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Eurex IOC Liquidity Indicator for Options - Gaining Insight from cancelled orders

First Published 10th September 2015

A new white paper published by Mondo Visione reveals that Deutsche Börse's Eurex IOC Liquidity Indicator for Options, which makes "invisible" cancelled IOC orders visible, can create huge potential for improved price discovery and provides interesting new trading signals.

The white paper explains the mechanics of the IOC Liquidity Indicator and shows how it can be used by traders and other market participants.

If an exchange's order book were a cash register in a shop, it would show transactions at the counter, but not customers who came into the store wanting to buy something but then left without doing so. At least this is the case when it comes to 'immediate or cancel' orders (IOCs).

Those lost opportunities for transactions - not filled immediate or cancel orders - are not recorded in the order book, yet represent real potential liquidity. Deutsche Börse Market Data + Services has launched a new product within its real- time analytics product family that allows traders to gauge those potential transactions in the options market and trade accordingly, resulting in fewer 'empty shopping baskets'.

As the options market today is characterised by increasing electronification, there are several new dynamics at play: potentially higher volumes and an increased emphasis on time sensitivity in trading strategies. This offers opportunities for increased high-frequency trading, electronic market-making or simply highly responsive news-tracking algorithms. Data that can reveal the evolution of the order book is therefore crucial in order to generate a picture that will support the trading strategy.

Deutsche Börse's new analytics product, the 'Eurex IOC Liquidity Indicator for Options' supports options traders at all levels, providing real-time analytics for the options market that go beyond the normally visible spectrum of information in the order book.

Click here to download the latest report "Eurex IOC Liquidity Indicator for Options - Gaining Insight from cancelled orders".