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Traders’ Guide
Global
Equity Markets
to
Noah Garland, Marina Vlasevich and Pamela Cheng
2014 - Q3
EDITION
CONTACT
INFORMATION
24-Hour Electronic Execution Desk
+ 1 877 227 6848 (US)
+ 44 20 7070 0130 (Europe)
traders@convergex.com
Electronic Sales Desk
+ 1 212 468 7646 (US)
+ 44 20 7070 0150 (Europe)
equitysales@convergex.com
Global Portfolio and ETF Execution
Sales and Execution Desks
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+ 44 20 7070 0160 (London)
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Sales Trading
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Operations
+1 407 608 1900
allocations@convergex.com
www.convergex.com
Global Trading Markets
COUNTRY CODE EXCHANGE
Australia AU Australian Stock Exchange
Austria AV Vienna Stock Exchange
Bahrain BI Bahrian Stock Exchange
Bangladesh BD Dhaka Stock Exchange
Belgium BB Brussels Stock Exchange
Botswana BG Botswana Stock Exchange
Brazil BS Sao Paulo Stock Exchange
Bulgaria BU Bulgarian Stock Exchange
Canada CF Canada National Stock Exchange
Canada CT/CN Toronto Stock Exchange
Canada CV TSE Venture
Chile CI Chile Composite
Chile CC Santiago Stock Exchange
China CG Shanghai Stock Exchange
China CS Shenzhen Stock Exchange
Colombia CX Colombian Stock Exchange
Croatia CZ Zagreb Stock Exchange
Cyprus CY Cyprus Stock Exchange
Czech Republic CP Prague Stock Exchange
Denmark DC Copenhagen Stock Exchange
Egypt EC Egyptian Exchange
Estonia ET Tallinn Stock Exchange
Finland FH Helsinki Stock Exchange
France FP Paris Stock Exchange
France NM Paris Stock Exchange New Mkt
Germany GY Frankfurt Stock Exchange
Germany NY Xetra Neuer Market
Ghana GN Ghana Stock Exchange
Greece GA Athens Stock Exchange
Hong Kong HK Hong Kong Stock Exchange
Hungary HB Budapest Stock Exchange
Iceland IL Icelandic Stock Exchange
India IB Bombay Stock Exchange
India IS National Stock Exchange India
Indonesia IJ Indonesia Stock Exchange
Ireland ID Irish Stock Exchange
Israel IT Tel Aviv Stock Exchange
Italy IM Milan Stock Exchange
Italy NI Milan NI Stock Exchange
Japan JQ JASDAQ Stock Exchange
Japan JX Hercules Stock Exchange
Japan JN Nagoya Stock Exchange
Japan JO Osaka Stock Exchange
Japan JT Tokyo Stock Exchange
Jordan JR Amman Stock Exchange
Kazakhstan KZ Kazakhstan Stock Exchange
Kenya KN Nairobi Stock Exchange
Kuwait KK Kuwait Stock Exchange
Latvia LR Riga Stock Exchange
Lebanon LB Beirut Stock Exchange
COUNTRY CODE EXCHANGE
Lithuania LH Vilnius Stock Exchange
Luxembourg LX Luxembourg Stock Exchange
Macedonia MS Macedonian Stock Exchange
Malaysia MK Kuala Lumpur Stock Exchange
Mauritius MP Mauritius Stock Exchange
Mexico MM Mexican Stock Exchange
Morocco MC Casablanca Stock Exchange
(MTF) EB BATS Trading Europe
(MTF) IX BATS CHI-X Europe
(MTF) TQ Turquoise
Namibia NW Namibian Stock Exchange
Netherlands NA Amsterdam Stock Exchange
New Zealand NZ New Zealand Stock Exchange
Nigeria NL Nigerian Stock Exchange
Norway NO Oslo Stock Exchange
Oman OM Muscat Stock Exchange
Pakistan PK Karachi Stock Exchange
Peru PE Lima Stock Exchange
Philippines PM Phillipine Stock Exchange
Poland PW Warsaw Stock Exchange
Portugal PL Lisbon Stock Exchange
Qatar QD Qatar Exchange
Romania RO Bucharest Stock Exchange
Russia RM Moscow Stock Exchange
Russia RU Russian Trading System
Serbia SG Belgrade Stock Exchange
Singapore SP Singapore Stock Exchange
Slovenia SV Ljubljana Stock Exchange
South Africa SJ Johannesburg Stock Exchange
South Korea KS Korea Composite
South Korea KP Korea Stock Exchange
South Korea KQ KOSDAQ
Spain SM Madrid Stock Exchange
Sri Lanka SL Colombo Stock Exchange
Sweden SS Stockholm Stock Exchange
Switzerland SW SIX Swiss Exchange
Switzerland VX SIX Swiss Exchange
Taiwan TT Taiwan Stock Exchange
Tanzania TZ Dar es Salaam Stock Exchange
Thailand TB Thailand Stock Exchange
Tunisia TU Tunis Stock Exchange
Turkey TI Istanbul Stock Exchange
Ukraine UZ Ukraine Composite
United Arab DH Abu Dhabi Securities Market
Emirates DU Dubai Stock Exchange
United Kingdom LN London Stock Exchange
United Kingdom LI London International Order Book
United States US NYSE/NASDAQ
Vietnam VM Ho Chi Minh Stock Exchange
ConvergEx algorithmic trading markets are in turquoise. Additional ConvergEx DMA trading markets are blue.
1
Welcome
Welcome to the 2014 Q3 Traders’ Guide to Global Equity
Markets. As is customary in our guide, we aim to highlight
some market-related topics that are relevant to traders, not
only at the time we go to press, but also areas that we believe
will remain pertinent for the foreseeable future. Amidst lower
global volumes, investors have sought out opportunities
to expand their exposure, seeking alternatives outside of
developed markets.
As frontier markets continue to offer up eye-catching
economic growth rates, investor interest in these markets
continues to grow as well. For example, according to their
GDP Annual Growth Rates, Nigeria and Pakistan saw 2013
growth rates of 6.3% and 4.1%, respectively. Looking ahead,
the target growth for Pakistan for 2015 is at 5.1%. While large
growth over the past year on the MSCI Frontier Markets Indices can be attributed to
heavily weighted UAE and Qatar, both having graduated to EM status at the end of May,
countries like Nigeria and Pakistan are poised to garner more attention. Additionally, YTD
growth of the MSCI 100 Frontier Index sits around 15%. While UAE and Qatar names in
the index were mainstays within the top ten constituents, four out of ten names were
Kuwaiti and Nigerian names that accounted for 17% on the index and still remain.
In addition to the inherent geo-political risks associated with these markets, some of the
largest hurdles investors face when transacting in these markets are the lack of sophisticated
trading mechanisms, scarce liquidity and a dearth of strong local relationships. One thing is
certain: the complexities of frontier markets are unrivaled, and ultimately can be a difficult
entry barrier for a client to overcome. Having a trading partner that not only understands the
market landscape, but has the extensive local relationship network to meet their demands
and trading styles are important factors in successfully navigating frontier markets.
Since there has been so much interest in this field over the past year and with investors
seeking to enter these markets, a trader’s knowledge of each market is what can truly set
them apart. Here at ConvergEx, our global trading desks are ready to support clients in
markets and names they express interest in. To do this we can leverage our deep experi-
ence and strong relationships in the local markets. During the recent MSCI rebalance,
which saw both Qatar and UAE upgraded to EM status, our trading desk supported our
clients throughout the session as we executed rebalance names on their behalf.
As we move into the second half of the year, no matter the regulatory or market
conditions that may lie ahead, we are happy to be your partner as you navigate the
ever changing landscape. As always, if there is anything that we can assist you with as it
relates to the global markets – developed, emerging, or frontier - we are here for you.
New to this issue is the Witching Days chapter, which aims to explain what witching days
are and when they happen. We’ve also updated the Exchange Guides with the most
recent data available to us.
All the best for the second half of the year!
Noah Garland
Head of Asia-Pacific Trading,
ConvergEx Limited
2
Table of Contents
Welcome ....................................................................................1
Table of Contents .......................................................................2
Trading Minefields
DMA Order Types ...................................................................................3
Opening Auction .....................................................................................7
Closing Auction .....................................................................................10
Board Lots .............................................................................................12
Circuit Breakers .....................................................................................15
Tick Size .................................................................................................17
Dark Pools .............................................................................................20
Dark Liquidity in Europe ........................................................................ 23
Dark Liquidity in the Asia-Pacific Region ..............................................26
Auto Volume .......................................................................................... 28
TCA Benchmarks ...................................................................................31
Retrospective and Real-Time Uses of TCA ...........................................34
Transparency ..........................................................................................40
Algos for Quantitative Trading Shops ...................................................44
Optimal Trading Tactics ......................................................................... 46
Trading in Consolidated Markets ..........................................................48
ADR Conversion Trading .......................................................................50
Trading Illiquid ETFs in Size ...................................................................52
Clearing and Settlement .......................................................................54
Social Media and Trading ......................................................................58
Witching Days........................................................................................61
Mini Minefields: Lunch Breaks, SQ Days, DST ......................................63
Market Profile Metrics ..............................................................66
Exchange Guides (alphabetical) ................................................78
ConvergEx Algorithms ...........................................................148
Abraxas
SM
............................................................................................. 149
Closing Price ........................................................................................ 150
Darkest ................................................................................................151
Grey .....................................................................................................152
Initiation Price ...................................................................................... 153
Inline ....................................................................................................154
IQx® .....................................................................................................155
Momentum ..........................................................................................156
Peg .......................................................................................................157
POV ......................................................................................................158
Reserve ................................................................................................160
TWAP ...................................................................................................161
Value ....................................................................................................162
VWAP ................................................................................................... 163
About ConvergEx Group ........................................................164
Trading Minefields | DMA Order Types 3
DMA Order Types
Order types sound like an open-and-shut case: market orders and limit orders, maybe
throw in some reserve size and pegging—all standard DMA stuff, right? What’s to
explain? Actually, quite a lot. These are the underlying tools at traders’ and algorithms’
disposal, and their behavior varies alarmingly across markets.
Let’s start with garden-variety market orders. The general notion is that when you place
a market order, you expect to execute 100% of your order at the best price available
given the available instantaneous liquidity. We typically expect a market order to sweep
multiple levels on the opposite side of all the available limit order books. In some
markets, market orders are close to that ideal; for example, a market order will do just
what you expect it to do in Japan (where dark pools haven’t really taken a firm hold yet).
Less than five years ago, market orders in most core European markets (e.g., Germany,
London, and the Euro-next markets) would also have met our basic expectations. Today,
however, market orders directed to exchanges or MTFs only sweep their specific books.
If you need your market orders to sweep all available liquidity, you need to use a bro-
ker’s smart router.
The United States provides an extreme case for market-order confusion. Under
Regulation National Market System (Reg NMS), when an exchange receives a market
order, it only has to honor the displayed liquidity at all light exchanges. Beyond that,
the exchange is free to plumb the depths of liquidity in the exchange’s own book.
Exchanges don’t have to walk one another’s books to fill an order. At this writing,
of the exchanges, only BATS ferrets out all available liquidity (walks all light books).
ConvergEx’s smart routers do the same. However, other brokers’ smart routers are
configured in all sorts of ways. This is especially the case in Europe, where there is no
hard and fast rule that brokers must include all displayed liquidity in their respective
smart routers. Our advice: ask, especially if you ever use large market
orders.
The variety in market order behavior doesn’t end with approaches to
fragmentation. For example, in Hungary, a market order acts more
like an “Immediate or Cancel” (IOC) order. It only sweeps the top of
the book, and cancels any unfilled portion of your order. On the other
hand, the stock exchange in Poland also sweeps only the top of the
book, but it does something else with any unfilled portion: it turns your
order into a limit order with the price set at the last trade executed.
(In markets like these, marketable or aggressive limit orders might be
better options—we discuss that below.) Meanwhile, other exchanges
don’t even allow market orders during continuous trading: for example, Hong Kong,
Brazil, and Turkey are limit-order only markets.
Marketable limit orders offer a highly attractive alternative to straight market orders.
Marketable limit orders essentially act like market orders that allow you to set a ceiling
or floor on the price at which you’re willing to buy or sell a stock. In addition to helping
you access liquidity and protect against the occasional “fat finger,” marketable limit
Marketable limit
orders offer a highly
attractive alternative
to straight market
orders.
4 Trading Minefields | DMA Order Types
orders allow you to place an order that resembles a market order in countries that
don’t support market orders, like Mexico or the Czech Republic. They are also useful
in exchanges that do support market orders. Remember Hungary and Poland, where a
market order acts more like an IOC order? A marketable limit will behave like a normal
market order there, sweeping as many levels as necessary on the other side of the
book to fill your order. There are other exchanges where most traders agree that you’d
be crazy to use a market order, even though technically you can. For example, use a
marketable limit order instead of a market order in places with limited transparency and
a lot of volatility, like Tel Aviv. Just be careful with what you set as your limit, as some
exchanges already have (and many more are getting) reasonability bounds on limit
prices. Hong Kong, for instance, will reject a limit order that is more than 24 ticks away
from the current bid or offer. During its pre-opening period, Tel Aviv will not allow a limit
order that is more than 35% from the previous day’s closing price. In the US, NYSE Arca
uses percentage price checks:
• If the price is USD 0.01-25.00, your order must be within 10% of the price.
• If the price is USD 25.01-50.00, your order must be within 5% of the price.
• If the price is higher than USD 50.00, your order must be within 3% of the price.
Using marketable limit orders as a substitute for market orders does leave you with one
problem: the leaves will be posted at your limit price, which may or may not be what
you want. Most brokers support FOK (Fill Or Kill) or IOC (Immediate Or Cancel) instruc-
tions to negate this posting behavior if you prefer.
In stark contrast to market orders, plain, vanilla, non-marketable limit orders are well
standardized in global markets. When you place a vanilla limit order, you openly declare
your willingness to buy or sell a stated number of shares at a given price. Since Turkey
now allows traders to cancel their limit orders intra-day, every material market supports
non-marketable limit orders in pretty much the same way. Only the order standing rules
vary (price, time, size, source, exchange, etc.).
Moving now from vanilla to strawberry (or your second most common ice cream flavor
of choice), we turn our attention to reserve/iceberg orders. These orders allow you
to display only a portion of your order at a time. Each time that smaller portion gets
filled, the iceberg order replenishes it. This allows you to place a larger order without
showing your hand—the world only sees a tip of the iceberg at a time. Just how much
of a large order to show, under what circumstances, in which conditions and markets,
is a matter of high trader art. The knee-jerk response is to always show only one board
lot. However, this approach sacrifices the power of liquidity signaling. Small display sizes
also compromise order standing in most markets.
While iceberg orders are attractive to traders, not all exchanges support them. Asian-
Pacific exchanges do not, as well as a handful of European exchanges. Some brokers
offer synthetic iceberg orders in markets that do not support them. However, this can
be a bit of a sticky wicket. For example, a trading engine can post the first 1,000 shares
of
Trading Minefields | DMA Order Types 5
a 100k buy order at the limit price. When the small order is filled, the trading engine can
then replenish the order in the market with another 1,000 shares. However, imagine 20k
blasts through the market. This approach will only get 1,000 shares done against the
large sell order. This can be very frustrating to watch as you can see lots of shares get
done below your limit price. There are technological solutions (be fast) and quantitative
solutions (construct a ladder of limit orders below the actual limit) that mitigate these
problems (ConvergEx does both), but the trading world will be a better place when all
exchanges support iceberg/reserve limit orders. The table on page 6 provides a list of
markets that offer native iceberg limit orders. ConvergEx provides them synthetically
with our Reserve algorithm for our algo markets where they are not supported.
If reserve orders are the answer to the question “how can I provide a lot of liquidity to
the market without telegraphing my intentions?” then pegging orders are the answer
to the question, “How can I provide liquidity to the market without telegraphing my
intentions and keep up with current prices?” Pegging orders typically float along at
the bid or offer displaying a bit of the actual order size. (Pegging orders are always
implemented with iceberg functionality.) Essentially, you are telling the market, “I don’t
want to be alone at the inside. But if there is somebody else who is willing to pay a price
(up to my limit price), I will join her.” You will not be surprised to learn that not every
market supports native pegging. This table provides a list of markets that do:
We offer synthetic pegging in all the other algo markets. There are other alternatives
to pegging the bid (for a buy) or the offer (for a sell), but these are special-use products
that are beyond our discussion here.
In our chapters on Opening and Closing Auctions, we mention that each exchange
has its own rules for which order types you can use during auctions. Most exchanges
allow the same order types in auctions as in continuous trading, but there are some
exceptions. Hong Kong only allows limit orders in continuous trading, but allows market
orders in the opening auction. In their closing auction, Mexico will only permit market
orders. Auctions can even change the order type you use: Japan’s Funari order type
works as a limit order throughout the day, but turns into a Market on Close (MOC)
order at the close. It is important to remember, however, that Japan is a tale of two
Country Market Code(s)
Belgium BB
Canada CF, CN, CT
France NM
Germany NY
Italy NI
Japan JN, JT, JQ, JX
[MTFs] IX, TQ
United States US
Vietnam VH, VM
6 Trading Minefields | DMA Order Types
sessions: be sure to enter Funari orders in
the afternoon session to achieve the P.M.
closing price—otherwise Funari orders
complete at the morning session’s closing
price.
Finally, we come to more exotic order
types, which we mention just to give you
an idea of the complexities roaming the
world. In the US, where dark pools have
captured so much liquidity, the exchanges
have hidden order types. London,
Germany, and most of the Scandinavian
exchanges also support these completely
hidden order types. Again in the US,
where maker/taker fees are the principle
ways in which exchanges compete, you
can specify that you want to post hidden
at the mid-spread and add liquidity only.
Meanwhile, potential contras can tell the
markets that they don’t want to interact
with this flow. Stop orders (or stop-loss
orders) are also an interesting type of
order; they are orders to buy or sell once
your stock hits a certain price (your “stop”
price). When the stock hits that price,
the stop order becomes a market order.
Stop prices for buys are above the current
market price, below for sells. These types
of orders can help limit your losses if
the market turns against you. Be careful
with these: once the stop order becomes
a market order, it can execute far from
your stop price, especially if the market
is moving quickly. Stop limit orders are
similar, but they turn into limit orders once
the stock hits your stop price.
Every exchange has its own unique
menagerie of order types; if you are
looking to trade in a new market, it would
be a good idea to get to know its native order types early on.
The sheer magnitude and complexity of DMA order types across the world calls for a
more extensive discussion than we can provide in this overview. You’ll find our contact
information on the cover of this guide; if you have any questions about order types in
any of the 100+ markets we serve, please give our trading desks a call.
Country
Australia
Austria
Belgium
Brazil
Canada
Czech Republic
Denmark
Finland
France
Germany
Greece
Hong Kong
Hungary
Ireland
Israel
Italy
Japan
Korea
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Singapore
South Africa
Spain
Sweden
Switzerland
United Kingdom
United States
Iceberg Rules
Must display at least 5,000 shares.
Overall order must be > 1000 shares, must display at least
10% of order size.
Must display at least 10 shares.
Overall display size must be > 1000 shares.
CT, CV: Display size must be a board lot.
CF: Display size must be greater than 50% of total order.
Not supported
Order must be a round lot.
Order must be a round lot.
Must display at least 10 shares.
Only supported on XETRA. Overall order must be > 1000
shares. Must display at least 10% of order size.
Not supported
Not supported
Not supported
Overall order must be > 1000 shares. Must display at least
10% of order size.
Not supported
Must display at least EUR 10,000.
Not supported
Not supported
Overall order must be at least 2000 shares. Display size
must be at least 5% of order.
Minimum display size is 10 shares.
Not supported
Must display at least NOK 10,000.
Must display at least 100 shares.
Must display at least 10 shares.
Not supported
Not supported
Must display at least 250 shares.
Order must be a round lot.
Not supported
Must display at least 40% NMS (Normal Market Size), which
is different for each stock.
Display size must be a round lot. Not supported on NYSE.
Trading Minefields | Opening Auction 7
Auction Types Exchanges
Indicative Size and Price United Kingdom, South Africa, Austria, Greece, Hong
Kong, Italy, Scandinavian markets, Germany, Ireland,
Israel, Czech Republic, Australia, Korea, Euronext and
Swiss markets, Japan, Spain, Canada
Indicative Price Only Poland and Singapore
Blind Static Auctions Mexico, New Zealand and Hungary
Dynamic Auctions Brazil
Opening Auction
Trading well entails playing each global opening auction properly… which is way, way
easier said than done. There are almost as many quirks to trading the open as there are
markets. In some markets, the opening auction is so small that it is better to disregard
it altogether. In other markets, the opening auction represents 10% of the daily volume
on a normal day and 35% on a big day. Some markets even have multiple competing
opening auctions for the same name. While nothing can replace local knowledge, we’d
like to point out a few of the land mines.
The theory of the opening auction is simple. Ideally, it is an efficient process that follows
a 16-hour hiatus in trading. Its purpose is to find an opening price that balances the
supply and demand for a stock. In its most full-blown form, the opening auction con-
sists of three periods:
1. Call (open to all orders)
2. Balancing (open to orders that decrease the trading imbalance)
3. Crossing and printing
However, the balancing phase is part of only a few auctions and is much more common
in closing auctions. Probably the best known example of an explicit balancing period
at the open is known as “Kehai Ticking,” which is invoked in Japan when the market
is struggling to find the right opening price for a stock in the face of huge, atypical
volume. This can delay the normal opening for many minutes.
Probably the most important thing a trader needs to understand about each market’s
opening auction is how big it is compared to the market’s daily volume. Misjudge this
and you could undersize your initial order and miss valuable liquidity, or oversize your
opening order and inadvertently wreck the price. For almost all markets, the opening
volume percentage is pretty consistent from day to day, though double or triple
witching days in the US and SQ days in Japan move a huge amount of volume to the
open. But that consistent percentage itself varies from market to market. For example,
Lisbon runs about 0.5%, London about 3%, Mexico 2%, Toronto 5% and Tokyo SE
about 10%.
Some global markets provide a great deal of information about the impending auction
size and price. Some provide nothing. This table shows how we categorize auctions:
It can often be tricky
just to identify the
opening prints on the
tape.
8 Trading Minefields | Opening Auction
The chart’s “Indicative Size and Price” markets make it easy to right-size your opening
orders. The next category supplies an indicative price feed that may be useful for making
a go/no-go decision on your opening orders. “Blind Static Auctions” are the trading
equivalent of the dark abyss. Meanwhile, Brazil is in a class of its own. While Brazil does
supply an indicative size and price, the auction time is so random that the information is
difficult to exploit.
While we are on the topic of auction sizes, many markets make
it hard to discern the size of the opening print(s) even after
continuous trading begins. A few exchanges make the open
auction obvious by putting up the auction prints well before the
regular session (Hong Kong and Singapore). In most exchanges,
however, the auction prints immediately lead regular market
trading prints. Some exchanges show a single aggregated auction
trade (e.g. Austria, Japan, South Africa, and the United Kingdom).
Other exchanges show individual auction trades with the same
opening price (e.g. Australia, Brazil, Scandinavian markets, and
Spain).
It can often be tricky just to identify the opening prints on the tape. Some exchanges
such as London, Brazil, Germany and Singapore, provide opening auction print condition
indicators while others do not. If an exchange does not put up the open as one print
and does not provide an auction print condition indicator, you have two ways of
guesstimating the opening print size. In markets with full indicative auction data, use the
last indicative auction size. In markets where this approach is not feasible, you are left to
add up all the initial prints of the day (within, say, the first 2 seconds) that are done at the
price of the first print. Assume the first off-price print is the start of continuous market
trading. This approach is crude, at best.
You can find information on the size and price of any specific opening auction by using
Bloomberg’s QR function to pull all trade records. Bloomberg normalizes indications
and auction trade conditions. Trade condition T means theoretical/indicative price
and volume. AU means auction trades. Other market data vendors have other
coding schemes. For example, IDC uses “AuctionMatching” in some markets and
“UncrossTrade” in others.
Most every market tries to open up at the same time every day… although both
Australia and Brazil provide some randomization of that time in an attempt to mitigate
gaming. (Australia has the added bonus of doing an alphabetically-staggered open. Ask
20 Australians “why” and you will get 20 different answers.) The Tel Aviv stock exchange
also presents an interesting challenge for traders new to its opening times: securities are
divided into two groups that open at two different times. Group A, which consists of the
TA 100 (the 100 most highly capitalized companies), opens randomly between 9:45 and
9:46. Group B, consisting of the rest, doesn’t open until 10:15. Almost all markets make
Trading Minefields | Opening Auction 9
accommodations to get a solid opening price in the face of excess volatility due to
news.
To make this even more interesting, different markets have other unexpected excep-
tions to auction times, like in Israel, where a general strike in Tel Aviv may delay the
opening of the whole exchange, including auctions.
What happens when you have multiple light venues trading the same name? In the US,
with its fifteen exchanges, you can have multiple open auctions for the same name,
which gets complicated quickly. The basic tenet, though, is that any exchange can
begin trading a security at 9:30 AM, so the primaries have put tremendous resources
behind opening as fast and as close to 9:30 AM as possible. Auctions are exempt from
trade-through protections for those prints in order to allow for competition. In contrast
to the US, Europe’s MTFs wait to trade until after the primary market opens a stock.
(Note: the MTFs do not routinely halt trading when the primary exchange halts trad-
ing.)
Different exchanges have different rules for what kinds of orders you can use in the
opening auction. Many markets allow both market and limit orders. Hong Kong, for ex-
ample, which allows only limit orders during continuous trading, allows both market and
limit in the opening auction, but forbids shorting in it. Other markets, like Brazil, only al-
low limit orders in the opening auction. Your tradable size also depends on the market.
For example, in Canada, opening auction orders are board lots only; you cannot trade
in odd lots. In Israel, odd lots can only be traded in auctions.
Bottom line: unfortunately there are no hard and fast rules that cover all markets’
opening auctions. If you want to trade well in a given market, you need to familiarize
yourself with its individual rules and patterns.
The first tier global algo vendors have customized their algos to play each market’s
opening auction well for the typical order. However, the best vendors will also give you
the explicit option of including a Market on Open or Limit on Open (MOO or LOO) in
your order. Making the right choice for your order can materially improve your trading
performance.
Two final notes:
1. MOO orders are much less popular than LOO orders for good reason: you never
know what price might come out of the auction. Limit prices provide simple smart
protection.
2. In most markets, large opening auction orders leak information. If you are trading in
size, the prospect of information leakage at the open needs to be a key part of your
auction strategy.
10 Trading Minefields | Closing Auction
Closing Auction
The closing price provides the universally accepted reference price for all institutional
equity products. Investors buy into and cash out of managed portfolios at this price.
Mark-to-market accounting uses the primary exchange’s closing price. Because of this,
equity players need to transact a lot of shares at or near the closing price; hence the
importance and impressive liquidity of the closing auction.
If you read the previous chapter on the opening auction, much of the information about
the closing auction will sound familiar to you. Almost all markets try to close at the same
time each day, with the exception of Brazil, which randomizes its closing auction time the
same way it does with its opening auction. Israel’s exchange is another exception, as it
has a dynamic time frame for its auctions.
While opening auctions tend to be more popular in the Asia-Pacific region than in Europe,
closing auctions are the opposite. Traders from western European markets tend to lean
very hard into the closing auction. However, this can be an expensive mistake, depending
on the market. Paris, London, Amsterdam, Lisbon, and many other markets do 10-20%
of their daily volume at the close. This represents tons of liquidity. However, in Toronto,
this figure is more like 5%. It gets worse: in Tel Aviv and Prague, maybe 2% of the days’
volume gets done at the close. Double and triple witching days cause unusual volume at
the closing in Mexico. And Hong Kong doesn’t even have a closing auction.
It helps to put the global markets into a few different camps based on the timing of their
closing auctions:
• No closing auction, like in Hong Kong
• Closing auction done at the exact end of continuous trading with no lock-up period,
like Canada, Japan, Mexico, and NASDAQ in the US (in fact, due to its lunch
break, Japan gets to have two closing auctions)
• Closing auction done at the exact end of continuous trading with a lock-up period,
like NYSE in the US
• Separate closing auction occurring after the end of the continuous trading, as in
most exchanges, including much of Europe
• Brazil, where the closing auction time for each stock is dynamic each day. Three
times per year, the index rebalances, so the closing auction starts five minutes earlier
those four times a year.
This is one place where Europe’s market structure has a strong advantage over the US.
One of the hardest calls in all of trading is how much of a large order to reserve for
execution at the closing auction. Good information to inform the MOC/LOC decision
comes late, if at all. Meanwhile, the amount of volume done at the close in a given stock
on a given day is shockingly volatile. It is common to find today’s closing volume to be
25% of yesterday’s closing volume or even 10 times yesterday’s closing volume for a
given stock.
Trading Minefields | Closing Auction 11
Markets span the range on the quality and amount of “indicative” information they
provide for their closing auctions:
• No indicative information for electronic traders (e.g. Mexico, New Zealand,
Hungary)
• Indicative price only (e.g. Poland)
• Indicative size (imbalance; the other side of the order that is not matched) and
price (e.g. Australia, Canada, and most of Europe. Only the US & Canada have
imbalance)
• Brazil, which provides both indicative size and price but, since the auction is at a
random time, the information is almost impossible to use.
You can use Bloomberg’s QR function to gauge the price and size of a specific closing
auction by pulling all trade records. Bloomberg normalizes indications and auction trade
conditions. Trade condition T means theoretical/indicative price and volume. AU means
auction trades. Other market data vendors have other coding schemes. For example,
IDC uses “AuctionMatching” in some markets and “UncrossTrade” in others.
Some exchanges have multiple closing prints (like Australia, the US, and Scandinavian
markets), while others, like Germany and London, have a singular print. Identifying the
closing prints is easier than with the open auction in many cases, however, as many
markets have a break between continuous trading and the closing auction. The break
lasts 5 minutes in most European countries.
Most closing auctions follow their markets’ guidelines for order types, so if the ex-
change allows both market and limit orders, the auction does too. A few exceptions
to this are Israel, Hungary, and New Zealand, where you can only trade limit orders in
the closing auction. Mexico is also an exception for the opposite reason: you can only
trade market orders in the closing auction there. To participate in the closing auction
for most markets, you send your market or limit order during the auction. However, for
the countries that have no gap between continuous trading and the closing auction (like
Canada, Japan, and the United States), you need to send specific Market on Close or
Limit on Close (MOC/LOC) orders to be clear.
Global exchanges will move heaven and earth to make sure MOC orders get executed.
However, MOCs do not provide guaranteed execution. If there is a regulatory halt,
exchanges often cancel rather than postpone the closing auction. Plus, because the
closing auction is so dependent on “primary exchange” status, they are subject to
technical and system halts. Finally, the closing imbalance may simply be too great to
find an acceptable clearing price. (Generally, “clearly erroneous” closing auctions are
nipped in the bud.)
12 Trading Minefields | Board Lots
In the last decade,
many markets have
been walking away
from board lots.
US markets are a
typical case in point.
Board Lots
In many global markets you can forget you ever heard of a board lot. However, in other
markets, board lot restrictions can get in the way of even block trading. In these markets,
board lots are a trading problem waiting to happen.
A board lot is the minimum order size that an exchange would prefer to see you trade.
What’s more, the exchange would really like to see you trade in multiples of board lots.
In Canada and the United States, board lots are called round lots. Confusingly, a round
lot is also the name everyone gives to a multiple of a board lot.
Odd lot orders are for fewer shares than a board lot. Mixed lots are
orders for fractional multiples of board lots (a multiple of a board
lot plus change). Note that the leaves portion of a round lot order
can easily become a mixed lot or odd lot order if the market allows
fractional-lot fills.
Exchanges demonstrate their preference for round lots in many
ways. At one extreme, an exchange can forbid all odd-lot orders
and executions. They can also provide odd-lot orders with poor
execution quality and/or order standing. Exchanges may be willing
to accept a few odd lots but will then subject a pattern of repeated
odd lots to sizable fines. Exchanges can also promote round lots by
having a minimum ticket charge for exchange transactions. Finally, exchanges can exclude
non-round lots from auctions and/or they can make some order types unavailable to odd
and mixed lots.
Historically, in manual trading, there was ample justification for board lots. It was in the
interest of both the exchange and institutional investors to make trading productive,
and individual transactions were costly and error prone. Board lots helped ensure that all
transactions were material. With the dawn of decimalization and smaller ticks, board lots
provided the added value of ensuring that at least your order couldn’t get “pennied” by
a tiny order.
However, in the last decade, many markets have been walking away from board lots.
The US markets are a typical case in point. America still has board lots, set nominally at
100 shares for almost every stock you will ever hear of. However, there’s a famous coun-
terexample: Berkshire Hathaway (BRK A) which, at this writing, is going for nicely north
of $100,000. A normal 100-share board lot would sell for well above $10M. Therefore it
makes more sense to set the board lot for BRK A at 1 share.
While the US still has board lots, there is almost no practical impediment to odd and
mixed lots in US trading. There are no longer any fines for repeated odd-lot trading.
Transaction fees are all done on a per-share basis, so there is no minimum or fixed
component to the transaction charge. These days, odd lots have exactly the same
standing in the book as if they were round lots. The sole vestige of the old odd-lot
discrimination is that they are not displayed as quotes. Board lots in the US now serve
about the same useful function as an appendix for humans.
Trading Minefields | Boarding Lots 13
Many markets have stopped even the pretense of board lots, especially in Europe. For
example, Hungary, Ireland, Spain, and South Africa all have board lots of 1. Many other
European countries only have board lots above 1 for a handful of securities.
