nasdaq cxc subscriber manual - nasdaq | business...
TRANSCRIPT
1
Nasdaq CXC Subscriber Manual
Nasdaq CXC Limited
Nasdaq CXC Limited (NCXL) is an alternative trading system (ATS) that operates three trading
books; Nasdaq CXC, Nasdaq CX2 (CX2) and Nasdaq CXD (CXD). This Subscriber Manual covers information about the operations of Nasdaq CXC
Purpose This document explains Nasdaq CXC’s policies, procedures, and technology. Because the information contained in this document is subject to change at any time please contact Nasdaq
CXC for the most recent updates at [email protected].
How to Subscribe Subscriber Eligibility
Nasdaq CXC Subscribers must be members of the Investment Industry Regulatory Organization of Canada (IIROC) in good standing with the ability to clear trades on a continuous net
settlement (CNS) basis with the Canadian Depository for Securities (CDS). If a Subscriber ceases to be a member of IIROC it shall also cease to be a Subscriber of Nasdaq CXC. If a Subscriber
has its membership privileges suspended by IIROC, it status as a Subscriber of Nasdaq CXC will
also be suspended. The latest version of the NCXL approval criteria is provided below. Please check for any updates on the Nasdaq CXC website.
NCXL Approval Criteria for Subscribers, Data Vendors and Sponsored Participants
1. Subscribers must be registered in all Canadian jurisdictions in which they do business and in good standing with IIROC.
2. Subscribers must execute Nasdaq CXC’s Subscription Agreement in accordance with National Instrument 21-101 before Nasdaq CXC before Nasdaq CXC accepts any order to
buy or sell securities from such Subscriber. 3. Subscriber must provide Nasdaq CXC information about such Subscriber’s clearing
arrangements, including the identification of such Subscriber’s clearing broker.
4. Subscriber must conduct its trading activities in compliance with the Universal Market Integrity Rules and any other order or direction made by IIROC.
5. Subscribers, Data Vendors and Sponsored Participants must make timely payment of all fees charged by Nasdaq CXC for market data and other fees charged for Services.
6. Subscribers, Data Vendors and Sponsored Participants must receive written pre-approval
from Nasdaq CXC for any data re-distribution by such Subscriber, Data Vendor, or Sponsored Participant to any third party.
7. Subscribers, Data Vendors and Sponsored Participants must provide monthly notification to Nasdaq CXC of the number of professionals and non-professional market data users.
8. Subscribers, Data Vendors and Sponsored Participants must furnish promptly to Nasdaq CXC any information required by Nasdaq CXC to confirm the accuracy of the reported
number of users of each category receiving data through such Subscriber, Data Vendor,
or Sponsored Participant
2
Nasdaq CXC may from time to time modify these criteria as it deems necessary and any such
modifications will be posted on the Nasdaq CXC website.
Available Documents
The following documents are available for subscribers:
Nasdaq CXC Subscription Agreement – contract between Nasdaq CXC and
Subscribers Nasdaq CXC Subscriber Manual – general policies and procedures on Nasdaq CXC
(this document)
Nasdaq CXC Connectivity Guide – connectivity options and bandwidth
recommendations
The following documents are available for vendors:
Nasdaq CXC Vendor Agreement – contract between Nasdaq CXC and vendors
(covers order entry and market data)
The following technical specifications are also available for order routing and market data connectivity:
Nasdaq CXC FIX Specification – orders using FIX format.
Nasdaq CXC CHIXMD Specification – Nasdaq CXC direct unicast market data
information.
Nasdaq CXC CHIXMMD Specification – Nasdaq CXC direct multicast market data
information.
The following Nasdaq CXC Market Data Agreements are also available for market data customers: Nasdaq CXC Limited Data Use Agreement – for NCXL market data customers using
Nasdaq CXC market data for internal use only.
Nasdaq CXC Limited Data Distribution Agreement – for NCXL market data
customers who distribute Nasdaq CXC Market Data to third parties.
Please contact Nasdaq CXC at (888) 310-1560 for more information about becoming a
Subscriber.
3
The Nasdaq CXC Alternative Trading System
Nasdaq CXC is a fourth-generation, alternative trading system (ATS) running on open-standard and
commoditized technologies, and architected to maximize speed, performance and reliability.
Market Overview
Market Type Market Operation Securities
Traded Market Data Order Entry
Alternative Trading System (ATS)
A continuous auction market based on strict price and time priority. • Customer orders
are protected from trade-through, locked and crossed markets
TSX®-listed and TSX® Venture
securities
Disseminated electronically either directly or through third-party data vendors. The data feed offers full depth of book (price volume) as well as trade data.
Industry-standard FIX protocol order entry via third-party and proprietary execution management systems. • Advanced order types • Low latency, high volume
message processing • Intelligent Order Book™ • Market-level smartrouting
Trading Hours
The ATS shall allow Subscribers to trade in a continuous auction market between the hours of 8:30 a.m.
and 5:00 p.m. (Eastern Time) on business days.
Dynamic Order Re-pricing
Orders that are entered on Nasdaq CXC that cross the Protected National Best Bid Offer (“the best bid
and offer from all Protected Marketplaces” or “PNBBO”) and would either trade-through or quote-through
a better priced protected order will be automatically re-priced to prevent a trade-through or crossed
market from occurring. In addition, orders that are entered at the PNBBO that would lock the market will
also be re-priced. When an order is re-priced, its price priority after each re-pricing is determined by the
price level to which it has been re-priced, while its time priority is determined by the time each re-pricing
occurs. When re-pricing multiple orders to the same price level, the time sequence for the re-pricing will
be determined by each order’s original timestamp or by the timestamp associated with the last re-pricing,
whichever is more recent.
