Insights
Glossary
Definitions of the terms used on the venue and across this site, aligned with the Rulebook and the fee schedule. Where a term has a dedicated page, it is linked.
Axe
A specific interest a participant holds to buy or sell a particular option risk, typically because it offsets an existing position. On OptAxe an axe is posted to the venue with the issuer's chosen distribution. The protocol
Axe inventory
The aggregate set of axes posted to the venue at a point in time, viewable by permissioned participants.
Axe-driven liquidity discovery
The model at the centre of OptAxe: participants find liquidity by screening posted axes, real interests with a committed direction, rather than by broadcasting requests and waiting for prices. Discovery starts from what the market actually wants to trade. The platform
Best execution
The obligation on an investment firm to take all sufficient steps to obtain the best possible result for its clients when executing orders, considering price, costs, speed, likelihood of execution and settlement, size and nature. In OTC FX options, evidencing best execution depends on capturing comparable quotes and timestamps, one of the drivers of electronic execution.
Buy-side
Institutions that trade to manage investment or hedging exposures, such as asset managers, hedge funds and corporates. On OptAxe, buy-side participants access the venue through the web UI. For the buy-side
Dealer and Client
The two participant categories in the OptAxe fee schedule. A Dealer is a participant that is a bank, a non-bank market maker or a broker or intermediary; a Client is any participant that does not fall within the definition of a Dealer. Categorisation is determined by OptAxe at onboarding in accordance with the Rulebook and the Participant agreement. Fee schedule
Delta hedge
A spot or forward trade executed alongside an option to neutralise its directional exposure. Many FX option trades are executed delta hedged.
EMIR classification
The categorisation of a counterparty under the European Market Infrastructure Regulation (and UK EMIR) as a financial counterparty, non-financial counterparty or otherwise, which determines reporting and clearing obligations.
Exotic option
An FX option with features beyond a standard call or put, such as barriers, digital payouts or averaging. Exotics trade OTC and remain largely voice negotiated.
FIX API
A connection using the Financial Information eXchange protocol, the industry standard for electronic trading messages. Market makers use FIX to receive requests, return prices and confirm executions from their own pricing systems. FIX API
Implied volatility
The volatility implied by an option's market price, quoted in annualised percentage terms. OTC FX options are conventionally quoted and traded in implied volatility rather than premium, so price discovery happens on the volatility itself.
Indication of interest (IOI)
A non-binding expression by a participant of an interest to transact an instrument on the venue, as defined in the Rulebook. An axe is posted as an indication of interest; a firm price arises only when a request for quote is answered with a quote.
Information leakage
The risk that revealing a trading intention to the market, for example through a wide request for quote, moves prices against the initiator before execution.
Interest-matched RFQ
OptAxe's request protocol. A request for quote goes only to the issuer of the axe it responds to, where the bilateral credit check takes place, rather than being broadcast to a list of dealers. Because both sides have already shown a matching interest, the request signals far less to the wider market. The protocol
Liquidity provider
A participant willing to take the other side of a trade by quoting prices, often used interchangeably with market maker. In the OptAxe fee schedule, the Liquidity Provider is the paying party in dealer to client trades.
Liquidity taker
The participant that requests or trades on a price provided by a liquidity provider, as defined in the Rulebook.
Market impact
The adverse price movement caused by a participant's own trading activity or by signalling its intention to trade.
Market maker
A participant that provides prices to other participants. On OptAxe, market makers price in their own systems and connect by FIX. For market makers
Multilateral trading facility (MTF)
A regulated trading venue, defined under UK MiFIR, that brings together multiple third-party buying and selling interests in financial instruments under non-discretionary rules. OptAxe is authorised by the FCA to operate an MTF. Regulatory status
Participant
A firm that has been admitted to the venue under the Rulebook and has signed the Participant agreement. Onboarding
Precious metals options (PMO)
Options on precious metals such as gold and silver. OptAxe is extending its axe-driven model beyond OTC FX options to precious metals options; the instruments page records the current scope. Instruments
Request for quote (RFQ)
A trading protocol in which a participant asks one or more counterparties for a firm price on a specified instrument and size. On OptAxe, requests are targeted at counterparties that have posted a matching interest rather than broadcast to a list.
REST/WS API
An HTTP based programming interface for reading venue data such as axe inventory and trade reports, and for integrating with internal systems. REST/WS API
Risk reversal
A strategy combining an out of the money call and an out of the money put in opposite directions. In FX, the risk reversal is also the market's standard measure of skew: the implied volatility differential between the call and the put at a given delta, most commonly 25 delta.
Rulebook
The set of rules under which the MTF operates, binding on all participants. MTF Rulebook
Straddle
A call and a put at the same strike and expiry. In FX, the at the money straddle is the benchmark structure through which implied volatility is quoted and traded.
Strangle
A call and a put at different out of the money strikes with the same expiry. In FX, the strangle margin quoted over the straddle volatility is the standard measure of the smile.
Symphony
A secure messaging and workflow platform used widely by financial institutions. OptAxe delivers axe and request notifications into Symphony. Symphony
Targeted RFQ
A request for quote sent only to counterparties with a demonstrated, opposing interest. It reduces information leakage compared with a broadcast multi-dealer request.
Transaction reporting
The obligation to report details of executed transactions to the regulator. As an MTF, OptAxe reports transactions executed on the venue where the participant is not itself subject to the obligation.
Vanilla option
A standard FX call or put with a single strike and expiry and no added features such as barriers. Vanillas are the most liquid part of the OTC FX options market and the first to electronify.
Volatility surface
The implied volatilities for a currency pair across strikes and expiries. In FX the surface is conventionally built from at the money straddles, risk reversals and strangles at standard deltas and tenors.