FIT Trading Trading Procedures and Guidelines V1.10 Effective Date 1 May 2013
CONTENTS PAGE INTRODUCTION 3 ROLES AND RESPONSIBILITIES 3 PRICE TAKER RULES 5 PRICE TAKER OPERATIONAL RESPONSIBILITIES 5 PRICE MAKER RULES 7 PRICE MAKER OPERATIONAL RESPONSIBILITIES 7 REUTERS CENTRAL TREASURY ADMINISTRATION 8 TRADING RULES 8 MARKET CONVENTIONS 11 DAY COUNT CONVENTIONS 11 THOMSON REUTERS WILL SUPPLY A LIST OF DAY COUNT CONVENTIONS WHICH CAN BE SELECTED FOR REQUEST FOR QUOTE TRADING FROM THE PRICE REQUEST TICKET. 11 COMPLIANCE WITH REGULATORY REQUIREMENTS 11 SECURITY 11 ADDRESSING ISSUES AND CHANGES 12 GLOSSARY OF TERMS 13
INTRODUCTION All activity on Fixed Income Trading is subject to the rules contained in this. As a condition of your Organisation s contract with Thomson Reuters, you need to be familiar with these Rules and comply with them. This applies to all trading when using Fixed Income Trading. Certain rules or parts of rules apply only to Price Makers or Price Takers. These rules are designated accordingly. Rules not specifically designated will apply to all trading and parties. Thomson Reuters may amend, add or delete rules in the from time to time, and will notify you of such changes. Rules may be changed to take account of changes to the system, changes in responsibilities or workflow, and changes to achieve regulatory compliance. The rules are in addition to any specific regulatory requirements with which your Organisation or you, as a User, must comply. The trading platform connects Price Takers from Thomson Reuters information products to Cash Bond Price Makers globally. Fixed Income Trading provides a Price Taker with access to over 17,000 securities (across Government Bonds, UST s, Eurobonds, Asian Bonds & Emerging Markets), with a variety of flexible electronic trading models. The service combines a number of best of breed components: Efficient and comprehensive price discovery, embedded in the trading applet. Automated Dealing Technologies (ADT) delivering bilateral and multi bank trading models for seamless execution Price Makers executable pricing providing breadth and depth of real time prices with deep liquidity and increased price transparency Help Desks The term Help Desk is a generic term that refers to a Thomson Reuters-staffed department that can respond to your questions concerning system operation; the conditions under which you may need Help Desk assistance are specified in the. Although the term Help Desk is used throughout the, for other purposes some of the Help Desks may have other names. You will be able to contact the Help Desk using the Help, Contact Us option on the trading applet, the contact us options in Thomson Reuters Eikon, by telephoning the Help Desk number, by e-mailing the Help Desk. Telephone conversations with help desk staff may be recorded. ROLES AND RESPONSIBILITIES Role types Fixed Income Trading will have the following roles: Price Taker organisation Price Taker-trading user Authorised Price Taker coordinator Price Maker organisation Price Maker order view user Authorised Price Maker coordinator Central Treasury Administrator Operational responsibilities Operational responsibilities by Role Type are summarised below: Trading service availability Fixed Income Trading will be available Monday to Friday between the following times opening hours: 00:00-22:00 GMT. Planned maintenance will be scheduled outside of these hours. Emergency maintenance may be performed during these hours if deemed necessary by Thomson Reuters. NA040413 3
Role Price Taker Organisation Authorised Price Taker Coordinator Price Taker trading user Price Maker Organisation Authorised Price Maker Coordinator Price Maker order view user Central Treasury Administrator Responsibilities Nominating authorised Price Taker coordinator to represent Price Taker organisation Advising Central Treasury Administrator of all trading accounts and their settlement venue details Advising Central Treasury Administrator of new Price Taker-trading users and their authorisation profile Requesting Price Maker relationships to be approved (via Central Treasury Administrator) Advising Central Treasury Administrator of required changes to user trading profiles Advising Central Treasury Administrator of Price Taker users that should no longer have system access e.g. have left their organisation Selecting correct instrument to trade Specifying correct trading account, settlement venue, and quantity for each order Printing order ticket and passing order to settlement function Defining best price rule settings Nominating authorised Price Maker coordinator to represent Price Maker organisation Maintain price contributions for Fixed Income CPI (Trading API) connection. Credit checking of orders Responding to Price Taker orders and RFQ s Settlement of filled orders Advising Central Treasury Administrator of new Price Maker order view users Advising Central Treasury Administrator of Price Maker users that should no longer have system access e.g. have left their organisation Advising Thomson Reuters of Price Taker users and trading accounts approved to trade Advising Thomson Reuters of changes to Price Taker user profiles No specific responsibilities Implementing Price Taker configuration parameters, Price Maker configuration parameters, and approved trading relationships as instructed by authorised Price Taker and Price Maker coordinators NA040413 4
