Turquoise SwapMatch. Matching Service Description. Version 2.1

Transcription

1 Turquoise SwapMatch Matching Service Version 2.1 Effective

2 Contents 1 About Turquoise 4 10 Turquoise SwapMatch Universe Turquoise Cash Trading Services Turquoise NYLON Turquoise SwapMatch Universe 18 2 About this Document 6 3 Change History 7 4 Terms 8 11 Reference Prices, Swap Dates, ISINS and Swap Additions Reference Prices Swap Dates ISINs and Swap Additions 18 5 Turquoise SwapMatch Introduction to Turquoise SwapMatch Event Model Matching Run Event Model Life-Cycle Events Static Data and Swap Recording Static Data Swap Recording 19 6 Order Record Keeping Requirements Overview Short Code/Long Code Mapping for Order Record Keeping Requirements Tariff Model Tariff Information Fee Assumptions 19 7 Dealing with Turquoise SwapMatch Matching Runs Life-Cycle Events Trading Calendar 16 8 Matching Run Allocation Methodology Matching Run Allocation Methodology 16 9 Matching Parameters Counterparties Other Matching Parameters 17

3 Trading Service 3

4 1 About Turquoise Turquoise Global Holdings Limited 1 (TGHL or Turquoise) is an investment firm authorised and regulated by the Financial Conduct Authority of the United Kingdom. Initially founded in 2006 by a consortium of nine investment banks, Turquoise has been majority owned by London Stock Exchange Group (LSEG) in partnership with the user community since Turquoise operates a Multilateral Trading Facility (MTF). 1.1 Turquoise Cash Trading Services With a single connection, members can trade shares, depository receipts, ETFs, and European Rights Issues of 19 European countries, with an Open Access model that allows members to choose among 3 different CCPs to clear these trades. Membership is uniformly open to qualified firms, with members including banks, brokers, specialist trading firms and retail intermediaries. Sponsored Access and Direct Market Access are available to non-member participants. Turquoise participants benefit from fully risk-managed clearing solutions, and market surveillance to ensure fair and orderly operations. Turquoise features four Order books. Turquoise Lit combines simple limit and iceberg orders with Large In Scale hidden Orders. Turquoise Lit Auctions are price forming auctions within a Primary Market Best Bid and Offer (PBBO) Reference Price Collar, operating frequently and with pre-trade transparency throughout the trading day, supporting simple limit and PBBO midpoint pegged orders, and allows users to configure Minimum Execution Size. Turquoise Plato 2 nondisplayed midpoint prioritizes orders by size and allows users to configure Minimum Execution Size; it features two distinct mechanisms, each executing at the midpoint of the PBBO: Continuous matching and Turquoise Plato Uncross, an innovation that provides randomised uncrossings during the trading day, ideal for larger and less time sensitive passive orders. The Turquoise NYLON Cash Order Book is a non-displayed Large in Scale auction mechanism, offering a series of scheduled block uncrossings during the trading day, executing at the PBBO midpoint. Turquoise Plato Block Discovery matches undisclosed Block Indications that execute in Turquoise Plato Uncross. The Turquoise trading platform is hosted in LSEG data-centres and features interfaces common to other LSEG markets, including London Stock Exchange and Borsa Italiana, ensuring that customers accessing other LSEG markets can enjoy access to Turquoise with little incremental cost or effort. 1.2 Turquoise NYLON Turquoise NYLON brings together Turquoise s innovative equity derivative trading solutions: Turquoise SwapMatch and Turquoise CFD Turquoise and SwapMatch are trademarks of Turquoise Global Holdings Limited. 2 From 6 September 2016, Turquoise rebranded its non-displayed services as Turquoise Plato. For further details see the press release, 4

5 Turquoise SwapMatch is a venue for financial institutions to match block interests in equity total return swaps. Turquoise CFD is a platform facilitating the negotiation, execution and lifecycle management of daily resetting, term equity CFDs, each over a single Underlying Security ( Turquoise CFDs ), between Turquoise Member Firms, with the CFD contract specification defined by Turquoise. All trades resulting from Turquoise CFD are executed on the Turquoise MTF and cleared by LCH Limited. 5

6 2 About this Document The objective of this document is to provide an understanding of the most relevant technical, operational and business features of Turquoise SwapMatch. This document is not intended to be used as a Technical Specification for the development of any software application. For any feedback or queries about this document please contact: turquoisenylon@tradeturquoise.com. 6

