TRADITION SEF PLATFORM SUPPLEMENT 2 VOLBROKER CURRENCY OPTIONS TRADING PLATFORM. ( Platform )

Transcription

1 TRADITION SEF PLATFORM SUPPLEMENT 2 VOLBROKER CURRENCY OPTIONS TRADING PLATFORM ( Platform ) This Tradition SEF Platform Supplement to the Tradition SEF Rulebook, (the Rulebook ) sets out the additional terms and conditions which shall apply exclusively to participation in and trading on the Platform and should be read in connection with the Rulebook. January 28, 2016

2 Contents Page Chapter 1 - General Provisions Rule S Definitions and Interpretation... 1 Rule S Application... 2 Rule S Amendments... 2 Rule S The Platform... 2 Chapter 2 - Participation In The Platform Rule S Application Procedure... 4 Rule S Eligibility... 4 Rule S Participant and Customer Obligations... 4 Rule S Access to the System... 4 Chapter 3 - Products Traded On The Platform Rule S Eligible Products... 5 Chapter 4 - Chapter 4 - Trading Rules Rule S Trading Days, Orders and Order Book... 6 Rule S Crossing of Pre-Arranged Customer Orders... 6 Rule S Error Trades... 6 Rule S RESERVED... 6 Rule S System-Related Error Trades... 7 Rule S Suspension of Trading... 8 Rule S Market Surveillance... 8 Rule S2-408 Risk Control Mechanisims... Appendix 1 - Financial Products Tradeable on the Platform: Currency Options 1. Currency Options - Product Types Currency Options - Orders Currency Options - Order Book Currency Options - Trading Day timings Appendix 2 - Financial Products Tradeable on the Platform: Currency Options Fixed Price Auction 1. Currency Options Fixed Price Auctions - Timings, Characteristics and Process Currency Options Fixed Price Auctions - Product Types Currency Options Fixed Price Auctions - Orders Currency Options Fixed Price Auctions - Dark Order Book Appendix 3 - Financial Products Tradeable on the Platform: Currency Options Volcall 1. Currency Options VolCall - Product Types Currency Options VolCall - RFQ Process Currency Options VolCall - Trading Day timings... 15

3 CHAPTER 1 - GENERAL PROVISIONS Rule S Definitions and Interpretation In addition to the Definitions as set forth in the Rulebook in these rules, the following expressions shall have the meanings set out below. When used herein, the term Participant refers only to a Participant who has been granted Trading Privileges on the Platform by Tradition SEF, and the terms Customer, Broker Firm Participant, Authorized Trader and Authorized Broker refer only to such Persons who have been granted access to the Platform by such Participant. Auction Eligibility Criteria Financial Products Platform System Trading Day Transaction Volbroker Rules/Rulebook Platform User Agreement means the functionality on the System for an order matching facility at a fixed price and for defined periods to be determined by Tradition SEF in accordance with this Volbroker Rulebook, during which Participants or Customers may submit orders to a dark order book to be matched against other orders, but provided that ongoing market data dissemination shall not be made in respect of submitted orders, unless and until such order is matched with another order submitted to the System; means the criteria for the time being set by Tradition SEF which determine eligibility to become a Participant or Customer and participate in the System; means the financial instruments admitted to trading on the Platform from time to time and as described in more detail in the Financial Product Appendix to these Volbroker Rules; means the Volbroker Platform market operated by Tradition SEF; means the TFS Broker Suite electronic trading system operated and administered by Tradition SEF for the purpose of the Platform; means a day on which the Platform is open for business other than a day which is a public holiday in the relevant jurisdiction; means a transaction in respect of a Financial Product executed on the Platform formed by way of a matching bid and offer price in an agreed volume; means the rules in this Platform Supplement 2 as the same may be amended, varied, extended, supplemented or replaced from time to time; and means the agreement of the same name governing access by Participants or Customers to the System. References to statutes, statutory instruments, rules of a regulatory authority or provisions thereof shall be construed as references to any of the foregoing as they may be amended, extended varied or replaced from time to time. Unless the context otherwise requires, words denoting the singular shall include the plural and vice versa.