Some markets have dropped the notion of board lots but maintain a “minimum ticket
charge.” Because of this minimum charge, trading many small odd lot orders can get
expensive, so many brokers set up their own required board lots to avoid losing money
on a transaction. You’ll find the majority of markets like this in Europe: the Euronext
markets (Belgium, France, Portugal, the Netherlands) and Germany are examples of
places where the charges to trade in small lot sizes often drive brokers to require board
lots of 100 or 200.
Even in nominally no-board-lot markets, there are some exceptions. In the United King-
dom, for example, trading in a different currency may trigger some lot size requirements.
In London, many GDRs and ADRs that trade in Hong Kong dollars, Japanese Yen, or US
dollars trade in multiples of 50 shares.
Canada, Mexico, and the Philippines are good examples of markets where the notion of
board lots is still powerful. In these countries, the board lot for each stock is determined
by its price: the lower the price, the larger the board lot. The notion is that a proper
transaction ought to represent material economic value. For example, here is a sample
of the table from the Philippine Stock Exchange:
A 1-million share board lot seems impressive until you look at the accompanying price.
Exchanges are not always responsible for setting board lots. In Hong Kong, board lots are
determined by the board of directors of the listed company. As such, board lot values can
vary greatly, with 56 distinct values ranging from 1, 5, 10 to 50,000, 60,000, and 80,000 in
Hong Kong. Similarly, in Japan, board lots are also determined by listed companies, but
these sizes are more standardized; trading units are set at 1, 10, 50, 100, 500, 1000, and
3000 shares.
Stock Price (in PHP) Board Lot
0.01 to 0.001 1,000,000
0.011 to 0.1 100,000
0.105 to 1 10,000
1.02 to 10 1,000
10.25 to 100 100
Greater than 101 10
14 Trading Minefields | Board Lots
With lot sizes as
varied as they are,
it can be difficult
to know just
how much of
something you’re
allowed to trade.
Israel fills a “board lot” niche of its own. While there is no board lot per se, there is
a rule where the quantity of the order has to be more than the “minimum order size.”
The minimum order size is the nominal price divided by the previous month stock clos-
ing price. Due to price fluctuations, the minimum order size for each stock
changes daily. The exchange publishes a new list for all securities each
month to help traders keep up.
Global traders need to be aware that odd lot rules for auctions do not
always follow the continuous trading pattern. In Israel, lots less than the
minimal lot size are only allowed in auctions, not during continuous trad-
ing. Conversely, in Canada, odd lots are only allowed during continuous
trading, not in auctions.
Some markets go so far as to have a separate book for odd lot trading. A
few of them, like Canada, have electronic odd lot books (though Canadian
exchanges discourage odd lots). The Czech Republic also has its own
electronic trading system, KOBOS, that allows odd lots. Singapore also has
a separate trading system for odd lots. Finally, Mexico plans on bringing out an electronic
odd lot system, though in the meantime, all odd lots have to be entered manually.
No discussion of board lots would be complete without mentioning that a few markets
have the opposite concept of a board lot, a size too big to trade. For example, in Hong
Kong, an order has to be less than 3000 board lots. Other countries (like South Africa)
also have maximum lot sizes, but their limits are so high that it is unlikely anyone would
reach them.
With lot size rules as varied as they are, it can be difficult to know just how much of
something you’re allowed to trade. If in doubt about the board lot for an individual stock
or market, we recommend you use the DES function under the equity to see round lot
or board lot under Stock Data in Bloomberg. In Reuters, bring up the quote window and
type your value (for example, 0001.HK), to see Lot Size (1000, in this example).
Trading Minefields | Circuit Breakers 15
Circuit Breakers
In a perfect trading world, we wouldn’t need to explain anything about circuit breakers
because in a perfect trading world, markets would never be volatile enough to need
them. However, we live in the real world, where many exchanges have found it necessary
to implement circuit breakers to protect markets and investors from too much volatility.
Circuit breakers are restrictions or halts that an exchange or regulatory body sets on
trading when a security or market becomes too volatile. The enforced halt in trading
allows the market (and traders) time to calm down. In this way, trading circuit breakers
work a little like the circuit breakers in a house, which cut off electrical flow if it could
cause an overload. The introduction of circuit breakers in trading came after Black
Monday in 1987, when markets around the world crashed. Over the years following Black
Monday, many exchange authorities decided that there should be regulations in place to
stop markets from declining or rising too sharply in a short amount of time.
While not every market has circuit breakers in place, most have them in some capacity
or another. The most common types of circuit breakers fit into one of two categories:
Market-Wide Circuit Breakers or Single-Stock Circuit Breakers.
• Market-Wide Circuit Breakers (sometimes abbreviated as MWCBs, and sometimes
referred to as Exchange-Wide Circuit Breakers) cause the entire market to halt or
close if a market or index starts declining rapidly. Each market sets its own thresholds
for triggering circuit breakers, and the percentages and halt lengths vary widely
around the world. For example, in the US, if the S&P 500 drops past a 7% threshold
(Level 1), the entire market shuts down for 15 minutes. If it then drops past a 13%
threshold (Level 2), the market shuts down for another 15 minutes. If later that day
the S&P 500 were to drop by 20%, the market would shut down for the rest of the
trading. In Thailand, if the index falls by 10%, the market closes for 30 minutes. If it
falls by 20%, it closes for an hour. These different levels of triggers are intended to
help keep declining markets from going into freefall.
• Single-Stock Circuit Breakers are trading halts issued on one stock or security if
its price fluctuates too rapidly. Many exchanges set trading bands around the price
of a security, and any order placed outside of this trading band can cause a Single-
Stock Circuit Breaker. For example, the London Stock Exchange places a 5-minute
halt on orders that are 5% above or below the last automated book trade (so we
would call that a 5% trading band). Among the exchanges that have single-stock
circuit breakers, trading bands can be set for all stocks or determined by a security’s
sector or trading segment. Some exchanges reject outright orders that are too far
outside a trading band. (Please note that trading halts can be issued on securities
for a plethora of reasons, such as the release of big news about a company or
industry, a company’s failure to meet listing requirements, or a business issue such
as nonpayment of exchange fees. However, halts like these do not count as circuit
breakers, which are halts triggered by price fluctuations, and they are beyond the
scope of our discussion here.)
16 Trading Minefields | Circuit Breakers
Global exchanges vary greatly on which kind of circuit breakers they have, if they have
any at all. Some markets have both market-wide and single-stock circuit breakers, while
others have only one of the two. There are even markets with no specific circuit breaker
regulations in place.
The differences between markets’ circuit breaker rules do not end there. Once you
know what kind of circuit breakers an exchange has in place, you should also find out
whether they’re static or dynamic. Static limits are determined at either the start of the
trading day or the end of the previous day’s trading. For example, in the US, the S&P
500‘s previous day’s closing price is the price used to calculate the 7%, 13%, and 20%
thresholds for the trading day. That initial number—the previous day’s closing price—
does not change throughout the trading day, so it is static. Dynamic limits change
along with the price in real time, as in London’s single-stock circuit breaker (mentioned
above), which is a 5% trading band around the last automated book trade. As the price
of the security changes, so do the upper and lower price limits.
As you may have noticed, it is almost impossible to discuss any hard and fast rules
about circuit breakers, as the regulations differ so radically from market to market.
There are a few other ways markets’ circuit breaker rules vary:
• In several exchanges, such as the US’s NYSE, Canada’s TSX, and Brazil’s BOVESPA,
circuit breakers do not apply in the last 30-60 minutes of trading. If the index
crosses the thresholds late in the day, trading continues as normal.
• Some exchanges allow each circuit breaker level to trigger only once (as in the US)
whereas others can be triggered multiple times if trading remains volatile.
• Some markets hold volatility auctions after a single-stock trading halt to determine
the new price of the halted security.
These are all elements to look up and keep in mind if you are trading in a new market.
While if all goes well, you may never need to know an exchange’s circuit breaker
regulations, it’s still handy to have an idea of the rules in place just in case the market
ever gets too volatile. To help get you started, we offer a brief summary of each
market’s circuit breaker rules in the “Exchange Guides” section of this guide, starting
on page 78.
Price Tick Size
< 2000 1
> 2000 5
Price Tick Size
Up to 0.25 0.0001
0.2501-1 0.0005
1.0001-2 0.001
2.0001-5 0.0025
5.0001-50 0.005
> 50 0.01
Trading Minefields | Tick Size 17
Tick Size
In simplest terms, tick size is the smallest amount that the price of a security can move.
While those are the simplest terms, an example is clearer: Euronext markets (Belgium,
France, the Netherlands, and Portugal) have a tick size of EUR 0.01. That is, the mini-
mum amount a security’s price can change on Euronext Paris is 1 cent. If a price is at
EUR 10.12, you can’t post at 10.115; the exchange will only allow movements of 1 cent,
so you’d have to post at 10.11. On the surface, this seems pretty straightforward, but
of course global exchanges can make even the simplest things feel labyrinthine. In this
chapter, our goal is to provide a basic understanding of how tick sizes work across vari-
ous markets.
Tick sizes are set by exchanges, and come in two flavors: static and
dynamic. (These terms are probably familiar to you if you’ve read our
chapters on auctions or on circuit breakers—the trading world loves
separating things into “static” and “dynamic!”) Static tick sizes are a
fixed amount, regardless of the price of the security. The Euronext tick
size in our example above is static—no matter the price of the security,
the tick size is EUR 0.01. Other examples of markets with static tick
sizes include Brazil, South Africa, and the US.
Dynamic tick sizes change based on the price of the security. Usually, the higher the
price of a security, the higher the tick size. As an example, let’s look at the price and tick
size table from our exchange guide for Hungary (also found on page 102). The tick size in
Hungary is technically dynamic, but very simple: if the price of a security is less than HUF
2000, the tick size is 1; HUF 1 is the smallest amount by which you can change the price.
If the security costs more than HUF 2000, the tick size increases to 5.
Now that you’re more comfortable with the concept of dynamic tick sizes, let’s look at
a slightly more common price and tick size table, from our Italy exchange guide (page
110). The values are different (more prices and tick sizes, and the tick sizes are a lot
smaller on the low-priced securities), but by now it should make some sense: if the price
of a security is less than EUR 0.25, the tick size is relatively small: 0.0001 cent; if greater
than EUR 50, the tick size is 1 cent.
Our goal is to provide
a basic understanding
of how tick sizes work
across various markets.
LN Price Tick Size
LN 0 0.01
LN 10 0.25
LN 500 0.5
LN 1000 1
LN_EURO 0 0.0001
LN_EURO 0.1 0.0025
LN_EURO 5 0.005
LN_EURO 10 0.01
LN_SET1 0 0.0001
LN_SET1 0.5 0.0005
LN_SET1 1 0.001
LN_SET1 5 0.005
LN_SET1 10 0.1
LN_SET1 50 0.5
LN_SET1 100 1
LN_SET1 500 5
LN_SET1 1000 10
LN_USD 0 0.01
18 Trading Minefields | Tick Size
Dynamic tick sizes are more common across global exchanges than static ones. If you’re
curious about any one exchange in particular, you can find price and tick size informa-
tion on each of our exchange guides, starting on page 78.
Easily the most confusing piece of information about tick sizes is that in many ex-
changes, the tick size—static or dynamic—is not consistent across segments, indices, or
different types of securities. Futures and ETFs also frequently have different tick sizes
from single-stock securities. Different segments can also have different tick size rules;
an example is in London, whose chart is below (and also found on page 145).
Most securities on the exchange follow the basic (“LN” on the chart) price and tick size
rules. However, different segments and trades can have different tick size rules. Notice
that trades conducted on the exchange in Euros and in US dollars have different tick
sizes, even though they’re on the same exchange as other securities. The London Stock
Exchange separates some securities into segments, some of which have their own tick
size rules. We’ve included SET1 on this chart because it is a heavily-traded segment;
there are other segments on the exchange as well.
Similarly, on some exchanges, different indices can have different tick size rules, such as
in South Korea’s KRX, where KOSPI and KOSDAQ have slightly different tick size rules.
Some global markets even have different tick sizes based on whether you’re trading
in the electronic or non-electronic system. MTFs, for the most part, follow the main
exchange’s tick size rules for a security.
Trading Minefields | Tick Size 19
You may be asking yourself, why do markets go through all these complicated rules
and regulations? What’s the point of setting tick sizes? Well, competition for pricing
would be complicated and intense if there were no tick size rules; you could out-price
someone by one millionth of a cent, and they could react by changing their price to
two millionths of a cent, and so on, until the pricing resembles children on a playground
arguing that they have “infinity plus one!” more toys than the other kids.
There is talk among global markets of simplifying tick size rules; it has been mentioned
that European exchanges may someday have consistent tick size rules across all Euro-
zone markets. Other exchanges weigh the pros and cons of implementing more “gran-
ular” (smaller) tick sizes, which may increase market efficiency and encourages high
frequency trading, but may also drive out non-HFT participants. Whatever direction tick
size rules go, we’ll be sure to follow—and keep you updated in the process.
* ConvergEx Group companies do not engage in market making or investment banking, but may
operate in a riskless principal and/or net trading capacity as well as in an agency capacity. In connection
with certain ETF transactions requested by clients, ConvergEx Execution Solutions may act as a principal
or engage in hedging strategies in connection with such transactions.
20 Trading Minefields | Dark Pools
Dark Pools
Willie Sutton famously robbed banks because “that is where the money is.” In a parallel
vein, traders need to care about dark pools because that is where the liquidity is.
Three types of venues allow you to automatically execute trades: traditional exchanges
(like NYSE, LSE, or HKEX), exchange alternatives like Electronic Communication
Networks (ECNs) and the light European Multilateral Trading Facilities (MTFs), and dark
pools.
In a nutshell, dark pools are trading venues that allow traders access to anonymous
liquidity, do not publish quotes, and do all prints at or better than the NBBO of the
primary market. While orders placed in dark pools are secret, prints generally go
immediately to the tape and are not secret. Depending on the regulatory framework, the
prints on the tape may or may not be attributed to a specific dark pool.
To make this all more confusing, many lit exchanges now offer dark orders as well. These
orders are a natural evolution of exchange reserve orders. But now, instead of showing
one board lot, you can show nothing at all. The benefit of using exchange dark over dark
pool orders is that you get to interact with light orders. This is a mixed blessing. If you’re
vacillating between the two, use both to access the most liquidity.
One useful way of viewing the dark pool universe is by who owns them:
• Consortium-owned dark pools (e.g. Level)
• Large-bank-owned (e.g. Goldman/Sigma and CS/Crossfinder)
• Market makers (e.g. KCG)
• Independent/agency firms (e.g. ConvergEx* and ITG)
You will find that the execution characteristics of these types of dark pools are largely
consistent with the mission of their owners.
Almost all pools fall into a category known as “streaming” dark pools, where the average
execution size is a few hundred shares or less. In contrast, dark pools like POSIT and
Liquidnet in the US are designed to attract block orders.
All of the different flavors of dark pools evolved over time, and regulations have had to
evolve with them. The first successful dark pool, POSIT, was created in the US in 1987
as an anonymous alternative to upstairs block trading. Many dark pool ideas were tried
under a variety of regulatory regimes until finally the US’s SEC introduced Reg ATS
(Alternative Trading System) to formalize the rules under which dark pools operated.
Dark pool trading has expanded around the world since then, leading the European
Union to introduce parallel regulation with MiFID (Markets in Financial Instruments
Directive) in 2004.
Trading Minefields | Dark Pools 21
Dark interactions account for about 20% of trading in the US, around 10% in Europe
and about 2% in the Asia-Pacific region, and have been on the rise in recent years.
Despite the increase in dark pool trading, the number of dark pools is stagnating—at
least in the US. With 30+ dark pools already running, the US doesn’t need another one.
Indeed, several US dark pools are essentially out of business. No recently-introduced
pool not tied to a large bank (which can provide resident flow and market making) has
gotten any traction. Meanwhile, in Europe and the Asia-Pacific region, the field will
undoubtedly grow even as many pools continue to flounder.
The bottom line: if your orders demand a high portion of the available liquidity or if
your orders have a lot of short term alpha, then you will benefit from leveraging dark
pools. You have the information advantage that dark pools can help you maintain as
long as possible.
Be aware that leakage can occur even in the dark. Dark pools offer less leakage than
light reserve orders, and the other side has to trade to learn anything… but that is not
the same as no leakage. How does it happen? Let’s first review how leakage happens in
light markets:
• In the old days of trading, there were no reserve orders. If you wanted to trade
size, you had to display an appalling look at your own hand.
• With the advent of reserve orders, this got better. You wanted to buy 250k, but
you only had to show 100 shares. The size you chose to show became an element
of gamesmanship.
• However, people soon learned to read the tape while watching the montage dis-
play. For example, if only 100 shares showed at the bid, but when you hit it again
and again and it never changed, you could be near certain that somebody had a
large reserve order parked there.
Dark Pools have no quote display, but they are still subject to the same intelligence
finding by anyone willing to trade. If every time you send an order to a dark pool, you
get filled immediately, you can be pretty sure that there is a large resting order there in
size. Small orders intended to ferret out hidden liquidity are known as pings.
Be aware of gaming in the dark pools. The nature of dark-pool derived prices makes
them a very fat target. For example, if Evil Bob correctly guesses that there is a large
resting mid-cap order to buy in a dark pool, he can buy 2000 shares in the light market,
spike the price up and short the resting dark order 10k shares at the stupid high price.
He can then cover the short in the open market 10 minutes later. By the way, pegging
orders in the lit market have exactly the same weakness, which is why they are the fa-
vorite target of day traders everywhere. Your best defense: use tight limit prices.
Owners of quality dark pools spend a lot of effort on anti-gaming and on limiting abuse.
Good dark pools police the participants (systematic short term price reversion is a sure
sign of gaming), and a good dark pool will let you decide what kinds of participants you
want to play with.
22 Trading Minefields | Dark Pools
One final word of caution: dark trading in highly volatile markets will remind you of the
meaning of adverse selection. If you are buying and the markets are falling, you will be
filled immediately at the high prices before the market drops. If you are selling, you will
not be filled at all and you will get to sell later at a horrible price.
Many brokers provide direct access to their own dark pool. Some provide direct
connects to a few others. However, no dark pool has more than a small percent of the
total market liquidity. It is dangerous and ineffective to post in only one pool.
One of the best ways to trade in the dark is to use a dark aggregation tool. Think of
it as a smart router for the dark. A good tool will let you get to many pools at once. A
great tool will give you transparency into where it is finding liquidity and full control
over just how it operates. A strong dark aggregation tool puts strict, ever-evolving
limit prices on any order it puts into the market. It will make sure that no one dark pool
has very much of the order and it will allow the trader to set a minimum dark fill to 200
shares or more.
Meanwhile, pretty much every algorithm from every major vendor touches the dark
now. To the algos, dark pools are just one more place to fish for liquidity. Beyond that
are what are labeled “dark themed” algos, for want of a better name. These algos
either trade exclusively in the dark or, at a minimum, do as much as possible before
they resort to the light markets. The performance of these algos is all over the map.
TCA is ultimately your best guide to quality.
Trading Minefields | Dark Liquidity in Europe 23
Dark pool trades in
Europe hit a record
high at the beginning
of this year.
Dark Liquidity in Europe
Now that you know the gory details of trading in the dark from our chapter on dark
pools, let’s narrow our focus to discuss dark liquidity in Europe. While interest in dark
pools originated in the US, dark liquidity is on the rise across Europe. In fact, dark pool
trades in Europe hit a record high at the beginning of this year, coming in around 10%
of market volume.
Before we get into the major categories of dark liquidity in Europe,
we should talk a bit about Broker Crossing Networks. Broker Crossing
Networks, or BCNs (sometimes called BCSs), are firms’ internal dark
pools, such as Deutsche Bank’s SuperX. Currently, these are the
heavyweights of dark liquidity in Europe. Like dark pools in the United
States, BCNs use the listed market NBBO quote to determine the prices
at which they can execute. Buying and selling liquidity in a BCN will
not directly move the public quote, and orders execute anonymously.
Typically, a firm’s dark algorithms and dark aggregation tools turn to their
BCNs for liquidity first.
This is a little painful, but stay with us. MiFID created three major categories of dark
liquidity in Europe:
• Systematic Internalisers (SIs)
• Multilateral Trading Facilities (MTFs)
• Exchange-run venues (or regulated markets)
MiFID regulations require BCNs to register as one of the first two categories. If BCNs
provide customers with direct access to their dark pools instead of routing the orders
for clients, MiFID rules state that the BCNs must register as an MTF—which we get to
later. In contrast, if a firm in a BCN crosses its own clients’ orders, or if it allows clients
to execute trades in its own book, and regularly uses its own capital to make trades, it
has to register as a systematic internaliser.
A Systematic Internaliser, or an SI, is a firm that often trades with its own capital, and
executes clients’ orders against its own book or against other clients. MiFID regula-
tions treat SIs as small exchanges: they must follow pre- and post-trade transparency
regulations. Like BCNs, they use the public quote to determine prices, but all trading is
done in their private books; they don’t post to an exchange. A few examples of SIs in
Europe are Citigroup Global Markets, BNP Paribas, and Credit Suisse’s Crossfinder. As
with BCNs, MiFID has rules against SIs becoming too large: if a Systematic Internaliser
becomes too big under MiFID standards, it must go on to register as an MTF.
We touched on the subject of Multilateral Trading Facilities, or MTFs, in our Dark
Pools chapter, and you’ll find more about them in the Trading in Consolidated Markets
chapter. But for the sake of finding dark liquidity in Europe, it is useful to know a few
things about MTFs. MTFs are required to display quotes, and, like SIs, are held to pre-
and post-trade transparency rules. They use the primary exchange’s opening price to
24 Trading Minefields | Dark Liquidity in Europe
set prices at the start of the day, but throughout the day, trades do not have to execute
within the primary exchange’s best quotes. Many MTFs, including Chi-X Europe, BATS
Europe, and Turquoise, operate an integrated book and a separate dark book. People
seeking dark liquidity will find advantages to both: posting only in dark books allows
you to place orders completely anonymously, and there is no size restriction on your
order. Integrated books allow you to access both displayed and non-displayed liquidity,
so you can get the best of both worlds, and you can use a hidden order type to interact
anonymously. However, hidden order types often have a
minimum order requirement. Some examples of MTFs with
dark books are Chi-X’s Chi-Delta, Turquoise Dark, BATS Dark,
Goldman Sigma X MTF, and Euronext Smartpool.
Finally, outside the whole BCN-SI-MTF continuum, we have
exchange-run venues, venues run by regulated markets.
Some exchanges run their own dark venues where the book is
closed and orders are anonymous and matched at the mid. This
category will sound especially strange to people used to dark
trading in the US, where exchanges are not permitted to run
dark pools. Xetra Midpoint, Nordic@Mid, and SLS (SIX Swiss
Exchange Liquidnet Service) are all exchange-run dark venues. At
the time of this writing, exchange-run venues account for a very
small portion of overall market volume; combined, they make
up less than .05%. In addition to exchange-run dark venues,
many lit exchanges can also offer anonymous access to liquidity
through hidden order types. Hidden order types allow you to
send completely hidden orders to the exchange order book
without displaying either price or volume to other participants.
They interact both with displayed orders and other hidden orders
on the order book. The only catch is that under MiFID, hidden
orders must be “large in scale.” “Large in scale” is a criterion
based on a stock’s average daily turnover, and ranges from stock
to stock. It can range as widely as EUR 50,000 to EUR 500,000
depending on the stock.
The table above shows the major dark venues in Europe by type.
Hidden order types are helpful for accessing dark liquidity on lit exchanges, but what
kinds of order types should you use in dark venues? Order types in European dark
pools are generally the same as what you would use elsewhere, with pegged orders
being especially popular. While pegged orders are supported in almost all dark venues,
some only support midpoint pegging, while others allow you peg to the mid, bid, or
offer, so be sure you know the regulations of your specific dark pool of choice.
Venue Type
CS Crossfinder SI
Goldman Sachs Sigma X MTF
Deutsche Bank SuperX BCN
CitiGroup Global Markets SI
Chi-X Chi-Delta MTF
UBS MTF MTF
ITG POSIT MTF
BATS Dark MTF
Turquoise Dark MTF
Liquidnet Negotiation MTF
Nomura NX MTF
Euronext Smartpool MTF
Instinet BlockMatch MTF
SLS (SIX Swiss/Liquidnet) Exchange-run
Xetra MidPoint Exchange-run
ICAP BlockCross MTF
Nordic@Mid Exchange-run
Trading Minefields | Dark Liquidity in Europe 25
When you’ve executed orders in dark pools, how can you find the prints on the tape?
As you can see in our Auto Volume chapter, we discuss which kinds of orders go on the
tape and how varied exchanges across the world are in their reporting of different kinds
of prints. In the US, dark volume is generally considered Auto Volume, so we can find
it there. In Europe, there is no consistent rule as to how to classify dark executions on
the tape. Hidden orders at exchanges in Europe are generally reported as Auto Volume.
MTFs like Chi-X Europe, BATS Europe, and Turquoise flag orders executed in their dark
books with a dark trade print condition, and count all dark volume as Auto Volume.
Exchange-run venues publish their dark volume as midpoint dark trade conditions, but
they do not consider dark volume to be Auto Volume; they count it as “irregular” volume.
Finding dark trades on the tape can be a subtle art, but it will inevitably become easier to
figure out as dark trading becomes more popular in European exchanges.
Dark liquidity in Europe is still in its infancy, but it already accounts for a substantial
amount of average daily volume. As the volume in European dark venues increases,
we’re likely to see more regulation in the future. The face of dark trading will change as
MiFID II comes into effect. The buy-side is becoming savvier about using dark liquidity,
and more demanding in their use of it—this too will drive necessary change.
26 Trading Minefields | Dark Liquidity in the Asia-Pacific Region
The vast majority of
dark trading in Asia-
Pacific markets is
done on BCNs.
Dark Liquidity in the Asia-Pacific Region
The advantages to dark trading in the Asia-Pacific region are the same as in other parts
of the world: it allows you to access liquidity without displaying your hand to the market.
Trading in the dark often means opportunities for price improvement, and you can work
large orders there without the risk of other parties seeing what you’re doing. This is
especially valuable in Asia-Pacific markets, where liquidity is sometimes scarce. While
these markets have been a little slower to warm to dark interactions than the US and
European markets, the trend is growing. Dark liquidity accounts for about 2% of trading
in the Asia-Pacific region now, and that percentage will probably rise over the next few
years.
Remember Broker Crossing Networks, or BCNs, from our chapter on Dark Liquidity in
Europe? The vast majority of dark trading in Asia-Pacific markets is also done on BCNs.
Some examples include Credit Suisse’s Crossfinder, Morgan Stanley’s MS POOL, and
UBS’s dark venue. BCNs’ popularity is on the rise in Asia-Pacific trading, and many trad-
ers find that the most convenient way to access many of those BCNs
at once is through dark aggregators (which you may remember from
the Dark Pools chapter).
One of the main reasons that most dark interactions take place in
BCNs is that the Asia-Pacific region lacks the large offering of dark
venues that we see in the US or in Europe. Asia-Pacific markets are
more cautious about new dark offerings, which is why dark trading
has been adopted there slowly and why dark volumes are typically
rather low. In fact, Chi-X’s Chi-East closed early in 2012 because its
trading volumes failed to meet expectations.
Chi-East opened in 2010 as a joint venture between Chi-X Global and Singapore’s SGX.
It was the only non-broker pan-Asian dark venue, and the only non-BCN to provide
access to dark liquidity in Hong Kong and Singapore. Unfortunately, while global trading
volumes have been on the rise, that rise was slower than Chi-East was counting on, and
Chi-East representatives cited lower-than-expected trading volumes as the reason for its
closure in May of 2012.
Now that Chi-East is no longer a contender, dark venues outside of BCNs are hard to
come by in the Asia-Pacific region. Australia’s ASX has an exchange-run dark venue called
CentrePoint, and… well, as of this writing, that’s pretty much it for non-broker dark pools
in the Asia-Pacific region. You can access alternative liquidity through Chi-X Australia and
Chi-X Japan. Though these venues are lit, they do provide non-exchange-based liquidity,
and Chi-X Australia even offers a hidden order type. In Japan, alternative trading systems
(ATSs) like Chi-X Japan and SBI Japannext are known as Proprietary Trading Systems, or
PTSs. These resemble Europe’s SIs and MTFs, and though they are all lit venues, they
do offer Iceberg and MaxFloor order types. They are becoming increasingly popular; for
example, market-maker Getco has been trading on both Chi-X Japan and SBI Japannext
PTS, raising the volume traded on each.
Trading Minefields | Dark Liquidity in the Asia-Pacific Region 27
Large dark venues that serve multiple markets are going to be slow to emerge in the
Asia-Pacific region, as the market structures and regulations in Asia-Pacific countries
vary much more dramatically from nation to nation than in the US and Europe. Chi-
East’s closure will likely deter other dark pools from opening for the time being.
However, with dark liquidity’s increase in popularity over the past few years in other
markets, we hope to see more options and more convenience for traders looking for
dark liquidity in the Asia-Pacific region.
28 Trading Minefields | Auto Volume
Auto Volume is
comprised of prints
that an electronic
trader (DMA or algo)
has a chance of in-
teracting with on an
exchange.
Auto Volume
“Auto Volume” belongs in the category of “shouldn’t the world have figured this out
already?” Unfortunately, the world hasn’t, but understanding the concept of Auto
Volume is vital for effective global trading.
Traders know that the difficulty of executing an order is primarily driven by the size
of the order relative to the available market liquidity. An order demanding 4% of the
available liquidity is easily handled, whereas managing an order that demands 40%
of the available liquidity is extremely challenging. But what exactly is
the “available liquidity?” In many global markets, looking at raw ADV
(average daily volume) figures can be misleading. Not every print on the
tape represents a genuine opportunity to trade. So how can you tell what
volume to track on an exchange? What volume counts? What doesn’t?
Enter what is called “automatically executed electronic volume,” or Auto
Volume for short. Auto Volume is comprised of the prints that an electronic
trader (DMA or algo) has a chance of interacting with on an exchange.
Please remember this simple definition, because the “how sausage is
made” side of this story is a bit ugly.
Before we get into the ugly bit, let’s review some kinds of prints that don’t
belong in the Auto Volume camp. Big block crosses done away from the
market (upstairs prints), trading corrections, and hold-over trades from yesterday’s post-
market are not part of the liquidity available for an electronic order and are therefore not
part of the Auto Volume.
Exchanges recognize that not all prints are created equal, so they’ve created “print
condition codes” and the notion of regular/irregular print indicators. You see these
codes and indicators on any proper “time and sales” tape display. Most irregular prints
come from some process other than the normal continuous/open/close auctions. Ideally,
Auto Volume would be the simple aggregate of all the regular trades. And in a perfect
world, the print condition codes would be clear and consistent across all exchanges and
markets. But in practice, print condition codes are a mess of conflicting systems. Israel
has fewer than 10 print condition codes while Australia has over 100. Some exchanges
have a very rigorous and commonsensical approach to flagging trades as irregular;
others label every trade as regular.
In Mexico, Hungary, and Japan’s JASDAQ, all trade conditions are considered automatic
trades. On the other hand, London and Australia have so many different trade conditions
that it’s hard to tell if anything is regular. MTFs don’t have irregular volume, so all is Auto
Volume. In the US, dark pools are considered regular, and it’s mostly errors that are out.
Auctions are almost always part of Auto Volume. New Zealand excludes international
marriage but includes ordinary and off-market marriage. Married trades are essentially
Trading Minefields | Auto Volume 29
cross trades, but certain other cross trades are excluded while still others are included. In
Singapore, married trades are also excluded while auction, buy-in,
and unit share trades are included. In London and Johannesburg,
cross and block trades are excluded, and automatic and auction
trades are included.
Dizzy yet? There’s more: Exchanges provide lots of different
volume measures. Examples include session, order-book, off-book,
uncrossing, block, and trade volumes. Some of these come very
close to the spirit of Auto Volume, but every exchange makes up
what trade conditions are regular and what aren’t.
For the sake of consistency, the real distinction between what
is and isn’t Auto Volume is made by data vendors and/or algo
providers. Market data vendors like Bloomberg examine the
conditions and decide what to include or exclude when it comes
to Auto Volume. Bloomberg is considered the industry standard
for providing Auto Volume… mostly because it’s the only data
vendor that does. Others (like Reuters and NYSE Euronext) are
working on similar functionality. While they try to be consistent
with their rules across markets, vendors and algo providers aren’t
always consistent with each other. So if you compare Bloomberg
with another vendor, or two algo providers, you may find that they
don’t agree on whether certain trades belong in the Auto Volume
category.
The table at left provides some sense of how big the discrepancies
can be between apparent market volume and real available
liquidity.
No discussion of available liquidity and Auto Volume would be
complete without mentioning the need for a consolidated view.
In the US, liquidity is available at fifteen exchanges and more than
thirty dark pools. The notion of primary exchange volume is dead.
In Europe, it’s getting there. In many names, the MTF volume is
just as important as the volume from primary exchanges.
