embonds Multilateral Trading Facility

embonds Multilateral Trading Facility Participant Manual 23 November 2017

CONTENTS CONTENTS 1 INTRODUCTION... 5 2 OVERVIEW... 6 2.1 Methods of Trading... 6 2.2 All to All / Participant Types... 6 2.3 Clearing Brokers... 6 2.4 Participant Interfaces... 6 2.5 Structure of this Document... 7 3 GENERAL INFORMATION... 8 3.1 Access to the Platform... 8 3.2 Platform Participants... 8 3.3 Platform Hours of Operation... 9 3.4 Participant Agreement and Rule Book References... 9 3.5 Testing... 9 4 POLICIES AND PROTOCOLS GENERAL... 10 4.1 Securities List... 10 4.2 Quote Type... 10 4.3 Matches... 10 4.4 Transactions and the Clearing Brokers... 11 4.5 Post-trade Confirmations and Settlement... 11 4.6 Allocations... 12 4.7 Anonymity... 12 4.8 Match Cancellation/Modification... 12 4.9 Algorithmic trading... 13 5 LIMITS POLICY... 14 5.1 Exposure... 14 5.2 Limits and Disabling Bonds... 14 5.3 Limit Breaches and Enforcement... 15 5.4 Un-utilised Limit... 16 5.5 Limits vis-a-vis multiple open orders... 16 5.6 Margins... 16 6 FEES POLICY... 17 6.1 Fees... 17 6.2 Rebates... 18

CONTENTS 6.3 Tier Points... 18 7 CENTRAL LIMIT ORDER BOOK... 20 7.1 Participant Interfaces for the CLOB... 20 7.2 Entering an order... 21 7.3 Amending an existing order... 24 7.4 Cancelling an order... 24 7.5 Order rejection or cancellation by EMBonds... 24 7.6 EMBonds Matching Algorithm... 25 7.7 After a Round of Matching... 26 7.8 Iceberg Rules... 26 7.9 Time Stamp Rules... 26 7.10 CLOB Market Data... 26 7.11 Market History... 27 7.12 Anonymity Override... 27 7.13 Small Size Anonymity Threshold... 27 7.14 Differences in treatment of Quotes and Orders in the CLOB... 27 8 EMBONDS RFQ... 29 8.1 Introduction - the EMBonds RFQ World... 29 8.2 Indicatives and the Bulletin Board... 30 8.3 Subscription to RFQ... 31 8.4 RFQ Anonymity... 32 8.5 Star Assignment... 32 8.6 RFQ Process... 33 9 EMBONDS AUCTIONS... 43 9.1 An EMBonds Auction... 43 9.2 Auction Interests... 44 9.3 Auction Matching Mechanism... 45 9.4 Anonymity... 46 9.5 Fees... 46 APPENDIX A BUY-IN AND SELL-OUT PROCEDURES... 47 A.1 Benchmark Rate... 47 A.2 Late Settlement Procedure - Seller... 47 A.3 Buy-In Procedure... 47 A.4 Corporate Actions... 47 A.5 Late Settlement Procedure Buyer... 47 A.6 Pro Forma Buy-In Notification... 48 APPENDIX B EMBONDS MATCHING ALGORITHM... 49 B.1 Example Scenarios Fill Adjustments... 49

CONTENTS B.2 Example Scenarios - Resting All-or-None Orders... 50 B.3 Treatment Of Day Orders With A Max Floor Specified... 51 APPENDIX C APPROVAL POLICY... 53 APPENDIX D NEW ORDER SINGLE WITH TIMEINFORCE = GOOD FOR TIME (FIX API)... 54 APPENDIX E MARKET MAKING AGREEMENT... 56

Introduction 1 INTRODUCTION Emerging Markets Bond Exchange Limited ( EMBonds ) is authorised and regulated by the Financial Conduct Authority as the operator of an MTF (FRN624775). The company is a Limited Liability Company registered in England and Wales No. 8399650 with the registered office at One Canada Square, Level 39, London E14 5AB United Kingdom. The EMBonds multilateral trading facility ( Platform ) is an electronic execution venue for secondary market fixed income trading, provided by EMBonds. The Platform is available for use by institutional investors, and facilitates the trading of emerging markets Bonds, including those issued domestically as well as internationally, whether issued in local or hard currency. This document provides a comprehensive guide to use of the Platform, including a description of its features and also gives further practical details relating to rules covered in the EMBonds Rule Book ( Rules ) governing the access to and use of the Platform. Terms defined in the Rules or the EMBonds Participant Agreement ( Participant Agreement ) shall have the same meaning in this Participant Manual (unless the context requires otherwise). Information contained in this Participant Manual is subject to change at any time. For the latest version and any updates, please refer to our website (www.embonds.com) ( Website ). It is important for Participants to note the order of precedence, as set out in the Participant Agreement, in the event of any conflict between any provisions of this Participant Manual and the Participant Agreement and the Rules. The following order of precedence shall apply: the Rules; the Participant Agreement; this Participant Manual. 5