4 Rule S Application This Volbroker Rulebook sets out the terms and conditions which shall apply to participation in and trading on the Platform for all Participants or Customers in order to ensure orderly operation of the relevant market(s) operated by Tradition SEF. For the avoidance of doubt, any Rule contained in this Platform Supplement, to the extent that there is any conflict, shall take precedence over similar Rules in the Rulebook when associated with business conducted on the Platform. The Platform enables Participants or Customers to participate in trading Financial Products by means of the System. Rule S Amendments Tradition SEF has the right to amend, extend, vary or supplement the Volbroker Rules from time to time to the extent necessary or desirable in light of prevailing market conditions. Participants or Customers shall be notified of any changes at least five Trading Days prior to the effective date thereof, unless a short-term action of Tradition SEF becomes necessary due to particular market conditions. Any amendments, extensions, variations or supplements to the Volbroker Rules shall be notified to Participants or Customers by way of a Participant Notice setting out the announcement of Tradition SEF. Rule S The Platform Order Entry Electronic Orders (i) An Order may be submitted by electronic means directly to the Platform Order Book by a Participant, a Customer authorized by a Participant, or by a Broker Firm Participant authorized by a Participant or Customer to act on their behalf. (b) Non-Electronic Orders (i) An Order, other than an Order described in above, may be submitted by a Participant or Customer to a Broker Firm Participant that is authorized by such Participant or Customer to act on their behalf. Upon receipt of such Order, the Broker Firm Participant will submit the Order to the Platform on behalf of the Participant or Customer. Such Orders may be submitted to the Volbroker Platform either directly through manual interaction with the Platform GUI or via communication with a SEF Execution Specialist by such means as voice, IM, or . The Platform enables Participants and Customers admitted to trading to enter into Transactions electronically by use of the System in the manner provided in the Rules. Subject to this Platform Supplement 2 and as set out in associated Appendices contained herein and other relevant provisions of the Rules in the Rulebook, the System will display all prices and automatically selects the best price in terms of highest bid and lowest offer prices and if there are two identical bid or offer prices then priority will strictly be given to the earlier price submitted to 2

5 the System. A price is valid until deleted either by the Participant or Customer who submits it or a Broker Firm Participant who is registered with Tradition SEF and is authorized by a Participant or Customer to act on their behalf or the System at the end of the trading day. Parties to Transactions shall remain anonymous to each other on the System prior to the matching of a Transaction, but immediately following execution of such Transaction the Parties who are the principal party to that Transaction shall be made known to one another by electronic confirmations from the System. Such electronic confirmation from the Platform to each Participant or Customer who is a party to such Transaction shall contain all relevant information on that Transaction including, but not limited to, stated time of the Transaction, size of the Transaction, the price at which the Transaction was executed, the currency pair of the Transaction and the counterparty to the Transaction. 3

6 CHAPTER 2 - PARTICIPATION IN THE PLATFORM Rule S Application Procedure In addition to the Participant or Customer application process set forth in Rule 303 of the Rulebook, Participants or Customers who have direct access to the Platform shall be required to have in place a Platform User Agreement. Rule S Eligibility In addition to the Participant or Customer Criteria requirements set forth in the Rulebook, an applicant to participate on the Platform must have technical and organizational facilities sufficient (in the opinion of Tradition SEF) for the orderly settlement of Product transactions to be assured and must meet the technical requirements for connection to the Platform. Tradition SEF must be satisfied that the applicant has or will have sufficiently completed any necessary connectivity and/or conformance testing prior to conducting business on the Platform. Rule S Participant and Customer Obligations As set forth in Chapter 4 of the Rulebook. Rule S Access to the System As set forth in Chapter 3 of the Rulebook. 4

7 CHAPTER 3 - PRODUCTS TRADED ON THE PLATFORM Rule S Eligible Products Tradition SEF shall determine which Financial Products, from time to time, shall be permitted to be traded on the Platform and the protocols for Transactions to be entered. Full details of Financial Products are set out in the applicable Financial Product Appendix. 5

