Exchange Delivery Settlement Price Intraday Auction
The Exchange Delivery Settlement Price (“EDSP”) for FTSE 100 and 250 Index Futures and Options Contracts (“the Contracts”) is based on the Index value created by the intra-day auction in each of the constituent securities which is run specifically for that purpose by the London Stock Exchange.
These index expiries occur:
- On the third Friday of every month for the FTSE 100 Index Options.
- On the third Friday of every quarter (March, June, September and December) for the FTSE 100 and FTSE 250 Index Futures.
On the relevant day the auction call in each security starts at 10:10am. Uncrossing is scheduled to take place from 10.15am (a random start time of up to 30 seconds is applied). For the duration of the EDSP intra-day auction continuous electronic trading is suspended in the securities concerned.
The prime purpose of the auction is to concentrate liquidity in the constituent securities and establish a price for the London Stock Exchange Derivatives Market and NYSE Liffe’s expiring index contracts. The London Stock Exchange Derivatives Market and NYSE Liffe declare the final settlement price (the EDSP) against which all outstanding open positions in that delivery/expiry month are settled.
The current EDSP intra-day auction follows the same functionality as the London Stock Exchange’s daily closing auction process with the variation that tighter price monitoring parameters are applied.
A single 2 minute market order extension is invoked if the auction matching process would result in market orders remaining unexecuted on the order book.
If the uncrossing price of a security is calculated to be more than a pre-determined percentage away from the security’s previous electronic execution value, a 5 minute price monitoring extension will occur. The relevant thresholds for a specific trading sector can be found in the “Sector Breakdown” worksheet of the Millennium Exchange Business Parameters document, which is available as a download on the Trading Services page of the website.
The EDSP intra-day auction price monitoring percentages are currently set as:
- 1% for constituents of the FTSE 100 making up approximately 75% of its weighting; and
- 3% for the remaining FTSE 100 constituents and all securities making up the FTSE 250.
It is possible for up to 1 market order and 2 price monitoring extensions to be invoked at security level during an EDSP intra-day auction. Each extension is followed by a random period of up to 30 seconds. During the EDSP intra-day auction (including any extension period) participants can enter or delete limit, iceberg, hidden and market orders.
It should be noted that following the maximum number of permitted price monitoring extensions, the balance of orders may result in the uncrossing price being further away from the previous electronic execution value than the relevant percentage trigger level (i.e. the level at which the price monitoring extension was triggered).
FTSE International Limited (“FTSE”) calculates and disseminates indicative real time index values during the EDSP intra-day auction period until such time that all the securities have uncrossed.
Further details on auction processes can be viewed in the Guide to the trading system available as a download here.
Determining the price used to calculate the final EDSP
Each security’s EDSP uncrossing value is set as the single price that leads to the greatest number of shares to be executed. In the case where a security does not have a crossed book and no auction execution takes place, the latter of the last automatic trade price prior to 10:10 or where there is no automatic trade price, the previous day’s closing price will be used as the final EDSP value for that security.
All member firms must observe the standard of conduct required under Rules 1400 and 1410 when entering orders during auctions. In particular, member firms should refer to:
- the supplementary guidance to Rule 1400 under the heading “Entry and deletion of orders”; and
- the supplementary guidance to Rule 1410 under the heading “Additional guidance for closing auctions”, which applies equally to intraday expiry auctions. Member firms trading during index expiry auctions are reminded that they should have regard to the impact their order entry may have on the market and should consider the timing of orders entered and deleted to allow other member firms sufficient time to react to these changes.
Member firms offsetting derivative positions are reminded to ensure order entry is completed in a timely fashion, having regard to the impact on the market so as to allow other member firms to react to these orders, as per the Exchange’s guidance to Rule 1410.