7 3 Change History Date Version Changes 11/07/ Turquoise SwapMatch first published version. 01/12/ /06/ Amended version to cater for Turquoise SwapMatch being brought within Turquoise s permission to operate a Multilateral Trading Facility. Amended version to reflect the introduction of Turquoise NYLON. Updated sections 1, 2, 5.1, 5.2, 5.3, 6.2, 7.1, 7.2, 9.1, 9.2, 13.2 and Contact Details updated accordingly. Updated section 6.1, as MiFIR has now come into force. 7

8 4 Terms Term Basket Swap Early Terminate/Early Termination Equity Reset Date Final Valuation Date Initial Valuation Date Interest(s) ISIN Large in Scale (LIS) Match Matching Allocation Methodology Matching Cycle Matching Parameters Matching Run Member Portal Meaning means a Total Return Swap entered into between two Members that is capable of referencing more than one Underlying. All Trades executed via Turquoise SwapMatch are in Basket Swaps and will be reported as such for all relevant reporting requirements. means the termination of all or part of a Swap Position prior to its Scheduled Termination. means any dates described as such in any Turquoise SwapMatch Final Confirmation and/or any scheduled Valuation Date other than the Initial Valuation Date or the Final Valuation Date. is any date described as such and set out in the Turquoise SwapMatch Final Confirmation in respect of a Swap Position. is any date described as such and set out in the Turquoise SwapMatch Final Confirmation in respect of a Swap Position. means a Member s Total Return Swap interest(s) (including direction and size) in relation to a specific Underlying in relation to which it wishes to be provided with Suggested Swap Positions. means International Securities Identification Number. means a size of order as compared to the normal market size for the type of Basket Swap/Swap Addition in question as determined by MiFIR/MiFID. is where two or more Members have, to any extent, opposite Interests in relation to a specific Underlying. If there is more than one Member with an opposite Interest then the Match will be allocated in accordance with the Matching Allocation Methodology. means the allocation methodology utilised in each Matching Cycle means the process of utilising the Matching Allocation Methodology to produce Matches and Suggested Swap Positions. means parameters available for selection by Members to be taken into account as part of the Matching Allocation Methodology. means the combination of events set out at section 5.2 below. means the online communication tool operated by Turquoise for the management of member firm information 8

9 Term MiFID MiFIR Other Swap Event Member Reference Price Scheduled Termination Spread Suggested Swap Position(s) Swap Addition Swap Affirmation/Affirm Swap Confirmation/Confirm Swap Dates Swap Documentation Swap Position(s) Tariff Model Meaning Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending directive 2002/92/EC and Directive 2011/61/EU (recast). Regulation (EU) No 600/2014 of the European Parliament and of the Council on markets in financial instruments and amending Regulation (EU) No 648/2012. means a corporate action, substitution or other event affecting a Swap Position, other than an Early Termination or Scheduled Termination. has the meaning given in the Turquoise Rulebook. means the reference price of an Underlying used to calculate payments pursuant to a Swap Position. means the termination of a Swap Position following the Final Valuation Date. means is a per annum rate (which may be negative) expressed in terms of basis points which is added to the relevant reference rate and taken into account when calculating the Floating Amount of a Basket Swap. means a new Basket Swap or Swap Addition proposed by Turquoise SwapMatch to be entered into between any two Members as a result of a Match. means the addition of new Underlyings to an existing Basket Swap. phase/status indicating that a Member has no amendments or further amendments to make to a Suggested Swap Position, pending agreement of the Reference Price(s). phase/status indicating that a Member is willing to execute a Suggested Swap Position. means the dates in relation to a Swap Position set out in the Turquoise SwapMatch Final Confirmation. means standard over-the-counter ISDA swap documentation entered into between two Members setting out the full terms of any Swap Positions. a Suggested Swap Position that has been executed in accordance with this Service. Any new Basket Swap executed following a Scheduled Termination is also a Swap Position. means the tariff model set out at section 13 below and in the Turquoise Tariff Schedule. 9

10 Term Total Return Swap Trade Turquoise Turquoise SwapMatch Final Confirmation Turquoise SwapMatch Product Annex Turquoise SwapMatch Universe Underlying Valuation Date Meaning means an agreement where cash flows are exchanged between counterparties with one counterparty making/receiving payment based on the performance of an Underlying and the other party making/receiving payment based on a fixed or floating amount. means a trade executed via Turquoise SwapMatch. means Turquoise Global Holdings Limited. means a confirmation published to Members by Turquoise SwapMatch once a Suggested Swap Position has become a Swap Position. means the Product Annex to the Turquoise Rulebook relating to Turquoise SwapMatch. the Underlyings that are potentially available for matching in Turquoise SwapMatch. means a security or other instrument referenced by a Total Return Swap. any dates described as such and set out in the Turquoise SwapMatch Final Confirmation in respect of a Swap Position. 10

