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SpiderRock ATS

Overview​

SpiderRock ATS is an alternative trading system for US equity options that supports trading individual option series as well as option spreads in both exchange-listed and exchange FLEX instruments. All products that trade within SpiderRock ATS clear at the Options Clearing Corporation (OCC) and can be delivered to subscriber prime broker accounts in the normal fashion.

SpiderRock ATS is operated by SpiderRock EXS, LLC, a FINRA-registered broker-dealer. Access to the ATS is available to other broker-dealers and to all qualified institutional clients of SpiderRock EXS.

Auction Features​

SpiderRock ATS runs individual auctions lasting between 100ms and 5 minutes, designed to connect liquidity seekers with counterparties. At the start of the auction process, notices are sent to potential liquidity providers inviting responses. These auction notices can be targeted to specific responders by name or broadcast to all potential liquidity providers.

Initiators can choose to remain anonymous or reveal themselves, and can also choose to reveal their side and/or direction or keep them private. Both initiators and responders can specify limit prices using either traditional static price limits or formula-based limits that take underlying price levels into account.

Auction Start Requirements​

SpiderRock ATS auctions can only be started if the initiator is willing to pay at least mid-market (or better), either by reference to the current NBBO midpoint or by reference to a SpiderRock fair price model, regardless of whether the initiator chooses to reveal their side and/or price to responders.

Block Auctions​

SpiderRock ATS Block Auctions can be initiated for 50 contracts or more and are typically started and managed by individual initiators. These auctions are longer in duration (up to 5 minutes) and allow human traders to directly participate in the auction negotiation process. They are functionally similar to an RFQ or inter-dealer broker process and are designed for trading option series or spreads in larger block quantities.

Block Auction Process​

When a Block Auction begins, notices are sent to prospective responders, after which trial match processes run at one-second intervals. During each trial match, all formula-based prices are resolved and a penny price interval responder order book is formed. If a presumptive match is possible, the auction terminates immediately and the presumptive match is forwarded to an equity option exchange and crossed per exchange rules.

If no presumptive match is possible, at the end of a trial match process, the resulting responder-side order book is shown to the initiator and all other ATS subscribers. This process continues until either:

  • One or more responders arrive that can match with the initiator,
  • The initiator improves their price enough to interact with resting responders, or
  • The process reaches its expiration time with no action taken.

SpiderRock ATS Network​

Information pertaining to Block Auctions is disseminated to both ATS Subscribers and certain broker-dealer partners of SpiderRock, both directly and indirectly via EXS personnel and/or technology. These broker-dealer partners are not Subscribers to the ATS but are enabled to receive and respond to certain Block Auction information, either through automated technology that interfaces and communicates with such partners via ICE Chat or through EXS's brokerage desk, in the same manner as is available to ATS Subscribers.

These broker-dealer partners, together with all ATS Subscribers, comprise the "SpiderRock ATS Network." The broker-dealer partners within the SpiderRock ATS Network are generally those broker-dealers that EXS has determined, due to their regular activity in the options markets or otherwise, may have an interest in receiving notice of and may be able to provide contra-side liquidity to Block Auctions in SpiderRock ATS.

Flash Auctions​

SpiderRock ATS Flash Auctions can be initiated for any quantity, often by individual users looking to find electronic markets/quotes inside the publicly displayed NBBO levels. These auctions are typically started by either SpiderRock or third-party algos/execution routing strategies, and are designed to elicit responses from algos and other trading technology that can respond in a timely manner.

Flash Auction Process​

When a Flash Auction begins, notices are sent to prospective electronic responders. After 100ms, a trial match process runs. During this trial match:

  • All formula-based prices are resolved and a penny price interval responder order book is formed.
  • If a presumptive match is possible, a cross order is forwarded to an equity option exchange for exposure and potential price improvement.
  • If not, the Flash Auction concludes with no action taken, and the order initiating the Flash Auction and any non-matching responses received is cancelled.

