What is Fast Market Logic, and why does it exist?
Fast Market Logic (FML) is a volatility control mechanism that continuously monitors short-term price movement within an Exchange defined observation window. If a newly entered order would cause the market to move beyond a predefined allowable range, trading will temporarily pause (a “HALT”) to allow liquidity to re-form and price discovery to stabilize.
Once triggered, the impacted products will enter a brief market HALT. The triggering order will not execute and will remain resting on the order book. During the HALT, participants may enter new orders, cancel open orders, and amend existing orders, however, no matching will occur.
How does a Fast Market Logic event trigger?
A FML event is triggered when the defined threshold is breached.
How many instances are active per product?
FML operates with two instances per product: Fast Market Logic Short and Fast Market Logic Long. Both instances monitor all underlying instruments of the product and function the same way, with the only differences being their configured parameters, including, but not limited to, the distance threshold, whether the Price Band (PB) multiplier is enabled, and the observation window.
Fast Market Logic Short uses narrower parameters, while Fast Market Logic Long uses wider parameters. Using these two instances together allows the system to detect different fast-moving market scenarios.
How does distance threshold work?
Distance threshold controls the maximum allowed distance a fill price can be from the current reference price range. It checks whether a potential fill price has moved too far beyond the upper or lower reference prices tracked in the observation window. The distance threshold evaluates whether a potential execution price is too far from where the market has recently traded. It is designed to prevent, but not guarantee, sudden price spikes and cascading executions within a short time interval.
The distance threshold is measured against high and low reference prices calculated over a rolling observation window. The length of this window is defined by the Exchange and is typically set to less than one second.
Distance Threshold Concept:
“Is this execution too far from where prices have recently been?” If the threshold is breached, FML is triggered and the market enters a HALT state.
Think of it as: "How far outside the recent price range can a single fill occur?"
Distance Threshold checks:
Upper breach: fillPrice > lowerRefPrice + (threshold x PB Multiplier)
Lower breach: fillPrice < upperRefPrice - (threshold x PB Multiplier)
Distance Threshold Exceeded Example
Details:
Current Price = $100.00
Product tick size = $0.05
Distance threshold = 30 ticks ($1.50)
PB Multiplier = 1.0 (so threshold × PB = $1.50)
Observation window = 500ms
Upper Breach Example:
1. Activity within the 500ms window
t+0ms: Trade fills @ $100.00
PB Reference Price (RP) = $100.00
FML monitor: upperRef = $100.00, lowerRef = $100.00
2. t+50ms: Sell rests @ $99.90
PBRP = min($99.90, $100.00) = $99.90
FML monitor: upperRef = $100.00, lowerRef = $99.90
3. t+150ms: Buy rests @ $100.10
PBRP = max($100.10, $99.90) = $100.10
FML monitor: upperRef = $100.10, lowerRef = $99.90
4. t+300ms: Aggressive buy would fill @ $101.65
Upper distance check (anchored to lowerRef):
$101.65 > $99.90 + $1.50 = $101.40
Result: Upper Breach → HALT
Explanation:
The fill was $1.75 above the lowerRef ($101.65 − $99.90 = $1.75), exceeding the allowed $1.50 threshold (after PB multiplier).
Lower Breach Example:
Activity within the 500ms window
1. t+0ms: Trade fills @ $100.00
PBRP = $100.00
FML monitor: upperRef = $100.00, lowerRef = $100.00
2. t+50ms: Buy rests @ $100.10
PBRP = max($100.10, $100.00) = $100.10
FML monitor: upperRef = $100.10, lowerRef = $100.00
3. t+150ms: Sell rests @ $99.90
PBRP = min($99.90, $100.10) = $99.90
FML monitor: upperRef = $100.10, lowerRef = $99.90
4. t+300ms: Aggressive sell would fill @ $98.35
Lower distance check (anchored to upperRef):
$98.35 < $100.10 − $1.50 = $98.60
Result: Lower Breach → HALT
Explanation:
The fill was $1.75 below the upperRef ($100.10 − $98.35 = $1.75), exceeding the allowed $1.50 threshold (after PB multiplier).
How does the market reopen after a triggered event?
Once Fast Market Logic is triggered, the affected market enters a brief HALT period.
Reopening Process
At the conclusion of the HALT:
If the order book is crossed, the system generates an Indicative Opening Price (IOP).
The market transitions to OPEN, and normal matching resumes.
If no IOP is generated at the end of the HALT:
The market remains in HALT for an additional period.
At the end of each HALT cycle, the system attempts to generate an IOP.