Getting Auto Volume right is just as important for algo trading
as it is for conventional DMA trading. The number one global algo
mess-up is probably weak POV (percentage of volume) algos that
chase the wrong volume. These weak POV algos tailgate block
Exchange Auto Volume
as a percent of
Total Volume
Irish Stock Exchange 32.24%
London International Order Book 63.17%
London Stock Exchange 87.85%
Tokyo Stock Exchange 88.52%
Australia Stock Exchange 94.91%
New Zealand Stock Exchange 95.07%
Hong Kong Stock Exchange 96.79%
Spanish Stock Exchange 96.80%
Oslo Stock Exchange 98.44%
Korea Stock Exchange 98.63%
Johannesburg Stock Exchange 98.72%
KOSDAQ 98.89%
Euronext 95.69%
Brazil Stock Exchange 99.87%
Chi-X Europe 100.00%
BATS Europe 100.00%
Turquoise 100.00%
Mexico Stock Exchange 100.00%
Canada Venture 100.00%
Osaka 100.00%
JASDAQ 100.00%
30 Trading Minefields | Auto Volume
crosses creating impressive market impact. They trade in the wrong places and trade
too slowly because they ignore off-primary exchange volume. Other algos are not
immune either. For example, in Initiation Price algos, the number one driver of order
trading rate is the available liquidity (now and available until the end of the order).
Getting Auto Volume right is essential.
ConvergEx has spent a huge amount of time and effort getting Auto Volume right
for all the global markets in which we trade. Our customers tell us that it shows up in
the quality of our algos and our trading performance—no foolish chasing of chimera
volume; no ignoring valuable liquidity. Many days, knowing exactly what, when, and
where meaningful liquidity is available seems like half the battle in delivering high
performance global algorithmic trading results.
Trading Minefields | TCA Benchmarks 31
TCA Benchmarks
TCA (Trading Cost Analytics) enjoys roughly the same popularity among traders as
Brussels sprouts among preschoolers—a few fans do exist, but they have to keep their
preferences quiet if they want to be invited to all the right parties.
As traders, we all know why we are supposed to embrace TCA:
• Bad trading creates slippage. Slippage destroys alpha. Alpha is the lifeblood of
investment.
• Our job is to deliver execution quality; we shouldn’t be against measuring it.
• Best Execution is a fiduciary duty just about everywhere in the world.
• We all want to learn from our successes and failures.
However, we also know that TCA in the real world has some real practical problems:
• Traders’ trading costs are as much driven by the orders they get as by their skills.
Small VWAP orders for a large cap American stock are quite different from large
Hong Kong orders in names that trade by appointment.
• Luck, good and bad, colors almost every order. (Often, the answer to the question
“Why did you crush VWAP today?” is “Because we were buying, not selling.”)
• Order-to-order variability in trading results is so high that drawing meaningful
conclusions from data is a real trick.
• There is always someone trying to draw convenient conclusions from too-slim
data.
For better or worse, TCA is here to stay. Trading Cost Analytics will become an increas-
ingly important reference point for anybody who trades. The challenge is to make TCA
as practical and valuable as possible.
To use TCA effectively, you should to pick a benchmark or combination of benchmarks by
which to measure your trading performance. So which TCA benchmark(s) do you want to
use?
• Historically, the most popular benchmark has been Full Day VWAP (Volume
Weighted Average Price). It is probably still the most widely used measure,
and it has wonderful face validity: did you buy for less or sell for more than the
average trader today? VWAP offers the substantial joy of subtracting out market
movements from the reference price.
However, there are three main problems with full day VWAP. They are:
¤Annoying: Which prints should we include in defining the market average
price? Large arranged crosses? Probably not. MTF trades? Probably so. The
answers vary by vendor.
¤Troubling: When, during the trading day, should we start and stop calculating
market average price? Using full-day VWAP is an expedient answer, but not a
compelling one.
32 Trading Minefields | TCA Benchmarks
¤Fundamental: Trading in size moves the market average price. In fact, some
trading styles deliver strong VWAP performance by magnifying market
impact—pretty much the opposite of what we’re trying to achieve.
Debates over the duration question (above, under “Troubling”) have spawned
three different alternative VWAP answers:
¤Interval VWAP: measures the market VWAP from when the trader got the
order until she finished. If ending an order before the close is the trader’s
decision, this measure is kind of hard to defend.
¤Available VWAP: measures from the time order was received until the end of
the trading day. If you are just measuring traders as opposed to the invest-
ment process, this measure offers a substantial upgrade in defensibility.
¤PWP (Participation Weighted Price) is the high-water mark for VWAP
benchmarking. The benchmark period begins when the trader gets the
order and ends when the market has done enough volume to trade the
order several times over. For example, if the reference participation rate is
20% and the order is for 40,000 shares, then the benchmark period ends
when the market has done 200,000 shares since order origination (40,000 /
0.2). The huge strength of PWP is that it primarily solves the “Fundamental”
problem above, burying market impact. Study after study finds that market
impact is largely a function of the portion of market volume an order
consumes. By setting a reference participation rate for PWP calculations,
an organization effectively accepts an implicit optimal market impact. The
right reference POV rate is somewhere near 20% for organizations with
high short-term alpha trades and more like 3% for organizations with long-
term strategies. The Reversion measure discussed below is invaluable for
optimizing the choice of reference POV rate.
• The popular non-VWAP benchmark is IP (Initiation Price or Arrival Price), the
mid-point of the market just before the order began trading. (The initiation price
of an order initiated at/before the open is the previous trading day’s closing
price.) The compelling benefit of the IP benchmark is that the order cannot affect
the reference price. IP is prized for its purity over VWAP, but that purity has
its price: the IP benchmark yields far more variability in results than the VWAP
benchmark.
• Benchmarking against the Opening Price has strong face validity. However, if
the order is large and participates in size at the open, the market impact of the
order gets buried. This is probably the most game-able benchmark for large
orders. Using the Previous Night’s Close is often a better choice.
• Benchmarking against the Closing Price enjoys wide currency for the simple
reason that the closing price serves as a reference price for publically traded
managed portfolios (unit trusts, mutual funds, etc). In markets that offer MOC
Trading Minefields | TCA Benchmarks 33
(Market on Close) orders, this benchmark is easy to achieve, but nonetheless
problematic. Huge orders into the close will get the closing price, but by almost
any other measure, those orders will look horrible.
• Reversion is the final benchmark that deserves your attention. It measures your
order’s average or last price against the market price of the stock after your order
is done participating in the market. Usually, 15 or 30-minute periods are used in
these calculations (substituting the next day’s open if the order went to the end
of the day). The interpretation of Reversion is straightforward: if, when you are
buying, the market price of your stocks routinely drops after you finish trading,
slow down. If the market price routinely continues to rocket, speed up. Reversion
is typically measured against both the average price and last fill price of an order.
People make strong arguments for using different benchmarks in different markets.
These arguments usually boil down to avoiding doing something market-inappropriate in
pursuit of a given benchmark. Two classic examples:
1. Leaning hard against the Closing Price benchmark in thin stocks in markets that
have no closing auction is asking for trouble.
2. VWAP benchmarks invite trading confusion in many Asia-Pacific markets where
order queues are hours deep and 80% of the day’s volume is done in a few very
short trading volume spikes. A US-style VWAP volume slicer algo isn’t going to
get the job done.
In neither case is the benchmark inherently wrong, but the benchmark does invite mis-
chief.
For the most part, the war over the choice of benchmarks is over. We no longer have to
suffer the battles between “VWAP monkeys” and “IP propeller heads.” IP and PWP have
both won. We know of no case where the two different measures, applied rigorously,
paint a substantially different picture of the relative performance of brokers, trading
strategies, algos, or individual traders. (If you know of one, please contact us. Our quants
would love to dissect the trades with you.) Meanwhile, measuring against the close is
inherently problematic, and that problem is not going away as long as unit trusts exist.
Choosing the right TCA Benchmark for your trade is only the beginning of using TCA
effectively. See our next chapter, “Retrospective and Real-Time Uses of TCA,” for more
insight into how—and why—to make TCA work for you.
34 Trading Minefields | Retrospective and Real-Time Uses of TCA
Retrospective and Real-Time Uses of TCA
After reading our TCA Benchmarks minefield chapter, you probably know what bench-
mark you prefer. With that out of the way, it is time to actually use TCA. As far as we’re
concerned, there are two main uses:
• Retrospective: How well did you/your brokers/your traders/the tools you use
trade, and what does that say about how you can trade better in the future?
• Today: How can TCA help you with your trade blotter, right now?
Let’s start with Retrospective. As you look at a TCA report for one quarter, the first thing
that you’ll notice is the high volatility in trading performance. The graph below, from a
typical quarter, depicts all US domestic algo trades with over 10k shares filled. Extreme
results range from losing about 100 bps to gaining about 100 bps. On average, perfor-
mance was about -2 bps, and the standard deviation of performance was about 7 bps.
(Please note: this is for executed shares only. This data includes limit orders and dark
orders where performance on executed shares tends to be quite strong.)
As broad as this distribution appears, it actually quite narrow for a typical multiple-
approach global trading operation. The US is a comparatively predictable place. Algo
trading yields tighter (but not necessarily better) performance results than DMA trading.
Suppose that Broker A appears to be 1 bps better than Broker B in the quarterly report.
Is that luck or skill? Unfortunately, you would need each broker to have done at least 300
trades before you could safely come to a conclusion. If you have an internal TCA group
or an external TCA vender, insist that all results/conclusion come with “confidence”
statistics. This isn’t the time or place for going into these measures, but confidence
statistics are easy to interpret and invaluable if your TCA supplier takes the time to
create and explain them.
Source: ConvergEx internal data: USA desk-algo trading H1-2012, size > 10k shares, ADV > 100k
Trading Minefields | Retrospective and Real-Time Uses of TCA 35
Peer information
lets you know how
your brokers, algos,
and traders compare
to their counterparts
in other organizations.
Speaking of variability, here is the most important word in TCA: Winsorising. Haven’t
heard of it? It comes from statistician Charles P. Winsor (1895-1951). A quick visit to
Wikipedia gives you the following definition:
Winsorising: The transformation of statistics by limiting extreme values in the
statistical data to reduce the effect of possibly spurious outliers
The need to Winsorise trading results becomes quickly apparent to anyone who cares
about measuring trading performance. For example, a trader with a full day order to buy
on a stock that suddenly gaps up on huge volume with 45 minutes to go in the trading
day is going to look like a genius, having bought 80% of the order at the day’s lows. A
trader selling that same stock is going to look like an idiot. If you don’t Winsorise these
sorts of trades, the fat tails of trading will unfairly color your results. The challenge is to
keep the process rigorous so that you don’t end up throwing out trades to make the
results more flattering.
Some firms use retrospective TCA just to satisfy their Best Ex committee. Other firms,
on the other hand, use it as a core tool for trading management: driving their broker
choices, limiting the list of algorithms available to its traders, defining trader operational
latitude, setting trader compensation, and guiding trader tenure. In our experience,
as long as the traders involved see the process as disciplined, fair, and
transparent, you are ahead of the game. If your firm is not there yet,
our advice is to talk to the buyside firms famous for using TCA well. See
how they built it into their culture and how they deal with the inevitable
conflicts.
The reality is that for a firm doing only a few dozen trades per day,
TCA is hard to use meaningfully, as there isn’t enough data to support
valuable conclusion. At best, you get a sense of how your firm’s trading
stacks up in aggregate to other comparable firms. More trading—and
therefore more data—means more robust, valuable conclusions, such
as which broker serves you best, which algos work well under what
circumstances, whether traders err on the side of trading too passively
or aggressively, if your firm’s triage/assignment process is getting the right orders to the
right traders and whether those traders give the most important orders the attention
they deserve. We could go on; there are many such questions TCA can help you answer.
Should you do the TCA internally or with an external vendor? The best argument for
using a popular external TCA vendor is access to peer data. To some extent, every firm’s
orders are unique; direct comparison to other firms’ results is bound to be misleading. A
firm routinely trading large orders relative to ADV is going to have much higher reported
trading costs than a firm that plays small. However, a competent TCA provider can
adjust for these differences. Peer information lets you know how your brokers, algos,
and traders compare to their counterparts in other organizations. It is nice to know if you
36 Trading Minefields | Retrospective and Real-Time Uses of TCA
are at the top of the heap, and it is invaluable to know if you are not. If somebody else
enjoys substantially better performance in equivalent circumstances, you have every
motivation to look for better trading answers.
Quarterly TCA reports are all well and good. However, TCA’s role in day-to-day trading
is a far more compelling topic for most traders. They want today’s, not just retrospec-
tive, information. To borrow from Teddy Roosevelt, they are the men and women in the
arena:
It is not the critic who counts; not the man who points out how the strong
man stumbles, or where the doer of deeds could have done them better.
The credit belongs to the man who is actually in the arena, whose face is
marred by dust and sweat and blood; who strives valiantly; who errs, who
comes short again and again, because there is no effort without error and
shortcoming; but who does actually strive to do the deeds; who knows
great enthusiasms, the great devotions; who spends himself in a worthy
cause; who at the best knows in the end the triumph of high achievement,
and who at the worst, if he fails, at least fails while daring greatly, so that
his place shall never be with those cold and timid souls who neither know
victory nor defeat.
You are in the arena; how can real-time TCA help?
The simplest, most powerful use of real-time TCA is helping a busy trader add the
most possible value to a too-long trade blotter. Studies show that a competent trader
can trade three names really well; a great trader can trade ten names really well. If you
have 30-100 orders in your blotter, it is essential to pick the right names to focus on. A
decent EMS with embedded TCA makes it easy to screen for the difficult orders right in
the blotter. Once trading begins, in our experience, just seven numbers can tell 90% of
the story. Here are our favorite seven:
• Average price
• Market VWAP
• Last price
• Market POV rate on filled shares
• Estimated market POV required to complete by the end of the day
• IP performance on realized profit
• IP performance on unrealized profit
From this summary, the orders demanding your attention are readily apparent. The
point is not that these are the be-all-and-end-all seven measures, but that basic TCA
tools and a few well-chosen measures can greatly enhance trader productivity.
Trading Minefields | Retrospective and Real-Time Uses of TCA 37
The sky is the limit for the other end of the spectrum. The challenge is to get all the
information traders need to understand and manage their trades. This “trade intel”
snapshot illustrates the possibilities:
Let’s say you’ve put in a buy order with ConvergEx’s Abraxas
SM
algorithm. The
uppermost chart on the trade intel page shows what the stock was doing up to 10
minutes before you entered the order into the algo (represented by the vertical line at
10:40 am that appears in all charts). It clearly defines where you put your limit (the red
zone) and your IWould price (green zone). The chart also shows the market VWAP (yellow
line, adjusted for your limit price) and your average price (the light blue line).
The middle chart depicts when the algo traded and how many shares traded every
minute. Using the limit-adjusted market volume and the shares traded by the algo, it
shows a real-time POV rate (the red dotted line). Now you can see when the algo sped
up or slowed down based on price movements in the stock. The bottom chart shows the
market volume adjusted for your limit price.
38 Trading Minefields | Retrospective and Real-Time Uses of TCA
So, from a quick look at that trade intel page, you can see that the price hit your IWould
after 11 am, at which point the algo aggressively bought shares. The stock then rallied
beyond your limit price. You also see that the algo is currently beating VWAP and that
currently you are 40% of the total volume.
Finally, after the trade is complete, the trade intel page will print an additional 10
minutes of data so that you can see what affect you had on the stock while the algo
was trading. This page not only provides many points of valuable information during
trading, but continues to help after you’ve finished.
TCA is a hot topic these days, with many angles to consider and discuss. Rather than
rambling on until your eyes glaze over, we end this chapter with our answers to a quick
list of Frequently Asked Questions:
• TCA numbers never seem to be consistent across vendors. Why do two different
vendors disagree? Why does neither agree with Bloomberg? Who’s right?
While Bloomberg is the standard for most people, other vendors may have different
opinions and numbers and not necessarily be wrong. For instance, one vendor may
include trades on MTFs in Europe while another doesn’t. Neither would give you
wrong information, but you’d get different numbers from each.
• If I choose a VWAP benchmark, am I just shooting to be average?
The short answer is no, but it’s a little more complicated than that. On average,
good algos and buyside traders miss VWAP by about 1 bps (a bit more in thinner
markets), which means that technically speaking, shooting for VWAP is shooting
to be just above average. However, VWAP trading has its detractors as well as
its proponents. We discussed the obvious problems with using a US-style VWAP
algo in a “trade-by-appointment” market back in the “TCA Benchmarks” section.
To VWAP’s credit, there is evidence that introducing new traders to the VWAP
benchmark is helpful: it focuses their minds on the bets they make as it drives
out core mistakes like hugely overweighting the open or consistently waiting for
reversion. Ultimately, the real behavioral problem with VWAP benchmark is for
great traders. Experience suggests that it is very hard for even great traders not to
lock in a small win relative to VWAP on a trade and move onto the next order. This
benchmark game does not maximize traders’ value.
• How have ever-evolving market landscapes affected TCA?
Market fragmentation in Europe, the Asia-Pacific region, and Canada can cause
TCA numbers to look different across different brokers (as we touched on above).
Brokers have to create their own “consolidated tape” against which to compare
their performance. Some brokers want to compare their performance only against
Trading Minefields | Retrospective and Real-Time Uses of TCA 39
the primary exchange, others care about including MTFs and ATSs along with the
primary exchange, and still others want to track their performance against all liquidity
sources. Dark liquidity is becoming increasingly popular around the world—should
dark liquidity appear in TCA numbers? How? The wide variance in liquidity sources
and how clients want to count them forms one of the biggest challenges for TCA
providers. Because markets are fragmented and sometimes confusing, real-time TCA
is taking more of a center role.
A consolidated tape would eliminate gaps in data collection and provide more consis-
tency.
• Why doesn’t TCA analysis cover ancillary costs such as settlement and margin fees?
Settlement costs range so broadly by broker and by market that they could skew
results. And since you have to pay these costs no matter how you trade, results that
incorporate them don’t tell you anything useful about your trading decisions.
• What are the big new themes, trends, and developments in TCA?
Real-time TCA and peer review, both of which we discussed earlier, are seeing
increasing popularity in the TCA world. But perhaps one of the most important
developments that TCA providers and users look forward to is consistency across TCA
providers and numbers, the logistics of which will take quite a while yet to figure out.
40 Trading Minefields | Transparency
”Transparency” has
become one of the
biggest, newest buzz-
words in the trading
world.
Transparency
In recent years, trader jargon has taken on a life of its own. The language of trad-
ing has shifted from basics like “hit the bid/take the offer” to terminology and
buzzwords centering on nuanced concepts cloaked in plain language. (Which of the
smartest among us can define “best execution” in less than one hundred words?)
“Transparency” has become one of the biggest, newest buzzwords in the trading
world, and it has been tossed around by so many people in so many different ways
that it’s easy to lose track of just what it is and why it’s a good thing. The increased
interest in transparency is due in no small part to the fact that so many trading sys-
tems are automated these days.
To understand the quest for transparency in modern electronic markets,
it helps to understand a bit of the evolution that got us to this point.
In the last twenty years, stocks have gone from trading at a single point
of execution (like the NYSE floor) to what is now more akin to a net-
work of market centers (electronic exchanges, ECNs, dark pools, etc).
Block trades that used to be consummated publicly between two guys
in brightly colored jackets are now fractured into multiple tiny orders
and executed electronically at near light speed through thirty or more
different electronic venues.
In the past, traders needed to trust that the person handling their orders would
only expose their intentions to trustworthy counterparties. Today, orders delivered
electronically to brokers mainly circumvent any human interaction. In many cases,
machines (like order management systems) deliver trades to other machines (algo-
rithms) which break orders up into palatable sizes (smart orders), which then blast
out to up to thirty other machines (electronic trading venues). Although this com-
partmentalization originally came about as an effective way to reduce information
leakage, traders now face the challenge of knowing where their orders are routed
and if those decisions were the best choices relative to their performance.
While many folks believe that the electronic evolution of markets leads to more
transparency, all of the complicated steps and components can help make
automated systems seem confusing and harder to grasp than the simplicity of
people shouting on an exchange floor. Good transparency tools disclose any and
all information you need to understand your trade, effectively clearing away the
confusion and helping to build trust between traders and brokers. More and more
trading systems and firms are offering transparency tools to ensure that you can see
all the information you need and to help build trust that your trade will do what you
want it to do, in the way you want it to do it.
Trading Minefields | Transparency 41
Of course, there are many different levels of transparency, and everyone has a differ-
ent opinion on what level is most important to them. Two of the biggest reasons we
think transparency is important are:
• Transparency allows you to better understand the process. For example,
when you order a sandwich at a deli, the glass partition in front of the counter is
designed to allow you to watch as they make your sandwich. You know the end
product will be just what you ordered because you were able to see it happen.
• Transparency puts you more in control of the process. Sticking with our
deli example, because you can see your sandwich being made, you can make
changes or adjustments based on what you see. You can ask for extra onions
or leave off the lettuce—and see right away that it actually happens. You are in
control of the process, and if something goes wrong (like having onion breath),
you can explain how it happened and hopefully avoid the problem next time.
While transparency is important, it is only helpful to a certain degree. Too much
information makes you feel like you’re being flooded with details when all you
wanted was a basic understanding of what happened with your trade. When people
are overwhelmed, they tend to shut out information—so in some ways, being
provided with too much information at once can be worse than not getting much at
all. Transparency providers often have to walk a fine line between offering you a lot
of information and overwhelming you with too much. You may not want or need
every exact detail, but at the same time, if you can’t look at or figure out any one
part of your trade, you’re going to start wondering what it is you can’t see—and
why. Some of the best transparency tools make the information you want available
to you without overwhelming you with additional data you don’t need.
As an example, ConvergEx provides clients with varying levels of transparency on
their orders through our web-based TCA platform called PerformEx. From pre-trade
estimates to intra-trade P&L and fill rates by venue as well as easy-to-follow post-
trade tree maps, our goal is to provide traders with clear and concise execution
details which complement their trading experience.
Before you launch an algo order, our pre-trade estimator, below, shows the likely
venues your order will be posted in and the potential fill rates in those venues. The
key to transparency is seeing not just where an order is filled, but also where it’s
routed.
42 Trading Minefields | Transparency
Then, once you place an order, you can track performance across varying execution
venues in real time, as in the chart below. An algorithm’s dynamic decision making is
in full view.
After your trade is finished, you can use tree maps like the ones below to get a visual
representation of the size and number of orders routed to an execution venue as
well as the amount of shares filled at those venues. You can easily eyeball venues to
see how they compare to each other.
Trading Minefields | Transparency 43
When looking to execute larger orders, traders need to be aware of the challenges
in accessing liquidity from so many available venues and the opportunity costs
and information leakage that may degrade their quality of execution. As algorithm
usage continues to grow and more execution venues enter the marketplace,
traders are likely to require all their brokers to provide relevant and timely
information about their electronic orders. No matter how far the markets move
toward automation, how many slices orders are split into, and how many machines
speak to one another, the degree a trader can trust his broker remains the
cornerstone of their relationship.
Even if you are not
working for a quanti-
tative trading shop,
it is valuable to under-
stand how trading in
this world works.
44 Trading Minefields | Algos for Quantitative Shops
Algos for Quantitative Trading Shops
Trading is an art for most traders. They work for shops where humans generate
orders. Success depends on traders’ market insight, unique judgment, and their
command over their trading tools. Each trading day and each order represent a
new challenge demanding a unique interpretation and judgment. All of a trader’s
experience provides a valuable base to inform his or her judgment, but it does not
point to one clear choice of trading approach, timing, tools and/or settings. If you’ll
allow us a sports analogy, trading is like playing three rounds of golf every day, each
time at an unfamiliar course.
While trading is an art for a majority of traders, in the most mature
markets, trading is a science for over 50% of the flow. In these mature
markets, quantitative trading strategies generate over 50% of trade
volume. Even if you are not working for a quantitative trading shop, it is
valuable to understand how trading in this world works.
For the sake of this discussion, let’s agree to gloss over the pure high
frequency market-making shops. These firms have trading reflexes
measured in microseconds (one millionth of a second) and holding times
measured in milliseconds (one thousandth of a second) on fast moving
stocks and seconds for mid and small caps. They trade with very little
capital. For any firm moving size, high frequency shops simply do not matter that
much because they do not have material liquidity to offer. They are your broker’s or
algo’s problem when it comes to successfully placing and pricing each slice of your
order.
Depending on the mature market, maybe 30% of trades are driven by quantitative
trading strategies with holding periods between, say, fifteen seconds and one week.
A typical quantitative trading strategy involves hundreds or thousands of orders at
a time. Even smaller shops can easily trade ten million shares per day. At that size, a
trader has no chance to manage every order. The mission becomes finding the right
method to trade them all.
Thousands of orders, the great curse of quantitative trading strategies, become the
traders’ best friend. Remember our golf analogy? Optimal execution of orders from
quantitative strategies is like playing exactly the same holes a thousand times every
day. You have infinite opportunities to perfect each element of your game.
In our view, the best way to optimize execution for a new quantitative trading
strategy is set up a “horse race” between a handful of promising algos—say “pure
dark aggregation” versus “10 minute IP” versus “30 minute VWAP” versus… etc.
These algos should reflect trading styles ranging from the most passive to the most
aggressive. Set up a randomized trial among these algos and collect enough data to
see what works best. This requires a comprehensive TCA suite with a full complement
of metrics including implementation shortfall; full day, available and interval VWAP;
PWP; opening price; closing price; order ending price; and various reversion metrics.
Trading Minefields | Algos for Quantitative Shops 45
Now slice and dice the results by all the usual suspects. In the jargon of quantitative
trading, you “bucket” trading results by the factors that drive trading performance.
• Bucket by Buy, Sell, Sell Short, Buy to Cover. Typically each requires a separate
approach.
• Bucket on Liquidity Requirements. Typically entry strategies are much more
demanding of the available liquidity than exiting strategies.
• Bucket by ADV. High and low ADV orders can almost never be handled identically.
• Bucket by Spread. Quantitative strategies on wide spread stocks are especially
demanding.
• Bucket by Volatility. This can be hard because the quantitative trading strategies
are often keying on volatility, which confuses cause and effect.
• Bucket on Time of Trading Day. A lot of quantitative trading strategies try to pick
off opening mispricing, which can make it a nightmare to trade well.
• Bucket on Market Conditions – both volume and direction. Figuring out how to
trade when you are trading with or against momentum is usually central to strat-
egy profitability.
All the bucketing of all the trades gives you a collection of trading problems to
solve and a good idea of what sort of trading strategies will work best. Be careful to
manage the outliers. Now you can tune, tune, tune for each trading setup—say buy-
to-cover on high-spread stocks. We advise clients always to run two trading strategies
on every trading setup. In practice, this means taking the best trading strategy you
have so far and pitting it against your best alternative idea.
In this arena, every broker is different. Our collaborative approach is to provide full
analytical support to our quantitative trading clients. We will help set up every horse
race and provide the bucketing analysis. We offer full transparency into each trading
strategy alternative, and we place a huge premium on creativity. The best trading
approaches are born of rigorous analytics and some clever thinking about how to
handle difficult trading situations. We like horse races because we think we know how
to win them—and we figure that if our tools can’t win a horse race, we don’t deserve
the business.
So what does all this have to do with life for a trader not working for a black-box firm?
A lot. While you don’t get the same repeated trials as your quant-shop brethren, the
same techniques can inform your choice of trading tools. You need intuition to choose
the right trading tools for each trading situation. The criteria of available liquidity,
order alpha, market conditions, etc, all apply. The only difference is that you have to
substitute your traders’ intuition and judgment for statistical tools. Your job is frankly
harder.
46 Trading Minefields | Optimal Trading Tactics
Optimal Trading Tactics
In the previous chapter, “Algo Trading for Quantitative Shops,” we discuss the
selection and development of quantitative trading strategies. Now that you
understand that world a little better, let’s talk about how it’s possible to use similar
concepts to trade better—and to build better algos.
When you trade manually, you know where to send your orders and how to do it
efficiently. You learn a little from each trade, figuring out where (and where not) to
post or take, what kinds of orders and times of day work best for you. You optimize
your trading tactics intuitively. Electronic trading tools can’t intuit situations the way a
human can; to come to the same conclusions, they require a lot of research into what
venues, order types, and parameter settings work best for different kinds of orders.
Here’s how some of that research is done.
The last chapter mentioned that letting different brokers’ trading strategies compete
in a “horse race” can help show you the top trading strategy. Finding optimal trading
tactics works much the same way, but on an internal level: the best way to find the
best tactic is to run different alternatives against each other in a horse race and see
which one wins. To optimize how an order trades means looking at a wide variety of
factors—to what venue the order goes, what type of order it is, and how it trades
within its own parameters. Because so much can vary in the market from day to day,
you can’t really try to change one factor one day and another the next day, because if
you get different performance, it would be hard to tell what is correlation and what is
causation. You have to set up rigorous randomized trials between competing tactics.
Remember the factors that drive trading performance that we mention on page 45?
These “bucketed” groups, or groups of similar items, are useful for bucketing trades,
but some of the most important ones for determining optimal trading tactics are:
• ADV. High- and low- volume securities trade very differently and require different
tactics.
• Volatility. If a stock is very volatile, the optimal posting strategy is likely to be
passive. You have a very good chance of getting a (say) “bid-1 tick” limit order hit
with a highly volatile stock. In contrast, if you want to buy a low volatility stock,
you often have to be prepared to join very long, slow queues or offer some price
improvement to the market.
• Spread. A stock’s spread can change widely within the same day. A trading
strategy that works great when a security has a 1-cent spread could work badly if
the spread moves to 2 cents, and vice versa.
• Momentum. For some stocks, optimal trading tactics can usefully exploit
observed momentum (and reversion) either in the stock itself or momentum in
related stocks in the same sector. This does not work for all stocks or all market
conditions. The trick is to recognize the right regimes in the market.
• Quoting Behavior. A good trader can watch the quoting behavior in the market
and form an impression of the buying/selling pressure on a stock. As an extreme
example, with 1,000 shares showing on the bid and 55,000 showing on the offer, a
good trader would probably bet that the stock is going down. In the U.S., with the
growth of dark pools and the prevalence of hidden and pegging order types, this
isn’t a very useful indicator for the purposes of optimizing tactics, but it remains
invaluable in many European and Asian markets.
Trading Minefields | Optimal Trading Tactics 47
You can use any or all of the characteristics to define a trading situation, or bucket,
to optimize tactics. For example, you can ask the question, “What is the best
way to buy 1000 shares of high ADV stock, low volatility stock trading with 1 tick
spreads, when the momentum is against me but the quoting behavior seems pretty
balanced?” This leads you to question, “What are my options for trading tactics?”
Assuming you want to try posting first, you can use limit orders or pegging. You have
to price the initial order. You can be lit or dark. You can choose which destinations to
use. You must decide how long you want to remain with your initial posting strategy
if it doesn’t work. If at some point the tactic fails to get the order done without
paying the spread, where should it take and how? The challenge for taking tends to
be how best to find price improvement without bleeding information.
This is where horse races (randomized trials) come in. You don’t have to be omni-
scient, but you do have to have a few good ideas, the right technology, tons of order
flow, and some skill at experimental statistics. For a given situational bucket, identify
five or so of your best ideas for alternative trading tactics. Tell your trading engines
to run randomized trials between them (i.e., when the trading engine sees a given
situational bucket, it randomly chooses which alternative tactic to run).
In very little time, the engines
will have employed each tactic
thousands of times. Now you
can see which tactics are win-
ning and which are losing. In the
graph below, for example, the
lowest number is the winner, so
Tactic B is the clear winner. You
then pull out the losing tactics
(like Tactic D in the graph at
right), using statistical tools to
make sure that they really are
losers, and replace them with new ideas for how to handle the trading situation.
Then run the race again. The basic idea is that simple.
So what makes this process difficult?
• The characteristics that define a bucket are not at all obvious. Valuable distinc-
tions depend on the stock, the market, and the tenor of current market condi-
tions. These distinctions work for a time, but have to be re-thought continually.
• It takes a huge amount of high performance technology to implement
randomized trials in real time trading systems... and then a bunch more
technology to properly analyze results of the randomized trials.
• It takes a hugely sophisticated routing infrastructure to provide global, flexible,
comprehensive trading tactics. Without this, you have nothing to optimize.
ConvergEx has put tremendous resources into building our optimal tactics infrastruc-
ture. We make it all visible with our transparency tools in PerformEx. We have a team
of people constantly tuning it, all in an effort to improve your trading performance.
48 Trading Minefields | Trading in Consolidated Markets
Trading in Consolidated Markets
On the face of it, creating fragmented markets sounds like a really bad idea. Fragmented
markets introduce latency, impede price discovery, and complicate securing liquidity.
Consolidating fragmented markets requires copious regulation and extraordinary
technology. Fragmented markets demand inter-market arbitrage that, while performing
a valuable service, seems a little like breaking glass just to provide work for glass-repair
companies. However, we put up with all this in the name of creating innovation and
competition. Reasonable people can disagree about the trade-offs of competitive/
fragmented markets, but in the meantime, traders need to navigate the modern world of
trading in fragmented markets.
The US should be the poster child for fragmented markets with its fifteen exchanges, two
flavors of the NYSE (traditional and Arca), and more than thirty dark pools. However, a
few key regulatory features keep the competing markets well integrated. Every print has
to go to consolidated tape immediately upon execution. Since the late 1970s, the Consol-
idated Tape Association (CTA) has the regulatory mandate to manage the Consolidated
Tape System (CTS). The dark pools all get to tape via FINRA’s Trade Reporting Facility
(TRF) which is why all dark pools show up with an identical market code. CTA also has the
mandate to maintain the Consolidated Quote System (CQS), which ensures that there is
one authenticated NBBO (National Best Bid & Offer) for the US market. CTS and CQS
take care of the information dissemination portion of the consolidation challenge.