Holiday Schedule
The system will be available for trading on all business days – Monday through Friday inclusive – from
8:30 a.m. to 5:00 p.m. Eastern Time, excluding Canadian Statutory Holidays. A list of the current year’s holiday schedule can be found on the following page of Nasdaq CXC’s website:
http://business.nasdaq.com/trade/Canadian-Equities/Market-Hours
4
Eligible Securities
Nasdaq CXC offers trading in all Toronto Stock Exchange listed securities and TSX-Venture listed securities.
Minimum Price Increment
Nasdaq CXC allows the entry of orders in the minimum tick increment allowed by UMIR: For stocks with a price >= $.50 a minimum price increment of $.01 CAD
For stocks with a price < $.50 a minimum price increment of $.005
Board Lot Sizes
Nasdaq CXC permits orders to be entered in Board lots that are defined as Standard Trading Units by UMIR which are determined by the previous day’s National Last Sale Price (NLSP) also as defined by
UMIR. An order that is entered as an odd lot or a mixed lot will be rejected.
Nasdaq CXC Intelligent Order Book™
Nasdaq CXC consumes and consolidates market data feeds from all displayed markets in Canada. This
enables Nasdaq CXC to be able to calculate the best (PNBBO) which in turn facilitates compliance with
the Order Protection Rule (OPR) and the ability to prevent locked and crossed markets.
From the market data feeds, the matching engine dynamically updates the PNBBO for all securities eligible to trade on Nasdaq CXC. If a Subscriber’s order is not marked DAO (directed action order) for the
purposes of the Order Protection Rule the system will automatically re-price the order to a price within the protected quote if the order would cross the PNBBO to create a “crossed market” or trade outside the
PNBBO (trade-through). In addition, any buy order not marked DAO entered at the Protected National
Best Offer (PNBO) or any sell order not marked DAO is entered at the Protected National Best Bid (PNBB) that would result in a “locked market” it will be re-priced to a price within the PNBBO in order to prevent
the Locked Market from occurring. When an order is re-priced it will be placed in time priority behind any other orders at a price level. By re-pricing orders in these scenarios, Nasdaq CXC is able to meet its OPR
obligations and facilitate compliance by Subscribers with rules that prohibit Subscribers from intentionally
locking or crossing the market.
Where an order would not result in a trade-through or a locked or crossed market, it will execute against orders posted in the Nasdaq CXC book at or within the PNBBO.
Order Entry Interface
All orders entered and/or modified or cancelled by Nasdaq CXC Subscribers will be entered using the
Financial Information eXchange (FIX) protocol. FIX allows Subscribers and their software developers to
integrate Nasdaq CXC into their proprietary trading systems which can be used to build customized front ends. All orders are entered via FIX into the Core Matching Engine in the Nasdaq CXC FIX protocol which
supports all Canadian-specific and UMIR required fields.
FIX Order Entry Bandwidth Recommendations:
Bandwidth recommendations for submitting orders via FIX are gauged on expected Subscriber order volume. The following table shows the maximum number of inbound orders (and/or cancels) per second
that can be handled, with no buffering or delay, with different capacity connections:
5
Connection Bandwidth Examples
Order Protocol 64kb 128kb
FIX Message Capacity Standard High Frequency
Market Data Interface
NCXL Market Data is available in multicast protocol.
CHIXMMD Market Data Interface
CHIXMMD is Nasdaq CXC’s real-time multicast market data feed that delivers market data in UDP multicast packet streams which are published over the Nasdaq CXC multicast market data network. There
are multiple data streams published over this network for resiliency and redundancy purposes. All
streams carry identical content about Nasdaq CXC market data. By subscribing to these data streams, market data customers receive the latest market data updates from the Nasdaq CXC trading platform
including information about buy, sell and sell short orders and last match traded price.
The multicast message recovery service offers message recovery to market data customers. Market data customers can connect to a designated MMRS server and request for past message retransmission. The
recovery process is implemented via a TCP connection established by a request sent by the market data
customers to the MMRS server.
CHIXMMD Market Data Bandwidth Recommendations Nasdaq CXC recommends that Subscribers allocate at least 20Mb/sec for CHIXMMD market data.
Connection Bandwidth Examples
Market Data Protocol 20Mb
CHIXMMD Recommended
As trading volumes on Nasdaq CXC grow, the volume of quote messages will also grow and consequently increase the CHIXMD and CHIXMMD market data feed bandwidth requirement. Nasdaq CXC actively
monitors the number of quote messages that are being generated by the market. Should the situation
arise, Nasdaq CXC will provide Subscribers notification of any changes that are needed to be made in the CHIXMMD bandwidth requirement.
