Passive Liquidity Protection (PLP) is a market mechanism that can further improve the order book’s liquidity picture and price discovery process. Market participants providing passive liquidity need to spend significant resources preventing adverse hits due to short-term underlying movements in products where underlying or exogenous markets significantly drive price discovery. As a result, they may refrain from quoting in the order book and only provide liquidity off-book. By differentiating latency in selected option markets, we let market participants focus on serving the needs of the end clients and grow the market as a whole.
PLP was first introduced in all FX futures and options, followed by a pilot phase for the German and French equity options in June 2019. The DAX® index option (ODAX) added PLP as the first index option in August 2020, including its weekly contracts, followed by all remaining equity options. After encouraging results, Eurex activated PLP for the FTSE 100 index option (OTUK) in May 2021. Since October 2022, PLP is activated also in the EURO STOXX 50® index option family.