The system will attempt a maximum of three consecutive HALT cycles.
If no IOP is generated after three attempts (Max Reopen Loop):
The market transitions to OPEN, and normal trading resumes.
Lead Month and Back Month Interaction
If a back month instrument has a fully crossed book and could generate a clear IOP, the product will remain in HALT if the lead month is still halted.
The entire product will only reopen when:
The lead month generates an IOP and reopens, or
The lead month reaches the maximum number of HALT cycles and transitions to OPEN.
This ensures consistent reopening behavior across the product and prevents back months from reopening independently while the lead month remains halted.
Front Month vs Back Month Logic
Front Month Breach
When the lead month breaches Fast Market Logic thresholds, the HALT is applied at the product level.
All instruments within the product enter HALT.
All instruments reopen together.
A single reopening process governs the entire product.
This ensures orderly price discovery in the most actively traded contract and prevents fragmentation across expiries.
Back Month Breach
When a back month breaches Fast Market Logic thresholds:
Only the specific back month instrument enters HALT.
Any associated calendar spreads also enter HALT.
All other instruments within the product remain OPEN.
This isolates volatility to the affected expiry while allowing the rest of the product complex to continue trading.
Back Month Defers to Front Month HALT
Back months include safeguards that prevent independent reopening if the front month is in a product-level HALT.
If:
A back month triggers its own HALT, and
The lead month subsequently breaches and triggers a product-level HALT,
Then:
The back month’s individual HALT timer is suppressed.
The front month’s product-level HALT timer takes precedence.
The back month reopens only when the product-level HALT concludes.
This ensures consistent and coordinated reopening across the product and prevents misaligned market states between expiries.
How are the parameters determined?
All Fast Market Logic parameters are determined by the Exchange. The Exchange retains full discretion to adjust or expand parameter values in response to market conditions to help preserve market integrity.
Parameters are configured at the product level. The Exchange may assign different values to front and back month instruments within the same product. The Exchange may also disable either the Fast Market Logic Short or Long on any product.
The observation window will be set to a value of less than one second. However, the Exchange reserves the right to increase this window if deemed necessary.
Distance and range thresholds for each product, including separate settings for front and back months, will be maintained by the Exchange and reviewed periodically.
The HALT period is determined per product and is usually, but not guaranteed to be, 20 seconds or less. The exchange may adjust the HALT period per product as needed.
What are the exclusion periods?
Fast Market Logic has exclusion periods during which all Fast Market Logic breach checks are bypassed, and fills are allowed regardless of thresholds. However, the Fast Market Logic monitor continues tracking prices during suppression, so when the window ends, Fast Market Logic enforcement resumes with accumulated reference data. There are two types of suppression windows: Post-Open and End-of-Day Settlement.
End-of-Day Settlement: 60 seconds before settlement
Post-Open: 60 seconds after transitioning to OPEN
How does Fast Market Logic update the reference prices?
How FML updates:
FML is event-driven. Monitoring and recalculation occur only when there is trading activity or a new fill attempt. When activity resumes, the system immediately updates and applies the appropriate checks.
If there is an IOP at open:
When an instrument opens with an IOP, FML is seeded using that IOP as the reference price. If no trading occurs afterward, FML continues to use that IOP as its reference price. When trading resumes after a FML halt, the system automatically refreshes, continues monitoring based on that same reference price, and resets the Price Fluctuation Limits for the remainder of that hour.
If there is no IOP and no activity:
If an instrument does not generate an IOP and no trades occur, FML remains uninitialized because there is no reference price. The first trade will execute without FML protection, as there is no prior price data to evaluate against. That first trade establishes the reference price, and FML becomes active from the next price-moving event onward.
If there was activity, followed by a long period of inactivity:
If trading becomes inactive for an extended period, the short-term high/low reference range expires because it falls outside the observation window. However, the last PBRP remains stored.
When activity resumes, Fast Market Logic re-seeds using that single last PBRP rather than the old range. In effect, the market moves from a reference range to a single reference point after inactivity, with the last observed PBRP serving as the anchor for renewed monitoring.
If it is an inactive back month:
Back month contracts remain subject to product-level HALTs triggered by the lead month. If a back month becomes stale for an extended period, the lead month’s reference price may be used to seed the back month’s FML monitoring. This helps maintain consistency across the product, even when certain expiries are inactive.
How can I determine if a product or instrument is in a Fast Market Logic HALT?
A Fast Market Logic HALT can be identified through the FIX Market Data or UDP Market Data feeds, where the HALT reason is tagged as “Fast Market Event.”