6
Order Handling, Instructions and Smart Routing
Matching Engine – Nasdaq CXC accepts buy, sell, and sell short orders from system Subscribers,
comparing them in real-time and executing trades from matching orders based on strict price/time
priority. Orders accepted by Nasdaq CXC that are not immediately matched are “posted” in the engine’s Intelligent Order Book™, a dynamically updating real-time database of limit orders, where they are visible
to other Subscribers. Quotation for orders posted in the Nasdaq CXC book is disseminated to system Subscribers as non-attributed quotes anonymously aggregated at each price level; no Subscriber's
identity is disclosed during any part of the order lifecycle - before, during, or after an execution unless a
Subscriber opts-in for post-trade attribution.1
Post Trade Opt-in Attribution – Although quotation for orders entered in the Nasdaq CXC book is normally disseminated to system Subscriber’s as non-attributed quotes, Subscribers are able to choose to
have information about their Subscriber ID be displayed, post trade, on an order-by-order basis. Whereas most Canadian marketplaces enable Subscribers to opt-out of attribution by entering an order as
anonymous or with Broker ID #001, Nasdaq CXC enables Subscribers to opt-out of being anonymous by
entering an order as attributed with their Subscriber ID. Orders that are designated as attributed will display a Subscriber’s ID on a post trade basis - Subscriber ID’s are displayed for trades that occur.
Priority Matching
All orders follow the following sequence of execution priority; price/time.
Price Priority
Example
Priority Size Bid Offer Size
P1 300 10.00 10.01 500
P2 100 9.99 10.02 600
P3 100 9.98 10.03 100
The buy order for 300 shares by 09 has execution priority because it is the highest price bid. Likewise,
the sell order for 500 shares by 85 has execution priority because it is the lowest price offer.
Time Priority
Example
Priority Size Arrival Time Bid
P1 100 9:30:00 10.00
P2 100 9:31:00 10.00
P3 100 9:35:00 10.00
1 Subscribers’ identities are necessarily disclosed when trades are submitted to CDS
7
Where two or more orders are posted at the same price, the order that was entered first has execution
priority. In this example, the buy order for 300 shares entered at 9:30:00 has execution priority because it was entered before the other two orders for 100 shares each at the same price.
Nasdaq CXC’s Order Protection Solutions
Nasdaq CXC employs two solutions to reasonably prevent trade-throughs on its marketplace; re-pricing done by Nasdaq CXC’s Intelligent Order Book, and trade-through prevention by Nasdaq CXC’s Smart
Order Router offered to Subscribers who elect to use Nasdaq CXC Smart Order Router. Nasdaq CXC
Subscribers are provided choice in selecting which solution best fits their trading needs. Subscribers are also able to by-pass either solution by sending DAO orders which will be immediately entered on Nasdaq
CXC without reference or regard to prices on other marketplaces.
Trade-Through, and Order Re-pricing Conditions
Nasdaq CXC takes in external market data feeds from transparent Canadian marketplaces directly.
External market data feeds from protected marketplaces are consolidated to provide the matching engine with real-time market price information for the purpose of assisting Subscribers in complying with best
execution, CSA and UMIR obligations, such as the prohibition of intentionally locking or crossing a market, to the extent that is feasible based on the existing market infrastructure. If it is necessary to
look to additional marketplaces to satisfy UMIR obligations during this period, that will be the
responsibility of the Subscribers.
In accordance with NCXL’s Order Protection Rule Policies and Procedures, when an order is received directly by Nasdaq CXC, it compares the price of the order to prices from protected marketplaces for
trade-through obligations and will reasonably prevent a trade-through on its marketplace by re-pricing the order passively by one standard trading increment. Subscribers may override this preventative
mechanism by entering DAO orders.
The system will not reject orders because of trade-through. The system will assist Subscribers in meeting
these obligations by automatically re-pricing Subscriber orders as depicted in the examples below. In the case of an IOC or FOK order, the order will be cancelled back to the subscriber if it is not executed as per
the IOC or FOK instructions.
If an order would violate trade-through upon receipt, the matching engine will automatically re-price the
order before it is entered onto the order book. As a result, the pre-trade ATS market data that is disseminated accurately reflects the true state of orders and their prices on the Nasdaq CXC book in real-
time.
Example #1 - Trade-Through Prevention (ILLUSTRATIVE)
BID ASK
PBBO 10.10 10.13
Nasdaq CXC Book Quote 10.09 10.13
Given the market conditions noted above a SELL order entered at a price lower than the PNBB
will be re-priced to equal the PNBB.
Original Price Order Re-price
SELL Limit 10.09 10.11
8
SELL Market None (MKT) 10.11
A BUY order entered at a price greater than the PNBO will be re-priced to equal the PNBO minus a trading increment.
Order Price Order Re-price
BUY Limit 10.14 10.12
BUY Market None (Mkt) 10.12
In circumstances where the prevailing market conditions change after a re-priced order has already been
entered into the Nasdaq CXC book, the matching engine performs dynamic, virtually instantaneous, real-time re-pricing in reaction to market data ensuring that the order has maximum execution potential
within the constraints of the customers original order instructions.
Example #2 - Dynamic Order Re-pricing: Market Order (ILLUSTRATIVE)
BID ASK
PNBBO 10.10 10.13
Nasdaq CXC Book
Quote 10.10 10.14
Nasdaq CXC Subscriber Order Re-pricing Behavior
Original Order Price
Order Re-price
BUY Market None (MKT) 10.12 (MKT) MKT instruction is retained in memory in the matching engine
The buy market order is re-priced to 10.12, preventing a trade-through and a locked market.
However, the original instruction of MKT is retained in memory in the matching engine. As a
result the order price will float with the PNBO adjusted by a trading increment until the order is cancelled or becomes eligible for execution on terms that would not violate trade-through
obligations.