8 CHAPTER 4 - CHAPTER 4 - TRADING RULES Rule S Trading Days, Orders and Order Book Details of Trading Days, Orders and Order Book mechanics and specifications for each Financial Product tradable on the Platform can be found in the applicable Financial Product Appendix. Rule S Crossing of Pre-Arranged Customer Orders In connection with an Order for a Financial Product, which is deemed to be a Required Transaction as defined by the CFTC, an Authorized Trader or Authorized Broker who seeks to execute against its Customer s Order, or seeks to execute two of its Customer s Orders against each other through the Order Book, following some form of pre-arrangement or pre-negotiation of such orders, must first enter one Customer s Order for a period of time as set forth in this Product Supplement or the Rulebook from time to time, and then enter its Order or the other Customer s Order. Rule S Error Trades Product Transactions effected through the Platform on behalf of a Participant or Customer by their Authorized Trader, or by their Broker Firm Participant s Authorized Broker, shall be binding on such Participant or Customer subject to any other provision of these Rules or the Platform User Agreement. Notwithstanding the foregoing, Tradition SEF may cancel a Transaction in accordance with the policy set out in the Rulebook. Rule S RESERVED Rule S System-Related Error Trades 1. Tradition SEF may unilaterally cancel a Transaction where such transaction constitutes a System-Related Error Trade. 2. For the purpose of this Rule S2-405, a System-Related Error Trade shall occur where, due to an issue with the System, a Transaction is entered into: (b) (c) in the name of a Participant or Customer without the knowledge or authority of such a Participant or Customer; by a Participant s or Customers Authorized Trader after a notification to disable access to the System in respect of that Participant s or Customers Authorized Trader has been received by by Tradition SEF; or which is manifestly erroneous. 3. In the event that Tradition SEF becomes aware of a System-Related Error Trade or is notified by a Participant or Customer of a System-Related Error Trade (such notification from a Participant or Customer to contain the information set out in this Chapter 4 and be sent in accordance with the provisions in this Chapter and at least 30 minutes before the cut-off time for Tradition SEF to send the System-Related Error Trade Cancellation Notice as set out in this Rule), Tradition SEF shall issue a notice, containing the equivalent information to that required by Chapter 4, to all affected Participants or Customers where it intends to cancel a Transaction pursuant to this Rule (a System-Related Error Trade Cancellation Notice ). Tradition SEF shall issue a System- 6

9 Related Error Trade Cancellation Notice as soon as practicable following the System-Related Error Trade coming to its attention and in any event the System-Related Error Trade Cancellation Notice must be issued at least one (1) hour before the end of that Trading Day in order for the procedures in Chapter 4 to apply. 4. Within forty-five (45) minutes after the issue of a System-Related Error Trade Cancellation Notice by Tradition SEF, the Participants or Customers party to the relevant Transaction may, jointly, agree that the Transaction does not constitute a System-Related Error Trade (a Good Trade ). Good Trades shall not be cancelled but all System-Related Error Trades shall be cancelled by Tradition SEF in accordance with Chapter Where a System-Related Error Trade is to be cancelled, then Tradition SEF shall notify the counterparty(ies) of the cancellation of the Transaction, the Transaction shall be cancelled and a cancellation notice sent out to all Participants or Customers of the Platform in respect of each such cancelled Transaction. 6. For the avoidance of doubt, no handling charge will be payable in respect of a cancellation caused by a System-Related Error Trade. 7. If there is insufficient time in the Trading Day for any of the provisions of this Chapter 4 to be carried out, Tradition SEF and the relevant Participants shall use all reasonable endeavours to ensure that such procedures are completed prior to the commencement of trading on the next Trading Day or, if this is not possible, as soon as practicable after commencement of trading on the next Trading Day after the Trading Day on which the error event occurred. 8. For the avoidance of doubt, a Transaction cannot be both a System-Related Error Trade and subject to an Error Trade Cancellation Request. If a Transaction is a System-Related Error Trade the provisions of this Chapter 4 Rule S2-405 shall be followed to the exclusion of the rules in Chapter 4 Rule S Rule S Suspension of Trading 1. Tradition SEF may at any time suspend trading in whole or in respect of one or more Financial Product types, if it in its discretion considers such action necessary having regard to market conditions. Tradition SEF shall revoke the suspension of trading in whole or in respect of one or more Financial Product types if, in its opinion, the reason for such suspension has ceased to exist. 2. The decision of Tradition SEF regarding the suspension of trading of a Financial Product type is generally made after the end of the main trading phase and shall be made public to all Participants by electronic means prior to the commencement of the following Trading Day. 3. If trading in specific Financial Product types is suspended in whole or in part, no new orders or prices may be entered in respect of such Financial Product type for the duration of the suspension. Tradition SEF may, in the event of a suspension of trading, issue different instructions on a case-by-case basis. Rule S Market Surveillance and Market Operations 1. Tradition SEF shall perform surveillance pursuant to the Rulebook and the Tradition SEF Compliance and Surveillance Manual. 2. Tradition SEF shall enforce compliance with these Rules and may take all measures necessary to ensure orderly trading and the smooth operation of the System. 7

