Expand your network. Find the other side of the trade

Transcription

1 Expand your network Find the other side of the trade

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3 SIX Corporate Bonds is the new credit trading platform by SIX that allows credit traders to efficiently source liquidity in large ticket sizes with minimal information leakage to the broader market. Designed in consultation with head credit traders from a number of large international investment banks, this dealer-to-dealer (D2D) trading model complements existing trading practices, automates the search for liquidity, and optimises the opportunities for timely and efficient matching. SIX Corporate Bonds is a multilateral exchange like corporate bond trading platform that is domiciled in Switzerland and regulated by the Swiss Financial Market Supervisory Authority, FINMA.

4 Indicate. Match. Trade. Efficient.

5 Your advantages at a glance Indicate Participants may anonymously submit Indications of Interest (IOIs) to the SIX Corporate Bonds platform. Where internalisation of client orders is not optimal, SIX Corporate Bonds offers an alternative for sourcing liquidity, ensuring the best use of the participants balance sheet. Match SIX Corporate Bonds seeks to anonymously match trading interests systematically against active IOIs from other participants. Where needed, historical trades in the same bond are also searched to identify potential contra-interest. Variable matching logic can be selected to allow participants to expand the search to a broader range of similar bonds, thereby providing more choice to the end-client. This innovative use of technology complements the current dealer-to-dealer trading model, whilst systematically optimising the search for liquidity across market participants. Trade When SIX Corporate Bonds identifies potential matching opportunities, the counterparties to those IOIs are anonymously invited to negotiate price and size for a trade. When a trade is concluded, it is possible for other participants with an interest in trading that instrument to add volume for execution at the traded price, thereby optimising the volume executed once a price has been agreed. Efficient SIX Corporate Bonds automates and optimises the current dealer-to-dealer search for liquidity. By systematically and continuously searching active and historic trading opportunities across the platform, participants are ensured timely notification of opportunities to trade their positions. SIX Corporate Bonds gives participants a new, alternative source of liquidity.

6 Participants have a number of options for connecting to the SIX Corporate Bonds platform. The interface to SIX Corporate Bonds uses FIX 4.4 which is standard infrastructure across dealing rooms worldwide. Off-the-shelf solutions can be provided by well-reputed trading technology providers such as Algomi, ION and MACD. ION Trading (ISV) ION gateway Market Session window Algomi (ISV) Algomi Synchronicity Upgrade window to initiate Curtain Time or immediate Market Session MACD Trader GUI (ASP) Alternatively the interface specification allows participants to integrate SIX Corporate Bonds directly into their in-house rading systems. MACD Trader GUI window to initiate Curtain Time or immediate Market Session

7 Expand your network Find the other side of the trade Innovative trading model The SIX Corporate Bonds trading model has been developed in collaboration with head credit traders from a number of international investment banks. The model is based on existing dealer practices, optimised to systematically and continuously search for matching opportunities. Six phase trading model Trading session IOIs Notification Curtain Time Market Session Private Public IOIs Participants enter non-binding IOIs on an anonymous basis. Notification Participants with matching IOIs are notified and invited to a trading session. Curtain Time During the Curtain Time, participants firm up their IOIs to quotes as the basis for further negotiation. Private In the Private, the two participants of the initial Market Session are offered the opportunity to trade supplementary volumes at the already agreed price. Public In the Public, other participants with potential interest to trade that instrument are invited to execute further volume at the already agreed price. Market Session In the Market Session, participants negotiate price and size.

8 Indications of Interest (IOIs) The participants submit their corporate bond Indications of Interest (IOIs) to the SIX Corporate Bonds platform. IOIs can be uploaded individually or in bulk. IOIs are anonymous, they are not displayed and cannot be seen by other participants on the platform. MACD Trader GUI (ASP) Window to enter IOI incl. the relevant information Trading session IOIs Notification Curtain Time Market Session Private Public IOI s are not binding. Participants IOI s are used as the basis for the intelligent matching logic of SIX Corporate Bonds to flag potential trading opportunities. A participant can choose between matching against the exact bond or suggested alternatives (variable match). Cash or spread trading configuration is defined as part of the reference data of each individual bond.

9 Expand your network Find the other side of the trade Notification When SIX Corporate Bonds identifies a potential contra-interest for the IOI that participants have entered, it automatically notifies the owners of those IOIs. Should participants agree to proceed to the next stage, a trading session is initiated where the price and size can be firmed up. Should there be no active IOIs in a specific bond, SIX Corporate Bonds uses historical trades (the last two executed trades) in that bond to identify potential matching opportunities. Confirmation message of live and historical match on same bond Trading session IOIs Notification Curtain Time Market Session Private Public IOI s are not actionable until price and size are firmed up in a trading session. Historical trades (the last two executed trades) in a given instrument are used to identify potential trading interest if there are no active IOIs in a given bond on the platform.