At the end of each Flash Auction, the initiator and all ATS subscribers are shown the complete responder-side order book (if any) that existed when the auction concluded. As a result, Flash Auctions can be utilized to discover liquidity opportunities in markets that are either not quoted (such as FLEX options) or in markets that are quoted at wide levels.

Transfer Commissions​

A Flash Auction initiator who is a broker-dealer representing a client may propose and receive a transfer commission for initiating a Flash Auction on behalf of that client. To do so, the initiating firm and the expected transfer commission must be disclosed to all responders at the start of the auction. This transfer commission is in addition to any commissions or fees paid to SpiderRock ATS for hosting the auction.

"Mid-Market or Better" Auction Start Condition​

Initiators of both Block and Flash auctions are required to disclose an actionable limit price at the start of any Block or Flash auction. Initiators can request that this limit price be [Visible] or [Not Visible] to auction responders. Regardless of whether this limit price is disclosed to responders, it is an immediately actionable price that will trade if an appropriate matching response is received.

Initiators of both Block and Flash auctions also have the option of revealing their identity to potential responders or remaining anonymous. This decision has a significant impact on whether the Initiator's limit price must be mid-market or better to avoid being rejected by the system (the "Mid-Market Restriction").

When the Mid-Market Restriction Applies​

If the Initiator elects to disclose their identity to all potential responders, the Mid-Market Restriction does not apply, and their limit price is not subject to any price restriction. However, if the Initiator elects to remain anonymous, even to one potential responder, the following Mid-Market Restriction applies to their limit price.

Mid-Market Restriction Details​

Individual Listed Option Series​

For all individual listed option series, when buying the series, the initiator starting limit price must be greater than or equal to the OPRA NBBO bid price + $0.01. In addition, the initiator limit price must be greater than the least restrictive (to the initiator) of:

  • The OPRA NBBO bid price + $0.05
  • The OPRA NBBO mid-market price (adjusted down to the nearest penny) - $0.01
  • The SpiderRock Fair Mid price (adjusted down to the nearest penny)

Listed Option Spreads​

For all listed option spreads, when buying the spread, the initiator starting limit price must be greater than the least restrictive (to the initiator) of:

  • The OPRA NBBO leg package bid price + $0.05
  • The OPRA NBBO leg package mid-market price (adjusted down to the nearest penny) - $0.01
  • The SpiderRock Fair Mid leg package price (adjusted down to the nearest penny)

Selling Restrictions​

When selling either series or spreads, the starting Mid-Market Restriction mirrors the restrictions when buying the same series or spread.

FLEX Options​

For all FLEX option series and spreads, there is no restriction on the starting limit price level.

SpiderRock Fair Mid Price​

For purposes of the Mid-Market Restriction, the SpiderRock Fair Mid price is a proprietary price that represents SpiderRock's best estimate of what a fair market price would be for the series or spread in question. This price can be understood as a statistical estimate of the price level of the next trade price, should one occur.

Important notes about SpiderRock Fair Mid price:

  • The price may not be in an even penny increment.
  • The price level may not exist for all series or spreads; in such cases, any criteria based on this level will not apply when determining whether an auction can be started at a given price.
  • Nothing about the operation of an auction depends on the existence or value of the SpiderRock Fair Mid price.
  • At most, the SpiderRock Fair Mid price can allow auctions to start that would not otherwise be able to start using only OPRA NBBO-derived price restrictions.

Disclosures and Additional Resources​

The information above summarizes certain technical aspects of the SpiderRock ATS for quick reference. While it captures important points and overviews certain topics from the SpiderRock ATS Subscriber Manual, it doesn't include every detail. For comprehensive information and complete context, consult the SpiderRock ATS Subscriber Manual.

Additional information on SpiderRock ATS auctions, as well as information on being either an initiator or a responder, can be found on this site or by contacting us directly.