The trading rules portion of the US consolidation challenge is assured by a long history of
regulation. (Reg NMS and ATS are the most visible.) The top of the book at all exchanges
are protected quotes, which means that the market cannot trade through these orders
without executing the displayed orders. (Two important details: only the top of the book
is protected and only the displayed portion of a reserve order is protected.) The dark
pools do not have to display a quote (hence the name dark) but all dark trades have to go
off within the light markets’ NBBO.
Together, the three features: 1) statutory, immediate trade and quote dissemination
combined; 2) displayed order trade-through protection, and; 3) forcing dark pools to
trade within the light NBBO, make the US consolidated market work.
At right is a summary of
US prints for MSFT for a
typical day. Remember
that the ADF numbers
represent maybe thirty
dark pools. For traders
who are new to the US
market, it is hard to be-
lieve just how fragmented
the market has become.
Code Source Share Type
UQ NASDAQ GM 29.67% Exchange
UD FINRA ADF 25.10% Dark Pools
UF BATS 12.91% Exchange
UP NYSE ARCA 11.27% Exchange
VK EDGX 6.07% Exchange
UB NASDAQ OMX BX 3.90% Exchange
VJ EDGA 3.76% Exchange
VY BATS Y 3.34% Exchange
UX NASDAQ OMX PS 2.88% Exchange
Trading Minefields | Trading in Consolidated Markets 49
In Europe, specifics of consolidation are different from those of the US. The European
markets are composed of primary exchanges, more than four MTFs, OTC trading, and
several dark pools. Unlike in the US, there is no one regulated source of consolidated
quotes. Instead, firms’ in-house systems or vendors like Bloomberg or Reuters piece
together quotes from primary exchanges and from MTFs to create a single source of
streaming quotes. There are also no trade-through rules (which state that an order for a
stock that is on more than one exchange must happen via the best-priced exchange) that
protect an order. Arbitrage is the only way that the prices in MTFs are coupled to the
primary exchanges.
MiFID requires that dark pools use the (primary and MTF) consolidated quote to price
their trades and post the trades on a trade reporting facility (like BOAT, which is similar
to the US’s FINRA ADF). While the primary exchange is still the largest single source of
liquidity in Europe, MTFs, like dark pools, are gaining traction. If a primary exchange goes
down during the day due to technical issues, trading continues on the MTFs, though at
a slower pace. Note: If an exchange goes down for technical reasons before the open,
MTFs still continue to trade, but slower and with larger bid/ask spreads.
VOD is a good example of a stock traded across various liquidity sources. Here are the
trading results from a typical day.
Currently, for VOD, if you are routing to the top four destinations (not including BOAT,
which is a trade reporting facility, not a destination), you have almost full access to
liquidity. Europe is not yet nearly so fragmented as the US.
Finally, Asia-Pacific markets are just now beginning to open up competitive execution
destinations. The regulatory frameworks owe more to MiFID (best-ex driven) than to NMS
(prescriptive market structure driven). Chi-X has established a toehold in Australia, Japan,
Singapore, and Hong Kong. At this writing, alternative volumes are still well below 5%
of total market volumes. However, there is every reason to think these markets, too, will
become ever more fragmented. It is not clear how far the push will go. Asia-Pacific stock
exchanges generally understand the mistakes the European exchanges made (slow tech-
nology, high fees) and are working proactively to close these shortfalls in hopes of main-
taining their dominant positions.
Code Source Share Type
LN London Stock Exchange 33.00% Exchange
XB BOAT 37.66% TRF
IX Chi-X Europe 17.69% MTF
TQ Turquoise 5.44% MTF
EB BATS Europe 4.52% MTF
OTC OTC Markets <1.00% MTF
S1 Sigma X 0.40% Dark Pool
BQ Equiduct < 0.10% MTF
QM Quote MTF 0.01% MTF
50 Trading Minefields | ADR Conversion Trading
Today there are over
3,500 ADR programs
from more than 75
countries.
ADR Conversion Trading
Since the first ADR (American Depositary Receipt) was established in 1927, both
ADRs and the marketplace have evolved significantly. Today there are over 3,500 ADR
programs from more than 75 countries, with almost USD 3 trillion traded in 2012. ADRs
are US securities that trade in US dollars in the listed markets and Pink Sheets and settle
through the DTCC, the US’s centralized clearing system.
Institutional money managers invest in ADRs for a host of reasons: to diversify their
domestic portfolios while keeping their current trading and custody infrastructure, to
manage international ADR wrap mandates, or to gain cost efficiency in emerging markets
where local trading, settlement, and custody can be difficult or expensive.
On the surface, the steps in ADR conversion trading may seem fairly
straightforward: trade equities on local exchanges, execute a foreign
exchange contract, interface with an ADR bank, and settle the trade
in the US. But there are many moving parts in ADR trading, with which
come a few minefields that a good ADR conversion trader should be
aware of. In this chapter, we discuss four of the major minefields to
watch out for when it comes to ADR trading: measuring performance,
corporate actions, understanding conversion ratios, and buy-in markets.
The first potential stumbling block is measuring performance. Should you measure
the performance of an ADR conversion trade against the ADR market, or should you
measure the ordinary share component of the trade versus the ordinary share market?
Establishing a relevant benchmark will help you better gauge your trading performance.
Although the trade may start from the portfolio manager as an ADR trade, it is likely that
the majority of the ADR conversion will take place when the ADR market is closed—or
there could be limited hours to trade when both markets are open. We believe that
except for some potential outlier situations, an apple-to-apple measurement is to
compare the performance ordinary trade to the ordinary share market. For instance,
a better comparison would be the average ordinary share price versus ordinary share
VWAP, rather than the ADR conversion trade price versus ADR VWAP.
Measuring your foreign exchange (FX) performance is also tricky. When doing an ADR
conversion, FX trading is a critical component to the final ADR price. We recommend a
couple ways to manage the FX portion of the trade to help ensure that your FX price
is competitive. First, if you have multiple FX liquidity providers instead of one, you can
better ensure price discovery. Second, it is helpful to execute multiple FX contracts
throughout the life of the ordinary trade rather than all at one time. Third, make sure
you understand the tenor of your FX contract. Is it a spot (T+2), or forward contract
(T+3, T+4, etc)? A good understanding of these foreign exchange pointers can help
you improve the price of your ADR conversion trade. For instance, if you were doing a
six-hour, $10 million VWAP trade, would you rather do an FX contract at the end of the
equity trade, or multiple FX deals throughout the equity trade? We think spreading out
the FX will almost always help your ADR price.
Trading Minefields | ADR Conversion Trading 51
The second potential pitfall of ADR trading is the complications that can ensue with
corporate actions. Trading and settling trades in two markets means you have to be
especially aware of corporate actions, including cash dividends, stock dividends, ratio
changes, spin-offs, stock splits, books closed, etc. Not understanding exdates and record
dates in overseas and ADR markets can create a messy claims situation and turn a good
trade into a bad one. Sometimes the easiest option is simply to avoid trading around
corporate actions.
A simple example of a corporate action where you should avoid doing a conversion
trade if you do not want to be involved in a claims process is where the local market
is ex-dividend and the ADR market is cum-dividend. Buying the ordinary shares in the
local market is not necessarily a price advantage since once the ADR conversion trade
settles, you will be claimed for the dividend you are not entitled to from the ordinary
share purchase. Depending on certain markets, the potential penalty for being subject to
a claims process can be expensive. The process can be lengthy and subject to the rules
of non-US tax authorities and associated foreign exchange exposure. At ConvergEx, we
have set up a process (dependent on available information) to close our books to ADR
conversion trading in advance of corporate actions.
The third minefield within ADR trading is understanding conversion ratios. Many ADRs
have ratios associated with their trading program. For instance, one ADR can represent
ten ordinary shares, or 100 ADRs can represent one ordinary share. Before doing an ADR
conversion trade, using the correct ADR:ORD ratio will prevent expensive trading errors
by either under or over executing your trade. Confusing a 10:1 ADR for a 1:10 ADR could
be a very expensive mistake.
The final pitfall to watch out for in ADR trading is buy-in markets. In a number of
countries with strict buy-in market regulations, the penalties for failing to settle a trade in
a buy-in market can be harsh. When doing ADR conversion trading in buy-in markets, it
is essential to borrow the security prior to the settlement date in the local market in case
there are settlement fails during the conversion process. A good example of where this
is important is in Hong Kong, where the settlement cycle is T+2 but the ADR settlement
cycle is T+3. If you borrow on the trade date, the ordinary shares should be in good
order for settlement in HK on T+1, leaving a one-day buffer prior to the normal T+2
settlement.
One last note about ADR liquidity: many ADRs enjoy strong trading liquidity in the US
markets. However, not all ADRs have sufficient liquidity in the US markets. Because ADRs
represent the underlying security, you can use the overseas market to tap into the more
liquid trading market. Depending on your objective, you may wish to find additional
liquidity in overseas markets.
ConvergEx offers a comprehensive suite of patented electronic ADR execution tools
designed to help you achieve best execution for your ADR conversion trades. The Con-
vergEx ADR product suite features ADR Direct® and Reverse ADRs
SM
. We also have a
dedicated 24-hour ADR desk available to help guide you through ADR conversion trad-
ing.
52 Trading Minefields | Trading Illiquid ETFs in Size
Trading Illiquid ETFs in Size
Exchange-traded funds (ETFs) are the most popular type of exchange-traded product. An
ETF is an investment fund traded on stock exchanges, much like stocks. It holds assets
such as stocks, commodities, or bonds, and trades close to its net asset value over the
course of the trading day. Most ETFs track an index, such as a stock index or bond index.
ETFs may be attractive as investments because of their low costs, tax efficiency, and
stock-like features.
Only large broker-dealers that have entered into agreements with the ETF’s distributor,
called Authorized Participants (APs), actually buy or sell shares of an ETF directly from
or to the ETF, and then only in creation units (large blocks of tens of thousands of ETF
shares, usually exchanged in-kind with baskets of the underlying securities). Authorized
Participants may wish to invest in the ETF shares for the long-term, but they usually act
as market makers on the open market: they use their ability to exchange creation units
with their underlying securities to provide liquidity of the ETF shares and help ensure
that their intraday market price approximates the net asset value of the underlying
assets. Other investors, such as individuals using a retail broker, trade ETF shares on this
secondary market.
Institutional investors are increasingly adopting ETFs as a key component of their
investment strategies. It is not hard to see why. ETFs like SPY (large caps), Q’s
(technology) and XLF (financials) give investors the ability to rapidly gain or lose exposure
no matter how much money you have to spend. Given the proliferation and variety of
ETFs, designing almost any exposure profile using only ETFs is easy. However, if you
trade in size, you quickly discover the limitations of this approach. Most ETFs simply do
not offer adequate daily trading volume to build (or lose) large positions rapidly. Trading
costs quickly erode all of your strategy’s alpha.
Fortunately, there is a ready alternative. ETFs can be readily created and redeemed. The
example below illustrates the benefits of the creation/redemption process and how it is
used to achieve additional market liquidity efficiently.
An asset manager has identified an ETF to gain exposure to a certain market segment.
The ETF (let’s call it EXYZ) trades around $25 per share at an Average Daily Volume (ADV)
of 25,000 shares. The manager wants to commit around $5 million, which translates into
roughly 200,000 shares of EXYZ. What are the choices for trading this ETF?
• Execute on the Exchange. The manager could execute the entire order on the
exchange, but then the manager would likely pay a significant penalty in performance.
If the ETF trades at 800% of ADV, the market impact could be anywhere between 300
and 3,000 basis points. This level of market impact is unacceptable for most managers.
• Execute on secondary market using a broker. The manager could use a broker to
execute in the secondary market at a low participation rate to minimize market impact.
The broker could execute about 15% of ADV or 3,750 EXYZ shares each day.
Trading Minefields | Trading Illiquid ETFs in Size 53
At that rate, it would take 53 trading days to execute the entire trade. This method
would reduce the market impact cost but would expose the trade to significant
market timing risk. This is not a feasible option for most money managers.
• Execute via the ETF creation/redemption process. Only an Authorized Participant
(AP) has the ability to create and redeem ETFs as needed. So, for example,
ConvergEx is an AP for all major fund families and can buy the underlying basket
and deliver it to the ETF Provider. In return, the ETF Provider delivers the ETF to
ConvergEx, which we transfer to the client.
Let’s keep this simple: suppose the EXYZ
basket consists of 3 securities (X, Y and
Z) in the proportions listed in the table at
right.
EXYZ’s creation unit size is 50,000 shares.
This means that the ETF provider will only accept enough underlying shares from the AP
to create 50,000 shares of EXYZ at a time. In our example we will create 4 units for a total
of 200,000 shares.
The structure of most ETFs ensures that the underlying constituents can be readily traded
throughout the day to accommodate for creation and redemption. The pre-trade on doing
this trade demonstrates the power of accessing all the underlying liquidity.
For large trades of illiquid ETFs, trading the underlying basket can often save 90% of the
market impact of the trade.
Now that the underlying basket has been exchanged for the ETF, your AP broker needs
to provide you with an ETF price. If your AP broker engages in proprietary trading/market
making, that pricing mechanism is typically quite opaque and worth negotiating carefully
up front.
Need to Create Share
Security 1 Unit EXYZ in 4 Units
X 472 1888
Y 488 1952
Z 620 2480
# of Underlying
Shares in 4 20-Day Market Impact
Security Units of EXYZ ADV % ADV BPST
X 1888 26500 7.12 32
Y 1952 32000 6.10 28
Z 2480 41200 6.02 24
54 Trading Minefields | Clearing and Settlement
Clearing and Settlement
Many, maybe most, traders dedicate their lives to knowing only their particular niche
in the trading process, studiously avoiding all conversations about clearing and settle-
ment: transaction taxes, ID markets, ownership restrictions, buy-in rules, etc. Here’s
our take on the least you can get by with.
After you’ve executed your global trade, it needs to be booked and settled. There
are many things that can trip you up, as the global trading and settlement world is
a complex one, but to keep this to a short overview, we focus on a small handful of
important and often complex areas that are unique to global markets: Ownership
Restrictions, ID Markets, Transaction and Stamp Taxes, Settlements and Buy-Ins.
Ownership Restrictions and ID Markets
Many markets around the world place restrictions on how much or what kind of stock
an investor can own. Not all of these restrictions deal with foreign investment. Poland,
for example, requires all investors seeking majority stock in a company to receive
prior approval, and South Africa forbids any investors, foreign or domestic, from
exceeding certain ownership percentages of bank or insurance stocks. However, the
vast majority of exchanges’ ownership restrictions are to prevent foreign investors
from owning too large a share of any given stock, or to block them from owning
too much (or any) stock in sensitive industries. We see restrictions most often on
transportation, utilities, media/telecommunications, weapons/defense, and banking
industries. We list each market’s ownership restrictions in our Exchange Guide section,
starting on page 78.
There are also a handful of exchanges that require foreign investors to have a locally-
issued investor ID in order to trade. In these markets, traders get preapproval with
the exchange or some other local regulatory body, which then assigns them an
investor number. In some of these markets, that investor ID must be reported to the
exchange on the execution. If you get the number wrong, you can’t always amend it
post execution. Some exchanges will even require a cross in the market to effect such
a change. A few examples of markets that require IDs are Korea, India, Indonesia, and
Taiwan. Similarly, a few markets like Spain require that all trades identify the end buyer
or seller by way of a registration number that must be attached to trades. Again, if
you give an incorrect number on a trade, it may be very costly to amend and you may
face a close out of your trade or other penalties. Violating ownership restrictions,
an incorrect trade allocation, or other errors in the booking of a trade may result
in the trade failing to settle on time. We discuss what happens with failures in the
Settlement section of this chapter.
Transaction and Stamp Duty Taxes
Many global markets levy taxes or fees in connection with transactions that take place
on their exchanges or settle within their depositaries. Exchange taxes vary greatly
from one market to the next, from Dublin’s 1% Stamp Duty tax to Johannesburg’s
0.0002% investor protection levy. Determining and correctly accounting for the
Trading Minefields | Clearing and Settlement 5554 Trading Minefields | Clearing and Settlement
correct taxes and fees on a trade is a large part of the clearing process. The two
most infamous varieties of transaction taxes are local fees and levies and Stamp Duty
taxes. Local fees and levies are generally charges levied by a particular exchange or
clearing system. You can check our Exchange Guides for transaction taxes for our
algo markets, and the chart at the end of this chapter for a list of taxes and fees for
all of our other markets. Local fees can be levied on buys, sells, or both, depending
on the market. While some markets (including many in Europe) don’t charge any
local taxes or fees, the recent introduction of the French Transaction Tax (FTT) may
change that. The FTT sets taxes on buying specific securities (identified by their
ISINs), and while it is a French tax, you must still pay it on those securities even if
you’re buying them on, say, Germany’s Deutsche Börse. France introduced this tax
in 2012, and we’re likely to see other European markets following suit. Stamp Duties
are another very important transaction cost. Stamp duties are taxes collected on the
transfer of a security from one owner to another. Exchanges that charge stamp type
taxes include China, Hong Kong, Ireland, Malaysia, and the United Kingdom. In some
markets, stamp duty taxes can be avoided through the use of derivatives—note
the very active CFD (Contract for Difference) market in the UK, a country with 0.5%
stamp tax of stamp tax.
Settlement and Buy-Ins
After you’ve executed a trade and taken care of the booking, the trade settles.
That is, money and securities change hands. Depending on the parties involved,
it can sometimes take a bit of time to get everything ready to settle, even up to a
of couple days. Most exchanges recognize this, and the majority of markets allow
for this by mandating a particular “settlement cycle” for exchange trades. We
list exchanges’ settlement cycles in the Market Guide section of this book. Most
markets in the world follow a T+3 settlement cycle. That means you have three
business days from the time your trade completes (T) before you must settle. This
gives you time to get your affairs in order. Note that while the average settlement
date is T+3 days, different exchanges have different settlement cycles (for instance,
Germany’s settlement date is T+2, while South Africa’s is T+5), so be careful about
taking any more time than necessary.
Most trades settle on time, without issue. But if anything goes wrong (for example,
one counterparty to the trade doesn’t have the money or the securities), the trade
fails to settle. When sellers fail to deliver their end of the trade by the settlement
date, a process called buying in can occur. The buy-in process is a way for the buyer
to force settlement of the trade and pass any costs incurred to the seller who did not
meet their end of the trade. Each market has its own regulations around buy-ins and
these are often complex (see the Market Guide section for a breakdown by country),
but in general, a buy-in works like this:
• The buyer alerts the exchange as to the nondelivery.
• The exchange performs the buy-in.
56 Trading Minefields | Clearing and Settlement
Sellers should always
be aware that failure
to deliver shares ex-
poses them to risk.
• The exchange locates and gets the stock for the buyer.
• The seller must reimburse the exchange for the stock, paying any difference
in the stocks’ price since the failed trade. Most exchanges also tack on fees
or a fine of some sort that the seller must pay.
Some markets have very strict buy-in rules. For example, Hong Kong enforces an
automatic buy-in on all failed trades on the settlement date (T+2). Some markets
impose very high costs on the failing seller. Germany, for example, al-
lows the buy-in price to be up to 200% of the prior day’s close. That fail
could be very expensive. In other markets, members who consistently
fail to make good on their trades can be fined or even suspended.
While a strict buy-in regime contributes to the orderly settlement of
trades in the market and reduces risk for all, it can prove a painful les-
son to traders where a genuine mistake is made. Some markets impose
fines for late settlement of trades. These can be costly. Examples are
Australia, South Africa, and almost all of Europe. Some markets are less
strict, but sellers should always be aware that failure to deliver shares
exposes them to risk.
Some firms handle all aspects of the clearance and settlement process in-house,
while others appoint a prime broker, clearing broker or custodian to take care of it.
The global landscape is complex and constantly changing, and it can prove difficult
and costly for a firm to maintain the necessary infrastructure and personnel to pro-
cess and settle their trades. It is often more cost effective and less risky to outsource
this process to brokers and custodians with the necessary infrastructure and exper-
tise.
Because each exchange has its own regulations for clearing and settlement, it is a
difficult task to try to round up anything more than a very general overview when it
comes to discussing the process across all global markets, but this chapter should
give you an idea of what happens after the trade is done—and an appreciation for
the complicated work done by people in the back office.
The chart opposite this page provides a list of exchange taxes and fees for non-
algorithmic markets we access as of Spring 2014. For taxes and fees associated with
our algo markets, check the exchange guides starting on page 78. Unless otherwise
indicated, the fees listed are for both buys and sells.
Trading Minefields | Clearing and Settlement 5756 Trading Minefields | Clearing and Settlement
(1) per ticket flat rate (2) B/S-Less than KWD50,000 is 3.63; More than 50,000 is 2.9
(3) B/S-Less than KWD50,000 is .13; More than 50,000 is .1 (4) With max of 1000 RSD
(5) 48 on trades below 50mm, else 41.25
Exchange Taxes and Fees
Bahrain Stock exchange fees 5.5 bps
Botswana BSE Fee and 12% VAT 16.24 bps
CSD Fee and 12% VAT 1.68 bps
Handling Fee and 12% VAT 16.8 BWP
Chile 19% VAT 19%
China/Shangai Stamp Duty 10 bps
Exchange Levy 2.6 bps
Settlement Fee 5 bps
Admin Fee 0.4 bps
China/Shenzhen Stamp Duty 10 bps
Exchange Levy 3.4 bps
Settlement Fee 5 bps
Transfer Fee 50 HKD1
Colombia 16% VAT Comission 16%
Cyprus Cyprus Central Securities Depositary Fee 3 bps
Cyprus Stock Exchange Fee 1 bps
Clearing House Transaction Levy 0.5 bps
Sales Tax 15 bps on sells
Egypt Exchange Fees 5 bps
Stamp Duty 10 bps
Ghana Stamp Duty 70 bps
India Trading Fee 10 bps
Kenya NSE/CMA/CDS levies 34 bps
Kuwait Stock Exchange Fees 2.9 or 3.63 bps2
Clearing Company Fee 0.13 or 0.1 bps3
Lebanon Local Market Fees 10 bps
Mauritius SEM Fee 25 bps
CDS Fee 20 bps
FSC Fee 5 bps
Morocco Exchange Fee 10 bps
VAT on Exchange Fee 1 bps
VAT on Commissions 10%
Nigeria VAT of/on Commissions 5%
Stamp Duty 7.5 bps on buys; 7.5% on sells
SEC Fee 30 bps on buys
CSCS Trade Changes & VAT 6.3 bps on buys; 37.8 bps on sells
NSE/SEC Fee & VAT 31.5 bps on sells
Oman Stock Exchange Fee 15 bps
Pakistan FED 6.4 bps
Peru 7.445 Tax + 18% VAT on Tax 8.7851 bps
VAT on Comissions 18%
SMV fee 1.35 bps
Philippines Taxes 4 bps on buys; 54 bps on sells
Qatar Stock Exchange Fees 5.5 bps
Serbia Stock Exchange Fees 10 bps4
Central Registry Fee 5.669 bps
Sri Lanka CDS/CSE/SEC/Govt Cess 48 or 41.25 bps5
Taiwan Taiwan Transfer Tax 30 bps
Tunisia Exchange Trading Fee 20.00 bps
VAT on Commissions 24.00%
UAE Executed Order Fee 10 AED
Ukraine Exchange Fee/FTT 10 bps
Vietnam Taxes 10 bps on sells
Country Type of Fee Rate
1 Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: Netflix, Inc.,
and Reed Hasting, Securities and Exchange Act of 1934 Release No. - 69279 (April 2, 2013)
2 SEC Says Social Media OK for Company Announcements if Investors Are Alerted, SEC Release 2013-51
(April 2, 2013).
58 Trading Minefields | Social Media and Trading
Social Media and Trading
Love it or hate it, social media has become a huge part of everyday life. Even if you
don’t have an account with Facebook, Twitter, LinkedIn, or any other social network,
chances are you know well what they are—and that you have at least one person
hounding you to join so they can show you pictures of their pets or see how many
friends you have in common. A new use for social media is emerging, one that comes
with even weightier benefits and downsides: social media as a predictor and driver of
capital markets.
As social media has taken on a larger role in day-to-day life over the past few years, it
naturally began to interest traders. Investors are definitely interested in social media
enterprises as investments, but they’re also noticing that the value in social media
lies not only in the networks themselves, but also in the information they provide and
disseminate.
Traders can use social media to make trading decisions in many ways, but four
particular ways that social media can provide information have received the most
attention in recent market news and research.
1. Businesses with accounts on social networks often post information about
themselves that can help give traders an idea of how that business is doing. For
example, in 2012 the CEO of Netflix used his personal Facebook page to report
that Netflix’s monthly online viewing had exceeded one billion hours for the first
time. However, Netflix had not reported the same information to investors through
either a press release or a filing with the SEC prior to the post on Facebook. A
subsequent filing with the SEC by Facebook later that same day did not include
this information. Shares in Netflix rose after the post on Facebook. As a result,
the SEC launched an investigation. Ultimately, the SEC chose not to initiate
an enforcement action or allege wrong doing by Facebook or its CEO, citing
market uncertainty about the application of Reg FD to social media. In its related
investigation report,
1
the SEC stated that companies can use social media report
information provided that such reports comply with Reg FD and investors are
alerted to which social media outlets will be used to disseminate such information.
2
Even if a company doesn’t share market information directly on social media, you
can often find other relevant information through their social media postings.
You may notice that a company you follow is writing about new products and
new locations—these details would suggest that business is booming. Another
company might write a post about reducing its hours of operations—however
optimistic their presentation of this information might be, you could take it as a
sign of financial trouble. Even if the information isn’t market specific, a sharp eye
can tell a lot about that company from its social media content.
Trading Minefields | Social Media and Trading 5958 Trading Minefields | Social Media and Trading
Used correctly (and
cautiously), an un-
derstanding of social
media is a great tool
to have in your trading
tool belt.
2. The interaction between a business and consumers on social media platforms can
say a lot about the company’s well-being. A company may not tweet often or post
many status updates that let you know how they’re doing, but if hundreds of thou-
sands of people start or stop following that company, you know something’s going
on. Even seemingly small issues can change a lot about a company’s perception. For
example, say a dissatisfied customer writes about her bad experience on
a fast-food chain’s Facebook page. If the company responds negatively
in a public post on the page, other customers may be turned off of the
business—and the company could start losing consumer confidence. If
the company responds in a positive or witty manner, people may like and
support the business—and are more likely to spread the word by sharing
the post with friends.
3. This category may seem more nebulous than the previous two, but it
attracts the most interest from researchers. Social media allows people
to track consumer moods and market trends and patterns regardless of
whether a specific business or industry even has a social media presence.
You can track trends across social media platforms. As an example, you may notice
that your online friends post quotes from news websites instead of news they’ve
read in the paper, and you notice that a few of your LinkedIn contacts who used to
work at newspapers now work in companies whose names end in “.com.” You could
conclude that print news media is quickly falling behind online news. This example
is a little oversimplified, but you get the idea: the things people post on social
media allow us to track and predict trends before they become market news. Re-
searchers have noticed that looking at random (not market-related) tweets or Face-
book statuses and posts for positive or negative language can actually show how
the market is moving. If the vast majority of people are posting “happy” words, the
market is generally moving up; if people are posting more negative statuses, the
market is generally in a downward trend. There is a lot of research still to be done
in this area, but the existing research shows that social media can alert us to market
trends even without specific market news.
4. Social media disseminates important news and information very quickly, allowing
traders to make decisions before or as things happen instead of after the fact.
Although social media reports usually come to us in the form of headlines without
many other details, they spread news faster even than televised news or news
websites can. (This has its upsides as well as downsides, which we discuss below.)
There are, of course, already enterprises capitalizing on the usefulness of social media
when it comes to trading. Bloomberg terminals have a feature that delivers market-rel-
evant tweets to users throughout the day. Some companies have developed algorithms
that search social media platforms and blogs for the trend-predicting information we
discussed above in category 3. Other companies and firms hire social media analysts
whose job is to sift through relevant social media to determine moods and trends.
60 Trading Minefields | Social Media and Trading
Social media can be a powerful tool for making trading decisions. However, “with
great power comes great responsibility,” as Voltaire (or Spider-Man) would say. With so
many people relying on social media for their news, fake or hacked accounts become
a danger, especially to the trading world. Several news outlets have had their accounts
hacked over the past few years, with various effects on markets. The most significant
recent example comes from April of 2013, when someone hacked the Associated
Press’s Twitter feed. The tweets reported explosions at the White House, and the S&P
500 index dropped sharply in response. The AP reported that it had been hacked and
the statements were false, and the markets slowly went back to normal. Though the
whole ordeal lasted only minutes, it was still a wake-up call for traders who rely on
social media for trading decisions.
Many people believe that the “#hashcrash,” as it came to be known, was exacerbated
by electronic trading, thinking that the algorithms that read news articles were much
more gullible than a human trader would be. Others argue that the 20-second delay
between when the tweet came out and when the markets declined is too long for an
automated trading machine, but just about the right amount of time for a human to
read a headline and panic. The speed with which information on social media travels
can hurt traders who are caught unaware—whether their trades are done electronically
or not. However, for the downsides that social media presents, there are also upsides:
the information that the tweets were false spread online minutes before TV news
agencies reported that information. Traders following social media may have seen the
false information first, but they also received the corrections before anyone else, and
the market made a full recovery.
How could #hashcrash-like disasters be prevented? Right now, the answer is unclear.
But it is important to note that while the market did drop significantly at the news,
it also bounced back within minutes, and even ended the day up 1%. Greater
improvements in technology, from more secure accounts for important agencies to
smart algorithms that can read social media posts and make intelligent decisions,
will definitely improve the landscape as well as help resolve problems like the ones
presented by #hashcrash-type situations.
After the #hashcrash and other reports of social media hacking, you may be wondering
if using social media to make trading decisions is worth it. The fact is that social media
technology is on the rise, and we suspect that its use will not only become more
prevalent, but more reliable with time. Improvements are definitely needed, and more
events like those of April 2013 will provide the impetus to improve not only social
media, but trading technology. It may not be “the” answer to getting accurate and
adequate trading information, but used correctly (and cautiously), an understanding of
social media is a handy tool to have in your trading tool belt.
60 Trading Minefields | Social Media and Trading Trading Minefields | Witching Days 61
Witching Days
On some days the markets are more volatile than others. There’s often no way to
predict volatility unless you know for sure that something is going to happen on a
specific day, like news of a company going public. But there are special days when
volatility is predicted to be high every quarter: they’re called witching days.
While a witching day sounds like something out of a Halloween special, it’s simply a
phrase for when certain classes of futures and options expire on the same
day. When an asset’s contract “expires,” it means it’s the last day the
contract can be bought or sold, and the last day to honor the terms of the
contract. There are several kinds of witching days: the double, triple, and
quadruple.
The moniker itself refers to a bit of old superstition regarding midnight,
the witching hour, a time of night when supernatural creatures supposedly
appear and are at their most powerful. In modern context, the phrase
still refers to any time that may be associated with bad luck or when
something bad is likely to occur, which, in the trading world, can be when
there is high volatility in the markets. Higher volatility means higher risk
and a greater chance of decreased returns. But don’t let witching days
spook you; witching days are not really a huge cause for concern, and knowing about
them can help you prepare.
Double witching occurs when option and futures contracts expire on the same
day; this happens every third Friday of every month—except at the end of each
financial quarter in March, June, September, and December. On those months, triple
witching occurs. Triple witching, also sometimes referred to as “Freaky Friday,” is
the expiration of stock index futures, stock index options, and stock options. This
happens on the third Friday at the end of every quarter (March, June, September, and
December). Witching days can also be called (or contain) witching hours. The last hour
of trading on those days is referred to as the witching hour in the US (3:00 to 4:00
PM EST) because during this hour the stocks are at their most volatile; this is the last
chance for traders to close out of their positions before the expirations takes place.
Single-stock futures expire every month; when this coincides with the expiration of
stock index futures, stock index options, and stock options (i.e., when it coincides with
triple witching), it’s called quadruple witching. Triple witching and quadruple witching
are often used interchangeably since they happen to fall on the same day.
Because futures and options investors must close out of their position prior to the
expiration dates, trading volume increases both during the preceding week and on
the expiration day, although not always. It’s up to a trader to decide how they want
to trade on those days, since some traders may not be affected at all, while others
greatly. If you’re using algos to trade, especially volume-tracking algos, you may want
A witching day is
simply a phrase
for when certain
classes of futures and
options expire on the
same day.
62 Trading Minefields | Witching Days
to watch the market volume carefully on those days in case you need to adjust how
the algo trades.
The great thing about witching days is that they happen consistently every quarter.
While you may not be able to predict just how volatile the market is going to be on
other days, you can at least be ready for higher volumes on witching days and trade
accordingly.
Similar events exist in other global markets. In Japan they are known as “SQ Days”
(Special Quote Days) about which we talk about on page 64. Index rebalances can
exert a similar impact on trading volume in London, and in Brazil, when Bovespa
equity index rebalances four times a year, the closing auction starts five minutes
earlier.
Type of Asset Expires
Stock Futures
Stock Options
Market Index Futures
Market Index Options
Single-Stock Futures
January, February, April, May, July, August,
October, November
January, February, April, May, July, August,
October, November
March, June, September, December
March, June, September, December
Every month
Trading Minefields | Mini Minefields 6362 Trading Minefields | Witching Days
Mini Minefields: Lunch Breaks, SQ Days, DST
After reading some of our longer minefield chapters, you’ll be glad to know that some
trading minefields do not require lengthy discussions. There are three that we fit into
in this short section: Lunch Breaks, SQ Days, and Daylight Saving Time. They may be
quick topics, but any trader new to Asia-Pacific markets in particular should know the
following details about Lunch Breaks and SQ Days, and most of us can use a bit of help
when it comes to remembering daylight saving time.