11 5 Turquoise SwapMatch 5.1 Introduction to Turquoise SwapMatch Turquoise SwapMatch facilitates the matching of large block Interests in bilateral over-thecounter Total Return Swaps by seeking and identifying block matching opportunities between Members. Members can select which other Members they are willing to be matched with and may select other Matching Parameters to be applied during a Matching Run. Members are under no obligation to execute Suggested Swap Positions. Once both relevant Members Confirm any Suggested Swap Position on the same terms, the Swap Position is executed, subject to standard bilateral confirmation procedures in place between the relevant Members. Turquoise SwapMatch assists with the on-going processing and intermediation of Early Terminations and Scheduled Terminations in relation to Swap Positions. Where Turquoise SwapMatch is not used by Members for this purpose; Members must notify the Turquoise NYLON team of any changes to their Swap Positions so that these can be taken into account when calculating fees pursuant to the Tariff Model. 11

12 5.2 Event Model Matching Run Turquoise SwapMatch follows the event model described below for each Matching Run: Step Event Expected Timing 1. Interests Submitted by Members 08:00-10:00 2. Matching Cycle 10:00-10:15 3. Suggested Swap Positions Published By 10:30 4. Amendment and Swap Affirmation Period Opens 10:30-12:00 5. Swap Confirmation Period Opens, Execution and Turquoise SwapMatch Final Confirmations Published 10:30 Onwards Times are London Time Matching Run Interests Submitted Members submit Interests to Turquoise SwapMatch. Members must submit the following information: (i) (ii) The Underlying and quantity in which they have an Interest. The direction of the Interest (long or short). (iii) Details of the relevant short codes for order record keeping purposes (see further 6.2 below) Matching Run Matching Cycle Turquoise SwapMatch conducts the Matching Cycle utilising the Matching Allocation Methodology described in more detail at section 8 below Matching Run Suggested Swap Positions Published Suggested Swap Positions are published by Turquoise SwapMatch. Suggested Swap Positions are non-binding indications of interest and remain subject to change by all Members listed as counterparties to Suggested Swap Positions. From 3 January 2018, all Suggested Swap Positions must be above the relevant LIS threshold. 12

13 5.2.4 Matching Run Amendment and Swap Affirmation Period Members may: (i) (ii) amend downwards part of, or all of, any Suggested Swap Positions. Amendments are discouraged and are monitored by Turquoise SwapMatch to ensure a fair and orderly Matching Run; and declare the Spread at which they are willing to execute any Suggested Swap Position. From 3 January 2018, amendments that result in a Suggested Swap Position being below the relevant LIS threshold will be rejected. In the case of such rejection, the Member may increase the Suggested Swap Position or cancel the relevant Interest(s). Members are required to positively Affirm each Suggested Swap Position and the terms on which they are Affirming Matching Run Swap Confirmation Period, Execution and Turquoise SwapMatch Final Confirmations Published Members may amend the Reference Price of each Underlying subsequent to Affirmation. From 3 January 2018, amendments that result in a Suggested Swap Position falling below the relevant LIS threshold will be rejected. A Trade is executed within Rule 7 of the Turquoise SwapMatch Product Annex when both Members who are counterparty to a Suggested Swap Position Confirm that they are willing to proceed with the relevant Suggested Swap Position on the same terms. A Turquoise SwapMatch Final Confirmation is published as soon as possible after execution. All Swap Positions are subject to standard bilateral confirmation procedures between Members. Swap Positions are assumed by Turquoise SwapMatch to be bilaterally confirmed in accordance with the terms set out in the relevant Turquoise SwapMatch Final Confirmation and any regulatory reporting will be carried out by Turquoise SwapMatch on this basis, where required. Members are obliged to notify the Turquoise NYLON team if this is not the case. 5.3 Event Model Life-Cycle Events Turquoise SwapMatch, via the Turquoise NYLON team, assists Members with the processing and intermediation of Early Terminations and Scheduled Terminations Life-Cycle Events - Early Terminations Turquoise SwapMatch assists with the processing and intermediation of any Early Terminations of Swap Positions. This functionality is not operated under Turquoise s permission for operating a Multilateral Trading Facility and is not subject to any regulatory reporting. 13

