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Fixed Income
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Re: Specifying Order Quantity for Fixed Income
Citadel Bank / Confidential <>
8 Nov 2009 2:26PM ET Many thanks John. That was very helpful.
> The term "Par Value" means the dollar (or other currency) value of one
> unit of the subject security. For marketable U.S. Treasury securities,
> Par Value is currently one-hundred dollars ($100.00).
>
> The term "Par Amount" means the product of Par Value and the quantity of
> units of the subject security. One-thousand units of marketable U.S.
> Treasury securities would today equate to a Par Amount of one-hundred-
> thousand dollars ($100,000).
>
> The term "Face Amount" means the same thing as Par Amount, i.e., Par
> Amount and Face Amount are perfect synonyms.
>
> The term "Dollar Price" means the price of the subject security
> expressed as a percentage of Par Value. It may be expressed with or
> without a dollar sign.
>
> The term "Dollar Value" means the product of Dollar Price and Par (or
> Face) Amount. The Dollar Value of one-thousand units of marketable U.S.
> Treasury securities having a Dollar Price of $98.375 would be
> $98,375.00.
>
> Unfortunately, while the above definitions are useful, in the design of
> a fixed-income-order-routing or -matching system you will still have to
> work out rules of engagement on your own, with your counterparts.
>
> First, only recently did the Par Value of marketable U.S. Treasury
> securities become one-hundred dollars. For years, the Par Value of such
> securities was one-thousand dollars. All U.S. Treasury trading systems
> with which I am familiar still assume that the Par Value for U.S.
> Treasury securities is one-thousand dollars.
>
> Second, two notions of lot size prevail in the market.
>
> The dealer-to-customer market assumes a lot size of $1,000 Par Amount.
> Typically, in the dealer-to-customer market, a quoted size of "1"
> would mean $1,000 Par Amount; a quoted size of "100" would mean
> $100,000 Par Amount; a quoted size of "1,000" would mean $1 million
> Par Amount; and so forth.
>
> The inter-dealer market assumes a lot size of $1 million Par Amount.
> Typically, in the inter-dealer market, a quoted size of "1" would mean
> $1 million Par Amount; a quoted size of "25" would mean $25 million
> Par Amount.
>
> Going back to your original question, "convention" is a fuzzy concept in
> the fixed-income market. If you publish a FIX implementation
> specification for a system you are developing or are parsing one for a
> system with which you intend to connect, you will have no choice but to
> confirm these details on a case-by-case basis with your counterparts,
> either by telling them what you mean or asking them what they mean.
>
>
>
>
> > > > Hi All!
> > > >
> > > > Is there a convention for expressing order quantity in fixed
> > > > income?
> > > >
> > > > Thanks in advance,
> > >
> > > Quantity is the principal value of the trade, i.e. if you are buying
> > > 100,000 US treasuries with a nominal value of USD 100 each, OrderQty
> > > (tag 38) would be 10000000 (10 million)
> > Thanks Rob. But wouldn't it be more simple to specify quantity in
> > terms of face value, if a treasury with a $1000 face value is
> > trading at
> > 98.750% of par and I want to bid for 1000 of those bonds I would
> > specify the price as percent of par (98.750) and quantity as
> > 1,000,000 - NOT 987,500. Why wouldn't that work better?
> >
> > Thanks in advance,
Re: Specifying Order Quantity for Fixed Income
Citadel Bank / Confidential 8 Nov 2009 2:26PM ET
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