BID ASK
Updated PNBBO 10.12 10.13
Spread narrows because Nasdaq CXC
is the new inside bid
Nasdaq CXC Book Quote 10.12 (MKT) 10.14
Following a quote refresh the prevailing market conditions change and the PNBO updates to
10.14. The market buy order would not cause a trade-through if executed against the 10.14 sell order on Nasdaq CXC. As a result the market order becomes eligible for execution and a match
occurs at 10.14.
BID ASK
Updated PNBBO 10.12 10.14
Nasdaq CXC Book Quote 10.14 (MKT) 10.14 Execution occurs at 10.14
9
Note: Dynamic order re-pricing will only be available between 9:30 a.m. to 4:00 p.m. (Eastern Time).
Before 9:30 a.m. and after 4:00 p.m. (Eastern Time), the orders will be re-priced once and the price will remain static. To change the price the order must be modified or cancelled and replaced.
Example#3 - Dynamic Order Re-pricing: Limit Order (ILLUSTRATIVE)
BID ASK
PNBBO 10.10 10.13
Nasdaq CXC Book Quote 10.09 10.15
Nasdaq CXC Subscriber Order Re-pricing Behavior
Original Order
Price Order Re-price
BUY Limit 10.14 10.12 (10.14)
10.14 limit instruction is
retained in memory
in the matching engine
The buy limit order is re-priced to 10.12, preventing a trade-through. However, the original
instruction of a 10.14 limit is retained in memory in the matching engine. As a result the order price will float with the PNBO adjusted by a trading increment until the order is cancelled or
becomes eligible for execution that would not violate trade-through, up to the original limit
price.
BID ASK
Updated PNBBO 10.12 10.13
Spread narrows
because Nasdaq CXC is the new
inside bid
Nasdaq CXC Book Quote 10.12 (10.14) 10.15
Following a quote refresh the prevailing market conditions change and the PNBO updates to
10.15. There is a sell order on Nasdaq CXC at 10.15 but the limit buy order would not be eligible for execution because it is capped at the original 10.14 limit instruction.
BID ASK
Updated PNBBO 10.14 10.15
Nasdaq CXC Book Quote 10.14 10.15
10.14 limit top is
reached and enforced –
no execution
Note: Dynamic order re-pricing will only be available between 9:30 a.m. to 4:00 p.m. (Eastern Time).
Before 9:30 a.m. and after 4:00 p.m. (Eastern Time), the orders will be re-priced once and the price will remain static. To change the price the order must be modified or cancelled and replaced.
10
Please refer to the Nasdaq CXC FIX specification for detailed descriptions of how order types
are implemented.
11
Nasdaq CXC Smart Order Routing Strategies
Nasdaq CXC offers Subscribers a choice of order handling strategies to improve trading efficiencies and
help achieve best price and best execution. Nasdaq CXC Subscribers select from a suite of order handling
strategies on an order-by-order basis (default settings are available). Strategies that route orders to other marketplaces will route on a “service bureau” basis in which the receiving destination knows the
underlying Subscriber as the executing broker.
Nasdaq CXC’s Smart Order Router
Nasdaq CXC offers pre-configured (Standard Strategies) as well as customizable smart order routing strategies (Custom Strategies):
Pre-configured Smart Routing Strategies
Subscribers have the following options to choose from when selecting a pre-configured smart order routing strategy:
A) Posting destination: Nasdaq CXC, CX2, TSX, TSX-Venture
Orders will scan the Nasdaq CXC book for liquidity at a price equal to or better than the best prices displayed on other protected marketplaces; if sufficient liquidity to fully execute an order is not resident
on the Nasdaq CXC book, the SmartRouter sprays order(s) for any residual shares out to other protected marketplaces displaying liquidity at the PNBBO. Any residual shares that remain unexecuted after
scanning and spraying are posted to either: Nasdaq CXC, CX2, TSX, or TSX-Venture as determined by the
Subscriber.
B) Dynamic/Non-Dynamic:
Subscribers may elect to have the SmartRouter continuously scan the market and pull the order from the posting marketplace to re-spray if the posted order becomes marketable on other venues.
C) Access to Dark Liquidity
Subscriber’s may elect, if desired, to have their orders interact with orders on CXD and the MatchNow Dark Pool.
If at any point in time there exists a displayed market of which a Subscriber is not a member or subscriber, Nasdaq CXC and the Subscriber can discuss alternative order handling options; which include,
but are not limited to disabling routing to that market.
SMARTROUTER CUSTOM STRATEGY
Nasdaq CXC’s Canada SmartRouter has several configurable components that allow us to create custom smart routing configurations:
• Ping Destination – a blind IOC, to seek hidden liquidity for example
• Routing Table – market routing priority, also determines overspray priority
• Posting Destination • Dynamic/ Non-dynamic – re-interact with the market following a post/ stay put
• Top-Of-Book/ Multi-Price Level – price sensitive spraying/ time sensitive spraying
12
Nasdaq CXC makes ongoing enhancements to its SmartRouter to permit new and additional tailored custom strategies to meet the specific routing needs of our customers.
SmartRouter Odd/Mix Lot Order Handling:
Currently, Nasdaq CXC only accepts orders which are a multiple of the Standard Trading Unit (STU), i.e. a
Round Lot. CX2, TSX, TSX-Venture, Pure and Alpha accept Odd Lot orders (orders with a volume below a STU) however an Odd Lot will not match with a Round Lot.
The SmartRouter will intelligently handle Odd Lot orders based on the following guidelines: If marketable will be directed to CX2;
If nonmarketable will be directed to TSX or TSX-V.
Nasdaq CXC Smart Order Router Special Cases and Special Terms Order Handling
Order Type Route Description
Stop Order TSX Direct
TSX-Venture Direct
Stop and Stop Limit orders are directed to the TSX, or
TSX-Venture.
Opening Order Pre-9:30 a.m.
TSX Direct TSX-Venture Direct
Limit/Market On Open orders go directly to the TSX or TSX-Venture Opening Auction.
Opening Order Post
9:30
REJECT Limit/Market On Open orders post 9:30 a.m. are
rejected to prevent any routing errors.
Market Order Pre-9:30 a.m.
TSX Direct TSX – Venture Direct
Market Order pre-9:30 a.m. go directly to TSX Opening Auction as a Market On Open order.
Market Order
between 9:30 a.m. and 4:00 p.m.
SMRT * Market orders between 9:30 a.m. and 4:00 p.m. use
the specified SMART Strategy. (Market orders after 4:00 are rejected)
Limit On Close
(LOC) and Market On Close (MOC)
REJECT Limit On Close and Market On Close orders are
rejected.
GTC REJECT Good Till Cancel orders are rejected.
Odd Lots TSX Direct TSX-Venture Direct
Odd Lots if marketable are directed to NCX2 or otherwise are directed to the TSX or TSX-Venture.
Special Terms Limit
Order
CHIX - Direct Limit orders with MinQty, FOK, or AON parameters are
directed to CHIX.
Pegged Orders CHIX - Direct Pegged orders are directed to Nasdaq CXC.
Hidden Orders SMART CHIX Dynamic Hidden orders are sent using the SMART CHIX
Dynamic strategy.
13
Order Types
Nasdaq CXC Traditional Order Types
Market Order – An order to buy or sell a security at the best available price on Nasdaq CXC but will not
trade at a price outside the PNBBO.
Limit Order – An order to buy or sell a security at a price equal to, or better than, the specified limit
price.
Short Sell Order – An order to sell a security that the seller does not own (either directly or through an
agent or trustee) at the time of the order.
Short-marking Exempt Order – An order by an account to buy or sell a security that meets the definition of a short-marking exempt as defined by UMIR.
Nasdaq CXC Advanced Order Types
Intentional Cross
The simultaneous entry of both an order to buy and sell the same amount of a security at the same price entered by the same Subscriber. In accordance with IIROC guidance on rules for dark liquidity, Nasdaq
CXC will accept better priced intentional crosses including those entered with a price of a half trading
increment.
Internal Cross
An intentional cross between two accounts that are managed by a single firm acting as a portfolio manager with discretionary authority in managing the investment portfolio.
Basis Cross
A cross of at least 80% of the component share weighting of the basket of securities, index participation unit, or derivative instrument that is the subject of the basis trade. In accordance with UMIR, prior to
execution, the Subscriber shall report details of the transaction to IIROC.
VWAP Cross
A VWAP cross is a cross of a security at the volume weighted average price of multiple trades on a
marketplace or on a combination of marketplaces over a specified time period. The volume weighted average price is the ratio of value traded to total volume. In accordance with UMIR, where applicable,
prior to execution, the Subscriber shall report details of the transaction to IIROC.
Contingent Cross
A cross resulting from a paired order placed by a Subscriber on behalf of a client to execute an order on
a security that is contingent on the execution of a second order placed by the same client for an
offsetting volume of a related security as defined in UMIR.
Sweep and Cross Order
This order type is only available to Nasdaq CXC Smart Order Routing customers. The Sweep and Cross
order facilitates an Intentional Cross by displacing any better priced orders on protected markets. Nasdaq
14
CXC will route IOC's to all protected markets that contain displayed prices that are better than the
customer’s limit price. The IOC's will be sent to all protected markets simultaneously and carry the Bypass marker. Once Nasdaq CXC has attempted to execute against all better prices on the protected
markets, it will send a "cross" order to the Nasdaq CXC book
Bypass Order
The Bypass order marker indicates that the user does not want the order to interact with undisplayed
orders or undisplayed portions of iceberg or X-berg orders on the Nasdaq CXC market. Orders marked with the Bypass marker will be treated as Immediate-Or-Cancel (IOC).
Directed Action Order (DAO)
The DAO order marker indicates that the user has already checked the quotes of all other markets before routing to Nasdaq CXC. This order will not be eligible for Nasdaq CXC smartrouting, and Nasdaq CXC's
dynamic re-pricing and trade-through prevention mechanism will not apply. It will trade with the best priced contra-side order(s) without consideration of prices on other marketplaces.
Subscribers and their vendors will use the DAO when smartrouting orders to Nasdaq CXC. Since the Subscriber's or Subscriber's vendor's smartrouter will route to Nasdaq CXC after taking a snapshot of the
consolidated market data, there isn't a need for Nasdaq CXC to perform the price check a second time before executing the order. The DAO order allows Subscribers or their vendors who are using
smartrouting technology to "opt-out" of Nasdaq CXC's re-pricing and trade-through protection mechanism, as they are performing the price checking on their own.
Post-Only Order
An order that will post in the Nasdaq CXC order book intended to provide liquidity. If the order upon
entry would result in a trade, the order will be re-priced one tick increment more passively and booked.
This order will not interact with hidden liquidity. Post-only orders may be combined with any other order type including non-displayed orders. Two contra-side post-only non-displayed orders eligible to match will
not execute. Instead, both orders will maintain their price until executing against an active order. In addition, no execution will take place between a resting dark limit order and an incoming contra order
marked post only with the same price as the resting order. Instead, both orders will sit in the book at the
locked price.
Reserve/ Iceberg
An order where a customer determines the number of shares to be displayed,2 while the remainder is hidden in reserve. When the visible portion is fully executed, a new visible displayed size is refreshed,
drawing from the amount of the reserve. New displayed sizes will refresh until the amount of the reserve
is less than the displayed amount. At that point, the remaining reserve quantity will be displayed. An example of how priority is determined for Iceberg orders is provided below.
Example – Display Priority, Reserve/ Iceberg In the example below, the displayed buy order share sizes of 100, 200, and 100, respectively, will be
executed against matching sell (or sell short) orders based on time priority. The reserve quantities of 900 and 300 will not become eligible for matching until all displayed shares at that price level have been
exhausted.
2 The displayed quantity must be equal or greater than one standard trading unit (STU) or such greater size as designated by
IIROC.
15
Display Reserve Arrival Time Bid
100 (900) 9:30:00 10.00
200 (300) 9:31:00 10.00
100 0 9:35:00 10.00
The X-berg
An order that is similar to an Iceberg order. However, instead of the displayed size being the same every
time the order is refreshed, the displayed quantity is chosen at random by the system within a pre-specified range set by the customer. A customer sets the amount of shares to be displayed and the
amount of shares to held in reserve when first entering the order. An example is as follows:
Example – X-berg
Quantity Price Display Quantity Reserve Random Refresh Range
50000 10.00 1000 49000 +/- 500
Possible Display QTY Refreshes (STU = 100)
1500 Random (Maximum 1000 + 500)
1400 Random
1300 Random
1200 Random
1100 Random
1000
Random (Original Display
Quantity)
900 Random
800 Random
700 Random
600 Random
500 Random (Minimum 1000 – 500)
Nasdaq CXC Non-displayed Orders
Minimum Quantity
A Minimum Quantity order, such as All-or-None (AON), is an order that will only execute if there is
sufficient demand or supply to satisfy the minimum quantity instruction or the entire order in the case of
AON. If the remaining shares of a partially-filled MQ are less than the original MQ instruction the
remaining quantity will become the new MQ instruction.
Mid-Peg Order
The Nasdaq CXC Mid-Peg order is a non-displayed order that floats at the mid-point of the PNBBO which is calculated and updated in real time by Nasdaq CXC’s Intelligent Order Book. Unique to this order type,
when the PNBBO spread is an odd increment, Mid-Point orders will execute at half penny prices. Mid-Peg
orders also provide Subscribers the option to enter a limit price with the order which can be either a full
16
or half-tick increments. Limit prices entered with Mid-Peg orders have no impact on an order’s priority
standing. A limit price only determines whether or not an order is eligible to trade at a particular price point. The Mid-Peg order is an ideal tool for Subscribers to reduce market impact and to be offered price
improvement opportunities. Adding a pegged offset is not permitted for Mid-Peg orders.
The Mid-Peg order is only available from 9:30 a.m. to 4:00 p.m. Any Mid-Peg orders entered between
8:30 - 9:30 a.m. will be held by the system until 9:30 a.m. At 9:30 a.m. the orders will be “booked” and become eligible for trading. Mid-Peg orders entered after 4:00 p.m. will be rejected and any Mid-Peg
orders remaining on the book at 4:00 p.m. will be cancelled. Adding a pegged offset is not permitted for Mid-Peg orders.
When the PNBBO is locked, no Mid-Peg executions will be permitted.
Hidden Order
A non-displayed limit order that adheres to the same execution priority conditions as other non-displayed order types.
Execution Priority
Non-displayed orders will always execute after lit orders at the same price on Nasdaq CXC. After all lit orders have been displaced the hidden portion of an Iceberg or X-berg order is then given execution
priority followed by fully-hidden orders that are executed in price/time priority. Price priority for a re-priced non-displayed order is not affected by an underlying limit price. Time priority for a non-displayed
order that is re-priced is determined by the time that each re-pricing occurs. When re-pricing multiple
non-displayed orders to the same price level, the time sequence for the re-pricing will be determined by each order’s original timestamp or by the timestamp associated with the last re-pricing, whichever is most recent.
Nasdaq CXC Peg Order Types
Pegging is only available from 9:30 a.m. to 4:00 p.m. Pegged orders entered between 8:30 - 9:30 a.m.
will be held by the system until 9:30 a.m. At 9:30 a.m. the orders are “booked” and become eligible for
trading. Pegged orders entered after 4:00 p.m. will be rejected. All Pegged orders remaining on the book at 4:00 p.m. will be cancelled.
Primary A “Primary Peg” buy/sell order will peg to the PNBBO.
Primary Peg orders can be entered as either displayed or non-displayed in the Nasdaq
CXC book, and Subscribers will also have the option of entering a limit price with the
order.
Mid “Mid-Peg” orders are described above under Nasdaq CXC Non-displayed Orders
Market A “Market Peg” buy/sell order will peg to the best protected ask/bid adjusted by a trading increment as defined by UMIR.
In order to prevent locked markets, Market Peg orders will execute at the best protected ask/bid adjusted by a penny for securities priced equal to or greater than $.50 and by a
half-penny ($.005) for securities priced less than $.50.
Primary Peg orders can be entered as either displayed or non-displayed in the Nasdaq CXC book, and Subscribers will also have the option of entering a limit price with the
order
17
When the PNBBO is locked, no Peg order executions will be permitted.
Peg Offset – An increment/ decrement offset of the peg price that allows a pegged order to become
more passive/aggressive than the quote to which it is pegged. Peg offsets are not permitted to be added
to Mid-Peg orders.
Example: a Primary Peg with a + $0.01 offset will peg to the PNBB plus one cent.
Execution priority: Execution priority for non-displayed pegged orders follows the same execution
priority that was described above for “Nasdaq CXC Non-displayed Orders”. Execution of any non-
displayed pegged order or Hidden Order at the PNBBO must also be in conformance with UMIR
requirements that would allow for such executions. Execution priority for displayed pegged orders
continues to follow price/time priority with its price and time priority being affected by re-pricings in the
same manner as described below for dynamically re-priced orders.
Pegged Order Handling
From 8:30 - 9:30 a.m.
Pegged orders will be accepted but will be held by the system until 9:30. At 9:30 a.m. the orders are “booked” and become eligible for trading.
From 4:00 p.m. to 5:00 p.m.
Pegged orders entered after 4:00 p.m. will be rejected. All pegged orders remaining on the book will be cancelled at 4:00 p.m.
Time in Force Conditions
IOC – An “Immediate-or-Cancel” (IOC) order is one in which any portion of the order that is not filled
immediately is cancelled. FOK – A “Fill-or-Kill” order must execute as a complete order as soon as it becomes available on the
market, otherwise the order is cancelled.
DAY – A Day Order will remain live on Nasdaq CXC for the duration of the trading day or until cancelled by the subscriber. At the end of the Nasdaq CXC trading day (5:00 pm Eastern Time) all
outstanding, unfilled Day orders will be cancelled. GTD – A “Good ‘Till Date” (GTD) order expires at the earlier of a specified Expire Time or the end of the
Nasdaq CXC trading day. At the end of the Nasdaq CXC trading day (5:00 pm Eastern Time) all outstanding, unfilled Day orders will be cancelled.
GTC – “Good ‘Till Cancelled” (GTC) orders will be cancelled at the end of the day.
All orders that remain on the Nasdaq CXC expire and are cancelled at the end of the Nasdaq CXC trading
day (5:00 pm Eastern Time).
18
Nasdaq CXC Controls Risk Management Suite
Cancel on Disconnect Subscribers have the option to have all open orders cancelled in the event the FIX session between Nasdaq CXC and the client is disconnected.
No-Self Cross This feature is enabled on an order-by-order basis through the use of two FIX tags; the first denotes a
participant generated key to prevent orders with the same key value from trading against each other, the second informs the system which version of the No-Self Cross should be applied.
Subscribers can choose from one of the following implementation options:
Cancel the Active order;
Cancel the Passive order;
If the orders are different in share quantity, reduce the larger order and cancel the other one;
Send a fill to both orders but not shown as a trade on the public market data feed.
*Please note that although orders are not shown as a trade on the public market data feed, the fill reports will be reported to IIROC in a standardized form via a real-time regulatory feed. The unique key
provided by a Subscriber for this fourth implementation option is intended for use only on buy and sell orders for accounts that may result in trades where there is no change in beneficial or economic
ownership.
Order Entry Parameters Price limit – Please see Marketplace Thresholds section.
Share limit – Subscribers are able to set the maximum number of shares permitted per order per security. If an order is entered which exceeds the share limit, the order will be rejected and sent back to
the Subscriber.
Notional limit – Subscribers are able to set the maximum notional value per order per security. The
notional value of a trade is calculated by the number of shares multiplied by the price of the security. If an order is entered which exceeds the notional limit the order will be rejected and sent back to the
Subscriber.
19
Marketplace Thresholds
Marketplace Thresholds operate as part of a multi-tiered approach to preventing erroneous orders and
controlling short term, unexplained price volatility. In accordance with IIROC Guidance, NCXL supports
controls to prevent orders from executing outside of certain price thresholds (Marketplace Thresholds) on
all of its trading books. Orders are prevented from executing outside of two reference prices; the national
last sale price (NLSP) and the national last sale price established at one-minute intervals (OMLSP) (each a
Reference Price, taken together Reference Prices). Marketplace Thresholds are applicable during regular
trading hours (9:30 a.m. and 4:00 p.m.) and apply to all orders including DAOs with the exception of a
Basis Order, a Closing Price Order, a Special Terms Order, a Volume-Weighted Average Price Order, an
Opening Order, a Market-on Close Order and an order that participates in an auction following the
resumption of trading after a trading halt.
IIROC has prescribed different threshold levels for different classes of securities. Please see IIROC Notice
15-0186 Guidance Notice on Marketplace Thresholds (August 25, 2015) and IIROC Notice 16-0138
Additional Guidance Respecting Single-Stock Circuit Breakers and Marketplace Thresholds (June 20,
2016) for a list of prescribed thresholds for each asset class. Subscribers should refer to any new IIROC
Guidance as it becomes available and is amended from time to time.