Lunch Breaks
During an exchange’s lunch break, the order book closes and all trading stops for
one to two hours, depending on the exchange. Historically, only a few of the Asia-
Pacific exchanges have had lunch breaks, with very few other lunch-break markets
around the world, and as these countries see the competitive advantage to staying
open throughout the trading day, the list is getting smaller. Singapore, for example,
eliminated their 90-minute lunch break in 2011. At the time of this writing, the
exchanges that currently support lunch breaks are in:
• China
• Hong Kong
• Indonesia (which has a longer lunch break on Fridays to allow time for
religious observances)
• Japan
• Malaysia
• Thailand
• Turkey
Even in these last holdout markets, change is on the horizon. Between 2011 and 2012,
both Japan’s TSE and Hong Kong’s HKEx shortened their lunch breaks from 90 to 60
minutes, and we wouldn’t be surprised if they phased out lunch breaks completely in
the next few years.
While lunch breaks generally operate as a simple pause in trading, the lunch break in
Japan makes trading there a little more interesting. The morning session (the trading
period before the lunch break) and the afternoon session (the trading period after the
lunch break) each have opening and closing auctions. This is especially important to
remember if you enter Market on Close (MOC) orders in the morning in Japan—they’ll
trade at the morning session’s close, not at the close of the day. After the lunch break,
the afternoon opening auction usually results in a spike of trading volume. You can
enter a DMA order 30 minutes before the end of the lunch break. For algo orders, it is
ideal if your algo automatically participates on the second opening auction; if not, be
careful about it chasing the spike of volume. Malaysia, Thailand, and Turkey also have
opening auctions after their lunch breaks.
64 Trading Minefields | Mini Minefields
You can see a list of
this year’s SQ Days
in our Japan guide
on page 112.
SQ Days
There are certain days in Japan known as SQ Days, or Special Quote Days, during which
we see unusually high volume levels on the exchanges caused by the expiration of secu-
rities. There are two kinds of SQ Days in Japan: big SQ Days, on which futures, indices,
and options expire all on the same day, and mini SQ Days, on which any two of
those three occur on the same day. SQ Days move a huge amount of volume
to the day’s open, which could cause traders caught unawares to start their
day off very badly. You can see a list of this year’s SQ Days in our Japan guide
on page 112. If you do a lot of algo trading in Japan, it’s a good idea make
sure your algorithm is designed to handle SQ Days, or you might have some
surprising results.
Similar events happen globally, in the U.S. for example, we usually call them
“Witching Days” about which we talk about on page 62.
Daylight Saving Time
In countries that observe it, daylight saving time (DST) can help conserve fuel and
electricity and can help people make the most of daylight hours. It can also really trip us
up in trading if it catches us unaware, as it can be hard to know which countries observe
DST and when.
Daylight saving time, which is the practice of advancing clocks by one hour in the
spring and setting them back one hour in the fall (or the reverse in the Southern
Hemisphere) began in Germany to conserve coal during World War I. Germany’s allies
in the Central Powers also adopted the measure, soon followed by the Allies. For the
most part, DST, or summer time, was considered (and sometimes called) “war time,”
and almost all participating countries dropped the practice after the war ended. It
saw a brief resurgence in World War II, but the policy didn’t have any staying power in
times of peace until the energy crisis of the 1970s, when conserving fuel again became
an important issue. After the 1970s, daylight saving time became an annual practice in
many countries around the globe.
Many countries observe daylight saving time, but not all. Almost all of Europe observes
DST, with Iceland, Belarus, and Russia being the only exceptions. North America and
parts of Oceania observe it as well. Outside of those regions, the practice is not as
wide: the closer a country is to the Equator, the more consistent the day’s length is, and
changing the clocks doesn’t help conserve energy. As a result, only a handful of coun-
tries in Asia, Africa, or the Middle East observe daylight saving time, and only the more
southerly regions of South America do. To make things even more complicated, some
regions within countries that observe DST still don’t observe it. For example, only the
southeastern states and territories in Australia observe DST. In Canada, the province of
Saskatchewan does not observe it, nor do the states of Arizona and Hawaii in the US.
Since Brazil is an equatorial country, only the southernmost parts observe DST.
Another one of the more confusing aspects of DST is that it never begins and ends on
a fixed calendar date. For example, in Europe, DST starts on the last Sunday of March
64 Trading Minefields | Mini Minefields Trading Minefields | Mini Minefields 65
and ends on the last Sunday of October. In Canada and the US, DST begins on the sec-
ond Sunday of March and ends on the first Sunday of November. In Mexico, DST starts
on the first Sunday of April and ends on the first Sunday of October (though some
areas on the border of Mexico and the US observe the same dates as the US, to make
border issues easier to manage). Confusing, right?
The chart below provides DST dates for this year. A completely comprehensive chart
would take up more space than we have room for, so we include only the countries for
which we have exchange guides (starting on page 78). As we’ve said above, certain
regions in DST-observing countries below may not observe DST. However, for trading
purposes, if the country’s primary exchange is in a region that does observe it, we
count it as a country that observes DST in the chart.
Country Daylight Saving Time
Australia
Austria
Belgium
Brazil
Canada
Czech Republic
Denmark
Finland
France
Germany
Greece
Hong Kong
Hungary
Indonesia
Ireland
Israel
Italy
Japan
Korea
Malaysia
Mexico
Netherlands
Norway
Poland
Portugal
Singapore
South Africa
Spain
Sweden
Switzerland
United Kingdom
United States
April 6, 2014 - October 5, 2014
March 30, 2014 - October 26, 2014
March 30, 2014 - October 26, 2014
February 16, 2014 - October 19, 2014
March 9, 2014 - November 2, 2014
March 30, 2014 - October 26, 2014
March 30, 2014 - October 26, 2014
March 30, 2014 - October 26, 2014
March 30, 2014 - October 26, 2014
March 30, 2014 - October 26, 2014
March 30, 2014 - October 26, 2014
Does not observe DST
March 30, 2014 - October 26, 2014
Does not observe DST
March 30, 2014 - October 26, 2014
March 28, 2014 - October 26, 2014
March 30, 2014 - October 26, 2014
Does not observe DST
Does not observe DST
Does not observe DST
April 7, 2014 - October 26, 2014
March 30, 2014 - October 26, 2014
March 30, 2014 - October 26, 2014
March 30, 2014 - October 26, 2014
March 30, 2014 - October 26, 2014
Does not observe DST
Does not observe DST
March 30, 2014 - October 26, 2014
March 30, 2014 - October 26, 2014
March 30, 2014 - October 26, 2014
March 30, 2014 - October 26, 2014
March 9, 2014 - November 2, 2014
0
50
100
150
200
250
300
350
400
450
500
550
600
650
CP
VX
ID
PL
HB
AV
LI
SM
FH
NA
DC
BB
NO
GA
SW
IM
SJ
IT
SS
FP
PW
GY
LN
< $1 $1 - $10 > $10
66 Market Profile Metrics | Symbols per Exchange
Market Profile Metrics
“Assume nothing” is a good mantra for anyone with years of experience in global equity trading. It seems like
every time someone says “It works this way in country A, so it probably works the same way in country B,” the
markets prove them wrong. Each market demands custom solutions.
You might think that good market-vs-market comparisons would be readily available, but they are not. A lot of the
information that is available elsewhere is not really focused on the needs of traders. In this section, you can find
important standard trading metrics for many key global markets. (If you need a refresher on the exchanges’ two-
letter market codes, turn to the inside front cover of this guide.) Please let us know what other metrics you would
like to see. We would love to expand it to meet your particular needs and interests.
How Many Symbols are on Each Global Exchange?
Knowing the number of symbols that trade on an exchange can give you an idea of what it will be like to trade in
that market. The following charts depict the number of symbols (as of Fall 2013) per market, sorted from least to
most symbols. We also include price ranges of the symbols. In these charts, the more established the market is, the
more likely it is to have more symbols. In general, many of the exchanges with fewer symbols, the ones on the left
side, have seen a lot of volatility or are in countries that have had financial difficulties in recent years. These are not
hard and fast rules, however; you’ll see some outliers below.
Europe
It is interesting to note that while most Central and Eastern European markets have fewer symbols, Poland’s War-
saw Stock Exchange (PW) is a notable exception; it has a larger number of symbols than most European exchang-
es. Most of its activity, however, seems to be concentrated in inexpensive stocks.
Market Profile Metrics | Symbols per Exchange 67
0
300
600
900
1200
1500
1800
2100
IJ TB SP KP MK KQ HK AU JT
< $1 $1 - $10 > $10
0
300
600
900
1200
1500
1800
2100
CF MM BS CT CV
< $1 $1 - $10 > $10
66 Market Profile Metrics | Symbols per Exchange
Asia-Pacific
The Asia-Pacific chart shows what you would expect from this region: the more established the market, the more
symbols it has. The up-and-coming markets, like Thailand Stock Exchange (TB), have fewer, mostly inexpensive symbols.
Americas
The different Canadian exchanges (Canada National, or CF; Toronto, or CT; and TSE Venture, or CV) have strikingly
different numbers of symbols.
68 Market Profile Metrics | Trade Value
1M
10M
100M
1000M
10000M
GA
PL
ID
IT
NO
IM
PW
SS
SJ
FH
LN
SM
HB
DC
SW
BB
NA
GY
AV
FP
LI
CP
VX
< $1 $1- $10 > $10
Market Profile Metrics
Where Is the Money Going?
The number of symbols in a market is useful information, but it is also important to follow the money. The following
charts depict the average daily notional value of trades, from the market that trades the most inexpensive stocks
to the market that trades the least inexpensive stocks. As in the charts above, more volatile markets tend to have
more inexpensive stocks than pricier ones.
Europe
Note that Switzerland’s SIX VX segment only trades expensive stocks. Trading in these markets can be tricky;
though a 100-share order of a, say, $3 stock sounds negligible, a 100-share order of a $700 stock can move the
stock. To deal with these complications, it’s a good idea to tune your trading tools to trade expensive names with-
out making a big dent in the market.
68 Market Profile Metrics | Trade Value
1M
10M
100M
1000M
10000M
100000M
IJ TB SP HK MK AU KQ KP JT
< $1 $1 - $10 > $10
1M
10M
100M
1000M
10000M
CF CV MM BS CT
< $1 $1 - $10 > $10
Market Profile Metrics | Trade Value 69
Asia-Pacific
Again, the Asia-Pacific charts show us about what you’d expect in this region. Japan is an advanced market, where
most of the spending goes into higher-priced stocks. In markets that trade more inexpensive stocks, like Hong
Kong, you may actually see trades for hundreds of millions of shares that don’t even move the market.
Americas
Canada’s Toronto and Brazil’s Sao Paolo exchanges have the more expensive stocks in the Americas, whereas
Canada’s other exchanges have very few.
70 Market Profile Metrics | Average Spread
-
5
10
15
20
25
30
35
40
45
50
GA
PW
ID
PL
IT
SW
CP
NO
HB
LI
DC
IM
FH
BB
SS
LN
SM
VX
GY
FP
NA
Market Spread Index Spread
Market Profile Metrics
Which Market Has the Tightest Spread?
The following charts depict the average bid-ask spread in each market, as well as the spread of the market’s largest
index, in basis points (bps). In general, smaller spreads make for more efficient trading. However, notice that some
exchanges have quite a difference between the market spread and the index spread. In these markets, trading a
non-index symbol can be tricky and will need more of your time and attention than trades done on the index.
Europe
By now, you’re familiar with the common theme in the European region charts: the more volatile markets are on
the left, and the more established markets are on the right. Notice that in Greece, on average, the spread for a
non-index security can be almost three times the spread of a security on their main index. The Irish Stock Exchange
(ID) has the largest index spread.
70 Market Profile Metrics | Average Spread
-
10
20
30
40
50
60
70
80
90
IJ
SP
TB
MK
HK
AU
JT
KP
Market Spread Index Spread
-
5
10
15
20
25
30
35
40
45
50
BS
MM
CT
Market Spread Index Spread
Market Profile Metrics | Average Spread 71
Asia-Pacific
Even though Japan’s Tokyo Exchange has more symbols and higher trade values than Korea’s KOSPI, on average,
Korean securities have smaller spreads.
Americas
No surprises here: Canada’s Toronto exchange has the lowest spread compared to Mexico and Brazil.
72 Market Profile Metrics | Volume Curves by Market
Market Profile Metrics
Volume Curves by Market
Long-time Traders’ Guide readers will recognize the good old VWAP Curves on the following pages; we have up-
dated them with the most recent data available to us. They depict the percentage of Average Daily Volume (ADV)
over time for each market. We have labeled the volume percentage at each market’s open and close.
Australia
Canada - Toronto
Brazil
Austria
Canada - Venture
Belgium
3.27%
14.67%
0%
3%
6%
9%
12%
15%
MOO
10:15
10:35
10:55
11:15
11:35
11:55
12:15
12:35
12:55
13:15
13:35
13:55
14:15
14:35
14:55
15:15
15:35
15:55
1.45%
15.81%
0%
3%
6%
9%
12%
15%
08:59
09:20
09:45
10:10
10:35
11:00
11:25
11:50
12:15
12:40
13:05
13:30
13:55
14:20
14:45
15:10
15:35
16:00
16:25
16:50
17:15
1.04%
13.26%
0%
3%
6%
9%
12%
15%
08:59
09:20
09:45
10:10
10:35
11:00
11:25
11:50
12:15
12:40
13:05
13:30
13:55
14:20
14:45
15:10
15:35
16:00
16:25
16:50
17:15
0.31%
9.72%
0%
3%
6%
9%
12%
15%
09:59
10:15
10:35
10:55
11:15
11:35
11:55
12:15
12:35
12:55
13:15
13:35
13:55
14:15
14:35
14:55
15:15
15:35
15:55
16:15
16:35
16:55
1.56%
6.10%
0%
3%
6%
9%
12%
15%
09:29
09:45
10:05
10:25
10:45
11:05
11:25
11:45
12:05
12:25
12:45
13:05
13:25
13:45
14:05
14:25
14:45
15:05
15:25
15:45
2.90% 2.98%
0%
3%
6%
9%
12%
15%
09:29
09:45
10:05
10:25
10:45
11:05
11:25
11:45
12:05
12:25
12:45
13:05
13:25
13:45
14:05
14:25
14:45
15:05
15:25
15:45
Market Profile Metrics | Volume Curves by Market 73
Volume Curves by Market
Charts depict percentage of ADV (Average Daily Volume) over time.
Czech Republic Denmark
Finland France
Germany Greece
0.73%
12.29%
0%
3%
6%
9%
12%
15%
09:09
09:30
09:55
10:20
10:45
11:10
11:35
12:00
12:25
12:50
13:15
13:40
14:05
14:30
14:55
15:20
15:45
16:10
1.23%
12.36%
0%
3%
6%
9%
12%
15%
08:59
09:20
09:45
10:10
10:35
11:00
11:25
11:50
12:15
12:40
13:05
13:30
13:55
14:20
14:45
15:10
15:35
16:00
16:25
16:50
0.73%
8.67%
0%
3%
6%
9%
12%
15%
09:59
10:20
10:45
11:10
11:35
12:00
12:25
12:50
13:15
13:40
14:05
14:30
14:55
15:20
15:45
16:10
16:35
17:00
17:25
17:50
18:15
1.04%
13.84%
0%
3%
6%
9%
12%
15%
08:59
09:20
09:45
10:10
10:35
11:00
11:25
11:50
12:15
12:40
13:05
13:30
13:55
14:20
14:45
15:10
15:35
16:00
16:25
16:50
17:15
1.03%
13.54%
0%
3%
6%
9%
12%
15%
08:59
09:20
09:45
10:10
10:35
11:00
11:25
11:50
12:15
12:40
13:05
13:30
13:55
14:20
14:45
15:10
15:35
16:00
16:25
16:50
17:15
1.18%
6.60%
0%
3%
6%
9%
12%
15%
10:29
10:45
11:05
11:25
11:45
12:05
12:25
12:45
13:05
13:25
13:45
14:05
14:25
14:45
15:05
15:25
15:45
16:05
16:25
16:45
74 Market Profile Metrics | Volume Curves by Market
Volume Curves by Market
Charts depict percentage of ADV (Average Daily Volume) over time.
IrelandIndonesia
HungaryHong Kong
Italy
Israel
1.56%
6.67%
0%
3%
6%
9%
12%
15%
09:29
09:45
10:05
10:25
10:45
11:05
11:25
11:45
12:05
12:25
12:45
13:05
13:25
13:45
14:05
14:25
14:45
15:05
15:25
15:45
0.88%
9.36%
0%
3%
6%
9%
12%
15%
09:01
09:22
09:47
10:12
10:37
11:02
11:27
11:52
12:17
12:42
13:07
13:32
13:57
14:22
14:47
15:12
15:37
16:02
16:27
16:52
0.40%
10.84%
0%
3%
6%
9%
12%
15%
07:59
08:20
08:45
09:10
09:35
10:00
10:25
10:50
11:15
11:40
12:05
12:30
12:55
13:20
13:45
14:10
14:35
15:00
15:25
15:50
16:15
0.84%
7.04%
0%
3%
6%
9%
12%
15%
08:59
09:15
09:35
09:55
10:15
10:35
10:55
11:15
11:35
11:55
12:15
12:35
12:55
13:15
13:35
13:55
14:15
14:35
14:55
15:15
15:35
3.78%
7.22%
0%
3%
6%
9%
12%
15%
10:14
10:35
11:00
11:25
11:50
12:15
12:40
13:05
13:30
13:55
14:20
14:45
15:10
15:35
16:00
16:25
16:50
17:15
17:40
2.35%
7.42%
0%
3%
6%
9%
12%
15%
08:59
09:20
09:45
10:10
10:35
11:00
11:25
11:50
12:15
12:40
13:05
13:30
13:55
14:20
14:45
15:10
15:35
16:00
16:25
16:50
17:15
Market Profile Metrics | Volume Curves by Market 75
Volume Curves by Market
Charts depict percentage of ADV (Average Daily Volume) over time.
Japan: JASDAQ
Korea
Japan: Tokyo
Japan: Osaka
Malaysia Mexico
5.49%
2.37%
0%
3%
6%
9%
12%
15%
08:59
09:15
09:35
09:55
10:15
10:35
10:55
11:15
11:35
11:55
12:15
12:35
12:55
13:15
13:35
13:55
14:15
14:35
14:55
5.35%
0.95%
0%
3%
6%
9%
12%
15%
08:59
09:15
09:35
09:55
10:15
10:35
10:55
11:15
11:35
11:55
12:15
12:35
12:55
13:15
13:35
13:55
14:15
14:35
14:55
1.39 %
8.18%
0%
3%
6%
9%
12%
15%
08:59
09:15
09:35
09:55
10:15
10:35
10:55
11:15
11:35
11:55
12:15
12:35
12:55
13:15
13:35
13:55
14:15
14:35
14:55
4.71% 4.75%
0%
3%
6%
9%
12%
15%
08:59
09:15
09:35
09:55
10:15
10:35
10:55
11:15
11:35
11:55
12:15
12:35
12:55
13:15
13:35
13:55
14:15
14:35
14:55
0.58%
7.22%
0%
3%
6%
9%
12%
15%
08:59
09:20
09:45
10:10
10:35
11:00
11:25
11:50
12:15
12:40
13:05
13:30
13:55
14:20
14:45
15:10
15:35
16:00
16:25
0.04%
6.58%
0%
3%
6%
9%
12%
15%
09:29
09:45
10:05
10:25
10:45
11:05
11:25
11:45
12:05
12:25
12:45
13:05
13:25
13:45
14:05
14:25
14:45
15:05
15:25
15:45
76 Market Profile Metrics | Volume Curves by Market
Volume Curves by Market
Charts depict percentage of ADV (Average Daily Volume) over time.
Netherlands Norway
South Africa
Singapore
PortugalPoland
0.94%
11.34%
0%
3%
6%
9%
12%
15%
08:59
09:20
09:45
10:10
10:35
11:00
11:25
11:50
12:15
12:40
13:05
13:30
13:55
14:20
14:45
15:10
15:35
16:00
16:25
16:50
17:15
1.07%
11.19%
0%
3%
6%
9%
12%
15%
08:59
09:20
09:45
10:10
10:35
11:00
11:25
11:50
12:15
12:40
13:05
13:30
13:55
14:20
14:45
15:10
15:35
16:00
0.93%
9.48%
0%
3%
6%
9%
12%
15%
07:59
08:20
08:45
09:10
09:35
10:00
10:25
10:50
11:15
11:40
12:05
12:30
12:55
13:20
13:45
14:10
14:35
15:00
15:25
15:50
16:15
0.87%
12.58%
0%
3%
6%
9%
12%
15%
08:59
09:20
09:45
10:10
10:35
11:00
11:25
11:50
12:15
12:40
13:05
13:30
13:55
14:20
14:45
15:10
15:35
16:00
16:25
16:50
0.23%
13.56%
0%
3%
6%
9%
12%
15%
08:59
09:20
09:45
10:10
10:35
11:00
11:25
11:50
12:15
12:40
13:05
13:30
13:55
14:20
14:45
15:10
15:35
16:00
16:25
16:50
2.74%
6.63%
0%
3%
6%
9%
12%
15%
08:59
09:20
09:45
10:10
10:35
11:00
11:25
11:50
12:15
12:40
13:05
13:30
13:55
14:20
14:45
15:10
15:35
16:00
16:25
16:50
Market Profile Metrics | Volume Curves by Market 77
Volume Curves by Market
Charts depict percentage of ADV (Average Daily Volume) over time.
Spain Sweden
Switzerland
United States
United Kingdom: London
United Kingdom: London International
1.67%
5.34%
0%
3%
6%
9%
12%
15%
09:29
09:45
10:05
10:25
10:45
11:05
11:25
11:45
12:05
12:25
12:45
13:05
13:25
13:45
14:05
14:25
14:45
15:05
15:25
15:45
1.11%
15.99%
0%
3%
6%
9%
12%
15%
08:59
09:20
09:45
10:10
10:35
11:00
11:25
11:50
12:15
12:40
13:05
13:30
13:55
14:20
14:45
15:10
15:35
16:00
16:25
16:50
17:15
0.87%
13.39%
0%
3%
6%
9%
12%
15%
08:59
09:20
09:45
10:10
10:35
11:00
11:25
11:50
12:15
12:40
13:05
13:30
13:55
14:20
14:45
15:10
15:35
16:00
16:25
16:50
17:15
1.31%
10.35%
0%
3%
6%
9%
12%
15%
08:59
09:20
09:45
10:10
10:35
11:00
11:25
11:50
12:15
12:40
13:05
13:30
13:55
14:20
14:45
15:10
15:35
16:00
16:25
16:50
17:15
0.74%
11.72%
0%
3%
6%
9%
12%
15%
08:14
08:35
09:00
09:25
09:50
10:15
10:40
11:05
11:30
11:55
12:20
12:45
13:10
13:35
14:00
14:25
14:50
15:15
0.75%
14.61%
0%
3%
6%
9%
12%
15%
07:59
08:20
08:45
09:10
09:35
10:00
10:25
10:50
11:15
11:40
12:05
12:30
12:55
13:20
13:45
14:10
14:35
15:00
15:25
15:50
16:15
78 Exchange Guides
2014 MARKET
HOLIDAYS
AUCTION
INFORMATION
HOURS OF
OPERATION
Australia
(AU)
Australian Securities Exchange
Address Exchange Centre
20 Bridge Street
Sydney, NSW, 2000
Telephone +61 2 9338 0000
Internet www.asx.com.au
Time Zone GMT +10
Currency Australia Dollar (AUD)
Settlement Cycle T+3
Buy-Ins Sellers must either buy back the shortfall by T+6 or borrow the short-
fall to deliver. A penalty system exists for each failed day until the
stock is produced.
Taxes None
Foreign Ownership Individual foreign ownership is restricted to 15%; more than 15%
requires approval from the Foreign Investment Review Board. Ag-
gregate limit is 40%. Specific industries (gaming, ASX, telecommu-
nications) have other restrictions.
Pre-Open 7:00-10:00
Opening Auction 10:00-10:09:15 (staggered, see below)
Continuous Session 10:00-16:00
Pre-Close 16:00-16:10
Closing Auction 16:10-16:12
Opening Auction
Time to Submit LOO .......................30 seconds before each group open
Staggered open in groups from 10:00-10:09:15 based on alphabetical order:
Group 1 (A-B): 10:00:00 +/- 15 seconds
Group 2 (C-F): 10:02:15 +/- 15 seconds
Group 3 (G-M): 10:04:30 +/- 15 seconds
Group 4 (N-R): 10:06:45 +/- 15 seconds
Group 5 (S-Z): 10:09:00 +/- 15 seconds
Closing Auction
Time to Submit LOC ........................16:30:01
Pre-Close 16:00-16:10; Closing Single Price Auction 16:10-16:12.
Jan 1, 27 Apr 18, 21, 25 Jun 9 Dec 25-26
Half Days: Dec 24, 31
Price Tick Size
0-0.10 0.001
0.10-2 0.005
> 2 0.01
Australia 79
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
SUPPORTED
CONVERGEX
ALGOS
CIRCUIT BREAKERS
TRADER TIP
No official type of Circuit Breakers, but the exchange can halt a symbol from trading
following significant news about the underlying. The exchange can also call a halt to
general trading.
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
Eligible for ADR Direct®, Reverse ADRs
SM
.
Board lot is 1 for almost all securities.
Limit Order
Centre Point Order
Centre Point Crossing
Undisclosed orders
Iceberg Order
All shorts are treated as sell. Public disclosure must be made on certain conditions.
Price-Time Priority
While venues run by big local banks often have more liquidity, internal broker pools often
offer significant price improvement.
80 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
Austria
(AV)
Weiner Borse AG
Address Wallnerstraße 8
P.O.Box 192
A-1014 Vienna
Telephone +43 1 531 65-0
Fax +43 1 532 97 40
Internet http://en.wienerborse.at
info@wienerborse.at
Time Zone GMT +1
Currency Euro (EUR)
Settlement Cycle T+3
Buy-Ins Buy-in procedures begin on Settlement Date (SD)+3; automatic
settlement occurs on SD+4.
Taxes Stamp Duty approximately 4 bps (basis points) for both sides.
Foreign Ownership No general restrictions.
Pre-Open 8:00-8:55
Opening Auction 8:55-9:01
Continuous Session 9:02-17:30
Intraday Auction 12:30-13:30
Closing Auction 17:30-17:35
Opening Auction
Time to Submit MOO/LOO .............8:55-9:00
Closing Auction
Time to Submit MOC/LOC ..............17:30:01
Intraday Auction
Takes place from 12:30-13:30. Auction for odd, mixed, and unfilled round lots takes
place from 13:00-13:02.
Volatility Auction
Activated when the maximum price range deviation is exceeded, decided by the
exchange. Generally ends after 3 or 5 minutes, depending on security. The change to
the next scheduled trading phase is carried out whether or not a price occurs.
Single volatility interruption occurs if the expected auction price deviates less than
twice the value of the dynamic price range. An extended volatility interruption occurs
if the expected exchange price deviates by less than 10% from the last price for at
least 1 minute. If the expected exchange price differs by more than 3 times the dy-
namic price range and if the expected exchange price is not a market-driven price, no
further price determination takes place that day. Trading continues on the next trading
day.
Price Tick Size
0 0.001
10 0.005
50 0.01
100 0.05
Austria 81
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
CIRCUIT BREAKERS
2014 MARKET
HOLIDAYS
SUPPORTED
CONVERGEX
ALGOS
LOT SIZES
ADR ELIGIBILITY
TRADER TIP
Jan 1, 6 Apr 18, 21 May 1, 29 June 9, 19 Aug 15 Dec 8, 24-26, 31
Volatility Interruption Auction is triggered if either a static or dynamic price range is
exceeded (exchange does not publish thresholds) and is adjusted after an auction price
determination. Auction lasts approximately 2 minutes, with random ends. If price lies out-
side defined range, volatility interruption is extended until terminated manually.
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
Eligible for ADR Direct® and Reverse ADRs
SM
.
Board lot is 1.
Market Order
Limit Order
Iceberg Order
Prohibition on naked short selling.
Best price, Time, Order size.
Midpoint orders are executed according to volume/time priority.
Take care not to miss out on the brief odd/mixed lot auction that takes place in the
middle of the day from 13:00-13:02.
82 Exchange Guides
2014 MARKET
HOLIDAYS
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
CIRCUIT BREAKERS
Belgium
(BB)
Euronext Brussels
Address Palais de la Bourse/Beurspaleis
Place de la Bourse/Beursplein
1000 Bruxelles/Brussel
Belgique/België/Belgium
Telephone +32 (0)2 509 12 11
Internet www.euronext.com
infobrussels@nyx.com
Time Zone GMT +1
Currency Euro (EUR)
Settlement Cycle T+3 (Note: Settlement cycle will change to T+2 in October 2014)
Buy-Ins Buy-in notices will be issued on SD+4, and Buy-Ins occur on SD+5.
Taxes None
Foreign Ownership No general restrictions.
Pre-Open 7:15-9:00
Order Matching 8:55-9:00
Continuous Session 9:00-17:30
Closing Auction 17:30-17:35
Trading At Last 17:35-17:40
Opening Auction
Time to Submit MOO/LOO .............7:15
Closing Auction
Time to Submit MOC/LOC ..............17:30-17:35
In Trading At Last, shares can be traded at their respective closing prices. This only applies for certain
securities.
Special Auction
Double fixing stocks trade from 11:30 to 16:30. Single fixing stocks trade at desig-
nated auction periods depending on the trading group it belongs to. After each fixing,
the stock trades for another 30 minutes at the fixing price.
Jan 1 Apr 18, 19 May 1 Dec 25-26 Half Day: Dec 24, 31
+/- 10% (6% for BEL 20 stocks) from the dynamic reference price, which is reset every
time the market breaks its upside/downside threshold (last closing price for the opening).
If the traded price deviates more than +/- 5% (3% for BEL 20 stocks) from the last traded
price, the market stops for 2 minutes.
Belgium 83
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
SUPPORTED
CONVERGEX
ALGOS
TRADER TIP
Eligible for ADR Direct®, Reverse ADRs
SM
.
Board lot is 1, but for some specific instruments Euronext can decide to implement a
trading lot size.
Market Order
Limit Order
Stop Loss / Stop Limit Order
Pegged Order
Reserve (Iceberg) Order
Reporting requirement for short positions greater than 0.25% of share capital and a
request to abstain from lending financial company shares.
0.01. Some trading groups have dynamic tick sizes.
Central order book orders are executed according to strict price priority. Changes in the
order quantity or limit price cause forfeiture of time priority.
Huge cross trades occur often in Euronext markets, so make sure your trading tools don’t
cause you to chase that volume.
Although the book may look thin in comparison to other markets, Euronext has a lot of
hidden liquidity in the book, perhaps due to the comparatively lax iceberg rules.
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
84 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
Brazil
(BS)
BM & F Bovespa
Address Praça Antonio Prado, 48
Rua XV de Novembro, 275
Centro - São Paulo (SP)
Telephone 55 11 2565-4000
Internet http://www.bmfbovespa.com
Time Zone GMT -3
Currency Brazilian Real (BRL)
Settlement Cycle T+3
Buy-Ins On T+4, BOVESPA announces a buy-in order and the seller has until
T+6 to deliver or the buy-in is executed. The seller pays any extra
costs and fees.
Taxes Exchange fee 0.0325% for both sides.
Foreign Ownership Certain sectors and industries have restrictions, including transporta-
tion, financial institutions, energy, insurance, agriculture.
Pre-Opening Fixing 9:45-10:00
Continuous Session 10:00-16:55
Closing Call 16:55-17:00
After Market 17:30-18:30
Opening Auction
Time to Submit LOO .......................10:45-11:00
Closing Auction
Time to Submit LOC ........................17:55-18:00
Auction is postponed by 1 minute if the size or price changes in the last 30 seconds.
Intraday Auction
Auction for odd, mixed, and unfilled round lots: 13:00-13:02.
Volatility Auction
Traders may hold regular auction tradings as long as they have the permission of the
Exchange´s Trading Official and of the traders who are buying or selling the assets.
Regular auction tradings may be executed even without the consent of traders. During
regular auction tradings in an Open Outcry Session, electronic trading of the security is
suspended. Special auction trading is executed with priority over others and only buy-
ing traders may intervene.
Brazil 85
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
SUPPORTED
CONVERGEX
ALGOS
LOT SIZES
ADR ELIGIBILITY
CIRCUIT BREAKERS
2014 MARKET
HOLIDAYS
TRADER TIP
Jan 1 Mar 3, 4 Apr 18, 21 May 1, 30 Jun 19 Jul 9 Nov 20 Dec 24-25, 31
Three rules, although they do not apply during the last half hour of the trading session:
If Ibovespa (Bovespa Index) falls 10%: 30 minutes.
If it falls 15%: 1 hour.
If it falls 20%: Exchange may determine the suspension of trading.
Eligible for ADR Direct®.
Odd lots supported on cash market; round lots (most of which are at 100 shares) on
exchange-supported markets.
Limit Order
Protection Price Order
Market with Leftover as Limit Order
Stop Limit Order
Stop Order
Iceberg Order
Day: Immediate Or Cancel/Fill And Kill
Fill or Kill
Good Till Date
Good Till Cancel
Naked short selling is prohibited.
0.01. Stocks are quoted in BRL.
Price/Time priority.
Three times in a year, the index rebalances, which causes the Closing Auction to start
five minutes early on those days.