10 3. In order to ensure orderly system functionality, the commencement of trading may, at the order of Tradition SEF, be postponed for the entire System or trading hours may be extended or shortened accordingly. 4. In the event of technical problems, Tradition SEF may, for individual or all Participants, temporarily suspend access to or trading in the System. 5. In the event of measures being taken which materially affect the operation of the System, the Participants or Customers affected thereby shall, to the extent possible, be promptly notified via the System or - in the case of a system failure - by other suitable electronic means. 6. If participation in trading on the Volbroker Platform is not possible to individual Participants or Customers due to individual technical disruptions, the System shall continue to be available to other trading Participants. Rule S2-408 Risk control mechanisms to prevent and reduce the potential risk of market disruptions The Volbroker Platform contains the following key risk control mechanisms to prevent and reduce the potential risk of market disruptions: 1. Crossed market prevention: If a bid is entered which matches or is higher than an existing offer, it will be rejected. If an offer is entered which matches or is lower than an existing offer, it will be rejected. 2. Fat finger protection: Entering a transaction size greater than 1,000 times the default market size will be rejected (e.g. to prevent someone entering 20,000,000 rather than 20). 3. A two-step transaction verification mechanism for trade execution. Participants must confirm the level and amount they wish to trade before execution. 4. Self-trading prevention: Parties are blocked from self-trading at the organization level. APPENDIX 1 FINANCIAL PRODUCTS TRADEABLE ON THE PLATFORM: CURRENCY OPTIONS 1. Currency Options product types The full list of Currency Options product types available for trading on Tradition SEF is available on Because a Currency Option product is available for trading on Tradition SEF does not mean that the Product is available on the Volbroker Platform. The full list of product types admitted to and capable of being traded on the platform are available upon request from Tradition SEF, but in summary include but are not limited to the following : Currency Options in the following currency pairs: AUD/CAD, AUD/CHF, AUD/HKD, AUD/JPY, AUD/KRW, AUD/NZD, AUD/SGD, AUD/USD, AUDUSD/NZDUSD, BRL/JPY, CAD/JPY, CAD/SGD, CHF/HUF, CHF/JPY, CHF/TRY, EUR/AUD, EUR/BRL, EUR/CAD, EUR/CHF, EUR/CLP, EUR/CNY, EUR/CZK, EUR/GBP, EURGBP/GBPCHF, EUR/HKD, EUR/HUF, EUR/ILS, EUR/JPY, EUR/KRW, EUR/MXN, EUR/MYR, EUR/NOK, EUR/NZD, EUR/PLN, EUR/RON, EUR/RUB, EUR/SEK, EUR/SGD, EUR/TRY, EUR/USD, EURUSD/USDCHF, EURUSD/USDNOK, EURUSD/USDSEK, EUR/ZAR, GBP/AUD, GBP/CAD, GBP/CHF, GBP/JPY, GBP/MXN, GBP/SGD, GBP/USD, JPY/INR, JPY/KRW, MXN/JPY, NOK/JPY, NOK/SEK, NZD/CAD, NZD/JPY, NZD/SGD, NZD/USD, SEK/JPY, SGD/JPY, TRY/JPY, TRY/ZAR, 8