10 Curtain Time The first participant to act on a potential match becomes the initiator of the trading session. That participant may create a mini auction (Curtain Time) when other interested parties can firm up their IOIs to quotes, creating a pool of competing prices in that instrument. Once Curtain Time finishes, the most competitive firmed up price is then promoted to a bilateral negotiation with the initiator (Market Session). MACD Trader GUI (ASP) Window to enter price and size, initiator to choose between Curtain Time and Market Session Trading session IOIs Notification Curtain Time Market Session Private Public IOI s are not actionable until price and size are firmed up in a trading session. Historical trades (the last two executed trades) in a given instrument are used to identify potential trading interest if there are no active IOIs in a given bond on the platform.

11 Expand your network Find the other side of the trade Market Session Once both participants have firmed their quote, they enter a bilateral trading session where they can continuously fine tune their price and size in an attempt to match their positions. Prices are bilaterally revealed only to the two participants in the Market Session. Only the lower of the two sizes is displayed, so the lower size interest is not aware of the total volume of the higher size participant. Once the two participants prices match, the trade is executed and the two partici pants proceed to the next stage, Private. If agreement is not found on price, the Market Session lapses and the partici pants enquiry reverts to its prior IOI status. SIX Corporate Bonds uses sophisticated anti-gaming logic to prevent misuse of the negotiation process. Participant buying a bond Participant selling a bond Trading session IOIs Notification Curtain Time Market Session Private Public Negotiation takes place within a preset time frame, after which the negotiation will lapse. Where prices cross, or if both participants have selected Meet at mid, the execution will happen at mid-point. Upon successful completion of a trade, name give up is immediate to both parties.

12 Private Upon successful completion of the initial trade in the Market Session, the two participants have the option to add more volume with the same counterparty at the same price in a Private. If both participants submit more volume, the smaller of the two sizes matches automatically at the prearranged price. This process continues until one or other side has exhausted their available trading volume. Bond market overview information on Private Trading session IOIs Notification Curtain Time Market Session Private Public The minimum incremental size in a Private is 1 million. The Private takes place within a preset time frame. The participant with unfilled volume gets time priority in the next phase of the trading session, the Public.

13 Expand your network Find the other side of the trade Public Once the initial bilateral trade and the associated Private have been concluded, other SIX Corporate Bonds participants with an interest in trading that instrument are invited to submit additional volumes for execution at the same price as the initial execution. Candidates to join the Public are identified using active IOIs and the prior two trades in that instrument. There is no obligation for the initial parties to the trade to participate in the Public phase. However, should a party to the initial trade proceed to the Public with additional volume, they get priority for execution. Bond market overview information on Public Trading session IOIs Notification Curtain Time Market Session Private Public The minimum incremental size in a Public is 1 million. The smaller of the matchable amounts is executed. Matches are made on a time priority basis.

14 Further information Bond universe supported SIX Corporate Bonds supports trading of large ticket sizes (minimum 2 million of the respective currency), in European financial and non-financial credit denominated in EUR, GBP and USD. Participants can expand the universe of supported bonds by requesting specific bonds to be included on the system. Reporting Executed trades automatically fulfil the reporting duty. Publication Further, the SIX Corporate Bonds website will publish volume and price of trades executed on the platform (T+3). Settlement Settlement is on a bilateral basis. Notice to U.K. persons: This document is directed only at persons having professional experience in matters relating to investments, as defined in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, and to others to whom it can lawfully be distributed, in the United Kingdom. Persons who do not have professional experience in matters relating to investments should not rely on it and any other person should not act on such information. The investment services described in this document are only available to investment professionals in the United Kingdom. The information given in this document is provided for information and discussion purposes only. This is a working document outlining the service of a new corporate bond facility. None of the information contained herein constitutes an investment advice or guidance for investment or other decisions, or an offer to purchase or sell a financial instrument traded on SIX Corporate Bonds AG or on any other facility. SIX Corporate Bonds AG provides no warranty and assumes no liability for the accuracy or completeness of said information or for any damages of any kind whatsoever arising directly or indirectly from actions taken on the basis of information contained in this document. SIX Corporate Bonds AG is a joint-stock company under Swiss law wholly owned by SIX Swiss Exchange AG that operates an exchange-like organisation authorised and supervised by the Swiss Financial Market Supervisory Authority FINMA. SIX Corporate Bonds AG (FRN: ) is an appointed representative of Kession Capital Limited (FRN: ) which is authorised and regulated by the Financial Conduct Authority in the UK. SIX Corporate Bonds AG. All rights reserved.

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16 SIX Swiss Exchange Ltd, SIX Swiss Exchange Ltd 15 Appold Street London EC2A 2NE United Kingdom T info@six-corporate-bonds.com