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
86 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
2014 MARKET
HOLIDAYS
Canada
(CT, CN, CV, CF)
Toronto Stock Exchange (TMX), Venture Stock Exchange (CV), Canada National (CF)
Address The Exchange Tower
130 King Street West
Toronto, ON M5X 1J2
Telephone (888) 873-8392
Fax (416) 947-4662
Internet http://www.tmx.com
info@tmx.com
Time Zone GMT -5
Currency Canadian Dollar (CAD)
Settlement Cycle T+3
Buy-Ins The receiving broker may buy-in the securities on the open market
and charge the cost to the defaulting party. In October 2012, related
to the repeal of its downtick rule, Canada introduced a locate re-
quirement for any counterparty that has been previously responsible
for an “Extended Failed Trade,” a trade that has failed beyond
SD+10. Any counterparty responsible for an extended failed trade is
now required to mark their locate on all future short sells.
Taxes None
Foreign Ownership Investment in certain industries (finance, telecommunivations, trans-
portation, and utilities) is monitored and limited.
Opening Auction 7:00-9:30 (order entry)
Continuous Session 9:30-16:00
Closing Auction 15:40-16:00
Only round lots are permitted during auctions.
Opening Auction
Time to Submit MOO/LOO .............7:00-9:30
Pre-order Matching: ........................9:30
Blackout Period ...............................9:30, lasts ~30 seconds
Closing Auction
Time to Submit MOC ......................7:00-15:40
MOC Match .....................................16:00
Price Movement Extension ..............16:00-16:10
Cancel Session .................................16:10-16:15 (any open orders can be canceled)
Permissible order types during closing include Anonymous and MOC types.
Jan 1 Feb 17 Apr 18 May 19 Jul 1 Aug 4 Sept 1 Oct 13 Dec 25-26
Note: Settlement dates can be affected on US holidays.
Note: ConvergEx offers USD settlement in this exchange.
Price Lot Size
0-.10 1000
0.10-0.99 500
1.00 + 100
Price Tick Size
0 0.005
0.5 0.01
Canada 87
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
CIRCUIT BREAKERS
SUPPORTED
CONVERGEX
ALGOS
TRADER TIP
Coincides with NYSE. 7%, 13%, or 20% decline in the S&P 500 will cause a circuit
breaker. If Canadian exchanges are open, but US exchanges are not, halts are triggered
if the S&P/TSX composite declines 7%, 20%, or 30%.
If the price of a single security swings 10% or more within a 5-minute period, trading
in that security will halt for 5 minutes. Further, all trades executed at more than 5%
beyond the price that initially triggered that circuit breaker will be cancelled.
Abraxas
SM
Darkest
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
Not ADR eligible.
Odd lots have their own book and can be executed only during continuous trading (not
at closing auction).
Board lot sizes vary:
Market Order
Limit Order
Iceberg Order (must be board lot)
Anonymous
At Auction Order
Market on Close
On-Stop
Dark Mid-point and Dark Limit order
Day: Good Till Date/Good Till Canceled/Fill Or Kill
The downtick rule was repealed in October 2012 for all Canadian listed securities. A
short marking exempt (“SME”) designation was introduced for trades executed that are
“directionally neutral.” In broad terms, market makers and high frequency traders can
mark orders which are technically short as SME orders. Please refer to IIROC Notice 12-
0300 (October 11, 2012) for more detailed guidance regards “short sale” and “short-
marking exempt” order designations.
Disclosed orders are executed prior to undisclosed ones. Board lots have higher priority.
You can enter MOC orders into the MOC book from 7:00 to 15:40, but not after that.
LOC orders are only allowed if the symbol has an imbalance: you can enter them
between 15:40 and 16:00 to offset the imbalance (or until 16:10 if there’s a price move-
ment extension).
88 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
CIRCUIT BREAKERS
2014 MARKET
HOLIDAYS
Czech Republic
(CP)
Prague Stock Exchange (has two parallel systems: SPAD and KOBOS)
Address Prague Stock Exchange
Rybna 14
Prague 1
110 01
Telephone + 420 221 831 111
Internet http://www.pse.cz
info@pse.cz
Time Zone GMT +1
Currency Czech Koruna (CZK)
Settlement Cycle T+3
Buy-Ins Buy-in procedures may be enforced on SD+6. Brokers are liable for
settlement failures and their resolution.
Taxes None
Foreign Ownership Foreign ownership in weapons companies must be less than 50%.
Order Collection 8:00-8:45
Auction Regime 8:45-9:10
Continuous Session 9:10-16:20
Closing Auction 16:20-16:27 (selected securities)
Closing Auction
Transactions may be concluded within the allowable spread, which is for the entire
period of this phase defined by the best quotation valid as at the end time of the open
phase, increased by 10% in each direction.
Jan 1 Apr 18, 21 May 1, 8 Oct 28 Nov 17 Dec 24-26, 31
If the midpoint of the allowable spread deviates by more than 20% from the midpoint
at the beginning of the open phase and does not return to within the spread within 2 min-
utes, trading is suspended for 5 minutes. During the break, transactions of the issue in
question cannot be concluded in SPAD. If at least 3 market makers apply for quotation
during the suspension, the allowable spread is extended by 10% after the break, up to
a maximum of +/- 50%. Trading is suspended every time the next 10% spread level is
exceeded.
Price Tick Size
< 200 0.01
200-1000 0.10
≥ 1000 1.00
Czech Republic 89
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
ADR ELIGIBILITY
LOT SIZES
SUPPORTED
CONVERGEX
ALGOS
TRADER TIP
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
Not ADR eligible.
Size of lot fixed at 1 unit for all securities. Mixed lots allowed only on KOBOS.
Market Order
Limit Order
Iceberg Order
At Best
Market on Open
Short selling is supported.
Price-Time priority.
There are two trading systems: KOBOS, which is electronic, and SPAD. KOBOS has a
lower volume of trades, but it is the system to turn to if you want to track auto volume.
90 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
CIRCUIT BREAKERS
2014 MARKET
HOLIDAYS
Denmark
(DC)
OMX Copenhagen
Address NASDAQ OMX Copenhagen A/S
Postbox 1040
1007 Copenhagen K
Visiting address: Nikolaj Plads 6
Telephone +45 33 93 33 66
Fax +45 33 12 86 13
Internet http://www.nasdaqomxnordic.com
Time Zone GMT +1
Currency Danish Krone (DKK)
Settlement Cycle T+3 (Note: Settlement cycle will change to T+2 in October 2014)
Buy-Ins Buy-in notices will be issued on SD+4, and Buy-Ins occur on SD+5.
Taxes None
Foreign Ownership No general restrictions.
Pre-Open 8:00-9:00
Opening Auction 9:00
Continuous Session 9:00-16:55
Closing Auction 16:55-17:00
Opening Auction
Time to Submit MOO/LOO .............30 minutes before open
Closing Auction
Time to Submit MOC/LOC ..............1 minute after close
Volatility Auction
Triggered when the price deviates more than a certain percentage from the reference
price. (See “Circuit Breakers” below for these percentages.) Static volatility auction
ends after 60 seconds, dynamic volatility auction ends after 180 seconds.
No Volatility Auction in the last 4 minutes of trading.
Jan 1 Apr 17-18, 21 May 29 Jun 9, 30 Dec 24-26, 31
Static limit: 15% (10% for OMXC20) from the opening; dynamic limit: 5% (3% for
OMXC20). Suspension is 3 minutes for static and 1 minute for dynamic. See “Auction
Information” above for more information.
Price Tick Size
0 0.01
5 0.05
10 0.1
50 0.5
500 1
5000 10
20000 100
Price Tick Size
0 0.01
5 0.05
10 0.1
50 0.5
500 1
5000 10
20000 100
Denmark 91
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
SUPPORTED
CONVERGEX
ALGOS
TRADER TIP
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
Eligible for ADR Direct®, Reverse ADRs
SM
.
Board lot is 1 for almost all securities.
Market Order
Limit Order
Imbalance Order for Open and Close Auctions
Hidden Limit Order
Minimum Execution Quantity
Nordic@Mid Order
Ban on selling bank stocks.
Price-Internal-Display-Time.
(“Internal” means the incoming order is executed against the member’s own order.)
As a NASDAQ OMX market, this is one of the few world markets with an exchange-run
dark pool, called Nordic@Mid.
Copenhagen has a few really expensive stocks, like MAERSKA:DC and MAERSKB:DC,
that will require extra care when trading.
92 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
CIRCUIT BREAKERS
2014 MARKET
HOLIDAYS
Finland
(FH)
OMX Helsinki
Address NASDAQ OMX Helsinki Oy
P. O. Box 361
FIN-00131 Helsinki
Visiting address: Fabianinkatu 14
Telephone +358 9 616 671
Fax +358 9 6166 7368
Internet http://www.nasdaqomxnordic.com
Time Zone GMT +2
Currency Euro (EUR)
Settlement Cycle T+3 (Note: Settlement cycle will change to T+2 in October 2014)
Buy-Ins Buy-in notices will be issued on SD+4, and Buy-Ins occur on SD+5.
Taxes None
Foreign Ownership No general restrictions.
Pre-Open 9:45
Opening Auction 9:45-10:00
Continuous Session 10:00-18:30
Closing Auction 18:25-18:30
Opening Auction
Time to Submit MOO/LOO .............30 minutes before open
Closing Auction
Time to Submit MOC/LOC ..............1 minute after close
Volatility Auction
Triggered when the price deviates more than a certain percentage from the reference
price. (See “Circuit Breakers” below for these percentages.) Static volatility auction
ends after 60 seconds, dynamic volatility auction ends after 180 seconds.
No Volatility Auction in the last 4 minutes of trading.
Jan 1, 6 Apr 18, 21 May 1, 29 June 20 Dec 24-26, 31
Static limit: 15% (10% for OMXC20) from the opening; dynamic limit: 5% (3% for
OMXC20). Suspension is 3 minutes for static and 1 minute for dynamic. See “Auction
Information” above for more information.
Price Tick Size
0 0.01
Finland 93
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
SUPPORTED
CONVERGEX
ALGOS
TRADER TIP
Eligible for ADR Direct®, Reverse ADRs
SM
.
Board lot for most securities is 1.
Market Order
Limit Order
Imbalance Order for Open and Close Auctions
Hidden Limit Order
Minimum Execution Quantity
Nordic@Mid Order
Short selling is supported.
Price-Internal-Display-Time.
(“Internal” means the incoming order is executed against the member’s own order.)
As a NASDAQ OMX market, this is one of the few world markets with an exchange-run
dark pool, called Nordic@Mid.
Helsinki is the only Nordic market where stocks are listed and traded in euros.
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
94 Exchange Guides
2014 MARKET
HOLIDAYS
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
France
(FP)
Euronext Paris
Address NYSE Euronext Paris
39 rue Cambon
F 75039 Paris Cedex 01
Telephone +33 1 49 27 10 00
Internet www.euronext.com
infoeu@nyx.com
Time Zone GMT +1
Currency Euro (EUR)
Settlement Cycle T+3 (Note: Settlement cycle will change to T+2 in October 2014)
Buy-Ins Buy-in notices will be issued on SD+4, and Buy-Ins occur on SD+5.
Taxes French Transaction Tax: 0.2% on the transfer of ownership of specific
securities, listed by the exchange authorities.
Foreign Ownership Restrictions on a few specific sectors that the French government
considers sensitive (defense, healthcare, public safety).
Pre-Open 7:15-9:00
Order Matching 8:55-9:00
Continuous Session 9:00-17:30
Closing Auction 17:30-17:35
Trading At Last 17:35-17:40
Opening Auction
Time to Submit MOO/LOO .............7:15
Closing Auction
Time to Submit MOC/LOC ..............17:30-17:35
In Trading At Last, shares can be traded at their respective closing prices. This only applies for certain
securities.
Special Auction
Double fixing stocks trade from 11:30 to 16:30. Single fixing stocks trade at desig-
nated auction periods depending on the trading group it belongs to. After each fixing,
the stock trades for another 30 minutes at the fixing price.
Jan 1 Apr 18, 21 May 1 Dec 25-26
Half Days: Dec 24, 31
France 95
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
SUPPORTED
CONVERGEX
ALGOS
CIRCUIT BREAKERS
TRADER TIP
10% (6% for BEL 20 stocks) from the dynamic reference price, which is reset every time
the market breaks its upside/downside threshold (last closing price for the opening). If
the traded price deviates more than +/- 5% (3% for BEL 20 stocks) from the last traded
price, the market stops for 2 minutes.
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
Eligible for ADR Direct®, Reverse ADRs
SM
.
Board lot is 1, but for some specific instruments Euronext can decide to implement a
trading lot size.
Market Order
Limit Order
Stop Loss/ Stop Limit Order
Pegged Order
Reserve (Iceberg) Order
Reporting requirement for short positions greater than 0.25% of share capital and a
request to abstain from lending financial company shares.
0.01. Some trading groups have dynamic tick sizes.
Central order book orders are executed according to strict price priority. Changes in
the order quantity or limit price cause forfeiture of time priority.
Huge cross trades occur often in Euronext markets, so make sure your trading tools
don’t cause you to chase that volume.
Although the book may look thin in comparison to other markets, Euronext has a lot of
hidden liquidity in the book, perhaps due to the comparatively lax iceberg rules.
96 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
Germany
(GY)
Deutsche Boerse AG
Address Deutsche Böerse
60485 Frankfurt Am Main
Telephone +49-(0) 69-2 11-0
Fax +49-(0) 69-2 11-1 20 05
Internet http://deutsche-boerse.com
info@deutsche-boerse.com
Time Zone GMT +1
Currency Euro (EUR)
Settlement Cycle T+2
Buy-Ins The clearing house may initiate a buy-in on failed trades at its dis-
cretion and will generally enforce a buy-in on trades that remain un-
settled 5 days after contractual settlement date. Buy-ins occur in a
separate auction open to buy-in members of the exchange and can
occur at prices up to 200% of the prior day closing price.
Taxes None
Foreign Ownership No general restrictions.
Pre-Open 7:30-8:50
Opening Auction 8:50-9:00
Continuous Session 9:00-17:30
Intraday Auction 13:00-13:02
Closing Auction 17:30-17:35
Opening Auction
Time to Submit MOO/LOO .............8:50-9:00
Closing Auction
Time to Submit MOC/LOC ..............17:30:01
Intraday Auction
Auction for odd, mixed, and unfilled round lots: 13:00-13:02.
Volatility Auction
Activated when the maximum price range deviation is exceeded, decided by the ex-
change. Generally ends after 3 or 5 minutes, depending on security. The change to the
next scheduled trading phase is carried out whether or not a price occurs.
Single volatility interruption occurs if the expected auction price deviates less than
twice the value of the dynamic price range. An extended volatility interruption occurs
if the expected exchange price deviates by less than 10% from the last price for at
least 1 minute. If the expected exchange price differs by more than 3 times the dy-
namic price range, and if the expected exchange price is not a market-driven price, no
further price determination takes place that day. Trading continues on the next trading
day.
Note: ConvergEx offers USD settlement in this exchange.
Price Tick Size
0 0.01
10 0.05
50 0.1
100 0.5
Germany 97
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
CIRCUIT BREAKERS
SUPPORTED
CONVERGEX
ALGOS
LOT SIZES
ADR ELIGIBILITY
2014 MARKET
HOLIDAYS
TRADER TIP
Jan 1 Apr 18, 21 May 1 Dec 24-26, 31
Volatility Interruption Auction is triggered if either a static or dynamic price range is
exceeded (exchange does not publish thresholds) and is adjusted after an auction price
determination. Auction lasts approximately 2 minutes, with random ends. If price lies out-
side defined range, volatility interruption is extended until terminated manually.
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
Eligible for ADR Direct®, Reverse ADRs
SM
.
Board lot is 100, though most securities trade at a board lot of 1. Mixed and odd lots
allowed only during intraday auction.
Market Order
Limit Order (rejected if it could cause a volatility interruption)
Naked short selling of German companies is banned globally. Naked short sales in
government bonds is also banned. Intraday naked short selling is permitted.
Net short positions of 0.2% or more in selected financial companies must be reported to
BaFIN (Federal Financial Supervisory Authority) as of the close on the next trading day.
Further notifications are required when such positions change by 0.1%. Positions of 0.5%
or more are anonymously published on the home page of BaFIN.
Only positions held at the end of the day are relevant.
Best price, Time, Order size.
This is one of the few exchanges with its own trading facility and dark pool, called Xetra
MidPoint.
98 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
Greece
(GA)
Athens Stock Exchange
Address 110 Athinon Avenue
10442 Athens
Telephone +30-210 33 66 800
Fax +30-210 33 11 975
Internet http://www.helex.gr/
information-services@helex.gr
Time Zone GMT +2
Currency Euro (EUR)
Settlement Cycle T+3
Buy-Ins A buy-in occurs if a trade fails to settle by 13:30 on T+3. The ex-
change uses a local broker to buy the required shares. The cost could
be high to the defaulting party if brokers push up the price.
Taxes Transfer fees: 0.2% on all sales.
Levy: 0.0325% for all deals.
Foreign Ownership Interministerial committee approval is required to raise holdings
above 20% in strategically sensitive companies (e.g., telecommunications).
Opening Auction 10:15-10:30
Continuous Session 10:30-17:00
Closing Auction 17:00-17:09
Aftermarket Session 17:10-17:20
Opening Auction
Time to Submit MOO/LOO .............10:15-10:30
Closing Auction
Time to Submit MOC/LOC ..............15:00
Intraday Auction
Occurs on the 3rd Friday of every month for derivatives expiry. Orders for the intraday
auction can be entered from 11:45 onwards. The auction print occurs randomly any
time between 11:59 and 12:00.
Volatility Auction
Static or dynamic price limits are set to avert sudden fluctuations in the prices of trans-
ferable securities. Price limits are determined as percentages of divergence from their
reference prices. A price tolerance level of +/-30% from the previous day’s closing
price is set for most securities.
Volatility auctions occur within the day if a stock moves static +/-10% from last close
and dynamic +/-2% from previous trade. They last approximately 5 minutes.
Price Tick Size
0.01-59.99 0.01
60.00 + 0.05
Greece 99
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
CIRCUIT BREAKERS
SUPPORTED
CONVERGEX
ALGOS
LOT SIZES
ADR ELIGIBILITY
2014 MARKET
HOLIDAYS
TRADER TIP
Jan 1, 6 Mar 3, 25 Apr 18, 21 May 1 Jun 9 Aug 15 Oct 28 Dec 24-26
Half Day: Dec 31
Triggered when the price of a stock crosses the limit of 18% in either direction.
Price limits do not apply in the first three days of a company’s listing.
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
Eligible for ADR Direct® and Reverse ADRs
SM
.
Board lot is 1, though a few select securities are 10.
Market Order
Limit Order
Stop Order
Uptick rule applies. Naked short selling prohibited.
Price-Time priority.
After the three-minute closing auction, the Aftermarket session begins. Closing orders
generally participate into the Aftermarket phase instead of only in the closing auction, so
you’ll need to send a market order during the closing auction itself if you want to partici-
pate in it.
100 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
LUNCH BREAK
2014 MARKET
HOLIDAYS
CIRCUIT BREAKERS
Hong Kong
(HK)
HKEx
Address 12/F One International Finance Center
1 Harbor View Street
Central, Hong Kong
Telephone +852 2295 3106
Fax +852 2295 3106
Internet http://www.hkex.com.hk
info@hkex.com.hk
Time Zone GMT +8 (no DST)
Currency Hong Kong Dollar (HKD)
Settlement Cycle T+2
Buy-Ins Buy-in occurs on T+3 if order is not settled by 15:45 on T+2. Penal-
ties on defaulting brokers include buy-in price, default fees and sus-
pension of repeated offenders.
Taxes Stamp Duty: 0.1% (rounded up to nearest HKD)
Transaction levy: 0.003% (rounded to nearest HK cent)
Trading fee: 0.005% (rounded to nearest HK cent)
Italian Financial Transaction Tax: 22 bps (basis points) on buys only.
Foreign Ownership Investments are restricted in certain industries (e.g., broadcasting).
Pre-Open 9:00-9:30
Morning Session 9:30-12:00
Lunch Break 12:00-13:00
Afternoon Session 13:00-16:00
Volatility Auction
No specific volatility auctions, but stocks can be suspended intraday at HKEx’s discretion.
Order book is closed during the lunch break. Any orders that are not canceled are held
in the book during lunch. Replaces are not allowed, but you can cancel orders 30 minutes
before the lunch break ends.
Jan 1, 31 Feb 3 Mar 29 Apr 18, 21 May 1, 6 Jun 2 Jul 1 Sept 9 Oct 1, 2 Dec 25-26
Half Days: Jan 30 Dec 24, 31
No specific regulations, but the exchange has the right to suspend trading of a security
on its discretion.
Price Tick Size
0 0.001
0.26 0.005
0.51 0.01
10.01 0.02
20.01 0.05
200.01 0.1
100.01 0.2
500.01 0.5
1000.01 1
2000.01 2
5000.01 5
Hong Kong 101
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
SUPPORTED
CONVERGEX
ALGOS
LOT SIZES
ADR ELIGIBILITY
TRADER TIP
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
Eligible for ADR Direct®, Reverse ADRs
SM
.
Board lots only. Board lot sizes vary: examples include 400, 500, 1000, 2000, up to
5000000.
Maximum of 3000 board lots per order.
Limit Order
Enhanced Limit Order
Special Limit Order
At Auction Limit Order
At Auction Order
Only certain securities are eligible for short sales. Shorting is allowed in continuous
trading (not in auction); traders must peg to the offer and cannot hit the bid. ETFs can
hit the bid. Uptick rule applies.
Price/Precision rounding: 4 decimals.
Price-Time priority.
There are no alternative trading platforms in Hong Kong. Liquidity comes only from the
primary exchange and from brokers’ internal pools.
102 Exchange Guides
2014 MARKET
HOLIDAYS
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
CIRCUIT BREAKERS
Hungary
(HB)
Budapest Stock Exchange
Address 1H - 1364 Budapest
Pf. 24
Telephone +36-1-429-6700
Fax +36-1-429-6800
Internet http://www.bse.hu
info@bse.hu
Time Zone GMT +1
Currency Hungarian Forint (HUF)
Settlement Cycle T+3 (Note: Settlement cycle will change to T+2 in October 2014)
Buy-Ins No official rules.
Taxes None
Foreign Ownership No general restrictions, but issuers may have their own restrictions
in their articles of association.
Open Order Collection 8:30-9:00/9:01
Open Order Matching 9:00/9:01-9:02
Continuous Session 9:02-17:00
Closing Order Collection 17:00-17:05/17:06
Closing Order Matching 17:05/17:06
Closing Price Trading 17:06-17:10
Limit Orders only for auctions.
Opening Auction
Time to Submit LOO .......................8:30-9:00/9:01
Closing Auction
Time to Submit LOC ........................17:00-17:05/17:06
Jan 1 Apr 18, 21 May 1, 2 June 9 Aug 20 Oct 23, 24 Dec 24-26, 31
If the change in the transaction price exceeds 10% in comparison with the previous day’s
closing price, the trading halt limit is reached and trading in that security stops for 2-15
minutes. The Exchange applies a halt only once within one trading day for each product.
Price Tick Size
< 2000 1
> 2000 5
Hungary 103
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
ADR ELIGIBILITY
LOT SIZES
SUPPORTED
CONVERGEX
ALGOS
TRADER TIP
Eligible for ADR Direct® and Reverse ADRs
SM
.
Board lot is 1.
Market Order
Limit Order
Stop Order
Short selling is supported.
Price-Time priority.
This exchange has seen a real decrease in trading volume since 2011, when the govern-
ment encouraged transferring private pension fund assets to state pension funds.
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
2014 MARKET
HOLIDAYS
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
104 Exchange Guides
Indonesia
(IJ)
Indonesia Stock Exchange (IDX)
Address Indonesia Stock Exchange Building, 1st Tower
JI. Jend. Sudirman Kav 52-53
Jakarta Selatan 12190
Telephone +6221 5150515
Fax +6221 5150330
Internet http://www.idx.co.id/index-En.html
callcenter@idx.co.id
Time Zone GMT +7
Currency Indonesian Rupiah (IDR)
Settlement Cycle T+3
Buy-Ins Occur on T+3 for all deliveries to the clearing house that remain un-
settled by noon on T+3. The failing member firm is penalized by be-
ing required to pay cash equal to 125% of the highest price over the
previous 3 days.
Taxes Exchange levy: 4.3 basis points payable on both buys and sells.
Transaction tax: 10 basis points payable on sells.
Foreign Ownership No restrictions on foreign ownership except in relation to banking
and broadcasting industries. Banks may list for foreign ownership
shares representing up to 99% of their total capital. Foreign inves-
tors may not invest in private broadcasting companies unless the
investment is in newly-issued shares, capped at 20% of total capital.
Pre-open 8:45-8:55
Morning Session 9:00-12:00
Lunch Break* 12:00-13:30
Afternoon Session 13:30-15:49:59
Pre-closing Session 15:50-16:00
Post Trading Session 16:05-16:15
*-Note: On Fridays, the lunch break lasts from 11:30 to 14:00.
Opening Auction
Time to Submit LOO .......................8:45-8:55
Jan 1, 14, 31 Mar 31 Apr 18 May 1, 15, 27, 29 Jul 28–Aug 1 Dec 25-26, 31
Price Tick Size
< 200 1
200-500 5
500-2000 10
2000-5000 25
>5000 50
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
ADR ELIGIBILITY
LOT SIZES
SUPPORTED
CONVERGEX
ALGOS
Indonesia 105
TRADER TIP
CIRCUIT BREAKERS
If the index moves down 10% from the previous day’s close, trading is suspended for 30
minutes (or until end of session). If it moves 15%, trading is suspended until the end of
the day. For individual stocks, the exchange rejects orders that are 10% below or 20%
above the reference price.
Eligible for ADR Direct®.
Board lot is 500.
Limit Order
Short selling is supported for certain shares.
Price-Time priority.
While the lunch break is 90 minutes long betwen Monday and Thursdays, it is longer (150
minutes) on Fridays to allow for religious observances.
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
106 Exchange Guides
2014 MARKET
HOLIDAYS
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
Ireland
(ID)
Irish Stock Exchange
Address 28 Anglesea Street
Dublin 2
Telephone +353 (1) 617 4200
Fax +353 (1) 677 6045
Internet http://www.ise.ie
finance@ise.ie
Time Zone GMT
Currency Euro (EUR)
Settlement Cycle T+3 (Note: Settlement cycle will change to T+2 in October 2014)
Buy-Ins Buy-in notices will be issued on SD+4, and Buy-Ins occur on SD+5.
Taxes Stamp duty tax: 1% on purchases for registered stocks.
Brokers Levy: EUR 1.25 on contract over EUR 12,500.
Foreign Ownership No general restrictions, but issuers may have their own restrictions
in their articles of association.
Pre-Trading Phase 6:30-7:50
Opening Auction 7:50-8:00
Continuous Session 8:00-16:28
Closing Auction 16:28-16:30
Post Trading Phase 16:30-17:15
Start times for the opening and closing auctions are staggered and vary from security to
security and from day to day. The timeframe for all securities to enter into the auction
phase is typically no longer than 5 seconds, but the delay may be longer when exception-
al volumes of orders are present on the order book.
Opening Auction
Time to Submit MOO/LOO .............7:50-8:00
Closing Auction
Time to Submit MOC/LOC ..............16:28-16:30
Volatility Auction
Can occur during auctions and continuous trading and can be initiated where the po-
tential execution price lies outside the dynamic price range and the static price range.
Static and dynamic price ranges may be extended in a fast market. Volatility interrup-
tions may be extended in certain circumstances.
Jan 1 Apr 18, 21 May 5 Jun 2 Dec 25-26
Half Days: Dec 24, 31
Price Tick Size
9999 0.001
49995 0.005
99990 0.01
0.05
Ireland 107
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
SUPPORTED
CONVERGEX
ALGOS
LOT SIZES
ADR ELIGIBILITY
CIRCUIT BREAKERS
TRADER TIP
See “Volatility Auction,” opposite.
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
Eligible for ADR Direct®, Reverse ADRs
SM
.
Board lot is 1.
Market Order
Limit Order
Market to Limit Order
Hidden Order
Midpoint Order
Iceberg Order
Stop Market Order
Stop Limit Order
Short selling supported. Only market makers can short Irish financial company securities.
Precision rounding: 3 decimals.
Price-Time priority. Market orders enjoy priority over limit orders in the order book.
Between market orders, time priority also applies.
A large percent of trades are OTC and cross trades, so auto volume is sometimes scarce.
It can be hard to find natural liquidity, especially when trading with algos.
The closing auction only lasts for two minutes, so you’ll have to act fast if you want to
participate in it.
108 Exchange Guides
2014 MARKET
HOLIDAYS
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
Israel
(IT)
Tel Aviv Stock Exchange
Address 54 Ahad Ha’am Street
Tel Aviv 65202
Telephone +972 3 567 7411
Fax +972 3 510 5379
Internet http://www.tase.co.il/Eng/Pages/Homepage.aspx
Time Zone GMT +2
Currency Israeli New Shekel (ILS)
Settlement Cycle T+2 (T+0 for domestic investors)
Buy-Ins If the investor does not have sufficient funds, the broker will not sub-
mit the trade. The exchange states that buy-ins should start on T+5
for securities.
Taxes None
Foreign Ownership Limits in some industries and state-controlled companies (banking,
insurance, asset management): investments over a certain amount
are subject to authorization.
Exchange is open Sunday through Thursday.
Pre Opening 9:00
Opening Auction 9:45-9:46 (random) for Group A, 10:15 for Group B (see note)
Continuous Session 9:45-9:46 (random) for Group A, 10:15 for Group B
Pre Closing Sun: 16:14-16:15 (random) Mon-Thur: 17:14-17:15 (random)
Closing Auction Sun: 16:24-16:25 (random) Mon-Thur: 17:24-17:25 (random)
Note: Securities are separated into Group A (made up of the TA 100, Tel Aviv’s 100 most highly
capitalized companies) and Group B (the rest).
Only Limit Orders permitted in auctions.
Opening Auction
Time to Submit LOO .......................9:00
Limit orders that do not complete during the opening phase are transferred to the continuous
session at the original price limit and time priority. For Limit Opening orders, the remaining part
is cancelled and deleted from the books.
Closing Auction
Time to Submit LOC ........................16:14
Mar 16 Apr 14-15, 20-21 May 5-6 Jun 3-4 Aug 5 Sep 24-26 Oct 3, 8-9, 15-16
Israel 109
CIRCUIT BREAKERS
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
SUPPORTED
CONVERGEX
ALGOS
LOT SIZES
ADR ELIGIBILITY
TRADER TIP
To prevent typos and orders made in error, the Exchange requires orders where the price
is off by 35% or more from the last transaction to be submitted through a trade supervi-
sor.
In Continuous Trading , if the TA-25 index fluctuates by 8% in relation to the basic index,
it is interrupted for 45 minutes. If the TA-25 index fluctuates by 12% in relation to the
basic index, trading is halted until the end of the trading day.
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
Eligible for ADR Direct® and Reverse ADRs
SM
.
Board lot is 1 for almost all securities. Trade in odd lots takes place once a year.
Market Order (only in continuous session)
Limit Order
Limit Opening Order
A short sale is permitted only if the security sold is not a derivative. Naked short selling
is prohibited.
Tick size is 0.01
Price-Time priority.
This is the only market we know that has lot sizes based on trade value: the minimum
order size for each stock changes as the price of the stock changes.
110 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
Italy
(IM)
Borsa Italiana
Address Piazza Affari 6
20123 Milan
Telephone +39 02 72 42 61
Fax +39 02 72 00 43 33
Internet http://www.borsaitaliana.it
Time Zone GMT +1
Currency Euro (EUR)
Settlement Cycle T+3 (Note: Settlement cycle will change to T+2 in October 2014)
Buy-Ins The Central Counterparty can give notice of a buy-in on trades which
remain unsettled 4 days after contractual settlement date. The buy-in
occurs on SD+5.
Taxes Italian Financial Transaction Tax: 0.22% on the transfer of ownership
of specific securities domiciled in Italy with a capitalization equal to
or greater than EUR 500 million. The rate is reduced to 0.12% if the
transaction is executed on a Regulated Market or MTF.
Foreign Ownership No general restrictions, but issuers may have their own restrictions
in their articles of association.
Opening Auction 8:00-9:00 (ends randomly between 9:00 and 9:00:59)
Continuous Session 9:00-17:25
Closing Auction 17:25-17:30 (ends randomly between 17:30 and 17:30:59)
Trading at Closing Price 17:35-17:40
After-hours Trading 18:00-21:00
Opening Auction
Time to Submit MOO/LOO .............8:00-9:00/9:00:59
At the end of the auction, incomplete orders are cancelled and given an out.
Closing Auction
Functions the same way as the opening auction. The only difference is that validation
and auction phases take place in just 5 minutes for Blue Chip, Star and Ordinary 1 seg-
ments.
Incomplete orders are transferred to the following day’s opening auction as orders
with price limit (if entered) or as opening price orders if they had been entered the
previous day as closing price orders.
Volatility Auction
If the indicative auctions do not result in a valid price, the volatility auction is triggered
(repeated for opening auction and once only for closing auction).
Price Tick Size
Up to 0.25 0.0001
0.2501-1 0.0005
1.0001-2 0.001
2.0001-5 0.0025
5.0001-50 0.005
> 50 0.01
Italy 111
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
CIRCUIT BREAKERS
SUPPORTED
CONVERGEX
ALGOS
ADR ELIGIBILITY
TRADER TIP
2014 MARKET
HOLIDAYS
Jan 1 Apr 18, 21 May 1 Aug 15 Dec 24-26, 31
Both static and dynamic price tolerance level applies. This is determined by sector for
each market segment.