11 USD/AED, USD/ARS, USD/BHD, USD/BRL, USDBRL/EURBRL, USD/CAD, USD/CHF, USD/CLP, USD/CNH, USD/CNY, USDCNY/USDCNH, USD/COP, USD/CZK, USD/HKD, USD/HUF, USD/IDR, USD/ILS, USD/INR, USD/JPY, USD/KRW, USD/KWD, USD/KZT, USD/MXN, USDMXN/EURMXN, USD/MYR, USD/NOK, USD/OMR, USD/PHP, USD/PLN, USDPLN/EURPLN, USD/QAR, USD/RUB, USDRUB/EURRUB, USD/SAR, USD/SEK, USD/SGD, USD/THB, USD/TRY, USDTRY/EURTRY, USDTWD and USDZAR. The trading strategies permitted are Butterfly, Straddle and, Risk Reversal, and additionally in relation to Auctions and VolCall (see Product Appendices 2 and 3) Call, Put and Strangle, with a range of standard tenors, depending on pair, from ON through to 2Y with long-date tenors on selected pairs from 2Y out to 30Y. Volatility Swaps in the following currency pairs: AUD/JPY, AUD/USD, EUR/GBP, EUR/JPY, EUR/USD, GBP/USD, USD/CAD, USD/CHF and USD/JPY. 2. Currency Options - Orders (b) Prices can be offered for the products listed in paragraph above and shall remain valid, until changed or cancelled by the Participant. Orders entered in the System and not matched will be automatically cancelled at the end of the Trading Day. Order Types and Features (i) (ii) Good-til-Cancelled ( GTC ) the standard order type, known as BID or OFFER depending on direction. GTC orders are visible, subject to the maximum display size rule below. Maximum display size rule orders with a notional size of >n shall appear on the System as an order of n+, with the remaining size becoming visible as the visible order (or part thereof) becomes matched on the System (where n is a size variable determined by Tradition SEF and reflective of the currency pair and prevailing market conditions). The Maximum display size can be adjusted by Tradition SEF from time to time upon notice to Participants in accordance with this Volbroker Rulebook. (c) Internal self trading (i.e. matching bids and offers from the same Participant) is disabled on the System by default. The System will not permit matching of orders from the same Participant. 3. Currency Options - Order Book The order book contains all orders entered in the System by the Participants. The Participants may view in the order book all orders per Transaction. If an order is matched it will be removed from the queue and only live orders will be shown in the System. Orders not matched by the end of the Trading Day will automatically be cancelled and Participants must therefore re-enter their orders into the System on the next Trading Day. Minimum transaction sizes are calculated by the order book based on currency pair. Orders below the minimum quantity for a currency pair will be rejected and a warning message will appear providing the user with the minimum quantity necessary to continue with a transaction. 4. Currency Options - Trading Day timings Trading on the Platform for Currency Options shall take place on each Trading Day. Tradition SEF reserves the right to determine additional Trading Days after prior announcement thereof to the Participants. For the purposes of this paragraph 4.1, 9

12 Trading Day means the period from (AEST/ADST) to (EST/EDT) on every weekday in London other than Christmas Day and New Year s Day. (b) Trading on the Platform will be available from Monday (AEST/ADST) to Friday (EST/EDT) or for such other periods as may be determined by Tradition SEF and made known to all Participants in accordance with Chapter 1, Rule 3. 10