PRICE T AKER RULES Fixed Income Trading agreement The Price Taker organisation must sign the relevant agreement with Thomson Reuters for the Fixed Income Trading service before live trading for its organisation can commence. Authorised Price Taker coordinators A Price Taker organisation must appoint one or more authorised Price Taker coordinators that are authorised to act on behalf of the Price Taker organisation. Settlement of trades A Price Taker organisation must determine and communicate its internal settlement policy for Fixed Income Trading to its authorised Price Taker coordinator and Price Taker-trading users. Compliance with the A Price Taker organisation is responsible for ensuring that all of its users have received, understood and agreed to comply with the terms and conditions set out in the. Reporting of issues A Price Taker organisation must ensure any problems and issues arising for its organisation are reported to Thomson Reuters in accordance with the. PRICE T AKER OPERATIONAL RESPONSIBILITIES Authorised Price Taker coordinator Accuracy and completeness of information An authorised Price Taker coordinator is responsible for the accuracy and completeness of all information supplied to Thomson Reuters and Price Makers. Trading accounts An authorised Price Taker coordinator is responsible for sending requests to the Central Treasury Administrator, using the Price Taker configuration form, authorising: Addition of new trading accounts Amendments to existing trading accounts Removal of existing trading accounts Definition of settlement venues for each trading account Price Taker-trading user An authorised Price Taker coordinator is responsible for sending requests to the Central Treasury Administrator, using the Price Taker configuration form, authorising: Addition of new trading users Amendment of existing trading users Disabling of existing trading users Removal of existing trading users Definition of permissioned trading accounts for each trading user Definition of permissioned bond classifications for each trading user Changes to permissioned trading accounts for a trading user Changes to permissioned bond classifications for a trading user Price Maker trading relationships An authorised Price Taker coordinator is responsible for sending requests for approval for a trading relationship with a Price Maker bank including details of Price Taker-trading accounts and Price Taker-trading users. Requests must be made sending a Price Taker to Price Maker trading relationship request form to the Central Treasury Administrator. Price Taker to Price Maker trading agreements The authorised Price Taker coordinator must ensure that a trading agreement is in place with a Price Maker before making a request for approval for a Price Maker trading relationship to the Central Treasury Administrator. If a relationship does not currently exist, the authorised Price Taker coordinator can request that a relationship be set up via the Central Treasury Administrator. Providing cover for the authorised Price Taker coordinator role The authorised Price Taker coordinator is responsible for ensuring continuity of cover by appointing one or more representatives to take over their responsibilities in their absence. The authorised Price Taker coordinator must ensure cover is provided for anticipated hours of trading for their organisation. NA040413 5
Compliance with the The authorised Price Taker coordinator is responsible for ensuring that all Price Taker-trading users have received, understood and agreed to comply with the terms and conditions defined in the. Price Taker-trading user Gaining access to the Fixed Income Trading A Price Taker-trading user must request access to the Fixed Income trading system via their designated authorised Price Taker coordinator within their organisation. Permissioned user profile A Price Taker-trading user will be assigned a generic profile of trading permissions that will determine which trading accounts the user can trade on behalf of, which classifications of bonds the user can trade. This generic profile is determined by the authorised Price Taker coordinator. In addition, a Price Taker user may be approved to trade by one or more Price Maker banks. A Price Maker bank may approve all of the generic trading profile, or a subset of trading accounts, bond classifications that a user may trade. This bank approved trading profile may be different between banks for an individual Price Taker-trading user. A Price Taker-trading user will not be able to trade with a Price Maker bank until their trading profile has been approved by that bank. When operating in markets providing Competitive Request for Quote functionality a Price Takertrading user is responsible for setting the best price rule in the trading applet settings panel, which applies to competitive request for quote orders. This setting will be used to determine which Price Maker s price is highlighted as the best price in the event of two or more Price Makers tying joint first with their quotes. Settlement of completed orders A Price Taker-trading user is responsible for passing a trade to their settlement function for trade settlement. This can be achieved by printing a trade ticket or exporting a group of trades into an application. The exact method will be determined by the Price Taker organisation. Limitations on desktop access to Fixed Income Trading Thomson Reuters does not restrict trading access to individual desktops. Requesting trading relationships with Price Makers A Price Taker-trading user can request a trading relationship from within the trading applet relationships panel, found within the settings panel. The Central Treasury Administrator will receive requests made. The request will be referred to the authorised Price Taker coordinator in order that they may make a formal application. Trading accounts Trading accounts within a Price Taker organisation represent legal trading entities approved to trade by that Price Taker organisation. A Price Taker organisation will have at least one trading account defined. A Price Taker-trading user must always be permissioned to trade by the Price Taker organisation and approved to trade by one or more banks in order to trade on behalf of a trading account. Each trading account must have one or more settlement venues defined. The Price Taker-trading user is responsible for selecting the correct trading account and settlement venue. Setting best price rule for Cash Bond trading NA040413 6
PRICE MAKER RULES Fixed Income Trading Agreement The Price Maker organisation must sign the relevant agreement with Thomson Reuters for the Fixed Income Trading service before live trading for its organisation can commence. Authorised Price Maker coordinators A Price Maker organisation must appoint one or more authorised Price Maker coordinators that are authorised to act on behalf of the Price Maker organisation. Price contributions and trading connections A Price Maker organisation must maintain and monitor price contribution feed and trading connections to Fixed Income Trading. Contributed prices are assumed to be tradable prices unless specifically marked as indicative prices. The Fixed Income CPI Interface used to make trading connections shall be used for the sole purpose of implementing a Fixed Income CPI Trading Connection and using Fixed Income Trading in accordance with the Agreement Responding to Price Taker orders A Price Maker organisation must ensure that auto trading engines / manual traders are available to service Price Taker orders and RFQ s whilst the Price Maker organisation is connected to the Fixed Income Trading. Please note that a system timer is applied. When this preset time expires the order is automatically cancelled by the Fixed Income Trading system. Credit checking Price Taker orders A Price Maker organisation is responsible for performing any credit checks and other required checks against a Price Taker order or RFQ. Settlement of trades / STP A Price Maker organisation is responsible for passing completed trades to its internal systems for onward processing and settlement. Compliance with the A Price Maker organisation is responsible for ensuring that all Price Maker users have received, understood and agreed to comply with the terms and conditions defined in the. Reporting of issues A Price Maker organisation must ensure any problem and issue arising for its organisation is reported to Thomson Reuters in accordance with the. PRICE MAKER OPERATIONAL RESPONSIBILITIES Authorised Price Maker coordinator Accuracy and completeness of information An authorised Price Maker coordinator is responsible for the accuracy and completeness of all information supplied to Thomson Reuters. Defining configuration settings and trading permissions An authorised Price Maker coordinator is responsible for sending requests to the Central Treasury Administrator, using the Price Maker configuration form, to define or change configuration settings and trading permissions. Price Maker order view user An authorised Price Maker coordinator is responsible for sending requests to the Central Treasury Administrator, using the Price Maker configuration form, authorising: Addition of new order view users Disabling of order view users Removal of order view users Price Taker-trading relationships An authorised Price Maker coordinator must approve or decline part or all of each Price Taker request for a trading relationship by completing each Price Taker to Price Maker trading relationship request form received and returning to the Central Treasury Administrator. This will include approving Price Taker-trading accounts, Price Taker-trading users and their respective trading profiles. An authorised Price Maker coordinator must send a revised Price Taker to Price Maker trading relationship request form where changes to a Price NA040413 7
Taker s approved trading accounts, trading user or trading user trading profile are required. An authorised Price Maker coordinator must provide its internal identifiers (used within the Price Makers own environment) for a Price Taker s trading accounts and trading users as part of the approval process. Price Maker to Price Taker-trading agreements An authorised Price Maker coordinator must ensure that a trading agreement is in place with a Price Taker organisation before sending approval for a Price Taker-trading relationship to the Reuters Central Treasury Administrator. Providing cover for the authorised Price Maker coordinator role An authorised Price Maker coordinator is responsible for ensuring continuity of cover by appointing one or more representatives to Taker over their responsibilities in their absence. An authorised Price Maker coordinator must ensure cover is provided whilst tradable price contributions are made to the Fixed Income Trading. Compliance with the An authorised Price Maker coordinator is responsible for ensuring that all Price Maker users have received, understood and agreed to comply with the terms and conditions defined in the Rule Book. Price Maker order view user Price Maker order view users have no specific responsibilities. Price Maker configuration The Central Treasury Administrator must only implement changes received on Price Maker configuration forms from a nominated authorised Price Maker coordinator to define or change configuration settings, trading permissions, and order view users. The Central Treasury Administrator must advise a authorised Price Maker coordinator when request changes have been implemented. Price Taker to Price Maker trading relationship requests The Central Treasury Administrator must only implement approval requests received on Price Taker to Price Maker trading relationship request forms from a nominated authorised Price Maker coordinator to permission or de-permission a Price Taker s trading accounts, trading users and their respective trading permissions. The Central Treasury Administrator must advise relevant Price Taker and authorised Price Maker coordinators when a trading relationship request has been actioned. TRADING RULES Supported Fixed Income order types Fixed Income Trading supports the following outright buy and sell, order types for Cash Bond trading: Note some of these order types are restricted to particular markets. REUTERS CENTRAL TREASURY ADMINISTRATION Single Price Maker Order submission Subject order Request for quote Price Taker configuration The Reuters Central Treasury Administrator must only implement changes received on Price Taker configuration forms from the nominated authorised Price Taker coordinator to add, amend or remove trading accounts, users and their respective profiles. The Reuters Central Treasury Administrator must advise a authorised Price Taker coordinator when requested changes have been implemented. Multiple Price Makers Competitive request for quote Order type selection by Price Taker-trading users A Price Taker-trading user will select a single Price Maker order type by double clicking on the bid price (Price Taker sells) or ask price (Price Taker buys) of a Price Maker s rate from within the Fixed Income Trading Price discovery panels. NA040413 8
In markets where competitive request for quote is provided a Price Taker-trading user will select a competitive request for quote by double clicking on the bid size (Price Taker sells) or ask size (Price Taker buys) of a Price Maker s rate from within the Fixed Income Trading Price Discover Panels. A Price Taker-trading user will automatically be directed to a competitive request for quote where an un-attributed, indicative price is selected, regardless of the column double clicked. In markets without competitive RFQ the user is directed to a selection of price maker prices to initiate a single dealer trade. Note: A Price Taker-trading user will only be able to submit an order if they are permissioned to trade by their organisation and approved to trade by the chosen Price Maker(s). Definition of single Price Maker order types Single Price Maker order types will be determined according to the following rules: NA040413 9
Order Type Order submission Request for quote Any quantity Quantity Less than or equal to Price Maker size for price Greater than Price Maker size for price Less than or equal to Price Maker size for price Price Changed? Firm / Indicative Settlement Date No F (firm) Standard No F (firm) Standard Yes F (firm) Standard Any quantity N/A F (firm) Non standard Any quantity N/A I (ind) Standard Price Maker responses to order types Price Makers must respond to order types according to the rules below: Order type Initial responses Final responses Single Price Maker Order submission N/A Fill order, or Reject order Subject order N/A Fill order, Reject order, or Counter propose Request for quote Quote, or Decline to quote Fill order, or Reject order Multiple Price Maker Competitive request for quote Quote, or Decline to quote Fill order, or Reject order Request for quote / counter propose quote updates When a Price Maker chooses to quote or counter propose an order, the Price Maker will specify a timer period that a quote is good for. The Price Maker may update its quote before the timer period for a previous quote expires. The Price Maker can also cancel its quote at any time. When a Price Taker-trading user accepts a quote, it will be the most recent quote displayed on the users screen. NA040413 10
Request for quote / counter propose quote updates When a Price Maker chooses to quote, the Price Maker will specify a timer period that a quote is good for. The Price Maker may update its quote before the timer period for a previous quote expires. The Price Maker can also cancel its quote at any time. When a Price Taker-trading user accepts a quote, it will be the most recent quote displayed on the users screen. Trade completion A trade is not complete until a Price Maker successfully confirms that an order is filled. If the trade confirmation is rejected by the Fixed Income Trading system for any reason then the trade is cancelled. In the event of a disputed trade, the Price Taker and / or authorised Price Maker Coordinators only may request copies of the electronic logs for the order from Central Treasury Administration. Thomson Reuters will provide such records and will supply further information on the trade as requested by a court or regulatory body. MARKET CONVENTIONS Price conventions Cash Bonds Day Count Conventions Thomson Reuters will supply a list of day count conventions which can be selected for Request for quote trading from the price request ticket. COMPLIANCE WITH REGULATORY REQUIREMENTS Fixed Income Trading is regulated in a number of jurisdictions. Thomson Reuters is responsible for complying with regulatory requirements for the Fixed Income Trading. Price Maker and Price Taker organisations are responsible for complying with any regulatory requirements that apply to their organisation. SECURITY User Id, PIN and password security All users issued with User Ids, PINs and passwords are responsible for keeping their pin and password secure. If you suspect that a third party knows your PIN and/or password, you must request the PIN and/or password is reset immediately via the Help Desk. Thomson Reuters will configure bonds to be quoted in one of the following formats only: Decimal price e.g. 105.125 Fraction price e.g. 105*027 Yield e.g. 3.575% Minimum quantities and standard increments Thomson Reuters will configure minimum quantities and standard increments for every tradable bond on the service. Thomson Reuters will validate quantities entered by Price Taker-trading users, and will only pass valid order quantities to Price Makers. Accrued interest / settlement amount All prices shown within the Fixed Income Trading are clean prices. Thomson Reuters will provide an estimation of accrued interest and settlement amount. If these figures vary from a Price Maker s own values, the Price Maker values take precedence over Thomson Reuters values. NA040413 11
ADDRESSING ISSUES AND CHANGES Trade Cancellation Trade queries and issue resolution should be handled in a consensual way, wherever possible. However RTSL may, in its absolute discretion, cancel trades executed on Thomson Reuters Fixed Income Trading. This may be a response to a request from one of the counterparties to that trade or at its own volition. Generally RTSL will only consider such a cancellation, when it is considered that the cancellation is necessary to preserve the orderliness or the integrity of the trading system. Such cancellation will not be retrospective after successful settlement. Trade Terms in Original Request may not be changed. The price taker proposes a trade for a certain trade size settlement date and other terms, The Price Maker may not change these basic trade terms. The only value that can be changed in the Price Maker responses is the tradable price provided in a quote response or counter quote. Where trade disputes occur RTSL reserves the right to cancel trades. Price Maker issues with contribution or trading connections A member of the Price Maker organisation (ideally the authorised Price Maker coordinator) should call their designated Help Desk. Price Maker changes to configuration settings Requests to add or change Price Maker configuration settings must be made using the Price Maker configuration form and must be sent by the authorised Price Maker coordinator to the Central Treasury Administrator. Price Maker approval of Price Taker-trading relationships Request to approve / decline trading relationship additions / changes with a Price Taker must be made using the Price Taker to Price Maker trading relationship request form and must be sent by the authorised Price Maker coordinator to the Central Treasury Administrator. Problems with logging in Any user experiencing problems logging in should call their designated Thomson Reuters Help Desk. The Thomson Reuters Help Desk will arrange for forgotten passwords to be reset. Price Taker changes to permissions Requests to add or change or remove Price Taker permissions must be made using the Price Taker configuration form and must be sent by the authorised Price Taker coordinator to the Central Treasury Administrator electronically. Price Taker requests for trading relationships with Price Makers Requests to add or change or remove a trading relationship with a Price Maker must be made using the Price Taker to Price Maker trading relationship request form and must be sent by the authorised Price Taker coordinator to the Central Treasury Administrator. NA040413 12
GLOSSARY OF TERMS Term Accrued interest Definition The interest that has accumulated on a bond since the last coupon interest payment up to but not including the settlement date. Best price rule A rule with two settings decided by the Price Taker user that is used to determine the best price when two or more Price Maker prices are tied for best prices in a competitive request for quote, subject to that market providing Competitive Request for Quote orders. The settings are: first price bank; or favourite bank (determined by the order of the banks on the screen with Price Maker at top of the list being the most favourite). Bond classifications Thomson Reuters classifies bonds into smaller sets for ease of identification. Bond sets are described by asset class e.g. government, currency e.g. EUR, and market class e.g. Germany. Clean price The price quoted for a bond excluding accrued interest. Competitive request for quote An order type where a Price Taker submits the same request for quote to up to five Price Makers simultaneously. Competitive Request for Quote workflow is only available in certain markets. Counter propose A Price Maker response with alternate terms (e.g. price / yield) if the terms of an order can no longer be met. This could be due to a price being stale by the time it reached a Price Maker, or due to a Price Taker asking for a non-standard price or quantity. Fixed Income CPI Thomson Reuters name for the Price Maker fixed income trading API (application program interface). Minimum quantity Some bonds are issued for a nominal amount greater than one e.g. one bond certificate may be for $10,000. The minimum quantity validates that a specified quantity is greater than or equal to the nominal amount of the lowest denomination for a bond. Order submission An order type where a Price Taker submits an order for a standard (published) firm price / yield for a quantity less than or equal to the published maximum size and for a standard settlement date. PIN An alphanumeric value that is concatenated with a user id to enhance the level of security. Price contributions Prices contributed to Fixed Income Trading by Price Makers and as described in its relevant agreement with Thomson Reuters. NA040413 13
Term Price Maker configuration Definition A term that describes Price Maker settings within the system. Price Taker configuration A term that describes Price Taker settings within the system. Request For Quote (RFQ) An order type that is sent to a Price Maker if their contributed price is not firm, or if the order is for a non-standard settlement date. The Price Maker will then quote a firm price that the Price Taker can accept or reject. Thomson Reuters Eikon Thomson Reuters premium information desk top service. Fixed Income Trading Thomson Reuters trading capability to Price Takers, delivered via Thomson Reuters information desk top service that connects to multiple Price Makers. A combination of role definitions, responsibilities, assumptions and rules that Price Takers, Price Makers and Thomson Reuters agree to comply with in respect to Fixed Income Trading. Settlement The process used to describe the delivery of a bond from one party to another in return for a cash amount agreed on a given date as agreed at the time of a trade. Settlement amount The aggregate of the trade quantity at the agreed trade price and any accrued interest amount. Settlement policy A policy determined by a Price Taker or Price Maker that describes its settlement process and procedures. Settlement venue A third party through which delivery of a bond and the resultant cash payment will be made by the Price Taker and Price Maker parties. Standard increment Where bonds are issued for a nominal amount greater than one e.g. one bond certificate may be for $10,000, the specified quantity for an order must be a whole multiple of the bond denomination. STP Straight through processing: an industry term used to describes the automation of settlement process flows between systems and parties. Subject order An order type where a Price Taker submits an order for a standard settlement date, but for a non-standard price (where the published price is firm), or for a quantity greater than the published maximum size. Trading Account A legal trading entity of the Price Taker. Trading agreement An agreement to trade between a Price Taker and a Price Maker. Trading API See Fixed Income CPI NA040413 14
Term Trading connection Definition This refers to the Price Maker s Fixed Income CPI (trading API) connection. Trading relationship A relationship between Price Maker and a Price Taker where both parties have a trading agreement, a Price Taker has requested a trading relationship, and the Price Maker has approved the Price Taker for trading. 2013 Thomson Reuters. All rights reserved. Thomson Reuters and the sphere logo are the trademarks or registered trademarks of the Thomson Reuters group of companies around the world. Any third party names or marks are the trademarks or registered trademarks of the relevant third party. This Trading Procedures and Guidelines document is made available solely for the use and reference of current Fixed Income Trading subscribers only and must not be accessed by anyone else. By accessing this Trading Procedures and Guidelines, you represent to Thomson Reuters that you are a current FIT Rule Book subscriber. For further information about Thomson Reuters visit us online at www.thomsonreuters.com Published by Reuters Transaction Services Limited, The Thomson Reuters Building, South Colonnade, Canary Wharf, London E14 5EP United Kingdom Tel:+44 20 7250 1122 NA040413 15