14 Members wishing to take advantage of this part of the service should contact the Turquoise NYLON team with details of any Early Terminations required, including details of: (i) (ii) (iii) The original trade date of the Swap Position. The counterparty Member. The Underlying and quantity which it wishes to Early Terminate. Members should contact Turquoise NYLON at: +44 (0) Members should request assistance as soon as reasonably practicable from the Turquoise NYLON team, who will contact the requesting Member s counterparty to the Swap Position via or phone to process the Early Termination. The Turquoise NYLON team informs the requesting Member once the Early Termination and the relevant Reference Price have been acknowledged and agreed by the counterparty Member Life-Cycle Events - Scheduled Terminations Turquoise SwapMatch assists with the processing of the Scheduled Termination of any Swap Position. Turquoise SwapMatch notifies Members of any Scheduled Terminations prior to 09:00 on the Final Valuation Date of any relevant Swap Position to which they are counterparty. In addition, Turquoise SwapMatch provides Members with details of the current Underlyings of the Swap Position taken from its own records 6. This functionality is not operated under Turquoise s permission for operating a Multilateral Trading Facility and is not subject to any regulatory reporting. 5 Turquoise SwapMatch and the Turquoise NYLON team cannot be held responsible for any failure to contact the relevant counterparty. Notice of an Early Termination given to Turquoise SwapMatch cannot be taken as notice given to the relevant counterparty pursuant to the Swap Documentation. 6 This information should be used for reconciliation purposes only and should not be relied on as a full and accurate record of any Swap Position nor as replacing a Member s own books and records. 14

15 Members must notify Turquoise SwapMatch, via the Turquoise NYLON team, if they wish to enter into a new Swap Position (the New Swap Position) referencing all or any of the Underlyings referenced by the Swap Position for which there is a Scheduled Termination and the new terms of any such New Swap Position. All New Swap Positions must be above the LIS threshold. Members are required to positively Affirm when they are willing to proceed with a New Swap Position. The arranging of any New Swap Position is operated under Turquoise s permission for operating a Multilateral Trading Facility and is subject to regulatory reporting.. A Trade is executed within Rule 7 of the Turquoise SwapMatch Product Annex when both relevant Members Confirm the relevant New Swap Position on the same terms. A Turquoise SwapMatch Final Confirmation is published as soon as possible after execution. All New Swap Positions are subject to standard bilateral confirmation procedures between Members. New Swap Positions are assumed by Turquoise SwapMatch to be bilaterally confirmed in accordance with the terms set out in the relevant Turquoise SwapMatch Final Confirmation and any regulatory reporting will be carried out by Turquoise SwapMatch on this basis, where required. Members are obliged to notify the Turquoise NYLON team if this is not the case Life-Cycle Events - Other Swap Events Turquoise SwapMatch will, on request assist Members with the intermediation of Other Swap Events. The Turquoise NYLON team must be provided with sufficient information to be able to provide the assistance, covering at least the information outlined in section above. 6 Order Record Keeping Requirements 6.1 Overview From 3 January 2018, when MiFIR came into force, Turquoise is required to maintain prescribed data in relation to all orders submitted to Turquoise SwapMatch. 6.2 Short Code/Long Code Mapping for Order Record Keeping Requirements The data referred to above includes details of the person within the member who is responsible for the investment decision and details of the person who is responsible for the execution of any transaction. Turquoise will utilise the Member Portal and short code/long code mapping to assist with the recording of this data. From 3 January 2018, Members must inform the Turquoise NYLON team at the time that they submit Interests of the relevant short codes to be used for this purpose. Members must supply a mapping from each short code used to the long code information required by Turquoise, and report this to Turquoise via the Member Portal before the end of the day that the relevant Interests are submitted. 15

16 For more information on the Member Portal and how to register to gain access (available from late 2017), please contact: +44 (0) Dealing with Turquoise SwapMatch 7.1 Matching Runs Matching Runs take place on a Tuesday and Thursday, excluding days when Turquoise SwapMatch is closed, and otherwise at the discretion of the Turquoise. Members will be notified via regarding additional Matching Runs. 7.2 Life-Cycle Events The Turquoise NYLON team are available to assist Members in respect of Swap Positions between 7:30 and 5:30 (London time) on each day when a market(s) for Underlyings in the Turquoise SwapMatch Universe is open for business. 7.3 Trading Calendar Turquoise SwapMatch typically observes the domestic market practice for open business days. Therefore, where the Primary market of an Underlying is closed on a business day, Turquoise SwapMatch will not accept Interests related to the relevant Underlying. When there is cause for doubt a Market Notice is sent out to Members for clarification. The up-todate Turquoise Trading Calendar can also be found on the Turquoise website. 8 Matching Run Allocation Methodology 8.1 Matching Run Allocation Methodology Turquoise SwapMatch utilises a proprietary two staged non-discretionary algorithm. The two staged algorithm works as follows: 16