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
Eligible for ADR Direct®, Reverse ADRs
SM
.
Board lot is 1 for almost all securities.
Market Order
Limit Order
Iceberg Order
Executable Quote
Stop Orders
Short selling is supported. Ban on naked short selling.
Price-Time priority.
The aftermarket session in this exchange has a lot of retail flow.
112 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
Japan
(JP, JO, JQ)
Tokyo Stock Exchange, Osaka Securities Exchange/JASDAQ
Address Tokyo Stock Exchange Osaka Securities Exchange/JASDAQ
2-1 Nihombashi 8-16 Kitahama
Kabuto-cho, Chuo-ku 1-chome, Chuo-ku
Tokyo 103-8224 Osaka 541-0041
Telephone +81 3 3666 1361 +81 6 4706 0800
Fax +81 3 3665 1412 +81 6 6227 5272
Internet http://www.tse.or.jp http://www.ose.or.jp
Time Zone GMT +9
Currency Japanese Yen (JPY)
Settlement Cycle T+3
Buy-Ins Local member firms are subject to buy-in on trades open after con-
tractual settlement date and are subject to fines for failing to make
deliveries to the Central Counterparty.
Taxes None.
Foreign Ownership Limits of 20% for broadcasting shares and 33.3% for airline and tele-
communications (NTT) shares. Some restrictions exist around certain
banking stocks.
Tokyo Stock Exchange Osaka/JASDAQ
Opening Auction
9:00 Order Submission 8:00
Morning Session 9:00-11:30 Opening Auction 9:00
Lunch Break 11:30-12:30 Continuous Session 9:00-15:10
Afternoon Session 12:30-15:00 Closing Auction 15:10
Closing Auction 15:00
Opening Auction
Time to Submit MOO/LOO .............9:00 TSE, 8:00 OSE
Order Matching ...............................9:00
Special Quote (SQ) days can result in significant opening volume spikes. This is particularly true for
“Big SQ Days” (Mar 8, Jun 14, Sep 13, Dec 13 in 2012), when equity index futures expire, and “Small
SQ Days,” when stock options expire.
Closing Auction
Time to Submit MOC/LOC ..............Any time after the start of the second session
On TSE, if you send MOC and LOC orders before 11:00, it becomes an order at morning session clos-
ing. If you send them after 11:00, it becomes an afternoon session closing order.
There are also auctions before and after the lunck break on TSE.
Price Tick Size
up to 3000 1
5000 5
30000 10
50000 50
300000 100
500000 500
3000000 1000
5000000 5000
30000000 10000
50000000 50000
>50000000 100000
Japan 113
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
2014 MARKET
HOLIDAYS
SUPPORTED
CONVERGEX
ALGOS
LOT SIZES
CIRCUIT BREAKERS
ADR ELIGIBILITY
TRADER TIP
Jan 1-3, 13 Feb 11 Mar 21 Apr 29 May 3-6 Jul 21 Sep 15, 23 Oct 13 Nov 3, 23-24 Dec 23, 31
TSE allows for two circuit breakers of 15 minutes each, triggered by extreme price moves.
If the price moves a certain percent after the first circuit breaker ends, a second circuit
breaker will be triggered.
OSE has a 2000-point absolute limit.
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
Eligible for ADR Direct®, Reverse ADRs
SM
.
TSE: Board lots range 1, 10, 50, 100, 500, 1000, depending on security.
OSE: Board lots range 1, 10, 50, 100, 500, 1000, 2000, 3000, depending on security.
Market Order
Limit Order
Immediate Or Cancel
Fill Or Kill (Market orders only)
Uptick rule applies. Shorts and short sell exempt order types.
Starting November 5th, 2013, the uptick rule will only apply once the market has moved
-10% from the previous day’s closing price. Once the uptick is applied, it will be effective
until the end of the next trading day.
Price-Time priority.
Because of the lunch break, there are four different auctions throughout the day: an open
and close in the session before the break, and an open and close in the session after. You
can enter orders in the lunch break starting 30 minutes before the afternoon open.
114 Exchange Guides
2014 MARKET
HOLIDAYS
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
Malaysia
(MK)
Bursa Malaysia (MYX)
Address 10th Floor
Exchange Square Bukit Kewangan
50200 Kuala Lumpur
Telephone +(603) 2034 7000
Fax +(603) 2732 5258
Internet http://www.bursamalaysia.com
customerservice@bursamalaysia.com
Time Zone GMT +8
Currency Malaysian Ringgit (MYR)
Settlement Cycle T+3
Buy-Ins Occur on the morning of T+3 for all deliveries to the clearing house
that remain unsettled by 16:00 on T+2.
Taxes Transaction levy: 3 basis points (bps) on buys and sells with a cap of
MYR 1000 per settlement.
Stamp duty: 10 bps payable on buys and sells, with a cap of MYR 200.
Foreign Ownership Foreign ownership in certain industries is restricted and subject to
caps on the level of that foreign ownership. These industries include
brokerage, insurance, manufacturing, shipping, and telecommunications.
Pre-open 8:30-9:00
Morning Session 9:00-12:30
Morning Closing 12:30
Lunch Break 12:30-14:30
Afternoon Pre-open 14:00-14:30
Afternoon Session 14:30-17:00
Pre-close 16:45
Trading at Last 16:50
Market Close 17:00
Opening Auction
Time to Submit MOO/LOO .............8:30 for morning session, 2:00 for afternoon
Closing Auction
Time to Submit MOC/LOC ..............16:45 for afternoon session
Jan 1, 14, 17, 31 Feb 1 May 1, 13 Jun 7 Jul 28-29 Sept 1, 16 Oct 6, 23, 25 Dec 25
Half Day: Jan 30
Price Tick Size
< 1 0.05
1-9.99 1
10-99.99 2
100+ 10
Malaysia 115
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
SUPPORTED
CONVERGEX
ALGOS
LOT SIZES
ADR ELIGIBILITY
CIRCUIT BREAKERS
TRADER TIP
If the composite index falls by more than 10% from previous close, trading is suspended
for 1 hour or the rest of the trading session. If the index falls by 20% or more, the trading
is suspended for the rest of the day.
Eligible for ADR Direct®.
Board lot is 100 for most stocks.
Market Order
Limit Order
Market To Limit Order
Market Filll And Kill
Fill And Kill
Minimum Quantity
Short selling is supported for certain approved securities. Uptick rule applies.
Price-Time priority.
The opening auction here tends to be very light, so work MOO orders carefully to help
minimize market impact.
The closing auction can be quite tricky: while continuous trading ends at 16:45, the auc-
tion doesn’t start until 16:50, and then the stock can only trade at the last traded price.
Orders may not complete, since there has to be liquidity on the other side of the book at
that price.
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
116 Exchange Guides
2014 MARKET
HOLIDAYS
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
CIRCUIT BREAKERS
Mexico
(MM)
Bolsa Mexicana de Valores (BMV)
Address Reforma 255
Col. Cuauhtemoc
06500, Mexico DF
Telephone +52 53 42 90 00
Fax +52 53 42 95 52
Internet http://bmv.com.mx
cinforma@bmv.com.mx
Time Zone GMT -6
Currency Peso (MXN)
Settlement Cycle T+3
Buy-Ins No official rules.
Taxes None
Foreign Ownership Foreign investors can hold type B, C, L, and N shares, but not A
shares. For foreign investors to purchase restricted shares, they may
place a portion of their shares in a neutral trust and receive a CPO,
which strips the foreign investors of voting rights.
Pre-Open 9:00-9:25
Pre-order Matching 9:25-9:30
Continuous Session 9:30-16:00
Closing Auction 16:05
Opening Auction
Time to Submit MOO/LOO .............9:00-9:25
Pre-order Matching .........................9:25-9:30
Cannot enter orders from 9:25-9:30. Open double and triple witching can cause unusual volume.
Closing Auction
Time to Submit MOC/LOC ..............Any time before 15:40
From 15:40-16:00, the exchange calculates the price. Must use Market Order in Closing Auction.
Short sells treated as sell in auction.
Jan 1 Feb 3 Mar 17 Apr 17-18 May 1 Sept 16 Nov 17 Dec 12, 25
If a stock moves by 15% from the previous closing price, trading is halted at the discre-
tion of the exchange.
Price Tick Size
0.001-1 0.001
1.01 + 0.01
Mexico 117
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
SUPPORTED
CONVERGEX
ALGOS
TRADER TIP
Eligible for ADR Direct®, Reverse ADRs
SM
.
Board lot varies (1, 5, 100). On the main market, for >200 pesos, a board lot is 5. Below
200 peso, a board lot is 100 shares. On SIC segment, all board lots are 5.
Orders for less than 1 Board Lot are permitted. A separate odd-lot Electronic Book is
established for them.
Mixed lots are split and routed to two different exchange books.
Market Order
Limit Order
At the Close Order
Cross Order
Iceberg Order
Pegged Order
Short selling is supported. Pre-borrow must be in place.
Price-Time priority.
Double or triple witching (discussed on page 64) can cause unusual volume on the open
or on the close.
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
118 Exchange Guides
2014 MARKET
HOLIDAYS
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
MTFs
BATS (EB) Chi-X Europe (IX) Turquoise (TQ)
Address BATS Exchange HQ 10 Lower Thames St 10 Paternoster Square
8050 Marshall Dr London EC3R 6AF London EC4M 7LS
Lenexa, KS 66214
Telephone 913-815-7000 +44 20 7012 8900 +44 (0) 20 7382 7600
Fax 913-815-7119 +44 (0) 20 7382 7690
Internet http://batstrading.com www.batstrading.co.uk www.tradeturquoise.com
cinforma@bmv.com.mx InfoEurope@bats.com sales@tradeturquoise.com
Time Zone All trade in GMT
Currency All trade in the currency of the primary exchange.
Settlement Cycle Not applicable.
Buy-Ins Not applicable.
Taxes Not applicable.
Foreign Ownership Not applicable.
Continuous Session 8:00-16:30
Note: At Chi-X Europe, there is no opening and closing auction, and you can trade until
16:30 no matter what. For example, while the Danish exchange closes at 15:55, you can
still trade at Chi-X Europe until 16:30.
Opening Auction
Stocks can be traded during the opening auction phase at the primary exchange. Not
all order types are available during auction phases.
Closing Auction
Stocks can be traded during the closing auction phase at the primary exchange. Not
all order types are available during auction phases.
Volatility Auction
At Chi-X Europe, a stock can still be traded even if a volatility auction happens on the
primary exchange or if there is a trading halt at the primary exchange.
Securities are not traded on local public holidays. All 3 of these MTFs are closed on:
Jan 1 Apr 18 Dec 25
MTFs 119
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
SUPPORTED
CONVERGEX
ALGOS
LOT SIZES
ADR ELIGIBILITY
CIRCUIT BREAKERS
TRADER TIP
BATS
No official halts. If there is a trading halt by the Exchange, BATS halts the symbol if it
was due to regulatory or compliance. If the halt is due to a volatility halt or technical
default, BATS continues trade.
Chi-X Europe
No circuit breakers.
Turquoise
If the primary exchange suspends or halts trading of a security, Turquoise also halts it.
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
Not applicable.
Board lot is 1 for almost all securities. Odd and Mixed lots are not supported on Chi-X Europe.
BATS Chi-X Europe Turquoise
Market Order Limit Order Market Order
Limit Order Iceberg Order Limit Order
Iceberg Order Peg Order Iceberg Order
Discretionary Order Non-Displayed Order Pegged Order
Pegged Order
Post-Only or Partial Post-Only At Limit
Short selling is supported.
BATS
Identical to that of the primary exchange.
Chi-X Europe
Has a dynamic tick table, which is the same as the majority of stocks on the primary
exchange.
Turquoise
Follows tick sizes defined by the primary exchange, with the possibility of amending
tick sizes through a high-liquid model.
Price-Time Priority.
While BATS owns Chi-X (and the London Stock Exchange owns Turquoise), you won’t see
the same information across the MTFs. Everything is listed separately.
120 Exchange Guides
2014 MARKET
HOLIDAYS
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
CIRCUIT BREAKERS
Netherlands
(NA)
Euronext Amsterdam
Address NYSE Euronext Amsterdam
Postbus 19163
1000 GD Amsterdam
Telephone +31 (0) 20 550 4444
Internet www.euronext.com
infoeu@nyx.com
Time Zone GMT +1
Currency Euro (EUR)
Settlement Cycle T+3 (Note: Settlement cycle will change to T+2 in October 2014)
Buy-Ins Buy-in notices will be issued on SD+4, and Buy-Ins occur on SD+5.
Taxes None
Foreign Ownership No general restrictions.
Pre-Open 7:15-9:00
Order Matching 8:55-9:00
Continuous Session 9:00-17:30
Closing Auction 17:30-17:35
Trading At Last 17:35-17:40
Opening Auction
Time to Submit MOO/LOO .............7:15
Closing Auction
Time to Submit MOC/LOC ..............17:30-17:35
In Trading At Last, shares can be traded at their respective closing prices. This only applies for certain
securities.
Special Auction
Double fixing stocks trade from 11:30 to 16:30. Single fixing stocks trade at desig-
nated auction periods depending on the trading group it belongs to. After each fixing,
the stock trades for another 30 minutes at the fixing price.
Jan 1 Apr 18, 21 May 1 Dec 25-26 Half Day: Dec 24, 31
+/- 10% (6% for BEL 20 stocks) from the dynamic reference price, which is reset every
time the market breaks its upside/downside threshold (last closing price for the opening).
If the traded price deviates more than +/- 5% (3% for BEL 20 stocks) from the last traded
price, the market stops for 2 minutes.
SUPPORTED
CONVERGEX
ALGOS
Netherlands 121
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
TRADER TIP
Eligible for ADR Direct®, Reverse ADRs
SM
.
Board lot is 1, but for some specific instruments Euronext can decide to implement a
trading lot size.
Market Order
Limit Order
Stop Loss/ Stop Limit Order
Pegged Order
Reserve (Iceberg) Order
Reporting requirement for short positions greater than 0.25% of share capital and a
request to abstain from lending financial company shares.
0.01. Some trading groups have dynamic tick sizes.
Central order book orders are executed according to strict price priority. Changes in
the order quantity or limit price cause forfeiture of time priority.
Huge cross trades occur often in Euronext markets, so make sure your trading tools
don’t cause you to chase that volume.
Although the book may look thin in comparison to other markets, Euronext has a lot of
hidden liquidity in the book, perhaps due to the comparatively lax iceberg rules.
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
122 Exchange Guides
2014 MARKET
HOLIDAYS
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
CIRCUIT BREAKERS
Norway
(NO)
Oslo Børs
Address Oslo Børs
Pb. 460 Sentrum
0105 Oslo
Telephone +47 22 34 17 00
Internet www.oslobors.no
Time Zone GMT +1
Currency Norwegian Krone (NOK)
Settlement Cycle T+3 (Note: Settlement cycle will change to T+2 in October 2014)
Buy-Ins Buy-in notices will be issued on SD+4, and Buy-Ins occur on SD+5.
Taxes None
Foreign Ownership No general restrictions, but issuers may have their own restrictions
in their articles of association.
Pre-Trade 8:15-9:00
Opening Auction 9:00-9:00:30
Continuous Session 9:00-16:20
Closing Auction 16:20-16:25
Post Trade 16:25-17:30
Opening Auction
Time to Submit MOO/LOO .............8:15-9:00
There may be one or more auction extension periods (typically 1 minute each): up to two price moni-
toring extensions and up to one market order extension.
Closing Auction
Time to Submit MOC/LOC ..............16:20-16:25
Volatility Auction
Triggered when the price is outside the price movement tolerance. Automatic execu-
tion suspension period (AESP) occurs. Auction ends after 3 minutes.
Jan 1 Apr 17-18, 21 May 1, 17, 29 June 9 Dec 24-26, 31
Half Day: Apr 16
Circuit breakers can last for up to 4 minutes and are triggered if there are big price move-
ments in a security. The exchange has dynamic and static circuit breakers. Oslo Bors’s
Market Surveillance Department sets the limits that will trigger a circuit breaker based on
events affecting a company and market conditions.
Market Price Tick Size
NO_OBX 0 0.0001
0.5 0.0005
1 0.001
2 0.002
5 0.005
10 0.01
50 0.05
100 0.1
500 0.5
1000 1
5000 5
10000 10
20000 20
40000 40
50000 50
80000 80
100000 100
Market Price Tick Size
NO 0 0.01
10 0.05
15 0.1
50 0.25
100 0.05
250 1
SUPPORTED
CONVERGEX
ALGOS
LOT SIZES
Norway 123
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
ADR ELIGIBILITY
TRADER TIP
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
Eligible for ADR Direct®, Reverse ADRs
SM
.
Board lot is 1 for almost all securities.
Market Order
Limit Order
Pegged Order
Hiddin Pegged Order
Hidden Limit
Good Till Cancel/Time
Fill Or Kill
Execute and Eliminate
At the Open/Close
Good for Auction/Day/Intra-day Auction
Short selling is supported. Ban on naked short selling of specific financial stocks.
Price, Counterparty, Display Size, Time.
In August 2012, the Oslo Børs started a 6-month trial period of earlier market hours, now
closing at 16:25 instead of 17:25.
124 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
Poland
(PW)
Warsaw Stock Exchange
Address Warsaw Stock Exchange
Książęca 4
00-498 Warsaw
Telephone (4822) 628 32 32
Fax (4822) 628 17 54
Internet http://www.gpw.pl
gpw@gpw.pl
Time Zone GMT +1
Currency Polish Zloty (PLN)
Settlement Cycle T+3 (Note: Settlement cycle will change to T+2 in October 2014)
Buy-Ins NDS arranges a buy-in with the clearing agent on the intended
settlement date plus three days. In addition to the fee charged by
NDS, other costs may arise from the buy-in transaction and the cost
difference between the SD of original trade and the SD of the buy-in.
Taxes None
Foreign Ownership Any investors (domestic or foreign) who want to acquire a majority
stake in a company must receive permission from the Financial
Supervision Authority and the Antimonopoly Office.
Pre-Open 8:30-9:00
Opening Auction 9:00
Continuous Session 9:00-16:50
Pre-Closing 16:50-17:30
Closing Auction 17:00
Post-Auction Trading 17:00-17:05
Opening Auction
Time to Submit MOO/LOO .............8:00-9:00
Unfilled portions of orders automatically become a limit order at the opening price.
Closing Auction
Time to Submit MOC/LOC ..............17:20-17:35
If any part of an at-the-opening market order remains unexecuted, it becomes a limit order at a price
equal to the opening, closing, or single price or, if applicable, the price resulting from the balancing
activities.
Min Size order type not supported in auctions.
Price Tick Size
0-50 0.01
50-100 0.05
100-500 0.1
500+ 0.5
Poland 125
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
SUPPORTED
CONVERGEX
ALGOS
CIRCUIT BREAKERS
2014 MARKET
HOLIDAYS
TRADER TIP
Jan 1, 6 Apr 18, 21 May 1 June 19 Aug 15 Nov 11 Dec 24-26
If the price exceeds permissible variation limits, transactions are suspended and market
balancing begins. Static and dynamic limits are used.
Eligible for ADR Direct®.
Board lot is 1.
Market Order
Limit Order
Must Be Filled Order
Hidden Order
Min Size Order
Stop Order
Fill Or Kill
Fill And Kill
Good Till Cancel
Day
Only certain specific securities are allowed to short.
Price-Time priority.
The only order types that can be be entered during the pre-open are market and limit
orders.
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
126 Exchange Guides
2014 MARKET
HOLIDAYS
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
CIRCUIT BREAKERS
Portugal
(PL)
Euronext Lisbon
Address NYSE Euronext Lisbon
Av. da Liberdade n. 196 º - 7º
1250-147 Lisboa
Telephone +351 21 790 00 00
Internet www.euronext.com
infoeu@nyx.com
Time Zone GMT
Currency Euro (EUR)
Settlement Cycle T+3 (Note: Settlement cycle will change to T+2 in October 2014)
Buy-Ins Buy-in notices will be issued on SD+4, and Buy-Ins occur on SD+5.
Taxes None
Foreign Ownership No general restrictions, but issuers may have their own restrictions
in their articles of association.
Pre-Open 6:15-8:00
Order Matching 7:55-8:00
Continuous Session 8:00-16:30
Closing Auction 16:30-16:35
Trading At Last 16:35-16:40
Opening Auction
Time to Submit MOO/LOO .............6:15
Closing Auction
Time to Submit MOC/LOC ..............16:30-16:35
In Trading At Last, shares can be traded at their respective closing prices. This only applies for certain
securities.
Special Auction
Double fixing stocks trade from 10:30 to 15:30. Single fixing stocks trade at desig-
nated auction periods depending on the trading group it belongs to. After each fixing,
the stock trades for another 30 minutes at the fixing price.
Jan 1 Apr 18, 21 May 1 Dec 25-26
+/- 10% (6% for BEL 20 stocks) from the dynamic reference price, which is reset every
time the market breaks its upside/downside threshold (last closing price for the opening).
If the traded price deviates more than +/- 5% (3% for BEL 20 stocks) from the last traded
price, the market stops for 2 minutes.
Portugal 127
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
SUPPORTED
CONVERGEX
ALGOS
TRADER TIP
Eligible for ADR Direct®, Reverse ADRs
SM
.
Board lot is 1, but for some specific instruments Euronext can decide to implement a
trading lot size.
Market Order
Limit Order
Stop Loss/ Stop Limit Order
Pegged Order
Reserve (Iceberg) Order
Reporting requirement for short positions greater than 0.25% of share capital and a
request to abstain from lending financial company shares.
0.01. Some trading groups have dynamic tick sizes.
Central order book orders are executed according to strict price priority. Changes in
the order quantity or limit price cause forfeiture of time priority.
Huge cross trades occur often in Euronext markets, so make sure your trading tools
don’t cause you to chase that volume.
Although the book may look thin in comparison to other markets, Euronext has a lot of
hidden liquidity in the book, perhaps due to the comparatively lax iceberg rules.
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
128 Exchange Guides
2014 MARKET
HOLIDAYS
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
CIRCUIT BREAKERS
SUPPORTED
CONVERGEX
ALGOS
Singapore
(SP)
Singapore Exchange
Address 2 Shenton Way
#19-00 SGX Centre 1
Singapore 068804
Telephone (65) 6236 8888
Fax (65) 6535 6994
Internet http://www.sgx.com
Time Zone GMT +8
Currency Singapore Dollar (SGD)
Hong Kong Dollar (HKD) is also a tradable currency.
Settlement Cycle T+3
Buy-Ins SGX enforces a buy-in when the seller fails to deliver on T+3, some-
times at punitive prices. The seller pays the difference between the
selling price and the buy-in price as well as fees.
Taxes Stamp Duty not fixed, but 0.04% (Maximum of SGD 600 or equivalent
USD, HKD or AUD). SGX Access: 0.0075% fee on all trades,
calculated trade principal, no minimum or maximum.
Foreign Ownership Some restrictions exist for media and residential property securities.
Pre-Open 8:30-8:59
Continuous Session 9:00-17:00
Pre-Close 17:00-17:05
Closing Auction 17:06
Opening Auction
Time to Submit MOO/LOO .............8:30-8:59
Closing Auction
Time to Submit MOC/LOC ..............17:00-17:06
Jan 1, 31 Apr 18 May 1, 13 Jul 28 Oct 6, 23 Dec 25
On Feb. 24, 2014, SGX introduced an 10% dynamic limit for cash securities. A Circuit
Breaker Triggered signal will also be introduced for equities.
Abraxas
SM
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
Note: ConvergEx offers USD settlement in this exchange.
Price Tick Size
< 0.2 0.001
0.2 - 2 0.005
> 2 0.01
Singapore 129
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
ADR ELIGIBILITY
LOT SIZES
TRADER TIP
Eligible for ADR Direct®, Reverse ADRs
SM
.
Shares are mainly traded in board lots of 1,000 shares.
Trading of odd lots is allowed. If a complete order is not a board lot, the remaining size of
the order is traded on the Unit Share Market.
Market Order*
Limit Order
Market-to-Limit Order*
State Session Order*
Stop Order*
If-Touched Order*
Fill Or Kill*
Fill And Kill*
No orders over 30 million.
*- Available starting 31 March 2014.
Short selling is permitted. Borrow must be sourced prior to short sell date, otherwise
there is a buy-in penalty. No uptick rule.
Price-Time Priority.
The spread is usually high and the book is often thin in this market. This can make VWAP
trading tricky.
130 Exchange Guides
2014 MARKET
HOLIDAYS
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
South Africa
(SJ)
Johannesburg Stock Exchange
Address One Exchange Square, Gwen Lane
Sandown, 2196
Private Bag X991174
Sandton, 2146
Telephone +27 11 520-7000
Internet www.jse.co.za
info@jse.co.za
Time Zone GMT +1
Currency South African Cent (ZAc)
Settlement Cycle T+5
Buy-Ins No formal buy-in procedures.
Taxes 0.25% tax on buys. 0.0002% investor protection levy.
Scaled STRATE settlement charge: < ZAR 200,000 = ZAR 10.92
ZAR 200,000-ZAR 1 million = 0.05459%
> ZAR 1 million = ZAR 54.59
Foreign Ownership No investor (foreign or domestic) may hold more than 15% in a bank
or bank holding company or more than 25% in an insurance company
without approval from industry-relevant authorities.
Opening Auction 8:30-9:00
Continuous Session 9:00-16:50
Closing Auction 16:50-17:00
Opening Auction
Time to Submit MOO/LOO .............8:30-9:00
Unusual events or corporate actions may be deemed by the exchange to delay auctions.
Closing Auction
Time to Submit MOC/LOC ..............16:50-17:00
Allowed order types are Market, Limit, and Auction.
Volatility Auction
Price changes in liquid stocks or exchange discretion trigger volatility autions; Trigered
when price either changes 10% or 20% or if the exchange specifies.
Jan 1 Mar 21 Apr 18, 21, 28 May 1 Jun 16 Aug 9 Sep 24 Dec 16, 25-26
South Africa 131
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
SUPPORTED
CONVERGEX
ALGOS
CIRCUIT BREAKERS
TRADER TIP
No exchange-wide circuit breaker rule.
Eligible for ADR Direct® and Reverse ADRs
SM
.
Board lot is 1.
Market Order
Limit Order
Auction Market
Fill Or Kill
Market
Short selling is supported. Naked short selling prohibited.
Tick size of 1 for every instrument.
Price-Time priority.
The exchange trades in South African cents (ZAc) instead of in rands (much like London
trades in pence instead of pounds).
Abraxas
SM
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
132 Exchange Guides
2014 MARKET
HOLIDAYS
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
South Korea
(KS)
Korea Exchange (KRX)
Two main trading boards: KOSPI (main market) and KOSDAQ (small- and mid-sized Companies)
Address 33, Yoido-dong
Youngdeungpo-gu
Seoul 150-977
Telephone +82 2 3774 9000
Fax +82 2 783 4842
Internet http://eng.krx.co.kr
Time Zone GMT +9
Currency Korean Won (KRW)
Settlement Cycle T+2
Buy-Ins No official rules.
Taxes Transaction tax: 0.15% 0.3%, 0.5% for OTC trades (for sales only).
Foreign Ownership No general restrictions, but certain industries have limits in place.
Pre-Open 7:30-9:00
Opening Auction 9:00-9:05
Continuous Session 9:00-15:00
Closing Auction 14:50-15:00
Opening Auction
Time to Submit MOO/LOO .............8:00-9:00
Order Matching ...............................9:00-9:05
Can be delayed up to 5 minutes when the potential call price deviates by more than 5% from the
highest or lowest indicative price in the previous 5 minutes and the potential call price is more than
1% away from base price.
Closing Auction
Time to Submit MOC/LOC ..............14:50
Volatility Auction
Triggered when KOSPI or KOSDAQ index falls by more than 10% from previous close
for at least 1 minute. Trading is suspended for 20 minutes, then another 10 for auction.
Jan 1, 30-31 May 1, 5, 6 Jun 4, 6 Aug 15 Sep 8-10 Oct 3, 9 Dec 25,31
Market Price Tick Size
KOSPI 0-5000 5
5000-10000 10
10000-50000 50
50000-100000 100
100000-500000 500
500000+ 1000
KOSDAQ 0-5000 5
5000-10000 10
10000-50000 50
50000+ 100
South Korea 133
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
CIRCUIT BREAKERS
TRADER TIP
Triggered when KOSPI or KOSDAQ index falls by more than 10% from previous close
for at least 1 minute. Trading is suspended for 20 minutes, then another 10 minutes for
auction. The circuit breaker is limited to once per day and is not triggered during last 40
minutes of regular session.
Not ADR eligible.
KOSPI: Board lot is 10 or 1 (if price > 50,000 KRW)
KOSDAQ: Board lot is 1
Market Order
Limit Order
Limit-to-Market-on-Close
Immediate Executable Limit
Best Limit
Target Price
Short selling is supported. Locate required. Uptick rule applies.
Price-Time priority.
This exchange requires an investor ID for foreign ownership, which makes anonymous
trading impossible for foreigners.
134 Exchange Guides
2014 MARKET
HOLIDAYS
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
CIRCUIT BREAKERS
Spain
(SM)
Bolsa de Madrid
Address Plaza de la Lealtad, 1
28014 Madrid
Telephone 91 709 56 10
Internet www.bolsamadrid.es
infobolsamadrid@grupobme.es
Time Zone GMT +1
Currency Euro (EUR)
Settlement Cycle T+3
Buy-Ins If a trade is unsettled on T+4, IBERCLEAR orders a buy-in to cover the
outstanding sell. The exchange charges a 2% fine and retains profits.
Taxes None
Foreign Ownership No general restrictions, but a limited number of industries require
foreign investors to seek prior approval.
Opening Auction 8:30-9:00
Continuous Session 9:00-17:30
Closing Auction 17:30-17:35
Opening Auction
Time to Submit MOO/LOO .............8:30-9:00
Auction ends randomly between 9:00:00 and 9:00:30 to prevent price manipulation. Order book is
partially visible when there is no auction price. (Best Bid, Ask, and Volumes are shown.)
Closing Auction
Time to Submit MOC/LOC ..............17:30-17:35
Auctions randomly close between 17:35:00 and 17:35:30.
Volatility Auction
Static or dynamic range (calculated with the most recent historic volatilty of shares).
Lasts for 5 minutes plus random close of 30 seconds.
Jan 1 Apr 18, 21 May 1 Dec 25-26
Half Days: Dec 24, 31
No exchange-wide circuit breaker rule. However, the exchange has both a static and
dynamic price range. If a stock moves above that range, that individual stock will be
suspended.
Price Tick Size
0 0.005
1 0.01
10 0.02
Spain 135
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
SUPPORTED
CONVERGEX
ALGOS
TRADER TIP
Eligible for ADR Direct®, Reverse ADRs
SM
.
Board lot is 1.
Market Order
Limit Order
Pegged Order
Immediate Or Cancel
Minimum Volume Order
All or Nothing Order
Iceberg Order
Short selling is supported. Naked short selling prohibited.
Price-Time priority.
Spain is known for strict settlement regulations, which means that most of the liquidity
is on the primary exchange instead of on MTFs or other alternative venues.
Abraxas
SM
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
136 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
CIRCUIT BREAKERS
2014 MARKET
HOLIDAYS
Sweden
(SS)
OMX Stockholm
Address NASDAQ OMX Stockholm AB
105 78 Stockholm
Visiting address: Tullvaktsvägen 15
Telephone +46 8 405 60 00
Fax +46 8 405 60 01
Internet http://www.nasdaqomxnordic.com
Time Zone GMT +1
Currency Swedish Krona (SEK)
Settlement Cycle T+3 (Note: Settlement cycle will change to T+2 in October 2014)
Buy-Ins Buy-in notices will be issued on SD+4, and Buy-Ins occur on SD+5.
Taxes None
Foreign Ownership No general restrictions.
Pre-Open 8:00-9:00
Opening Auction 9:00
Continuous Session 9:00-17:25
Closing Auction 17:25-17:30
Opening Auction
Time to Submit MOO/LOO .............30 minutes before open
Closing Auction
Time to Submit MOC/LOC ..............1 minute after close
Volatility Auction
Triggered when the price deviates more than a certain percentage from the reference
price. (See “Circuit Breakers” below for these percentages.) Static volatility auction
ends after 60 seconds, dynamic volatility auction ends after 180 seconds.
No Volatility Auction in the last 4 minutes of trading.
Jan 1, 6 Apr 18, 21 May 1, 29 Jun 6, 20 Dec 24-26, 31
Half Days: Apr 17, 30 Oct 31
Static limit: 15% (10% for OMXC20) from the opening; dynamic limit: 5% (3% for
OMXC20). Suspension is 3 minutes for static and 1 minute for dynamic. See “Auction
Information” above for more information.
Price Tick Size
0 0.01
5 0.05
15 0.1
50 0.25
150 0.5
500 1
5000 5
Sweden 137
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
SUPPORTED
CONVERGEX
ALGOS
TRADER TIP
Eligible for ADR Direct®, Reverse ADRs
SM
.
Board lot is 1 for the majority of securities.
Market Order
Limit Order
Imbalance Order for Open and Close Auctions
Hidden Limit Order
Minimum Execution Quantity
Nordic@Mid Order
Short selling is supported.
Price-Internal-Display-Time.
(“Internal” means the incoming order is executed against the member’s own order.)
As a NASDAQ OMX market, this is one of the few world markets with an exchange-run
dark pool, called Nordic@Mid.
Stockholm always has many half days because of a rule that the day before a market
holiday must be a half day. The exchange closes at 13:30 on half days.
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
138 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
CIRCUIT BREAKERS
2014 MARKET
HOLIDAYS
Switzerland
(SW, VX)
SIX Swiss Exchange
Address SIX Swiss Exchange Ltd
Selnaustrausse 30
Postfach
CH-8021 Zurich
Telephone +41 58 399 5454
Fax +41 58 499 5455
Internet http://www.six-swiss-exchange.com
Time Zone GMT +1
Currency Swiss Franc (CHF)
Settlement Cycle T+3 (Note: Settlement cycle will change to T+2 in October 2014)
Buy-Ins Buy-in notices will be issued on SD+4, and Buy-Ins occur on SD+5.
Taxes None
Foreign Ownership No general restrictions.
Pre-Open 8:30-9:00
Opening Auction 9:00 (within 2 minutes)
Continuous Session 9:00-17:20
Closing Auction 17:20-17:30 (within 2 minutes of 17:30)
Opening Auction
Opening is randomized to occur within 2 minutes of 9:00. The Open Auction can be
delayed by 5-15 minutes if the theoretical opening price deviates sharply from the ref-
erence price, or if at the opening there are no quotes on the order book even though
executable orders exist on both sides of the market. The same is done for the close.
Closing Auction
Time to Submit MOC/LOC ..............17:20-17:30
Volatility Auction
Continuous trading is suspended for five minutes if the potential subsequent price dif-
fers by more than a certain percentage, which varies based on whether the securities
are Blue Chip or Mid Cap.
Jan 1-2 Apr 18, 21 May 1, 29 Aug 1 Dec 24-26, 31
No exchange-wide circuit breaker rule.
Note: ConvergEx offers USD settlement in this exchange.
Price Tick Size
0.0001-0.4999 0.0001
0.5-0.9995 0.0005
1-4.999 0.001
5-9.995 0.005
10-49.99 0.01
50-99.95 0.05
100-499.95 0.1
500-999.5 0.5
1000-4999 1
5000-9995 5
Switzerland 139
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
SUPPORTED
CONVERGEX
ALGOS
TRADER TIP
Eligible for ADR Direct®, Reverse ADRs
SM
.
Board lot is 1 for almost all securities.
Market Order
Limit Order
Short selling is supported. Naked short sales are prohibited.
Price-Time priority.
This exchange has the widest spread of all major European markets, perhaps due to its
wide tick sizes. There is more liquidity on the book here than in a lot of markets, most
likely because the exchange doesn’t allow iceberg orders.
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
140 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
Thailand
(TB)
Stock Exchange of Thailand
Address Stock Exchange of Thailand Building
62 Ratchadapisek Road, Klongtoey
Bangkok 10110
Telephone 0-2229-2222
Internet http://www.set.or.th
SETCallCenter@set.or.th
Time Zone GMT +7
Currency Thai Baht (THB)
Settlement Cycle T+3
Buy-Ins The clearing house will force the failing member to buy-in deliveries
that remain unsettled by the close on T+3. The buy-in must be exe-
cuted on the morning of T+4 and the shares must be purchased for
same-day settlement.
Taxes None.
Foreign Ownership Foreign ownership is limited to 49% of total shares issued in most
companies and 25% in commercial banks, finance companies, and
telecommunication companies.
Pre-open 9:30-9:55
Opening Auction 9:55-10:00 (random)
Morning Session 10:00-12:30
Lunch Break 12:30-14:00
Pre-open II 14:00-14:25
Afternoon Opening 14:25-14:30 (random)
Afternoon Session 14:30-16:30
Closing Auction 16:35-16:40 (random)
Opening Auction
Time to Submit LOO .......................9:30-9:55 (14:30 for afternoon session)
Opening is randomized to occur between 9:55 and 10:00. The opening for the after-
noon session is also randomized to occur between 14:25-14:30.
Closing Auction
Time to Submit LOC ........................16:30
Closing is randomized to occur between 16:35 and 16:40. Orders may be sent in from
16:30 until the market closes.
Price Tick Size
< 2 0.0001
2 up to 5 0.0005
5 up to 10 0.001
10 up to 25 0.005
25 up to 100 0.01
100 up to 200 0.05
200 up to 400 0.1
400+ 0.5
Thailand 141
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
CIRCUIT BREAKERS
2014 MARKET
HOLIDAYS
SUPPORTED
CONVERGEX
ALGOS
TRADER TIP
Jan 1 Feb 14 Apr 7, 14-15 May 1, 5, 14 Jul 1, 11 Aug 12 Oct 23 Dec 5, 10, 31
If the index falls by 10% from the previous day’s close, trading is suspended for 30
minutes. If the index falls by 20% from the previous day’s close, trading is suspended
for 60 minutes.
Eligible for ADR Direct®.
Board lot is 100 for almost all securities.
Limit Order
Market Price Order
At-The-Open Order
At The Close Order
Immediate-Or-Cancel Order
Fill-Or-Kill Order
Publish Order
Basket Order
Short selling is supported.
Price-Time priority.
Since the closing auction is blind, with prints starting randomly between 16:35 and
16:40, place your closing orders between 16:30 and 16:34:59 to make sure you don’t
miss the closing print.
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
142 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
Turkey
(TB)
Borsa Istanbul
Address Borsa Istanbul
Resitpasa Mahallesi
Tuncay Artun Caddesi
Emirgan, 34467, Istanbul
Telephone +90 212 298 21 00
Fax +90 212 298 25 00
Internet http://borsaistanbul.com
international@borsaistanbul.com
Time Zone GMT +2
Currency Turkish Lira (TRY)
Settlement Cycle T+2
Buy-Ins The exchange’s Settlement Center grants the failing party a period
of time (around three days) to right the default, collecting interest
throughout that period. The failing party pays the difference between
the selling price and the buy-in price as well as fees; the exchange
keeps any profits. The exchange may levy fines against failing parties.
Taxes No taxes/fees are included in net settlement.
Foreign Ownership No foreign ownership limitations, unless ownership exceeds
5% of the capital in the listed company. You must declare your
ownership to the public by sending a document showing your
ownership rate in the company to Borsa Istanbul.
Opening Session 9:15-9:35
Morning Session 9:00-12:30
Lunch Break 12:30-14:00
Afternoon Opening 14:00-14:15
Afternoon Session 14:30-17:30
Closing Session 17:30-17:40
Trades at Closing Price 17:38-17:40
Opening Auction
Time to Submit MOO/LOO .............9:15-9:30 (14:15 for afternoon session)
First Quotation for Market Makers is 9:30-9:34 and 14:10-14:15. First Quotation for the
system is 9:34-9:35 and 14:14-14:15.
Closing Auction
Time to Submit MOC/LOC ..............17:33-17:36
Closing Price Determination Phase occurs 17:36-17:38.
Price Tick Size
0.01 - 5 0.01
5.02 - 10 0.02
10.05 - 25 0.05
25.10 - 50 0.10
50.25 - 100 0.25
100.50 - 250 0.50
251 - 500 1.00
503.50 - 1000 2.50
1005+ 5.00
Turkey 143
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
CIRCUIT BREAKERS
2014 MARKET
HOLIDAYS
SUPPORTED
CONVERGEX
ALGOS
TRADER TIP
Jan 1 Apr 23 May 1, 19 Jul 28-30 Oct 3, 6-7, 29
Half Day: Oct 28
Trading is suspended when an “abnormal price or quantity movement” on a stock
occurs, as determined by the exchange. The suspension lasts for 15 minutes.
Eligible for ADR Direct®.
Lot size is 1.
Limit Order
Short selling is supported except in the opening sessions.
Price-time precedence
Turkey is the only European country whose market has a lunch break; keep this (and its
two opening sessions) in mind while trading there.
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
144 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
United Kingdom
(LN, LI)
London Stock Exchange, London International Order Book
Address London Stock Exchange (or London International Order Book)
10 Paternoster Square
London, EC4M 7LS
CH-8021 Zurich
Telephone +44 (0) 20 7797 1000
Internet http://www.londonstockexchange.com
Time Zone GMT
Currency British Pound Sterling (GBP). Tradable currencies: GBP, USD, EUR
Settlement Cycle T+3 (Note: Settlement cycle will change to T+2 in October 2014)
Buy-Ins Buy-in notices will be issued on SD+4, and Buy-Ins occur on SD+5.
Taxes Stamp Duty Reserve Tax (SDRT) of 0.5% is payable on all purchases
of eligible securities. Deliveries of eligible securities to certain ADR
depositaries, Clearstream accounts or other accounts outside of the
CREST system incur an add-itional SDRT charge of 1%. Levy of 1 GBP
on all trades above 10,000 GBP.
Foreign Ownership No exchange-wide restrictions, but individual stocks may have for-
eign ownership restrictions.
London Stock Exchange London International Order Book
Opening Auction 7:50-8:00 Market Open 7:00-8:00
Continuous Session 8:00-16:30 Opening Auction 7:50-8:00
Closing Auction 16:30:01-16:35 Continuous Session 8:15-15:30
Closing Auction 15:30-16:00
Post Close 16:00-17:15
Opening Auction
Time to Submit MOO/LOO .............7:50-7:59:50 (LN)
Auction open randomizes from 8:00:00 to 8:00:30. Could be delayed due to news out on the stock or
if the exchange has system issues.
Closing Auction
Time to Submit MOC/LOC ..............16:30:01 (LN), 15:30-15:40 (LI)
LN accepts market or limit orders in the closing auction.
Volatility Auction
Caused by attempts to execute at prices above or below the static and dynamic limits.
Divided into the volatility auction call and the volatility uncrossing period. Exchange
randomizes an uncrossing period, during which orders entered in the call period are
matched if possible. During the call period, participants may enter, modify, and delete
orders that contribute to the determination of the intraday auction’s indicative price.
Intraday Auction
Some segments trade only in auctions throughout the day (e.g., the quotes and the
crosses). Exchange determines the end times.
LN Price Tick Size
LN 0 0.01
LN 10 0.25
LN 500 0.5
LN 1000 1
LN_EURO 0 0.0001
LN_EURO 0.1 0.0025
LN_EURO 5 0.005
LN_EURO 10 0.01
LN_SET1 0 0.0001
LN_SET1 0.5 0.0005
LN_SET1 1 0.001
LN_SET1 5 0.005
LN_SET1 10 0.1
LN_SET1 50 0.5
LN_SET1 100 1
LN_SET1 500 5
LN_SET1 1000 10
LN_USD 0 0.01
LI Price Tick Size
LI 0 0.01
LI 50 0.1
LI 100.01 0.25
LI 1000 1
LI_EURO 0 0.01
LI_EURO 50 0.1
LI_EURO 100.01 0.25
LI_USD 0 0.01
LI_USD 50 0.1
LI_USD 100.01 0.25
United Kingdom 145
SUPPORTED
CONVERGEX
ALGOS
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ADR ELIGIBILITY
LOT SIZES
ORDER PRECEDENCE
CIRCUIT BREAKERS
2014 MARKET
HOLIDAYS
TRADER TIP
Jan 1 Apr 18, 21 May 1 Aug 25 Dec 25-26
Half Days: Dec 24, 31
5% to 25% tolerance levels (depending on the trading segment of the security). If these
levels are breached, an intraday suspension takes place. This lasts for 5 minutes until
the stock uncrosses or the offending order is removed.
An Automatic Execution Suspension Period (5 minutes plus random 30-second end
period) occurs during continuous trading when an order entered exceeds 5% from the
last automated order book trade.
Eligible for ADR Direct®, Reverse ADRs
SM
.
Board lot is 1 for the majority of securities. Odd lots are allowed. Mixed lots are split so
that the last slice is the odd lot. Board lot is only in USD.
Market Order
Limit Order
Iceberg Order
All shorts are treated as sell. Public disclosure must be made on certain conditions.
Price-Time priority.
The exchange trades in pence instead of pounds.
Abraxas
SM
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Reserve
TWAP
Value
VWAP
Note: ConvergEx offers USD settlement in this exchange.
146 Exchange Guides
AUCTION
INFORMATION
HOURS OF
OPERATION
(all times local)
CIRCUIT BREAKERS
2014 MARKET
HOLIDAYS
United States
(US)
Major Exchanges: New York Stock Exchange (NYSE), NASDAQ
Address NYSE Euronext The NASDAQ Stock Market
11 Wall Street One Liberty Plaza
New York, NY 10005 165 Broadway
New York, NY 10006
Telephone +1 212 656 3000 +1 212 401 8700
Fax +1 212 656 5549
Internet http://www.nyse.com www.nasdaq.com
support@nyx.com
Time Zone GMT -5
Currency United States Dollar (USD)
Settlement Cycle T+3
Buy-Ins Optional in OTC stocks not settled by T+10 and in NYSE names not
settled 30 days after the date of the trade.
Taxes Sells only; SEC transaction fee is $17.40 per million dollars traded.
Foreign Ownership No general restrictions.
New York Stock Exchange NASDAQ
Opening Auction 9:30 Pre-Market Session 7:00-9:30
Continuous Session 9:30-16:00 Continuous Session 9:30-16:00
Closing Auction 16:00 After-Market Session 16:00-20:00
After-hours Crossing 16:15-17:00
Opening Auction
Time to Submit MOO/LOO .............7:30-9:30 (NYSE)
Closing Auction
Time to Submit MOC/LOC ..............Before 15:45 (NYSE)
Jan 1, 20 Feb 17 Apr 18 May 26 Jul 4 Sep 1 Nov 27 Dec 25
Half Days: Jul 3 Nov 28 Dec 24
Market-wide trading halts occur if the S&P 500 declines by 7%, 13%, or 20% (called Level
1, Level 2, and Level 3 halts, respectively). Level 1 and 2 halts can each occur only once
per day. Trading halts depend on the decline and time of day, as follows:
7% decline: Before 15:25: 15-minute halt.
After 15:25: No halt.
13% decline: Before 15:25: 15-minute halt.
After 15:25: No halt.
20% decline: Market closes for the day.
United States 147
SUPPORTED
CONVERGEX
ALGOS
ORDER TYPES
SHORT SELLING
PRICE AND
TICK SIZE
ORDER PRECEDENCE
LOT SIZES
ADR ELIGIBILITY
TRADER TIP
Not applicable.
Board lot is 1 for many securities, 100 for others.. Odd lots are allowed for market or-
ders only. Mixed lot is board lot plus odd lot.
Market Order
Limit Order
MOC, LOC Orders
On Close Order
Immediate Or Cancel Order
Good Till Cancel Order
Opening Only Order
Closing Offset Order
Do Not Ship Order
Intermarket Sweep Order
Dark Reserve
Block Reserve
Day Order
Buy Minus Order
Sell Plus Order
Sell Short Order
Coupled Order
Short selling is supported. Uptick rule applies.
Tick size is 1 cent.
Price-Time priority.
NASDAQ has an active pre-market session, which isn’t the norm in many other markets.
Abraxas
SM
APEX
Buyback
Closing Price
Darkest
Grey
Initiation Price
Inline
IQx®
Momentum
Peg
POV
Spectrum
TWAP
Value
VWAP
148 ConvergEx Algorithms | Algorithms
Algorithms
ConvergEx algorithms give you powerful technology for trading across the globe.
Despite the remarkable differences between the world’s markets, our algorithms give you
a common set of tools that will work in a consistent fashion almost anywhere you need to
trade. (We are in 40+ algo markets and counting.) If you like how an algorithm works in
Germany, you will almost certainly like how it works in Australia.
This section provides you a guide to our most popular algorithms, what they are good
for, and how you can best control them. All of the 15 algos we review here will run with
no supplementary tags filled in. There are sensible defaults for every “broker field.” If
you are new to the ConvergEx algo rack or just new to one of our algos, try running
with the defaults: select the strategy and go. You will learn, in broad brush strokes, what
the algorithm can do for you. Then if you want to optimize the trading strategy for your
specific needs, the broker fields can be invaluable.
Four of the broker fields are so common that it makes sense to just talk about them up
front rather than again and again, on each strategy. (Remember: they can be left blank if
the default value meets your needs.)
Start Time: The time at which you would like the algo to begin working, in local
exchange time (hh:mm:ss). Default: “now” or at the market open.
Note: Start Time works differently with our Closing Price algo. Closing Price
treats it as a minimum time constraint. It will not start trading before the
Start Time, but may start trading later depending on market conditions.
End Time: The time at which you would like the algo to finish working, in local
exchange time (hh:mm:ss). Default: the end of the day.
Duration: The amount of time you want the algorithm to trade (hh:mm:ss). Can be
used instead of Start/End Time. For example, if you want the algo to trade
for 2 hours and 30 minutes, starting now (or at the open), enter 02:30:00.
IWouldPrice: The price at which you would be happy to complete your order, if the
market gets there.
One last point worth covering up front: maybe the most important defining feature of
an algo is whether it works to provide assured completion. Well-known algorithms like
VWAP and Initiation Price understand their job is to complete your order in the allowed
time. “Assured” is a funny word in this context. Clearly if your order is non-marketable,
the stock is halted, etc., the order will not complete. However, virtually all marketable
orders to assured execution algorithms complete. The Percentage of Volume (POV) algo
is the classic example of an algorithm that does not target assured execution. It will
happily trade along at 13% (or whatever value you tell it to use) of the market. If there is
adequate liquidity in the market, your order will complete. In the write-ups that follow, we
clearly mark which of our algos target assured execution and which do not.
If you have any questions about our algorithms, please contact our trading desks. They
have used all the algos countless times and are quite good at making them dance.
All screen-prints used with the permission of Bloomberg Finance L.P.
ConvergEx Algorithms | Abraxas
SM
149
Abraxas
SM
Efficiently seeks liquidity across all markets, light and dark. The algo engine also tactically
takes advantage of favorable price movements and volatility changes.
Example Order: “Buy 100,000 shares ABC leveraging both dark pools and lit liquidity.
Execute as much as you can with price improvement if possible and
make sure you are more than 15% of the volume. If you find a Dark
block, get me done.”
Broker Fields (* indicates an optional field that may be left blank)
*VolumeMax: The maximum percentage of volume participation you will allow the
algo to follow. Setting a cap on volume may impede completion.
*VolumeMin: The minimum percentage of volume participation you want the algo to
follow. For example, “15” would force the algo to at least participate
with 15% of the interval volume.
*Execution Style: Sets your preferred aggressiveness level. “Passive” buys at the bid in
dark and light venues. “Neutral” attempts to buy at midpoint or better
in dark venues and at the bid in light ones. “Aggressive” takes
liquidity on all sides of the spread (Bid, Mid, Offer) in dark venues as
it becomes available, and continues to post at the bid in light venues.
Default: Neutral. (Note: VolumeMin settings will cause Abraxas
SM
to
cross the spread if necessary.)
*MinDarkFill: Specifies the minimum quantity of shares you want to fill in dark
venues. Default: 0.
abraxas does not assure completion.
All screen-prints used with the permission of Bloomberg Finance L.P.
150 ConvergEx Algorithms | Closing Price
Closing Price
Designed to perform well against the day’s closing price. The algorithm can either
maximize alpha or strictly track the benchmark price.
Example Order: “Buy 50,000 ABC into the close. Maximize alpha.”
Broker Fields (* indicates an optional field that may be left blank)
*Vol Target: (Volume Target) The percentage of volume participation you prefer
the algo to follow.
*MOC Allowed: Allows you to choose to participate in the closing auction.
Default: True.
closing price does not assure completion.
All screen-prints used with the permission of Bloomberg Finance L.P.
ConvergEx Algorithms | Darkest 151
Darkest
Dark pool aggregator designed to maximize fill rates in non-displayed venues while
minimizing market impact.
Example Order: ”Sell 100,000 ABC looking for liquidity across dark pools. Execute as
much as you can intelligently without interacting with the displayed
markets.”
Broker Fields (* indicates an optional field that may be left blank)
*MinDarkFill: Specifies the minimum quantity of shares you want to fill in dark
venues. Default: 0.
*Execution Style: Sets your preferred aggressiveness level. “Passive” buys only at the bid
in dark venues. “Neutral” attempts to buy at midpoint or better in the
dark. “Aggressive” takes liquidity on all sides of the spread
(Bid, Mid, Offer) in dark venues as it becomes available.
Default: Aggressive.
darkest does not assure completion.
All screen-prints used with the permission of Bloomberg Finance L.P.
152 ConvergEx Algorithms | Grey
Grey
Hybrid order type that actively searches dark pools for liquidity while posting small,
primary-side pegged orders in the displayed market.
Example Order: “Buy 50,000 ABC. Search the dark pools for liquidity but also post a
smalll portion of my order at the best bid in case the price of the stock
moves in my favor.”
Broker Fields (* indicates an optional field that may be left blank)
*MinDarkFill: Specifies the minimum quantity of shares you want to fill in dark
venues. Default: 0.
*Execution Style: Sets your preferred aggressiveness level. “Passive” buys only at the bid
in both dark and light venues. “Neutral” attempts to buy at midpoint
or better in dark venues and at the bid in light ones. “Aggressive”takes
liquidity on all sides of the spread (Bid, Mid, Offer) in dark venues as
it becomes available, and continues to post at the bid in light venues.
Default: Neutral.
grey does not assure completion.
All screen-prints used with the permission of Bloomberg Finance L.P.
ConvergEx Algorithms | Initiation Price 153
Initiation Price
Aims to minimize movement away from the initiation/arrival price. User indicates market
impact tolerance by specifying target participation rate. Since order will complete, the
algorithm may exceed the implied aggression level.
Example Order: “Sell 75,000 ABC, ideally at $1 or better, but I do need to complete.”
Broker Fields (* indicates an optional field that may be left blank)
*VolumeMax: The maximum percentage of volume participation you will allow the
algo to follow. Setting a cap on volume may impede completion.
Default: 50%.
*Vol Target: (Volume Target) The percentage of volume participation you prefer the
algo to follow. Default: 5%.
*MinDuration: (Minimum Duration) The minimum amount of time you want the
algorithm to trade (hh:mm:ss). Can be used instead of Start/End Time.
Initiation Price aims to complete quickly; set this if you want your order
to last a certain amount of time.
initiation price assures completion.
154 ConvergEx Algorithms | Inline
Inline
Keeps a consistent participation rate but scales up its aggressiveness upon favorable
price movements.
Example Order: “Buy 50,000 XYZ go along at 10%. If prices move in my direction, get
more aggressive. Otherwise continue to participate at 10%.”
Broker Fields (* indicates an optional field that may be left blank)
*VolumeMax: The maximum percentage of volume participation you will allow the
algo to follow. Setting a cap on volume may impede completion.
Default: 50%.
*Vol Target: (Volume Target) The percentage of volume participation you prefer the
algo to follow. Default: 12%.
*VolumeMin: The minimum percentage of volume participation you want the algo to
follow. For example, “10” would force the algo to at least participate
with 10% of the interval volume (this may complete earlier than your
expected time if there is enough liquidity).
inline does not assure completion.
All screen-prints used with the permission of Bloomberg Finance L.P.
All screen-prints used with the permission of Bloomberg Finance L.P.
ConvergEx Algorithms | IQx
®
155
IQx
®
Provides optimal arrival price performance for small orders. Reads market trading
activity and dynamically manages its trading tactics across both light and dark markets.
ConvergEx optimizes the configuration of IQx for each customer.
Example Order: “Immediately buy 6,500 ABC within the spread if possible.”
iQx
®
assures completion.
156 ConvergEx Algorithms | Momentum
Momentum
Scales up participation rate with adverse price movement and decreases participation
with favorable price movement.
Example Order: “Buy 25,000 ABC at 15%. If it’s moving against me, get more
aggressive. If it’s coming in, slow down.”
Broker Fields (* indicates an optional field that may be left blank)
*VolumeMax: The maximum percentage of volume participation you will allow the
algo to follow. Setting a cap on volume may impede completion.
Default: 50%.
*Vol Target: (Volume Target) The percentage of volume participation you prefer the
algo to follow. Default: 12%.
*VolumeMin: The minimum percentage of volume participation you want the algo to
follow. For example, “10” would force the algo to at least participate
with 10% of the day’s volume (this may complete earlier than your
expected time if there is enough liquidity).
momentum does not assure completion.
All screen-prints used with the permission of Bloomberg Finance L.P.
All screen-prints used with the permission of Bloomberg Finance L.P.
ConvergEx Algorithms | Peg 157
Peg
Sends limit orders that move in tandem with the market. Aims to follow the market while
never executing trades as market orders. You can customize Peg to stay a certain limit
away from the last bid/ask price.
Example Order: “Buy 100k XYZ, but I want only to buy stock on the bid, so peg to the bid.”
Broker Fields (* indicates an optional field that may be left blank)
*DisplaySize: The displayed size of each smaller (child) order. The algo will continue
to refresh orders of that size until your entire order is complete.
Default: 10% of your order.
*MinSpread: (Minimum Spread) If the spread is less than this setting, the algo will
not participate in the market.
*PegTo: The price to which orders are pegged. You may select from bid, ask,
last, or mid price. Default: bid for buys, ask for sells.
*PegOffset: Use this to peg at a price relative to the PegTo price. It is a signed
amount that will be added to the PegTo price. For example, if you
add a PegOffset of “$.001” to a buy order with PegTo set at the bid,
your order will be Bid+$.001.
*Discretion: Amount that establishes a range in which the algo will take liquidity. If
size becomes available at the PegTo price plus the Discretion, the algo
sends IOC orders for quantity up to the displayed available size.
Default: 0. not available in the us.
(Peg Broker Fields continue on the next page)
158 ConvergEx Algorithms | Peg
Peg (continued)
*ReplDelay: (Replenish Delay). How long the algorithm will wait before refreshing
filled orders. Default: 2 seconds.
*RandDelay: (Randomize Delay). The algorithm will refresh child orders at time
intervals randomly selected between your Replenish Delay plus
or minus this percent of the Replenish Delay. Default: 0.
*RandDispSize: (Randomize Display Size) The algorithm will send child orders randomly
sized within your DisplaySize plus or minus this percent of the Display
Size. Default: 0.
peg does not assure completion.
ConvergEx Algorithms | POV 159
POV (Percentage of Volume)
Strives for minimal market impact by participating at a specified percentage of volume.
Ideal when consistent participation takes priority over assured completion.
Example Order: “Buy 50,000 ABC, but be no more than 10% of the volume. I
understand I may not complete.”
Broker Fields (* indicates an optional field that may be left blank)
*BlockXing: Allows POV to interact with, our block crossing engine.
only available in the us.
*Vol Target: (Volume Target) The percentage of volume participation you prefer the
algo to follow. Default:5%.
*Objective: Allows you to choose the method the algo uses to track volume. It
ranges from 1 (Max Alpha, which allows the algo to take advantage of
favorable pricing and increased liquidity) to 5 (Strict Tracking). Default:
Balance.
*MOOAllowed: Allows you to choose to participate in the opening auction. Default:
False.
not available in the us.
*ExclVolShrs>: Instructs the algo to ignore prints over a set number of shares of a
stock.
*MOCAllowed: Allows you to choose to participate in the closing auction. Default:
False. Not available in the US.
*ExclVolADV>: Instructs the algo to ignore volume prints over a set percentage of a
stock’s Average Daily Volume. Only available in the US.
pov does not assure completion.
All screen-prints used with the permission of Bloomberg Finance L.P.
160 ConvergEx Algorithms | Reserve
Reserve
Acts like a synthetic iceberg. Prevents others in the market from assuming you are work-
ing a large order. by maintaining a reservoir of shares and using it to continuously replen-
ish filled child orders. Helps to enhance anonymity.
Example Order: “Buy 50,000 shares of XYZ with a $15 top, display only 1000 shares at a
time.”
Broker Fields (* indicates an optional field that may be left blank)
*DisplaySize: The displayed size of each smaller (child) order. The algo will continue
to refresh orders of that size until your entire order is complete.
*RandDispSize: (Randomize Display Size) The algorithm will send child orders randomly
sized within your DisplaySize plus or minus this percent of the Display
Size. Default: 0.
reserve does not assure completion.
reserve is not available in the us.
All screen-prints used with the permission of Bloomberg Finance L.P.
ConvergEx Algorithms | TWAP 161
TWAP (Time Weighted Average Price)
Spreads the order out evenly over the user-specified time frame
Example Order: “Sell 60,000 ABC over an hour.” (I’d like to be filled on an average of
10,000 shares every 10 minutes).
Broker Fields (* indicates an optional field that may be left blank)
*VolumeMax: The maximum percentage of volume participation you will allow the
algo to follow. Setting a cap on volume may impede completion.
Default: 50%.
not available in the us.
*MOO Allowed: Allows you to choose to participate in the opening auction.
Default: False.
*MOC Allowed: Allows you to choose to participate in the closing auction.
Default: False.
*Objective: Allows you to choose the method the algo uses to track volume. It
ranges from 1 (Max Alpha, which allows the algo to take advantage
of favorable pricing and increased liquidity) to 5 (Strict Tracking).
Default: Balance.
*FrontLoad%: Allows you to control the volume profile across the time window. For
example, setting this field at “70” would make the algo complete 70%
of the order half way through the time horizon. Default: 50.
tWap assures completion.
All screen-prints used with the permission of Bloomberg Finance L.P.
162 ConvergEx Algorithms | Value
Value
Scales up participation rate when price is favorable and decreases participation when
prices are unfavorable.
Example Order: “Buy 100,000 ABC go along at 20%. If prices move in my direction, get
more aggressive. If prices move away from me, slow down.”
Broker Fields (* indicates an optional field that may be left blank)
*VolumeMax: The maximum percentage of volume participation you will allow the
algo to follow. Setting a cap on volume may impede completion.
Default: 50%.
*Vol Target: (Volume Target) The percentage of volume participation you prefer the
algo to follow. Default: 12%.
*VolumeMin: The minimum percentage of volume participation you want the algo to
follow. For example, “10” would force the algo to at least participate
with 10% of the day’s volume (this may complete earlier than your
expected time if there is enough liquidity).
value does not assure completion.
All screen-prints used with the permission of Bloomberg Finance L.P.
ConvergEx Algorithms | VWAP 163
VWAP (Volume Weighted Average Price)
Minimizes slippage against VWAP by targeting the stock’s expected volume profile
within the user-specified time frame. Uses historical and real-time volume data. Order will
complete.
Example Order: “Buy 100,000 ABC between now and 4pm, allocating slices of the trade
throughout the day according to expected liquidity.”
Broker Fields (* indicates an optional field that may be left blank)
*VolumeMax: The maximum percentage of volume participation you will allow the
algo to follow. Setting a cap on volume may impede completion.
Default: 50%.
*VolumeMin: The minimum percentage of volume participation you want the algo to
follow. For example, “10” would force the algo to at least participate
with 10% of the day’s volume (this may complete earlier than your
expected time if there is enough liquidity).
*MOO Allowed: Allows you to choose to participate in the opening auction.
Default: False.
*MOC Allowed: Allows you to choose to participate in the closing auction.
Default: False.
*FrontLoad%: Allows you to control the volume profile across the time window. For
example, setting this field at “70” would make the algo complete 70%
of the order half way through the time horizon. Default: 50.
vWap assures completion.
All screen-prints used with the permission of Bloomberg Finance L.P.
v14q3.001
164 About ConvergEx Group
About ConvergEx Group
SOLUTIONS TO HELP ACHIEVE
INVESTMENT OBJECTIVES
ConvergEx Group is a leading provider of global brokerage and trading-related
services for institutional investors and financial intermediaries. ConvergEx combines
client-first service with innovative products, sophisticated strategies and proprietary
technology to meet the challenges of increasingly dynamic and fast-paced markets.
We service our clients through six complementary businesses:
+ Execution Solutions
+ Commission Management
+ Options Technologies
+ Prime Services
+ Plan Sponsor Services
+ Broker-Dealer Services
Headquartered in New York with a presence in several other key locations including
London, Chicago, San Francisco, Boston, and Atlanta, the company serves more than
3,000 clients accessing over 100 global market centers.
To learn more, please visit www.convergex.com.
We offer algos to meet almost any need.
JUST GET
IT DONE
WHAT DO
YOU NEED?
MINIMIZE
IMPACT
MAXIMIZE
LIQUIDITY
MAKE A
BET ON
PRICE
Your comments are always welcome. Email us at ConvergExGlobalGuide@convergex.com
Favorable
Flat
Unfavorable
X
l l
l
lX
Fast and Simple
Darkest
Grey
AbraxasSM
Full Control
Performance:
Speeds Up
l Neutral
X Slows Down
POV
Inline
Value
Momentum
Pegging
Reserve
VWAP
Initiation Price
Closing Price
TWAP
IQx®
l l l
ConvergEx’s proprietary algorithms are developed by our in-house
Financial Engineering & Advanced Trading Solutions (FEATS) team.
Global Headquarters
1633 Broadway
New York, NY 10019
www.convergex.com
ConvergEx Group is a provider of global brokerage and trading-related services. Its companies provide services in the following areas:
global execution, commission management, independent research, commission recapture, options technologies and prime services. Con-
vergEx Group companies do not engage in market making or investment banking, but may operate in a riskless principal and/or net trading
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may act as a principal or engage in hedging strategies in connection with such transactions.
ConvergEx Group in the United States comprises ConvergEx Execution Solutions LLC (member NYSE/FINRA/SIPC); LiquidPoint, LLC (mem-
ber CBOE/SIPC); G-Trade Services LLC (member FINRA/SIPC); Westminster Research Associates LLC (member FINRA/SIPC); ConvergEx
Prime Services LLC (member FINRA/SIPC); and ConvergEx Solutions LLC, of which ConnEx, Jaywalk and LDB are divisions. ConvergEx
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