Overview 2 OVERVIEW 2.1 Methods of Trading The Platform features three methods of trading. Participants can enter an order into the Platform s central limit order book (the EMBonds Central Limit Order Book ) where it may create a match with another Participant s order(s). Alternatively a Participant can request firm quotes from one or more other Participants (an EMBonds RFQ ), either accepting a quote, thus creating a match, or instead choosing to negotiate. The third method of trading is for a Participant to enter a hidden interest into a periodic matching session (an EMBonds Auction ) in a security at a pre-specified mid-price. In such an instance, a match will occur if another Participant has also added a hidden interest but in the opposite direction. 2.2 All to All / Participant Types The Platform is All-to-All, whereby Participants include international banks, local banks, private banks, hedge funds, and real money investors. Each Participant is categorised by EMBonds as either a BANK or a FUND, which will be derived from whether they are sell-side or buy-side by nature. Despite this categorisation, generally speaking, all Participants are treated equally. An action available to one Participant on the Platform will be available to any other. All Participants can enter orders to the Central Limit Order Book, be involved in an EMBonds RFQ (as an initiator, requesting quotes, or as a responder ), or participate in an EMBonds Auction. In addition, there is no obligation on any Participant to make markets or provide liquidity. That said, there are various nuances to the Platform s Rules, to be explained in detail in this document, where a Participant s type is important. An example of such a nuance is that in the Central Limit Order Book specifically, when a BANK leaves a resting order, if he wishes, he can specify the restriction that the order is not aggressable by other BANKs. However, he doesn t have the ability to restrict from FUNDs, and furthermore, a FUND does not have the equivalent optionality when leaving an order. 2.3 Clearing Brokers Any trade done on the Platform between two Participants will be settled via Clearing Brokers 1. In this way, a Participant must have an established trading line with a Clearing Broker 2, but does not need established trading lines with any other Participant. 2.4 Participant Interfaces The Platform can be accessed through a web interface (the GUI ) at http://trade.embonds.com either using a compatible browser or using the HTML5 container developed by Openfin 3. A Participant guide to 1 As defined in the Participant Agreement (See below) 2 There is currently just one Clearing Broker available for trades done on the EMBonds Platform: ICBC Financial Services. 3 More information on the Openfin HTML5 container can be obtained at http://openfin.co 6

Overview the GUI is presented as a series of short videos, which can be found at http://www.embonds.com/help. Participants may also access the platform via the EMBonds FIX Gateway ( FIX ), details of which can be found in the following document ( FIX API ); o EMBonds FIX Gateway Technical Specification - Version 2.1 In addition to the GUI and FIX, the Platform can also be accessed through Microsoft Excel. Such access is solely for providing a convenience to those using the GUI provided that they are concurrently logged in. Information regarding the EMBonds Excel Spreadsheet, including sample sheets and installation instructions, can be found on the Website. 2.5 Structure of this Document - General Information relating to the Platform, including hours of operation and how to gain access - Policies and Protocols relating to use of the Platform generally - Limits Policy - Fee Policy - Policies and Protocols relating to the EMBonds Central Limit Order Book - Policies and Protocols relating to EMBonds RFQ functionality - Policies and Protocols relating to EMBonds Auctions - Appendices 7

General Information 3 GENERAL INFORMATION 3.1 Access to the Platform To be able to use the Platform, you must be an institutional investor. The platform is not open to private individuals. To gain access to the Platform, a prospective Participant ( Applicant ) must follow the following steps; 1. Complete EMBonds Application Form The Eligibility Criteria are set out in the Rules. EMBonds will require information from an Applicant to begin the onboarding process. Examples of the onboarding information required is set out in Appendix X and on EMBonds Application Form ( Application Form ) is available on the Website. 2. Enter into a Participant Agreement with EMBonds. The Participant Agreement comprises the terms and conditions on which access to the Platform is provided. A copy of the Participant Agreement can be found via the Website. 3. Enter into a principal agreement with a Clearing Broker EMBonds will introduce the Applicant to a Clearing Broker, in cases where there is no established relationship. A KYC process will subsequently take place, if necessary, and exposure limits will be agreed. 4. Complete technical onboarding with EMBonds Before access to the Platform is permitted an Applicant must complete technical onboarding which will include relevant Participant personnel being set up with accounts and log-ins, funds and sub-funds being set up if necessary, installation of required software, as well as system integration testing, including testing of FIX connectivity if applicable and the testing of any trading algorithms which may be employed. Note that an Applicant may be asked to provide answers and/or supporting material in relation to various items in order for EMBonds to make an assessment regarding the eligibility of the Applicant to use the Platform, and to comply with our Rules and the FCA Rules. 3.2 Platform Participants The term Participant is used here to denote the institution that has signed a Participant Agreement with EMBonds and has been onboarded. The Participant s employees and authorised agents who make use of the Platform, that is, traders, risk managers, compliance, etc, are termed Participant personnel generally, or Participant trader, etc, when referred to specifically in this Participant Manual. For any FIX communications, a Participant may have one or more FIX Participant system accounts. Note that EMBonds does not permit direct electronic access (direct market access or sponsored access) to the EMBonds MTF Platform and each Participant must not provide such access to its underlying clients or other third parties (other than Affiliates which have been approved by EMBonds). 8

General Information 3.3 Platform Hours of Operation The Platform s standard hours of operation are Monday to Friday, 7AM until 5PM (UK Local Time) on UK business days. Any changes to the standard opening hours will be publicised to all Participants via email in advance. At times outside of the hours of operation, new orders will not be accepted onto the Central Limit Order Book, no match can occur and no RFQ Process can take place. 3.4 Participant Agreement and Rule Book References As mentioned above, to gain access to the Platform, an Applicant must enter into a Participant Agreement with EMBonds and agree to abide by the Rules. Some of the concepts and terms referred to in the Rules are more fully described in the Participant Manual. These terms are listed below, together with the section of this document in which they are described; Matching Fee Policy This refers to the Fees Policy as set out in Section 6 Trading Protocol This refers to the following sections of this document; Section 4: Section 7: Section 8: Section 9: Appendix B: Policies and Protocols General EMBonds Central Limit Order Book EMBonds RFQ EMBonds Auctions EMBonds Matching Algorithm Limit Protocol This refers to the Limits Policy as set out in Section 5 Trade Cancellation Protocol Buy-in and Sell-at Procedures This refers to Section 4.8: Match Cancellation/Modification This refers to the protocol as set out in Appendix A 3.5 Testing EMBonds technical development follows the agile software development discipline, and has frequent small releases of functionality, following rigorous testing. From time to time Participants may like to test new features and functionality, prior to release to the production environment, for which a separate testing environment is made available. 9

Policies and Protocols General 4 POLICIES AND PROTOCOLS GENERAL 4.1 Securities List As mentioned in the Introduction, the Platform facilitates the trading of emerging markets Bonds, including those issued domestically as well as internationally, whether issued in local or hard currency. The list of securities available to trade is updated from time to time, for example if a new Bond is issued, following a Participant request, or if EMBonds has entered a new market. The list of Securities available for trading in the Platform ( Securities List ) can be viewed by Participants in the GUI, or can be requested over FIX. As well as listing the ISINS of Bonds available to trade on the platform, the Securities List also includes information specific to each Bond when traded via the Platform, for example; Quote Type (see below), Currency and EMBonds default settlement offset are all included, each of which are described in this document. Participants should consult the Security s prospectus or some other source for other definitional information relating to the Security, not specific to when traded on the Platform, such as maturity date, etc, where required. All Bonds in the Securities List are available for a Participant to trade in the Central Limit Order Book or via an RFQ Process, subject to limits (as mentioned in the Limits section). Every Bond is assigned by EMBonds to a Market Segment. For example, all local government Bonds issued by Turkey are within the Local Gov Turkey Market Segment. The relevance of the Market Segment in which a Bond sits will be described later in this document, and is specifically in relation to Anonymity Override and Star Assignment. 4.2 Quote Type The Platform supports both price-traded and yield-traded Bonds. As such, each Security available to trade on the Platform has a Quote Type designated by EMBonds as either Price or Yield. EMBonds will follow the market convention when specifying the type for a given Security. This will determine how a Participant should input an order or quote, as well as how that order or quote is displayed to other Participants. It should be noted that any match itself always takes place on a price. That is, for yield traded Bonds, yields are converted to price for the purposes of matching. The Participant will be notified of their match yield as well as equivalent match price in such an instance. However, for the resulting transaction between the Participant and their Clearing Broker, the clean price (inclusive of fees/rebates) and the settlement amount will be derived from the match price. 4.3 Matches A match can occur between two Participants on the Platform either as a result of crossed orders within the Central Limit Order Book, or on the back of a successfully negotiated RFQ. Each match will have a price or yield ( Match Price, Match Yield ) and a Nominal Amount associated with it. 10

Policies and Protocols General 4.4 Transactions and the Clearing Brokers As a result of a match happening, each Participant will enter into a transaction with a Clearing Broker, which will settle on a delivery-versus-payment basis. This transaction will be specified with a Clean Price that will be calculated by adjusting the Match Price for any fee or rebate (see Fees section below). Transactions resulting from a single match (with just one Clearing Broker involved) would look like this; Match on Platform Buyer Participant A Seller Participant B Transaction 1 Transaction 2 Buyer Seller Buyer Seller Participant A Clearing Broker Clearing Broker Participant B A Participant must have both an agreement in place and sufficient un-utilised limit with a Clearing Broker in order to trade on the Platform (see Limits section below). 4.5 Post-trade Confirmations and Settlement When a match occurs, the relevant Participant personnel at each of the two Participants will be notified by EMBonds of their resulting transaction by various means, including within the GUI itself, by email, and/or by FIX message, if applicable. The confirmation shall contain transaction details, including but not limited to the following; - Security Name - Nominal Amount - Parties to the Transaction (the Participant and their Clearing Broker) - Buy or Sell - ISIN of the Security - Match Price (and Match Yield if applicable) - Clean Price - Dirty Price - Total consideration for the Transaction ( Settlement Amount ) - Currency in which the Transaction will be settled ( Settlement Currency ) - Time and date on which the Transaction was entered into ( Transaction Date ) - Date on which the Settlement is agreed to be effected ( Contractual Settlement Date ) Upon receipt of the confirmation, the Participant should as soon as practically possible check the accuracy of the information contained therein and notify EMBonds of any discrepancies, errors, omissions, and inaccuracies. 11

Policies and Protocols General Subsequent trade confirmation and settlement will take place directly between the Participant and their Clearing Broker, and will be subject to the Buy-in and Sell-out Procedures outlined in the Appendix. The Contractual Settlement Date for a given Transaction Date may be different depending on the Bond traded and will be derived from the applicable holiday calendar, as available in the Bond prospectus, and the settlement offset (T+1, T+2, etc) for that particular match. For each Bond, there is a default settlement offset for trades done on the platform. This is included in the information provided in the Securities List. A Participant-trader will also be able to view their own and their colleagues matches in the GUI Matched Trades Blotter. Furthermore an Execution Report will be available to them, in the GUI, for each match, as often required by regulators to prove best execution. In this Execution Report will be shown a snapshot of all market data for the relevant Security at the time of the match. 4.6 Allocations Where a Participant has sub-funds, after a match, the Participant is required to alert EMBonds as soon as possible as to how the match should be allocated to its sub-funds. Separate transactions between each sub-fund and the Clearing Broker will result. 4.7 Anonymity Anonymity is referred to in relation to whether a Participant s identity is ever disclosed to other Participants. As mentioned already, any match between two Participants (each a match-counterparty ) will result in each of those Participants entering into a transaction with a Clearing Broker. As such, Participants will never enter into a transaction directly with one another. The Participants are matchcounterparties but not legal counterparties. In certain instances, post-match, each match-counterparty may find out the identity of the other ( name give-up ) for information purposes only. The criteria surrounding when this happens are described for the Central Limit Order Book, RFQ and Auctions in the relevant sections below. When considering anonymity pre-match, no Participant s identity will ever be disclosed to another. However, when a Participant has an order in the Central Limit Order Book, or is involved in an RFQ, his Participant type (these are currently set as either BANK or FUND as these are the main types of participant) will be viewable to other Participants. 4.8 Match Cancellation/Modification Matches executed on the Platform may be cancelled or modified by EMBonds in certain circumstances and will always be subject to the Rules. Such circumstances include when a software or connectivity related error has led to an unwanted match, or when a human error has led to an unwanted match. These are described in further detail below. Please note, EMBonds will not cancel or amend a match unless both parties involved in the match have agreed. It should be noted that when EMBonds conducts such a market operation on a match, if an associated remaining order (for either Participant) is still open at the time of the market operation, EMBonds will cancel the order first, and then notify the Participant of the cancelled or amended match. This is a safety measure, to ensure any repeated error is avoided, where possible. 12

Policies and Protocols General 4.8.1 Software and Connectivity Related Errors EMBonds shall continuously monitor the status of the Platform and take appropriate action if a match or multiple matches have been executed in error due to matters including but not limited to software bugs, issues with connectivity, computer viruses and denial of service attacks. If EMBonds determines that the integrity of the Platform has been compromised due to one of the aforementioned issues, EMBonds may halt trading in one, some or even all Securities whilst the matter is being investigated. Subsequently, EMBonds may determine that an isolated match, or a group of matches should be cancelled, each such match called a Match in Error. In the instance of a trading halt, any live orders in those Securities will be cancelled by EMBonds, and will not automatically be reinstated when trading is unhalted. In respect of each Match in Error, EMBonds shall notify the affected Participants and the Clearing Broker(s) of the request for cancellation of such matches and their corresponding transactions. The Match(es) in Error shall usually only be cancelled upon confirmation to that effect from both Participants that are party to a transaction. EMBonds shall endeavour to facilitate the agreement to cancel between the Participants. In cases where the match was made without a name give-up, the names of the Participants will only be disclosed to each other if EMBonds intermediation to resolve the matter is unsuccessful. Any direct losses suffered by a Participant if such a match is unable to be cancelled shall be the responsibility of that Participant. 4.8.2 Human Errors If a Participant on the Platform has inputted an instruction to the Platform in error and this has resulted in a match, the Participant should promptly notify EMBonds if they want the match to be cancelled. EMBonds will inform the other Participant who is party to the match of the cancellation request. Subject to the Rules and usually agreement from all parties, EMBonds shall cancel the said match. 4.9 Algorithmic trading If a Participant intends to send orders into the Platform using an algorithmic trading technique, this must be pre-approved with EMBonds. Each such algorithm must be notified to EMBonds in advance and every order shall include a flag which identifies the algorithm used and the identity of the relevant person authorised by the Participant to submit the order. Each Participant must satisfy EMBonds that appropriate testing has been carried out on each algorithm before it is employed on the Platform. Similarly, Participant will be expected to carry out ongoing maintenance and periodic testing of algorithms. 13

Limits Policy 5 LIMITS POLICY As mentioned above, a Participant must have sufficient un-utilised limit with a Clearing Broker in order to trade on the Platform. The EMBonds limit framework can be described in terms of exposures, limits, limit breaches and enforcement. 5.1 Exposure A Clearing Broker has an exposure to a Participant if he has entered into one or more transactions with the Participant, and some or all of the transactions have not yet been settled. Exposures for individual transactions and for particular sets of transactions can be calculated in the following way; Transaction Exposure Total Exposure Country Exposure Sector Exposure Bond Exposure For a given transaction, the absolute Settlement Amount for the transaction converted to US Dollar, at the relevant prevailing FX rate (unless the transaction has been settled, in which case it is zero) The sum of all Transactions Exposures associated with the Participant For a given country, the sum of all Transaction Exposures associated with the Participant, where the country of risk of the Bond(s) transacted is as specified For a given country/issuer-type combination, the sum of all Transaction Exposures associated with the Participant, where both the country of risk and the issuer-type (sovereign or corporate) of the Bond transacted are as specified For a given Bond, the sum of all Transaction Exposures associated with the Participant, where the Bond transacted is as specified 5.2 Limits and Disabling Bonds The Clearing Broker will specify a numerical limit to one or more of Total Exposure, Country Exposure and Sector Exposure, which it is willing to allow for a given Participant. The names of these limits are, respectively; Overall Limit Country Limit Sector Limit Limit to Total Exposure Limit to Country Exposure Limit to Sector Exposure 14

Limits Policy Similarly, the Clearing Broker might disable a given Bond for a Participant, which is equivalent to setting a limit to the Bond Exposure for that Bond to zero. When determining these limits, the Clearing Broker may first be provided suggested limits by EMBonds. A Clearing Broker may amend these limits from time to time, including during the trading day, in which case the Participant will be notified. A Clearing Broker may in theory decrease a limit below the exposure level at that time. 5.3 Limit Breaches and Enforcement EMBonds enforces such limits by removing the possibility of a Participant creating a match that would increase a relevant exposure beyond the relevant limit. EMBonds does this in the following way; 1. Rejects any new order to the Central Limit Order Book, which if matched in full, would result in an exposure exceeding a limit 2. Rejects any amendment to an existing order in the Central Limit Order Book which would mean that if it were matched in full, it would result in an exposure exceeding a limit 3. Cancels a Participant s order(s) in the Central Limit Order Book in the following events: a) if following a match on another of the Participant s orders, the change in exposure means that an order(s) has become such that if it were matched in full, it would result in an exposure exceeding a limit. b) if following an amendment to a limit by a Clearing Broker, the change in limit means that an order(s) has become such that if it were matched in full, it would result in an exposure exceeding a limit. c) if following an amendment to a limit by a Clearing Broker, the change in limit means an exposure exceeds a limit. d) if following a movement in FX rates, the change in exposure (which is measured in US Dollar) means that an order(s) has become such that if it were matched in full, it would result in an exposure exceeding a limit. EMBonds will cancel the minimum number of orders possible to enforce the limits, and will prioritise by removing orders first that are lower in the matching engine queue (See Central Limit Order Book section) 4. Prevents a Participant from providing a tradeable quote or counter during an RFQ process which if accepted, would result in an exposure exceeding a limit 5. Prevents a Participant from providing a tradeable counter during an RFQ process which if accepted by the other Participant, would result in a Clearing Broker s exposure to that other Participant exceeding that other Participant s limit 6. Prevents a Participant from accepting a tradeable quote or counter during an RFQ process, which would result in an exposure exceeding a limit 7. Cancels a Participant s tradeable quote or counter during an RFQ process if any of the events described in (3) above, occur. 15

Limits Policy 8. Prevents a Participant from entering or amending an Auction Interest during an EMBonds Auction, which if subsequently matched in full, would result in an exposure exceeding a limit. 9. Cancels a Participant s Auction Interest in an EMBonds Auction if any of the events described in (3) above, occur. As a result of these measures, the only way that a limit can be breached, is if a Clearing Broker reduces a limit below an exposure. Note that where possible EMBonds will inform the Participant in this event. 5.4 Un-utilised Limit At any time, a Participant is able to view on the Platform GUI, the limits that have been imposed on him, as well as his un-utilised limits (that is, relevant limit minus relevant exposure). Note that when a trade has been settled the un-utilised limits will be adjusted accordingly. 5.5 Limits vis-a-vis multiple open orders Because of the enforcement measures taken by EMBonds mentioned above, specifically the automated cancelling of orders when they have been rendered possible to breach a limit, a Participant is thus permitted to have multiple open orders whose aggregate size exceeds a limit. As a simplified example 4, assuming a Clearing Broker has imposed an Overall Limit of USD10mio on a Participant, and that Participant has no unsettled trades, that Participant may in theory have a USD10mio order on one Bond, and a USD10mio order on another Bond too. Should one of those orders be matched, in part or in full, the other order will be automatically and instantly cancelled, and thus no one could match against it to cause a limit breach. Note that while a Participant can generally have multiple open orders whose aggregate quantity exceeds a given limit, they may not do so on a single Bond on a particular side. EMBonds will reject any new order or amendment that would result in this. 5.6 Margins There is no requirement for posting margin with a Clearing Broker. Participants may however post margin with their Clearing Broker to allow for higher limits. 4 This example assumes Bonds are priced at par and have are zero coupon. Price and accrued interest affect Settlement Amount and so are taken into consideration when calculating the potential exposure an order may create. 16

Fees Policy 6 FEES POLICY EMBonds may apply a fee or a rebate to any trade done through the Platform. The fee policy is designed to incentivise the provision of liquidity on the Platform; for a given match in the Central Limit Order Book or in an RFQ, a fee is charged to the liquidity taker while a rebate may be granted to the liquidity provider. For a match in an EMBonds Auction, a fee is split equally between the two parties involved. When a match occurs in the Central Limit Order Book, it is the Participant whose order had been resting on the order book, as opposed to the Participant who entered a subsequent order which caused the match, who is considered the liquidity provider. The liquidity taker is that other Participant. When a match occurs after an RFQ Process, the Participant who initiated the RFQ is the liquidity taker, the other Participant (a Responder) is the liquidity provider. The fee or rebate is expressed as a percentage of par. When a match occurs on the Platform at the match price, then as already described, two transactions with Clearing Broker(s) will follow. The clean price specified for each transaction will be calculated by taking the match price and adjusting it by the applicable fee or rebate. For the transaction between a Participant and a Clearing Broker, whether the match price is adjusted up or down will depend on whether a fee or a rebate is being applied, and whether that Participant is buying or selling. The clean price for each of the two transactions, that is, the transaction between the liquidity provider and their Clearing Broker, and the transaction between the liquidity taker and their Clearing Broker, will thus be different. The two respective Settlement Amounts are calculated accordingly. How fees and rebates, as percentages of par, are generally calculated for a given transaction, is described below. 6.1 Fees Fee = Base Fee x Liquidity Factor where at the time of writing, the Base Fee is set at 0.04% (4 cents or ticks ), and where the Liquidity Factor for each security is determined as follows; Market Segment (type) Liquidity Factor Sovereign 0.5 Corporate 1 From time to time, EMBonds may change the Base Fee, the Liquidity Factor categories and/or the Liquidity Factor values. Participants will be notified in advance when this occurs, and updated details will be published at https://www.embonds.com/help/fee-schedule. Furthemore, the current Fee for each Security can at any time be found in the Securities List 5. 5 Fee information is only available on the GUI Security List, and not included in FIX Security List. 17

Fees Policy 6.2 Rebates Rebate = Base fee x Liquidity Factor x Tier Rebate where the Tier Rebate will depend on the Liquidity Provider Tier ( LP Tier ) of the Participant being granted the rebate, whether Gold, Silver, Bronze or Basic. LP Tier Tier Rebate Gold 20% Silver 10% Bronze 6% Basic 0% When first joining the Platform, a Participant will have an LP Tier of Basic. Thereafter, they can earn Tier Points which will affect their LP Tier. The LP Tier for each Participant will be reassessed monthly by EMBonds, and will be calculated by considering how many Tier Points have been earned over the preceeding three months. Participants exceeding the Minimum Tier Points threshold for that three month period will be entitled to keep their existing LP Tier unless they ve exceeded the Upgrade Tier Points threshold for that three month period, in which case they will be upgraded to the next LP Tier. Otherwise they will be downgraded to the Basic LP Tier. 6.3 Tier Points Tier Points can be earned either by consistently providing firm quotes to the Central Limit Order Book ( Quote Tier Points ), by responding to RFQs ( RFQ Response Tier Points ) or by trading on the Platform generally ( Transaction Tier Points ). The number of Tier Points earned in each case will be affected by the liquidity factor of the Security involved, and is calculated in the following way: 1. For a single transaction, Transaction Tier Points = Nominal Amount x Liquidity Factor where Nominal Amount is considered in US Dollar terms 2. For an eligible 6 two-way firm quote on a Security, Quote Tier Points = 10% x Nominal Amount x Liquidity Factor x Time where Nominal Amount is as quoted on each side of the market, considered in US Dollar terms and Time is the number of hours for which the quote is live. 3. For an eligible 7 quote in response to an RFQ, RFQ Response Tier Points = 10% x Nominal Amount x Liquidity Factor where Nominal Amount is that specified in the RFQ, considered in US Dollar terms 6 For a two-way firm quote to be eligible, it must have a reasonable bid-offer spread, as determined by EMBonds 7 For a quote in response to an RFQ to be considered eligible, it must be at a reasonable level in relation to the current market price of the relevant security, what is reasonable being determined by EMBonds 18

Fees Policy For the purposes of the monthly assessment of LP Tier, Minimum Tier Points is set at USD 150 million and Upgrade Tier Points is set at USD 300 million. Examples of Tier Point calculation and LP Tier determination are available on request. Please note, Participants pursuing a market making strategy must inform EMBonds and will be required to enter into a Market Making Agreement 8 in accordance with Article 48(2) of Directive 2014/65/EU. 8 A sample Market Making Agreement is provided in the Appendix. 19

Central Limit Order Book 7 CENTRAL LIMIT ORDER BOOK As mentioned in the Introduction, the Platform features three methods of trading; either within the EMBonds Central Limit Order Book, through an EMBonds RFQ or in an EMBonds Auction. The first of these, the EMBonds Central Limit Order Book ( CLOB ), discussed in this section, can be described as a hybrid quote-driven/order-driven model. All quotes and orders submitted to the CLOB are firm and executable limit orders, and trade matching may occur subject to the Rules of the Platform Matches in the CLOB can be conceptualised in the following way. Before a match, the CLOB will have one or more orders resting on it. A new order will be subsequently added to the CLOB which crosses 9 an existing order(s), and will create a match(es). The new order is said to have aggressed the existing passive orders, or alternatively is said to have initiated a match. That new order may itself then rest on the order book if it hasn t been completely filled by the match(es), and is not of a type which cancels automatically after an initial round of matching (See Time-in-Force below). If subsequently involved in another match, it would be passive in that case. Quotes and Orders described in the context of the CLOB are effectively the same thing, that is, they are both firm and executable limit orders and may create a match, if they cross one another. The only difference between the two is the rules that govern their input. This is discussed in the Quotes v Order section, but generally, they can both be considered the same, and where orders are mentioned in this section, it refers to both. During the Platform s hours of operation, Participants may enter, amend, or cancel their orders in the CLOB. Entering or amending an order may result in a match if it crosses another order. 7.1 Participant Interfaces for the CLOB Participants can enter, amend, or cancel orders in the CLOB using any of the following interfaces. - GUI - EMBonds Excel Spreadsheet - FIX As a general rule, if an order has been created via one of the interfaces, it can only be amended or cancelled using that same interface. The exceptions to this rule are the Panic Buttons which are 9 An order crosses another order when 1. Both orders are for the same Security 2. The orders were originated from different organisations 3. One is a Bid Order, the other is an Offer Order 4. Either of the following occur a) Limit Price of the Bid Order is greater than or equal to the Limit Price of the Offer Order, or b) Limit Yield of the Bid Order is less than or equal to the Limit Yield of an Offer Order 20

Central Limit Order Book available in the GUI. These Panic Buttons will cancel all orders of that Participant (or specifically of the Participant-trader who clicked it) regardless of which interfaces were used to create the orders. 7.2 Entering an order When entering an order onto the CLOB, some or all of the following fields will be specified. A description of each field together with the rules that govern its input are shown below Security This should be specified as the Security for which the order is being entered. Must be a Security included in the Security List. EMBonds uses ISIN as a Security identifier. Order Type EMBonds only allows limit orders to be entered into its Central Limit Order Book. Side Buy (Bid) or Sell (Offer/Ask). Order Quantity This should be specified as the nominal amount of the Security in which the order is being placed, expressed in the currency specified with the order. Must be greater than or equal to the Security s Minimum Size, and must be a multiple of the Security s Size Increment, both as shown in the Security List. Currency This should be specified as the currency in which the Order Quantity specified is being expressed. Must be the same as that shown in the Security List for the specified Security. Price This should be specified as the level, expressed in the price type specified with the order (price or yield), at which the order can at worst be matched. That is, the limit order s limit. Specifiable up to 4dp. Price Type This should be specified as the price type in which the Price specified is being expressed, price or yield. Must be the same as that shown in the Security List for the specified Security. Settlement Date This should be specified with the date implied by the default settlement offset for that particular Security, as shown in the Security List for the specified Security. Time in Force This should be specified as how long the order is allowed to exist in the order book before being automatically cancelled. EMBonds accepts the following types; 21

Central Limit Order Book DAY Such orders will automatically cancel at the end of the trading session. As a default, DAY orders will allow partial fills 10, but can be specified as all-or-none (See Execution Instructions, below). A DAY order will rest on the order book, whether specified as all-or-none or not, assuming it was not filled at inception. Immediate Execution Such orders will automatically cancel after going through a round of matching at inception. Immediate execution orders may be specified to either allow partial fills, or be allor-none. Immediate execution orders which allow partial fills are also known as Immediate-or- Cancel ( IOC ) orders. Those which are all-ornone are also known as Fill-or-Kill ( FOK ) orders. Via EXCEL, EMBonds will only accept DAY orders. Anonymity This should be specified as NAME or ANON 11 and will have the following effect: If there is a match associated with an order and the order had been resting on the order book before a new order was entered subsequently and created a match (that is, the order was aggressed ), this field specification will affect whether or not the two Participants involved in the match will discover each other s identity. If specified as NAME, both Participants will discover each other s identity, if specified as ANON, neither will. Note that the effect of this field specification is subject to the Participant s Anonymity Override, explained below. See that the specification of the aggressing order or the aggressor s Anonymity Override has no bearing on whether or not identities will be disclosed. As such, the aggressor has no control on whether or not identities are disclosed, other than by simply choosing not to aggress an order if the outcome would not suit him. To allow him to make such a decision, where orders are displayed in an unaggregated manner, the type of the Participant who entered the order (whether a bank or fund) will be displayed, and it will also be indicated whether or not aggressing that order would lead to a match where identities are disclosed. 13 10 Note that partial fills are subject to the EMBonds Matching Algorithm rules described later. 11 It is not possible to specify Anonymity from EXCEL; Anonymity is assumed to be NAME for such orders. 13 GUI only. This information is not included in Market data sent via FIX. 22

Central Limit Order Book Please also see Policies and Protocols General / Anonymity. Max Floor (Iceberg orders) It is possible for Participants to hide a part of their order from the market. That is, specify in their order such that only part of it is displayed to other Participants in the GUI Market View or included in FIX Market Data stream. In such an instance, the order is known as an iceberg (also known on the Platform as Live+ ). This optional field specifies the maximum nominal amount of an order that a Participant will allow other Participants to see. In the instance that a Max Floor has been specified and it exceeds the remaining quantity of the order, there would not be a hidden part of the order, and so the order would not be an iceberg, despite having a Max Floor associated with it. If specified, Max Floor must be greater than or equal to two times the Security s Minimum Size, and must be a multiple of the Security s Size Increment (both as shown in the Security List). May be greater than the order s Order Quantity, albeit without any effect. It is not possible to specify a Max Floor from EXCEL. Order Restrictions When a BANK leaves a resting order, if he wishes, he can specify the restriction that the order is not aggressable by other BANKs. Such orders will still be visible to other BANKs, but they will be highlighted as Restricted (Whenever a BANK enters a new order to the CLOB, such Restricted orders will not be considered for the purposes of matching). Please note, a FUND does not have the equivalent optionality when leaving an order. Execution Instruction: All-or-none It is possible for Participants to specify an order to be all-or-none. Such an order cannot be left part filled; it must be filled in its entirety or not filled at all. Note that there still may be multiple (simultanaeous) fills attributed to such an order, but their individual sizes must sum to the order s size. An IOC order, as mentioned above, is partially fillable by its nature so cannot be specified as all-or-none. An FOK order is all-or-none by its nature so needn t be specified additionally as such, but can be. It is not possible to specify an Excel order as all-or-none. It is not possible to specify a DAY order with a Max Floor (Iceberg) as all-or-none, either. Execution Instruction: Participate-Don t-initiate It is possible for Participants to specify an order such that it cannot initiate a match, it can only rest on the order book and be aggressed. This is done by specifying an Execution Instruction as Participate Don t Initiate. EMBonds treatment of such orders is to reject them if they cross an existing order on the order book. All orders sent via EXCEL are treated as participate-don t-initiate. It is not possible to specify an order as Participate-Don t-initiate from the GUI. Orders entered from there will always create a match if they satisfy the matching criteria described below. 23

Central Limit Order Book It is not possible to specifiy an immediate execution order as Participate-Don t-initiate, nor is it possible to specify a DAY order which is all-or-none as Pariticipate-Don t-initiate. 7.3 Amending an existing order A Participant may amend the Price and/or the Order Quantity of an existing order in certain circumstances. Attempts to amend any other field will not be allowed by EMBonds. Should a Participant wish to do so, the Participant must cancel the order and enter a new one with the desired specifications. For a Participant to be allowed to amend an order at all, the order must be live, that is, neither cancelled nor completely filled. An amendment of an order may in itself create a match. As such, the amended order is treated as a new order at the moment it is amended, in the context of a matching round. Validations for the Price and Order Quantity are the same as for a new order, with the addition that Order Quantity may not be amended such that it is less than then cumulative size of matches associated with that order. Furthermore, an order cannot be amended in a way that would cause its remaining quantity to be less than the Security s Minimum Size, as specified in the Security List. As mentioned above, an order can only be amended using the same interface (GUI, FIX or EXCEL) with which it was initially created. 7.4 Cancelling an order For IOC or FOK orders, the order is automatically cancelled after the initial round of matching. For DAY orders, the order is automatically cancelled at the end of the trading session. A Participant may actively cancel a live DAY order at any time. Again, with the exception of the GUI panic buttons mentioned above, an order can only be cancelled using the same interface with which it was created. 7.5 Order rejection or cancellation by EMBonds Other than reasons described above, EMBonds may also reject an attempt to create or amend an existing order, or may cancel a Participant s order (without their explicit request) in the following instances: - The order would cross with an existing live order of the same Participant - Trading on the Platform has been halted - Enforcement of Clearing Broker limits prevents the order being added/amended - The order would cross with an existing live order and this order is specified as Participate Don't Initiate. - A trade associated with the order is being amended or cancelled by EMBonds (See Match Cancellation/Modification section) - EMBonds is cancelling all of the orders of the Participant, for a reasonable commercial reason or because the Participant has requested this, by phone, say - System failure - Participant logout or disconnection - Participant has been locked by EMBonds - If it is a GUI or EXCEL order, and the order would breach the Screen Limit (A limit specified and 24

Central Limit Order Book managed in the GUI by the particular Participant-trader to manage their orders) if matched in full 7.6 EMBonds Matching Algorithm When a new order is accepted, the EMBonds Matching Algorithm determines if there are any matches created between that new order and any of the existing orders 14 on the Order Book. This is referred to as a round of matching. If there are any matches as a result of this round of matching, EMBonds determines the following for each; a) The buying order b) The selling order c) The match level d) The match size When considering the order book, the EMBonds Matching Algorithm treats the visible and hidden components of an Iceberg order effectively as two separate orders. Note that if the new order has a Max Floor specified, it is ignored for the purposes of this round of matching. If the new order crosses any existing orders, matches will be allocated to crossed orders, prioritising them by price then visibility then time 15, subject to the following rules: a) No match can occur whose size is less than the Security s Minimum Size b) No match can occur which results in any order, including the new order, being left with an unfilled amount less than the Security s Minimum Size c) An all-or-none order cannot be left partially filled d) A match cannot be created between two BANKs when the BANK whose order was resting had specified the order to be Restricted (See Entering an Order, above) To ensure these rules are adhered to, allocation of fills to crossed partial orders may have to be adjusted from the allocations which would have been based on a simple prioritisation. This is done in a way that attempts to avoid negatively affecting total match size any more than necessary, while looking to adjust fills to lower priority orders before higher priority orders where possible. In addition, resting all-or-none orders may be skipped from the round of matching if they cannot be filled in full. Some example scenarios where such adjustments and skippings occur are described in the Appendix (EMBonds Matching Algorithm Example Scenarios). Aside from the fill adjustments and all-or-none skippings, price/time prioritisation is respected, and there is never a rearrangement made to the queue of orders in the book. The match level for a given match will be the level associated with the relevant existing order with which the new order matches. Where there is a match allocated to both the visible component ( Visible Fill ) and the hidden 14 Existing orders must be DAY orders, otherwise they would have automatically expired already. They may be partially fillable DAY orders or all-or-none DAY orders. 15 The time associated with an order is determined by the Time Stamp Rules 25