17 9 Matching Parameters 9.1 Counterparties Each Member may notify the Turquoise NYLON team of any Members with whom it is not willing to execute Swap Positions using Turquoise SwapMatch. Any such notification must be received at the same time that Interests are submitted. 9.2 Other Matching Parameters Turquoise SwapMatch may offer Members the ability to select other Matching Parameters in addition to that mentioned in section 9.1. Where such Matching Parameters are offered, thresholds in relation to those Matching Parameters must be notified to the Turquoise NYLON team at the same time that Interests are submitted. 17

18 10 Turquoise SwapMatch Universe 10.1 Turquoise SwapMatch Universe The Turquoise SwapMatch Universe will be made up of the Underlyings available for trading on the Turquoise Lit Order Book, as available on the Turquoise Website. Any exceptions will be notified to Members. 11 Reference Prices, Swap Dates, ISINS and Swap Additions 11.1 Reference Prices Turquoise SwapMatch will utilise Primary market opening prices to suggest Reference Prices to be used on the Initial Valuation Date for all Swap Positions. Members may agree alternative Reference Prices prior to execution of any Swap Position Swap Dates Turquoise SwapMatch will utilise the Following business day convention to calculate Swap Dates to be used for all Swap Positions ISINs and Swap Additions As a result of MiFIR, as of 3 January 2018, Turquoise SwapMatch is required to obtain the ISIN of each financial instrument prior to the commencement of trading of that financial instrument on Turquoise SwapMatch. In respect of new Basket Swaps, Turquoise SwapMatch will obtain the ISIN for the new Basket Swap. In respect of Swap Additions, Turquoise SwapMatch will treat the Swap Addition as if it was a distinct new Basket Swap and obtain the ISIN accordingly (i.e. the ISIN will be obtained only on the basis of the Underlyings in the Swap Addition and not on the aggregated Underlyings inclusive of any previously executed Basket Swap). Turquoise SwapMatch will not update any previously obtained ISIN as a result of any life-cycle events, including as a result of any Early Termination. 18

19 12 Static Data and Swap Recording 12.1 Static Data Turquoise SwapMatch stores static data in relation to each Member in order to assist with the Matching Cycle and the production of Turquoise SwapMatch Final Confirmations. The static data includes: (i) (ii) (iii) Details of trading entities. Details of existing Swap Positions. Details of Suggested Swap Position terms (e.g. duration of Suggested Swap Positions) Swap Recording Turquoise SwapMatch keeps a record of all Swap Positions, Scheduled Terminations, Early Terminations and Other Swap Events which it assists with the processing of or of which it is otherwise made aware. This is to enable Turquoise SwapMatch to provide on-going accurate life-cycle services in relation to Swap Positions and to enable it to charge the correct fees (see further section 12 below). The records of Turquoise SwapMatch should be used for reconciliation purposes only and should not be relied on as a full and accurate record of any Swap Positions nor as replacing a Member s own books and records. 13 Tariff Model 13.1 Tariff Information Turquoise SwapMatch charges a fee in respect of each Swap Position, calculated on a daily basis for the term of each Swap Position (including any New Swap Position) on the notional value of the Swap Position. All tariff information is publically available. Please refer to the Tariff Schedule document located on the Turquoise website for up-to-date information Fee Assumptions. When calculating fees, Turquoise SwapMatch will only take into account those Early Terminations or Other Swap Events that it either assists with the processing of or of which the Turquoise NYLON team are otherwise made aware. Equity Reset Dates will be taken into account in accordance with any date schedules included with the relevant Turquoise SwapMatch Final Confirmation and otherwise in accordance with such Turquoise SwapMatch Final Confirmation, unless the Turquoise NYLON team are notified otherwise. 19

20 Disclaimer This service description is being distributed by Turquoise Global Holdings Limited only to, and is directed only at (a) persons who have professional experience in matters relating to investments who fall within Article 19(1) of the FSMA 2000 (Financial Promotion) Order 2005 and (b) persons to whom it may otherwise lawfully be communicated (together relevant persons ). Any investment or investment activity to which this document relates is available only to and will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this service description or any of its contents. Turquoise Global Holdings Limited is an authorised investment firm by the Financial Conduct Authority. Contact Details Turquoise Global Holdings Limited 10 Paternoster Square, London EC4M 7LS E: turquoisenylon@tradeturquoise.com T: