range of asset classes. The following provides a high-level overview of the exchange, connectivity information, supported order types and other related content.

2.  Network Connectivity

The FairX trading platform is housed In the Cyrus One Data center in Aurora, Illinois. The backup data center is located in the NY5 Data center in Secaucus, New Jersey. The below table lists the different environments supported by FairX and the supported network connectivity for each environment. For detailed information on the network connectivity guide, please reach out to the FairX team.

ENVIRONMENT PHYSICAL LOCATION CONNECTIVITY
Production Cyrus One Cross Connect
Disaster Recovery (DR) Equinix NY5 Cross Connect
Integration Equinix NY5 Cross Connect
Staging Internet

3.   API Connectivity

FairX offers Application Programming Interfaces (APIs) to different market participants for order entry, market data and drop copy. The below table lists the different protocols for each of the offerings. For detailed information on our API documentation, please reach out to the FairX team.

API PARTICIPANT PROTOCOL DESCRIPTION
FIX Orders API All Participants FIX 4.4 The FIX Orders API allows market participants to send, modify and cancel their orders.
FIX Market Data All Participants FIX 4.4 The FIX Market Data API allows market participants to receive market information including orders, trades, market state changes and instrument definitions.
FIX Drop Copy API All Participants FIX 4.4 The FIX Drop Copy API allows Participant firms to receive real-time copies of FairX Execution Report and Acks that are sent over the FIX Orders API.
SBE Orders API Market Makers SBE The SBE API allows Lead Market Makers to send, modify and cancel post only quotes which can interact only with orders submitted through the FIX Orders API. The API uses the Simple Binary Encoding protocol to encode/decode messages.
Multicast UDP Market Data API All Participants UDP The Multicast UDP Market Data API allows market participants to receive market information including orders, trades, market state changes and instrument definitions.

4.   Indicative Opening Price

The Indicative Opening Price (IOP) provides market participants with a probable price at which the market will open during the Pre-Open phase based on the current order book. During the Pre-Open, all priced orders are allowed, but no order matching takes place. The matching engine will evaluate all orders received from participants and calculate the IOP based on a given set of rules. The FairX rules for determining the IOP:

The FairX rules for determining the IOP:

RULE 1: Determine the maximum matching quantity at a price level.

RULE 2: Determine the minimum non-matching quantity.

RULE 3: Determine the highest price if non-matching quantity is on the buy side for all prices.

RULE 4: Determine the lowest price if non-matching quantity is on the sell side for all prices.

RULE 5: Determine the closest price to the settlement price.

5.   Contract Types

Futures Outrights

Equity Index

FairX equity index futures contracts will have 3 quarterly contracts listed at a given time in accordance with the March (H), June (M), September (U) and December (Z) quarterly cycle. A new expiry will be listed once the front month has expired.

Futures Calendar Spreads

In addition to the outright contracts, FairX will also list calendar spreads for each product. Calendar spread contracts involve the buying of one expiry and selling of another expiry with a single order. FairX equity future calendar spreads follow the reverse spread convention (i.e buying the calendar spread refers to buying the far month of the calendar spread, selling the calendar spread refers to selling the far month of the calendar spread).

Example: Buy 1 lot of TECU21-TECZ21 refers to Buying 1 lot of TECZ21 and Selling 1 lot of TECU21.

6.   Order Types

The following sections give an overview of the list of order types supported by FairX.

Market Order (with Protection)

A market order is a buy or sell order sent without specifying a limit price with the aim of executing at the best available price in the central limit order book. Each FairX product will have a designated protection point. When a market order is entered it will look at the opposing side of the book and assign a protection value to that price at which the market order is converted to a limit order. For buy market orders, protection points are added to the current best offer price. For sell market orders, protection points are subtracted from the current best bid price.

Limit

A limit order is a type of order to buy or sell at a specified price or better. For buy limit orders, the order will be executed only at or below the limit price, while for sell limit orders, the order will be executed at or higher than the limit price.

Stop Orders (with Protection)

A stop order is an order to buy or sell a futures contract when the price of the contract reaches a specified price (Stop Price).

Stop orders with protection prevent orders from being executed at extremely inferior prices after the stop price is triggered. The stop order with protection will be entered as a limit order with a protection price limit set at the stop trigger price plus or minus the protection point range. For buy stops with protection, protection points are added to the trigger price to calculate the protection price limit. For sell stops with protection, protection points are subtracted from the trigger price.

If the market trades at or through the stop trigger price, the order will be matched at the best available price level, executed at a price no worse than the protection price limit. If the order is not completely executed, the remaining quantity is then placed as a limit order in the order book at the protection price limit.

When a stop order is submitted, if the top of book of the same order side is already worse than stop trigger price, the stop order will get rejected.

Stop-Limit Orders

A stop limit order is an order to buy or sell a Futures contract at a specified price (limit price) when the price of the contract reaches a trigger price (stop price).

The limit price is the highest/lowest price at which the stop order can be filled. The order can be filled at all price levels between the trigger price and the limit price. If any quantity remains unfilled, the order will remain on the order book as a limit order at the specified limit price. The maximum differential between the trigger price and the limit price will be equal to the product’s price bands.

7.   Time In Force

FairX requires each order entered in the system to have a Time In Force, which is a qualifier that defines how long an order is in effect. FairX Supports the following time in force values.

DAY

Orders entered with a qualifier of DAY will remain on the book for the duration of the session that it is placed in. If a DAY order is not fully executed, any remaining quantity is cancelled at the end of the trading session.

Good Till Cancel (GTC)

Orders entered with a qualifier of GTC will work until either the order gets filled, or the contract expires.

Fill or Kill (FOK)

Orders entered with a qualifier of FOK will execute the entire order on entry. If the order is not fully executed, it is canceled.

Immediate or Cancel (IOC)

Orders entered with a qualifier of IOC will attempt to execute any available quantity (or the minimum specified quantity) upon entry and with any remaining quantity immediately canceled.

8.   Risk Management

Max Order Check

Exchange Max Order Check – The exchange will set a Max Order Size per product. This is a market wide control and can only be changed by the exchange. All orders will pass through the Max Order Size check and any orders above the Max Order Size will be rejected. For Spreads the Max Order Size is checked against each leg of the order. For example if the SuperTech Index max order size is 500 contracts, each leg will be compared against the 500 contract limit.

Executing Firm Max Order Check – Clearing Members can set an optional max order size per executing firm. This limit is for all products and does not supersede the Exchange Max Order Size by product. The most restrictive limit will win and orders above the Max Order Size are rejected.

Exposure Limits

Exposure Intraday Limit is set by the Clearing Members per Executing Firm in USD. This limit is the overall USD Long and USD Short allowed per firm and is calculated using each product’s initial margin rate, multiplied by the number of filled and working contracts. If this limit is not set orders will be rejected by the exchange.

Exposure limits will be calculated as follows:
  • Long USD positions = (long working quantity + day long fills – day short fills) * initial margin
  • Short USD positions = (short working quantity + day short fills – day long fills) * initial margin
CONTRACT LONG (WORKING) LONG (FILLED) TOTAL FUTURES LONG ΤΟΤΑΙ. EXPOSURE LONG S TOTAL EXPOSURE SHORTS TOTAL FUTURES SHORT SHORT (FILLED) SHORT (WORKING) MARGIN (X)
B5H21 5 50 45 $4,500 -$4,000 -40 10 0 $100
B5M21 60 25 85 $8,500 -$0 0 0 25 $100
B5U21 10 30 -10 -$1,000 -$7,000 70 50 50 $100
TECH21 15 250 165 $24,750 -$16,500 -110 100 40 $150
TECM21 10 30 28 $4,200 -$15,00 -10 12 8 $150
TECU21 0 5 5 $750 -$6,750 45 0 50 $150
Contributon $ $41,700 -$8,250
Contributon % 16.68% -3.30%

EXECUTING FIRM EXPOSURE LIMIT: $250,000

Once calculated all Longs will be summed to create a Total Long Exposure USD. Separately, all Shorts will be added to create a Total Short Exposure USD. These will be compared against the Intraday Exposure Limit.

Clearing Members will be notified as they approach specified thresholds (e.g. 50%, 80%, 90%, etc.). If an order is submitted that would exceed the Intraday Credit Limit, the order will be rejected.

Kill Switch

The exchange Kill Switch functionality will allow Clearing Firm Admins to shutdown firm activity at various levels. When activated all order entry is blocked and all working orders (DAY and GTC) are canceled for either a selected subset or all of the firm’s SenderComp IDs. Customers will receive all final order states when the Kill Switch is enabled and rejections for any new orders submitted. The kill switch will not cancel orders during Pre-open no cancel and Halted market states.

Message Throttle

FairX has three different throttles that are currently set. Note that these values are subject to change.

  • Throttle Duration: This is the duration interval during which the below throttle limits are calculated.
  • Throttle Limit: This is the number of messages during the throttle duration beyond which FairX will throttle inbound requests. For any messages that exceed the limit, FairX will reject the inbound requests. This is applicable to new and replace order requests.
  • Disconnect Limit: This is the number of messages during the throttle duration beyond which FairX will terminate the connection.
PARAMETER SBE GATEWAY FIX GATEWAY
Throttle Duration 1 second 5 seconds
Throttle Limit 500 2000
Disconnection Limit 1000 5000

Cancel on Disconnect

Cancel on Disconnect can be enabled on a per session basis for both FIX and SBE sessions. SBE sessions have cancel on disconnect enabled by default. FIX sessions have this functionality turned off by default and you will need to reach out to FairX to enable this functionality.

Self-Match Prevention (SMP)

FairX supports the ability for participants to enable self-match prevention across orders from entities with common ownership. This is done by a numeric SMP identifier that is set on a session level (SBE or FIX). Clients can choose to use this optional functionality across one or more of their sessions.

Price Limits

Equity Index Futures

During U.S. cash equity market hours, FairX equity index futures have intraday low limits of 7% and 13% and a daily low limit of 20%. From 08:30 to 14:25 CT there are sequential low price limits of 7%, 13%, and 20%. From 14:25 to 15:00 CT, the close of the cash equity market, only the 20% limit will be in effect.

When U.S. cash equity markets are closed, FairX equity index futures have 7% price limits up and down from the previous day’s settlement price. If markets reach 7% up or down during the overnight session, they remain open but can only trade up to those price limits. From 15:00 until 16:00 CT there is a hard up and down limit of 7% based off of the 15:00 CT settlement price. When FairX equity index markets reopen at 17:00 CT the 7% up/down limit will be in effect until 08:30 CT.

When NYSE Rule 7.12 is triggered due to a 7% or 13% decline in the cash S&P 500 Index, there is a coordinated market trading halt for the cash equity market and for all U.S. equity index futures. Trading for U.S. equity index futures will resume when trading in the cash equity market resumes, with price limits expanding to the next level. A 20% decline in the cash S&P 500 Index will terminate trading for the remainder of the trading day in U.S equity index futures.

Price Banding

FairX implements a price banding functionality that validates all order prices. This functionality is designed to prevent mispriced orders from trading in error. Price bands validate limit priced orders, rejecting any buy orders above the upper band and any sell orders below the lower band. Price bands are dynamic and will update based on changes to the banding reference price (BRP). Price banding does not prevent order entry for buy orders below or sell orders above the banding limits.

The banding reference price (BRP) is used to determine the upper and lower price bands. The BRP is determined by the last transaction, best bid or offer through the last transaction, or settlement price if no other prices are available for reference. Once the BRP is determined, a static price banding value will be added and subtracted from the BRP to determine the upper and lower bands for an instrument.

(BRP) + (Instrument Price Band Value) = (Upper Price Band)

(BRP) – (Instrument Price Band Value) = (Lower Price Band)

Summary of controls

INSTRUMENT SYMBOL Minimum Tick Minimum Tick Value Non Reviewable Range (NRR) (points) NRR (ticks) Price Banding Protection Point Max Order Quantity Large Trader Reporting (CFTC + Exchange Reporting Levels) Position Limit No of contracts that require CFTC reporting
Equity Index
Nano Bloomberg Large Cap Index B5 0.01 $1.00 0.20 20 0.16 0.08 1000 200 60,000
Calendar Spreads 0.01 $1.00 0.20 20 0.16 0.08 1000
Micro Bloomberg Large Cap Index L5 0.1 $1.00 20.0 200 16.0 8.0 1000 200 25,000
Calendar Spreads 0.1 $1.00 20.0 200 16.0 9.0 1000
Nano SuperTech Index TEC 0.01 $1.00 0.20 20 0.16 0.08 1000 200 60,000
Calendar Spreads 0.01 $1.00 0.20 20 0.16 0.08 1000
Micro SuperTech Index LTEC 0.1 $1.00 20.0 200 16.0 8.0 1000 200 25,000
Calendar Spreads 0.1 $1.00 20.0 200 16.0 8.0 1000

9.   Settlement

Daily settlement is determined by the FairX Command Center and is reflective of trading and market activity. Settlement values are official FairX prices established for their respective instruments at a given point in the trading day. The specific time when the settlement is calculated is determined on a product by product basis and applies to all corresponding contracts (all expiries and all strike prices) of a given product. Settlement price is the official mark-to-market price used by all market participants. Settlement prices are used for, but not limited to:

  • Calculation of margin requirements by the Clearing house
  • Calculation of the daily high/low limit price for products
  • Initial banding reference price
  • Net change calculation
  • Used as leg fill prices for spread to spread matches when the outright instrument has no other price available

Daily Settlement

Equity Index futures (15:00 CT)

Lead Month:

Tier 1. 1-min VWAP of futures contract rounded to the nearest tradable tick.

Tier 2. 1-min TWAP of futures contract midpoint of the Bid/Ask rounded to the nearest tradable tick.

Tier 3. Cash index value + (Previous Day’s Back-Front Spread / Days Between Front and Back Month Contracts) x Days to Expiration.

Non-Lead Months:

Tier 1. If the spread trades between 14:59:00 and 15:00:00 CT, then the spread VWAP is calculated, rounded to the spread’s nearest tradable tick and then applied to the lead month settlement to derive the back month settlement.

Tier 2. If there are no spread trades between 14:59:00 and 15:00:00 CT, then the last spread trade price is applied to the lead month settlement to derive the settlement. If the last spread trade is outside of the spread’s Bid/ Ask, then the bid or ask price that is closer to the last spread trade is applied to derive the settlement.

Tier 3. Front month settlement value + (Previous Day’s Back-Front Spread). If there is no data in deferred calendar spreads, the spread differential from the lead calendar spread will be applied to back month contracts.

Final Settlement

Equity Index futures: 15:00 CT

Final settlement price of the expiring contract will be the official closing index value of the underlying Index, determined at approximately 15:00 CT on the 3rd Thursday of the contract month; this will be calculated and disseminated by the Index Provider as calculation agent.

10.   Error Trade Policy

FairX Command Center Authority Regarding Trade Cancellations and Price Adjustments

  1. The FairX Command Center (“FCC”) has authority to adjust trade prices or cancel (bust) trades when such action is necessary to mitigate market disrupting events caused by the improper or erroneous use of the FairX Trading System or by system defects.
  2. Notwithstanding any other provisions of this Rule, the FCC may adjust trade prices or bust any trade if the FCC determines that allowing the trade to stand as executed may have a material, adverse effect on the integrity of the market.
  3. All decisions of the FCC shall be final.

Review of Trades

  1. The FCC may determine to review a trade based on its independent analysis of market activity or upon request for review by a user of the FairX Trading System. A request for review must be made to the FCC via phone within 10 minutes of the execution of the trade.
  2. The FCC shall determine whether or not a trade will be subject to review. In the absence of a timely request for review, during volatile market conditions, upon the release of significant news, or in any other circumstance in which the FCC deems it to be appropriate, the FCC may determine, in its sole discretion, that a trade shall not be subject to review.
  3. Upon deciding to review a trade, the FCC will promptly issue an alert to all Participants via the FairX Trading System or electronic mail indicating that the trade is under review.

Price Adjustments and Cancellations

  1. In reviewing a trade, the FCC will first determine whether the trade price is within the Non Reviewable Range for futures or within the Bid/Ask Reasonability Allowance for options, as described in Rule 539(g). The Bid/Ask Reasonability Allowance for an option is the maximum width of the bid/ask range which will be considered reasonable for use in applying the parameters necessary to establish the Non-Reviewable Range for the option.
  2. In applying the Non-Reviewable Range, the FCC shall determine the fair value market price for that contract at the time the trade under review occurred. The FCC may consider any relevant information, including, but not limited to, the last trade price in the contract or a better bid or offer price on the FairX Trading System, a more recent price for a different maturity date, the price of the same or related contract established in another venue or another market, the market conditions at the time of the trade, and the theoretical value of an option based on the most recent implied volatility.
  3. Trade Price Inside the Non-Reviewable Range. If the FCC determines that the price of the trade is inside the Non-Reviewable Range, the FCC will issue an alert indicating that the trade shall stand.
  4. Trade Price Outside the Non-Reviewable Range.
I.   Futures Contracts

If the FCC determines that a trade price is outside the Non-Reviewable Range for a futures contract, the trade price shall be adjusted to a price that equals the fair value market price for that contract at the time the trade under review occurred, plus or minus the Non-Reviewable Range.