Nasdaq CXC Limited Marketplace Thresholds
An order that is entered on any NCXL trading book at a price that exceeds either Reference Price will be
rejected upon entry. If a rejection occurs, the order will be returned to the subscriber with a message
describing that reason for the rejection.3 An order can be rejected as a single order or as part of a series
of orders. In addition, in the rare circumstance where an order is resting in the order book at a price that,
if executed would exceed a Reference Price, the order will be repriced to within the threshold parameter
based on the most recent Reference Price. Finally, a market order that is entered without a limit price will
be assigned a limit price upon entry and will post any remaining shares at the price of the most
conservative Reference Price adjusted for the applicable threshold level. For example, a buy order that is
entered as a market order on a security that has a 10% thresholds will be assigned a price that is 110%
of the lowest Reference Price.
Examples of Marketplace Threshold Controls
The following Reference Prices are used for all examples.
NLSP OMLSP Marketplace Threshold
$10.00 $10.05
10% from each Reference
Price
Example 1 Violation of the NLSP
Action: Buy order entered at $11.02
3 The message included on the order rejection is “ORDER EXCEEDED MKTPLACE THRESHOLD.”
20
Outcome: Order is rejected because it exceeds the NLSP by greater than 10%. ($11.02 > 110% of
$10.00 or $11.00)
Example 2 Violation of the OMLSP
Action: Sell order at $9.02
Outcome: Order is rejected because it exceeds the OMLP by greater than 10%. ($9.02 < 90% of
$10.05 or $9.045)
Example 3 Resting order repriced to prevent a potential trade outside the allowable threshold level
Action: Resting buy order at $11.00.
NLSP changes to $9.50
Outcome: Resting order is re-priced to $10.45. ($10.45 = 110% of $9.50, or $10.45)
Example 4 – Unpriced (market) order re-priced
Quantity BID ASK Quantity NLSP OMLSP
100 8.90 10.10 500 10.00 10.05
200 8.89 10.11 2000
Action: Sell order entered as a market order.
Outcome: Order Re-priced to $9.05. ($9.05 = 90% of $10.05).
21
Clearing and Settlement Clearing
Nasdaq CXC operates under the exchange clearing model.
All trades that have executed on Nasdaq CXC are reported to CDS at the end of the trading day. Trades include information about price, purchaser, seller, and their broker ID number. This report is used by CDS
to verify trade reporting by Canadian participants. Subscribers report all trades executed on a trading day to their custodians who in turn report all allocations to CDS.
On the next trading day after the trade (T+1) Nasdaq CXC Subscribers review the CDS trade comparison reporting between the trades submitted to CDS by Nasdaq CXC and Subscribers’ custodian. On the date
of settlement CDS, via the CNS process, will debit/credit Subscriber custodians’ CDS ledger and bank account for the trades in addition to electronically transferring the securities from the seller to the buyer.
Regular Settlement
Nasdaq CXC only accepts single orders with standard settlement instructions where settlement occurs on
the third trading day after the trade is executed (T+3) However, in the case where special direction for clearing and settlement is given by the listing exchange (as a result of an event such as de-listing, for
example) Nasdaq CXC will support trading in that symbol as long as the listing exchange also supports
trading in that symbol. Nasdaq CXC will make the appropriate adjustments to indicate the special clearing and settlement date (as agreed upon with CDS) that will be reflected in Nasdaq CXC ’s end of day trading
file that is sent to CDS.
Nasdaq CXC will not trade symbols with same day cash settlements. Symbols with same day cash
settlement will be halted on the system prior to the commencement of trading.
Special Settlement Intentional Crosses
Subscribers are able to enter intentional crosses with Non-Standard Orders4 that are subject to non-
standardized terms and conditions related to settlement that have not been set by the marketplace on which the security is listed. Non-Standard intentional crosses with special settlement instructions for same
day cash settlement will be accepted and trade.
4 A Non-Standard Order is a defined term in National Instrument 23-101.
22
APPENDIX A
Nasdaq CXC Limited Clearly Erroneous Trade Policy Definition - the execution of an order to buy, sell, or sell short a security, entered in error (e.g. in terms of price, quantity, side or symbol) at a price substantially away from, or inconsistent with, the prevailing market price for that security at the time of execution.
NCXCL reserves the right to initiate a review of a clearly erroneous trade, regardless of whether or not a
Subscriber request has been submitted, if it determines in its sole discretion that circumstances warrant
such a review.
In such instances NCXL will notify the relevant parties by electronic mail to authorized signatories, that a
transaction will be reviewed pursuant to this rule. Market participants that are not relevant parties will not
be notified that a transaction is under review.
NCXL designated principals, with the consent of IIROC will exercise their sole discretion under this policy
to cancel or amend a trade, where needed, that is the result of a trading book system error or
malfunction. Furthermore, NCXL will follow direction from IIROC to cancel, vary or correct a trade when
IIROC instructs it to do so. In addition, NCXL will facilitate the cancellation or amendment of a trade
when both counterparties to the trade agree to the trade cancellation or amendment. In this
circumstance, notification will be made to IIROC. Decisions will be made in a timely fashion and in all
cases a decision will be made no later than the close of business on the trading day of the occurrence
which led to the review being initiated.
NCXL will promptly notify the relevant parties and IIROC via electronic mail, and telephone as conditions
warrant, of its decision to cancel a trade or trades.
After NCXL processes the cancellation or amendment of any clearly erroneous trade, the trade is null and
void.