13 APPENDIX 2 FINANCIAL PRODUCTS TRADEABLE ON THE PLATFORM: CURRENCY OPTIONS FIXED PRICE AUCTION 1. Currency Options Fixed Price Auctions timings, characteristics and process (b) Auctions on the Platform for Currency Options shall take place on such days and at such times as Tradition SEF may notify to Participants, from time to time. An Auction shall be: (i) (ii) at a fixed price, with such fixed price being specified by Tradition SEF immediately prior to the Auction s commencement; with a minimum quantity and for a defined time (in multiples of 1 minute, with a minimum value of 1 minute), in each case as specified by Tradition SEF at the same time as the Auction is notified to Participants pursuant to paragraph. (c) (d) (e) (f) Tradition SEF shall establish the fixed price for an Auction by reference to the mid-market price on the Volbroker Platform for the product to be auctioned immediately prior to the Auction by reference to the Volbroker Curve, or by reference to some other benchmark level, such as executable or indicative current market prices received from Participants or Broker Firm Participants, or historical prices on the Volbroker Platform or any other registered SEF or designated contract market relating to the product being auctioned, in each case at the point immediately prior to the commencement of the Auction or when such benchmark level is published, if later. At any time there may be multiple Auctions in respect of different product types. At any time during an Auction, Tradition SEF may, by notifying all Participants, terminate such Auction, whereupon all unmatched orders residing in the System shall be cancelled. For the avoidance of doubt, orders matched prior to the termination of the Auction will not be affected. At any time prior to the commencement of an Auction, Tradition SEF may, by notifying all Participants, cancel such Auction. 2. Currency Options Fixed Price Auctions product types All product types eligible for trading on the Platform (as described in any Appendix to the Volbroker Rulebook, as may be amended in accordance with this Volbroker Rulebook from time to time) shall be eligible to be the subject of an Auction hereunder. 3. Currency Options Fixed Price Auctions - Orders During the Auction, Participants may enter new orders, amend existing orders, or cancel an order. Because of the fixed price nature of an Auction, an order s price characteristic cannot be amended. Similarly, an order cannot be amended such that the minimum quantity requirement would no longer be met. Orders shall contain the following information: an instruction to buy or sell; (b) price instruction (see condition 3(b)); and (c) notional value or number of contracts. 11

14 (b) Price Conditions. Due to the fixed price nature of an Auction, market orders into the Auctions express a willingness to accept the prevailing or fixed Auction price. Limit orders are permitted, but only at the fixed price set for the Auction and mispriced limit orders will be rejected accordingly. 4. Currency Options Fixed Price Auctions Order Book (b) (c) In an Auction the order book contains all orders entered into the System by the Participants. Auction participants are prevented from seeing details of interests building in the Order Book prior to the initiation of the price-matching function of the auction or during the auction session itself. The Order Book acts as, a matching engine for orders input during the Auction by Participants, matching strictly on a First In First Out time priority basis. If an order is matched fully or partially, the matched portion of the Order it will be removed from the Order Book. Orders not matched by the end of the Auction will be cancelled.. When the System matches orders, an execution message will be sent immediately from the System to each counterparty to the Transaction. Internal self trading (i.e. matching bids and offers from the same Participant) is disabled on the System by default. The System will not permit matching of orders from the same user. 12

15 APPENDIX 3 FINANCIAL PRODUCTS TRADEABLE ON THE PLATFORM: CURRENCY OPTIONS VOLCALL 1. Currency Options VolCall product types The full list of product types admitted to and capable of being traded on the platform are available upon request from Tradition SEF, but are listed in summary in Appendix 1, paragraph 1. Currency Options VolCall RFQ process [REDACTED CONFIDENTIAL TREATMENT REQUESTED] 2. Currency Options VolCall - Trading Day timings The VolCall functionality on the Platform for Currency Options is available each Trading Day at such other periods as may be determined by Tradition SEF and made known to all Participants in accordance with Chapter 1, Rule 3. Tradition SEF reserves the right to determine additional Trading Days after prior announcement thereof to the Participants. For the purposes of this paragraph 3.1, Trading Day means the period from (AEST/ADST) to (EST/EDT) on every weekday in London other than Christmas Day and New Year s Day. 13