If the trade at issue involves multiple parties, prices and/or contracts, the FCC has the authority, but not the obligation, to bust or price adjust such transactions. The FCC will issue an alert regarding its decision.

ii.   Option Contracts

If the FCC determines that a trade price is outside the applicable Non-Reviewable Range for an option contract, the trade price shall be adjusted. In the case of a buy (sell) error, the price will be adjusted to the determined ask (bid) price set forth in the Bid/Ask Reasonability Allowance in Section G plus (minus) the Non-Reviewable Range.

If the trade at issue involves multiple parties, prices and/or contracts the FCC has the authority, but not the obligation, to bust or price adjust such transactions. The FCC will issue an alert regarding its decision.

iii.   Busted or Adjusted Trade

Busted or adjusted trades shall be cancelled in the Exchange’s official record of time and sales, Trades that are price adjusted shall be inserted in the time and sales record at the adjusted trade price.

Alternative Resolution by Agreement of Parties

  1. With the approval of the FCC, parties to a trade that is price adjusted may instead mutually agree to cancel the trade.
  2. With the approval of the FCC, parties to a trade that is busted may instead mutually agree to price adjust the trade to a price consistent with the adjustment provisions of Rule 539(c).
  3. Subject to section (d)(1) and (d)(2), parties to a trade that is canceled or price adjusted may mutually agree to a cash adjustment provided that such adjustments are reported to the FCC and the parties maintain a record of the adjustment.
  4. An executed trade may not be reversed via transfer except where such trade is determined by FCC to be outside of the Non-Reviewable Range but not reported timely, subject to agreement of the parties and approval of the FCC. Any such transfer must occur at the original trade price and quantity; however, the parties may mutually agree to a cash adjustment.

Liability for Losses Resulting from Price Adjustments or Cancellation

  1.  A party entering an order that results in a price adjustment or trade bust shall be responsible for demonstrated claims of realized losses incurred by persons whose trade prices were adjusted or busted provided, however, that a claimant shall not be entitled to compensation for losses incurred as a result of the claimant’s failure to take reasonable actions to mitigate the loss.
  2. A claim for a loss pursuant to this section must be submitted to the Exchange on an Exchange claim form within one business day of the event giving rise to the claim. The Exchange will reject any claim that is not filed in a timely manner and such decisions shall be final. Eligible claims shall be forwarded by the Exchange to the party responsible for the order(s) that resulted in a trade bust or a price adjustment and to the Clearing Firm through which the trade was placed. Such party, or the Clearing Firm on behalf of the party, shall, within ten business days of receipt of the claim, admit or deny responsibility in whole or in part. Failure to respond to the claim within ten business days shall be considered a denial of liability.
  3. To the extent that liability is admitted, payment shall be made within ten business days. Unless otherwise agreed upon in writing by the parties, failure to make the payment within ten business days shall be considered a denial of liability for purposes of this rule. A copy of any such written agreement must be provided to the Exchange.
  4. To the extent that liability is denied, the party making the claim may submit the claim for arbitration pursuant to Chapter 8 of the Rules. Such claims must be submitted to the FCC within ten business days of the date the party was issued notification that liability was denied.

Schedule of Administrative Fees

When FCC busts or price adjusts a trade, the party responsible for entering the order into the FairX Trading System that gave rise to the trade bust or price adjustment shall pay an administrative fee to the Exchange in the amount of $500 for each such occurrence.

11. Market Holiday Calendar

DATE U.S. HOLIDAY
Monday, July 5th, 2021 Independence Day
Monday, September 6th, 2021 Labor Day
Thursday, November 25th, 2021 Thanksgiving Day
Friday, November 26th, 2021 Thanksgiving Weekend
Friday, December 24th, 2021 Christmas Eve
Monday, January 17th, 2022 MLK Day
Monday, February 21st, 2022 Presidents Day
Friday, April 15th, 2022 Good Friday
Monday, May 30th, 2022 Memorial Day
Monday, July 4th, 2022 Independence Day
Monday, September 5th, 2022 Labor Day
Thursday, November 24th, 2022 Thanksgiving Day
Friday, November 25th, 2022 Thanksgiving Weekend
Monday, December 26th, 2022 Christmas Day