Automated Improvement Mechanism

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In the electronic environment, CBOE's Hybrid system provides price improvement opportunities through features like the Automated Improvement Mechanism (AIM) and Complex Order Auction (COA).

CBOE's AIM is an automated process for paired orders of any origin type, which provides potential for price improvement and a participation right through an auction process. By utilizing AIM’s paired order mechanism, an order flow provider is afforded the opportunity to participate against their customers’ orders or to solicit another firm’s liquidity.[1]


Key Features

Order Submission: Buy and sell sides of the transaction are submitted together

  • Contra order size must be equal to that of the original order.
  • Contra order price must be NBBO (if 50 contracts or greater); one price increment (see Auction Process) better than NBBO (if 49 contracts or less);or MKT (indicates contra-submitting firm is willing to auto-match the best price of other auction participants).

Auction Process: Order is exposed to a brief electronic auction

  • Auction will begin at NBBO or better, depending on order size.
  • Auction price increment will not be less than one cent.
  • Auction length will be a randomly selected time period.

=== Trade Allocation: Participants on the best price at the auction end share in allocation === Resting customer orders are allocated first. If on the final price, contra-submitting firm receives:

  • 40% minimum - if matched by multiple participants.
  • 50% minimum- if matched by one participant.
  • 100% - if not matched by any other participants.
  • If auto-match is indicated (i.e., contra order = MKT), the contra-order will match other participants’ size at each price better than the final clearing price. At the final clearing price the contra order will be guaranteed a minimum of 40%.

References

  1. Automated Improvement Mechanism. CBOE.