System Overview - Market Maker - Quoting


Services provided by MJT Quote Engine include:


Connectivity to all the major Equity Options Exchanges.

Compliance with options market maker quoting requirements

Stock and Options Order routing to Clearing Firms and Exchanges.

Graphical Volatility Chart for extremly easy volatility management.

Trading Greeks analytics.

Extreme Risk analysis.

Real-time Haircut calculations.

Complex Order Entry and Management

Real-time options trade analysis for each trade.

Real time portfolio analysis by underlying and/or by portfolio.

Ability to send electronic orders based on user supplied criteria (both options and stock).

Stop Loss Order Handleing

Quicker updates to quote and order prices giving traders a competitive pricing edge.

Risk mitigation features for quoting and automated Order Management safety features to 

Ability to electronically send options quotes at a very low cost.

Real-time Mark to Mark Profit and Loss

Real-time Theoretical Profit and Loss.

Simple Solution to Market Making Regulatory Obligations.

Ability to Import and Export volatility information to and from other 3rd party applications.

MJT supports both ACTIV Financial and NYSE Technologies (Superfeed).

Very innovative trading displays

Maintenance Quotes (for minimizing risk and satisfying regulatory obligations)

Unique Trading Parameters Set up Page

Strategy trading (proprietary complex orders legging mechanism.


 The system includes a systems information monitor to check for lost connections. Many other safety measures such as heartbeat and severed-connection monitors remove the trader from the market until all dependencies are restored.


Before submitting quotes, users can clearly and easily see if their quotes are in line with the NBBO by viewing the market screen.


If quotes are better on one side or both sides (bid and offer) of the NBBO in any series, the background of that series is highlighted in a cautionary yellow.


Intuitive coloring is quick to learn, logical to traders and contrasts well to alert users to important events that occur in the trading session.

Users can control more issues (stocks) using automated alerts that are clearly displayed in the system.


Base Quote Prices Established from Underlying Prices


Typically, most systems use the mid-point of the primary market for the underlying to calculate base quote prices. 

Stock bid prices are used for call bids and put offers.

Stock ask prices are used for put bids and call asks.


The system prices calls and puts to the actual hedge value instead of the mid-point. The result is theoretical calculations are more accurate by capturing a true "edge to hedge" theoretical value.


The user can change volatilities for the entire curve by clicking on either the 1 point or .1 point spinner.  As an example, if the 1 pt. spinner is clicked up twice, the entire volatility curve for that month will be adjusted up by 2 (two) points.  This allows a user to rapidly change volatilities by term to rapidly changing market conditions.



Auto-Fade


While users may want to actively quote, they may not want  numerous simultaneous or nearly simultaneous consecutive executions within the same series. Auto-fade functionality allows users to digest trades without the further risk of executing at the same price within the same series minus the time to digest the risk associated with the trade or to hedge the trade. Users can enable/disable auto-fade.




Auto-fade has two user-configurable parameters:


x amount fade choices: 1x (actual fade amount), 2x (double the fade amount) and an amount in dollars to fade, supplied by users.

y amount of time duration of the fade.





Minimum and Maximum Volatility


Within the system, there is a minimum and maximum threshold that acts as a “collar” for volatility inputs. This collar provides protection to users by limiting the lower/upper boundary of the run volatility value. If the run volatility is accidentally or inadvertently is run too low or too high, users could potentially sell/buy too much or too quickly, creating many undesired trades. In this case, users could have a significant loss.

User-created values establish the collar.

If users do not input any values, the system uses default values of 0 for minimum and 800 for maximum.



Minimum Sell Price


In some cases, the volatility value for out-of-the­-money strikes creates a price too low to justify the risk. The minimum sell price buffers this potential situation.

If users input a value for the minimum sell price, this value overrides any base quote offer less than this value.

This functionality operates on the month level. It is not configurable on the series level.



Maximum Buy Size


This value is a cap for the buy size of the base quote generated by the system.

The maximum buy size overrides any size generated by the system that is greater than this value.

Operates on the month level.

Applies to both calls and puts.



Maximum Sell Size


This value is a cap for the sell size of the base quote generated by the system.

The maximum sell size overrides any size generated by the system that is greater than this value.

Operates on the month level.

Applies to both calls and puts.



MJT Risk Limitation Mechanism




Allows users to set parameters that, when met, disable users from trading.


Operates on two variables: x trades, over y seconds.










External Exchange Risk Parameters - OX Risk Limitation


The system accommodates exchange-level, risk-limitation mechanisms. Users can manage this external functionality through the MJT system.


 







Underlying Quote Quality for Base Quote Pricing


Maximum inversion

Maximum move from previous price

Maximum width





Trading Analyses / Trade List


Real Time Individual Trade Analysis




The system performs trade analysis for each trade, based on data shown to users within the trade list. Trader’s confidence is boosted by knowledge of all pertinent real-time data in easily understood and flexible format. It allows a trader to visually confirm many trades as profitable in an instant.




Listed below are some of the unique data that the MJT application offers:


Theoretical price at time of trade (time received)

Theoretical edge of trade:

Amount of edge captured at receipt of trade. (Edge is the difference between theoretical value and trade price.)

P&L edge.

Trade theoretical P&L (dollar-amount display of net profit or loss on each trade)

Delta plus or minus (net long/short deltas obtained by each trade)

Suggested stock hedge (amount of shares and price of the auto-hedge order that is sent)

Recent base quotes – provides last 20 base quote prices generated including the underlying prices.  This is especially useful for audit trail purposes and trade disputes.

Totals of trade list are displayed at the bottom of the list.

Position Update - “Done Away” Order Entry




OMS (Order Management System)


The MJT application has an order management system that displays all existing orders, including stocks and options, and their current status.


Displays typical information of an OMS: side, volume, series information, price, time of execution, etc.






Real Time Position Greeks Analysis

All critical position updates are real time and put into a single view for the trader.

Access to information related to haircut requirements, P&L information (theoretical and mark to mark), risk information, and all greeks is provided in this screen.





Position Analysis - Risk


MJT has spent considerable effort in creating different risk views for the trader so he can manage his risk on a more real time and informative manner.  Within the "greeks detail by month" functionality, traders have a much more granular view of their risk so they can take the appropriate action(s) when needed.  Since many risk managers now have real time risk management systems provided by their clearing firm, it is extremely important that the trader be as informed as the manager.  Traders can see their risk broken down by month and by stock and can see the effect of price changes to their portfolio.