Auto and Book execution

How an order reaches Derive, and how the route is picked.

When you confirm an order, the review offers a switch: Auto, Book and, where Derive quotes them, RFQ. It decides how your order reaches the market. Hover any of them in the review to see the live figures for your order.

How to send it
The switch in the order review, under How to send it. Hover an option for its live figures.

Book

Book buys and sells straight from the orders already resting on Derive's order book, the same book you see in the Order Book tab.

  • One leg at a time, buys first. A multi-leg position is sent as one order per leg. Buying legs go first, then selling legs.
  • A price limit on every leg. The limit is the average price the visible book shows for your size, plus 1% on a buy or minus 1% on a sell. No contract fills past it.
  • Fill now or not at all. Anything not filled at once is cancelled. Nothing is left resting on the book.
  • Stops at the first shortfall. If a leg fills only in part, or not at all, the legs after it are not sent, and the review says exactly what filled. A partly built position is shown as it is; the app never chases the rest.
  • Fees are the venue's. Before each leg is sent, Derive is asked what fee it expects, and the order is capped at that.
PriceContracts offeredYour buy of 5
$100.003Takes 3
$100.502Takes 2
Your limit $101.20
$102.504Not taken
$104.006Not taken
Example numbers. Buying 5 contracts takes 3 at $100.00 and 2 at $100.50, an average of $100.20. The order carries a limit of $101.20, that average plus 1%, so the orders at $102.50 and above are never touched. If the book changes before your order lands and there are not 5 contracts under the limit, the leg fills in part or not at all.
  1. 1BUYETH 2,800 Put5 of 5 filled
  2. 2BUYETH 3,600 Call5 of 5 filled
  3. 3SELLETH 3,000 Put3 of 5, stop
  4. 4SELLETH 3,400 CallNot sent
An iron condor of 5 contracts sent to the book. Both buys go first. The third leg found only 3 contracts under its limit, so the fourth was never sent, and the review shows exactly this. Nothing is retried behind your back.

The review shows the all-in cost: how far the book's prices sit from the fair mark for your size, plus fees. When the venue has not answered yet, the fee is estimated from its published schedule and marked est.

You pay$502.00
=
Fair value$499.00
+
Crossing the spread$2.00
+
Fee$1.00
All-in cost $3.00
Example numbers for the 5 contracts above, at a fair mark of $99.80 each. The all-in cost is what the route costs you on top of fair value, so a lower one is the better route.

RFQ

RFQ, a request for quote, asks market makers for one price on the whole position at once. It is taken only if it beats the book. Makers do not always answer, so the review shows the chance of a fill. RFQ is offered only where Derive quotes RFQs; on Derive's current version it does not, and the switch shows Auto and Book.

Auto

Auto is the default. It compares the routes for your exact order and picks the one expected to cost less.

  • Where RFQ is not offered, Auto sends to the book.
  • If the book has no size for one of your legs, RFQ is the only route, so Auto asks makers.
  • Otherwise Auto asks makers only when two things hold: they are likely to answer (about one time in four or better, raised after recent unanswered requests), and the expected saving is worth it (at least $0.50 or 1% of the position's value, whichever is larger).
  • If makers do not answer, or pull their quote, Auto falls back to the book.
  1. Does the book have size for every leg?No RFQ
    Where RFQ is not offered, the order cannot be sent.
  2. Yes
    Does Derive quote RFQs here?No Book
  3. Yes
    Are makers likely to answer? About 1 in 4 or better.No Book
  4. Yes
    Would RFQ save at least $0.50, or 1% of the position?No Book
  5. Yes
    Ask makers for one price on the whole orderRFQ
Auto asks these in order and stops at the first No. If makers then send no quote, or pull it, Auto sends the order to the book instead.

The hover on Auto says which route it picked for this order and why.

Which should I use?

Leave it on Auto unless you have a reason. Pick Book when you want the order on the visible book and nowhere else, for example to see each leg fill as it goes.

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