Backup venues and symbol splits in futures routing

Side-by-side trading and the symbol split

In early 2015 a listed futures exchange said it would close pit trading for nearly all futures in Chicago and New York, while keeping the full-sized S&P 500 futures and most option pits. When the closure was announced, about 1% of the exchange's executed futures volume still matched in the pits, so a typical retail account was expected to see little or no change.

The full-sized S&P 500 futures had never been listed for electronic matching. Other products already used side-by-side trading, with a pit book and an electronic matcher open at once. Electronic and open-outcry versions of the same contract were given different symbols so traders could choose the venue. That symbol split later made product identification on platforms and quote boards confusing.

Some speculative flow had already left the full-sized S&P 500 pit for the electronically matched E-mini S&P 500 to avoid delay and slippage.

Implementation cost after the decision to trade

Implementation cost is the delay, slippage, and failed or halted fills incurred after the decision to trade. The 2015 commentary listed transparency, faster execution and fill reporting, and reduced slippage as stated advantages of electronic matching over the floor.

Open-outcry is floor matching by voice and hand signals inside a designated pit rather than a screen book. Pit routing had been a backup when the exchange or a broker's screens failed. Without that path, a single halt leaves no alternate executable venue.

When a package still went to a floor desk

Simple option buys and sells could already be sent to an electronic platform. High-volume multileg option packages were still often given to an open-outcry broker. A multileg option spread is a package of option legs that must be filled together rather than as separate simple buys or sells.

Editorial: venue routing is the choice of which matching engine or floor desk actually receives and fills the order. Choosing the symbol is choosing the book. If that book is the only remaining path, a halt or a package the screen cannot work as one order is part of the cost of getting the trade done.