Eurex Euribor Eurex Euribor

Market Making IdeasMarket Making Ideas

Euronext Liffe EuriborEuronext Liffe Euribor

Opposite I have Opposite I have copied over the bid copied over the bid ask and sizes of the ask and sizes of the euribor outrights on euribor outrights on LIFFE. Obviously the LIFFE. Obviously the bid asks like all bid asks like all markets are markets are substantially reduced substantially reduced from recent history.from recent history.

Ex A

Month size Bid Ask size

Dec_08 100 95.995 96.000 500

Mar_09 450 96.495 96.500 80

Jun_09 250 96.655 96.660 170

Sep_09 305 96.595 96.600 80

Dec_09 250 96.280 96.290 402

Mar_10 85 96.170 96.175 125

Jun_10 100 95.960 95.965 130

Sep_10 105 95.780 95.785 93

Eurex Euribor Eurex Euribor Opposite are the bid asks Opposite are the bid asks

which are currently populating which are currently populating the Eurex Euribor prices. the Eurex Euribor prices. (bid/Ask/Size) As you can see (bid/Ask/Size) As you can see these prices are ridiculously these prices are ridiculously wide compared to the primary wide compared to the primary market. In my opinion, in a market. In my opinion, in a market which is hungry for market which is hungry for liquidity in all asset classes, liquidity in all asset classes, making prices in the eurex making prices in the eurex euribor would work very simply euribor would work very simply and effectively. Your prices and effectively. Your prices would not have to be would not have to be exceptionally tight. I have exceptionally tight. I have various ideas how to start various ideas how to start pretty simple market making pretty simple market making on Eurex. on Eurex.

Ex B

Month size Bid Ask size

Dec_08 100 95.985 96.010 100

Mar_09 100 96.485 96.510 100

Jun_09 75 96.640 96.670 75

Sep_09 75 96.580 96.610 75

Dec_09 75 96.270 96.295 75

Mar_10 50 96.160 96.185 50

Jun_10 50 95.950 95.975 50

Sep_10 50 95.770 95.795 50

Euronext Liffe Euribor CalendarsEuronext Liffe Euribor Calendars

Opposite I have pasted Opposite I have pasted the Calendar spreads the Calendar spreads listed on Liffe for the 3mth listed on Liffe for the 3mth euribors. These should euribors. These should be an integral part of any be an integral part of any market making process market making process from liffe to euribor. When from liffe to euribor. When I did the cme/liffe euro$ I did the cme/liffe euro$ these were my inside these were my inside market edge and enabled market edge and enabled me to manage my risk. me to manage my risk.

Ex E

Spread Size Bid Ask Size

z8/h9 200 -50.0 -49.5 700

h9/m9 300 -16.0 -15.5 1000

m9/u9 800 6.0 6.5 49

u9/z9 1500 31.0 31.5 500

z9/h10 828 11.0 11.5 50

h10/m10 600 20.5 21.5 1200

m10/u10 2000 17.5 18.5 1856

Most Basic method. Half a tic edge Most Basic method. Half a tic edge eurex priced around liffe.eurex priced around liffe.

Opposite I have Opposite I have copied the most basic copied the most basic method to make a method to make a market around liffe market around liffe prices. Simply making prices. Simply making a price around liffe. a price around liffe. This of course would This of course would be perfect in an ideal be perfect in an ideal world. And to test the world. And to test the application this would application this would be the place to start.be the place to start.

Ex C

Month size Bid Ask size

Dec_08 150 95.990 96.005 150

Mar_09 150 96.490 96.505 150

Jun_09 150 96.650 96.665 150

Sep_09 150 96.590 96.605 150

Dec_09 100 96.275 96.295 100

Mar_10 100 96.165 96.180 100

Jun_10 100 95.955 95.970 100

Sep_10 100 95.775 95.790 100

Malcolm MethodMalcolm Method Opposite is what I did in euro$. In many Opposite is what I did in euro$. In many

cases my price is the same as one of Liffe’s cases my price is the same as one of Liffe’s offers or bids. I calculate my bid ask spread offers or bids. I calculate my bid ask spread based off the edge I can create by selling based off the edge I can create by selling the offer or buying the bid. If I can lay off the the offer or buying the bid. If I can lay off the edge into another contract and produce edge into another contract and produce edge in the calendar spread I will make the edge in the calendar spread I will make the same bid or ask as liffe. This way I am sure same bid or ask as liffe. This way I am sure to be the best bid / offer and this will enable to be the best bid / offer and this will enable the product to becoe attract to traders and the product to becoe attract to traders and flow. The math is very simple. If you take my flow. The math is very simple. If you take my bid in Dec 09, we are the same as Liffe, but bid in Dec 09, we are the same as Liffe, but I know if I get given on the bid I have I know if I get given on the bid I have options to sell mar10 at 96.17 (creating me options to sell mar10 at 96.17 (creating me long the z9/h0 @ 11) if there is no edge I long the z9/h0 @ 11) if there is no edge I will remain outside the liffe price. The next will remain outside the liffe price. The next stage is managing the calendar I have stage is managing the calendar I have created with a guaranteed stop on the 11 created with a guaranteed stop on the 11 bid working an offer at 11.5 OCO. And the bid working an offer at 11.5 OCO. And the process continues,process continues,

Ex D

Month size Bid Ask size

Dec_08 250 95.990 96.000 250

Mar_09 250 96.495 96.505 250

Jun_09 250 96.655 96.665 250

Sep_09 250 96.595 96.605 250

Dec_09 150 96.280 96.290 150

Mar_10 150 96.165 96.180 150

Jun_10 150 96.955 96.970 150

Sep_10 150 96.780 96.790 150