NLX Trading Procedures - Nasdaq, Inc....NLX Official An appointed individual in the Market Operations team of NLX with specific authorization to manage relevant Market Operations procedures

NLX Trading Procedures

Version 1.6 (January 2015)

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Table of Contents

Definitions .................................................................................................................................................... 3 1 Executive Summary .......................................................................................................................... 8 1.1 Introduction ....................................................................................................................................... 8 2 Overview of the Market ..................................................................................................................... 9

2.1 Market structure ............................................................................................................................... 9 2.2 Interest Rate Products listed ............................................................................................................ 9 3. Participant Hierarchy ...................................................................................................................... 10 3.1 The Designated Representative ..................................................................................................... 10 4 Trading on the Market .................................................................................................................... 11

4.1 Session States................................................................................................................................ 11 4.2 Pre Open ........................................................................................................................................ 11

4.3 The Uncross……………………………………………………………………………………………… 13 4.4 Open Session - Continuous Trading .............................................................................................. 14 4.5 Post Close ...................................................................................................................................... 17 4.6 Closed ............................................................................................................................................ 17 4.7 Trading and Matching Halts and Restoration of Trading ................................................................ 17 4.8 Price Limits ..................................................................................................................................... 17 4.9 Request for Quote and Pre-Negotiated Cross Transactions .......................................................... 18 4.10 Strategies ....................................................................................................................................... 19 4.11 Settlement Prices ........................................................................................................................... 19 4.12 Trade Cancellations ........................................................................................................................ 21 5 Registration of Off Order Book Trades on the Trade Registration Facility ................................ 22 5.1 Block Trades .................................................................................................................................. 22 5.2 Asset Switch Trades ....................................................................................................................... 22 5.3 EFP Trades .................................................................................................................................... 22 6 Orders and Validity ......................................................................................................................... 24

6.1 Order types ..................................................................................................................................... 24 6.1 Time Conditions .............................................................................................................................. 25 6.2 Time-in-Force ................................................................................................................................. 25 6.3 Ranking of Orders .......................................................................................................................... 25 6.4 Order Modification .......................................................................................................................... 25 6.5 Tick Sizes ....................................................................................................................................... 25 7 Implied Orders ................................................................................................................................. 26

Appendix A: Session States for markets ................................................................................................ 27 Appendix B: Markets and Trading Functionality – an Overview........................................................... 29 Appendix C: Price Limit Spreads ............................................................................................................. 30 Appendix D: Minimum Tick Size .............................................................................................................. 31 Appendix E: Market Data and price concepts ........................................................................................ 32 Appendix F: Position Accounts ............................................................................................................... 33 Appendix G: Product Specification ......................................................................................................... 34 Appendix H: Block Trades ....................................................................................................................... 40 Appendix I: Asset Switch ......................................................................................................................... 43 Appendix J: Exchange For Physical (EFP) Trades ................................................................................ 45 Appendix K: Procedure for unauthorised use of usernames and passwords ..................................... 47

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Definitions

Asset Switch A type of Off Order Book Trade which is a two legged Trade

consisting of the simultaneous execution of two off-setting Trades in two different futures Products.

Asset Switch Executing Participant

Automatic Order Matching

An Individual authorised by a Participant to arrange and execute Asset Switch Off Order Book Trades on its behalf.

The process in the Central Order Book whereby sell and buy Orders that have been entered in the System by Participants are matched automatically in accordance with these Trade Procedures when the price, volume and other specifications of such Orders match.

BBO The Best Bid or Offer of an Order Book.

Block Trade A type of Off Order Book Trade which has a minimum volume

requirement.

Block Trade Executing Participant

An Individual authorised by a Participant to arrange and execute Block Trades on its behalf.

Business Day Has the meaning given to it in the NLX Rule Book.

Central Counterparty

(CCP)

Central Order Book

(COB)

Has the meaning given to it in the NLX Rule Book.

The auto-matching order book which holds all active Orders entered into the System by Participants.

Client Has the meaning given to it in the Rule Book.

Crossed Orders An order book where some offers exist at a price below the price of

some other bids or vice versa. This cannot exist during continuous matching as limit and market orders would be matched instantaneously.

Daily Settlement Prices The price for each Expiry Month or Delivery Month, of a Product, calculated at a predefined time as per the relevant Product specification for that Product on each Business Day.

Delivery Month The month the selling Participant must deliver the underlying asset of a Product, and the buying Participant must accept and pay for the underlying asset of the Product.

Designated Representative

Early Final Settlement Price

An ITR appointed by the Participant, who is responsible for all trading activities conducted on the Market by the ITRs authorised by that Participant.

The price for a Delivery Month, for a deliverable Long Term Interest Rate Product calculated at a predefined time as per the relevant Product specification on each Business Day during the Notice Period.

EFP Executing An Individual authorised by a Participant to arrange and execute.

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Participant EFP Off Order Book Trades.

Equilibrium Price The price, calculated in accordance with paragraph 4.2 of these

Trading Procedures.

Exchange for Physical (EFP)

A type of Off Order Book Trade which is a two legged Trade consisting of the simultaneous execution of a futures Trade and a related OTC or other futures product not listed on the Market (i.e. either an OTC product or a related futures product listed on another exchange).

Expiry Month The month a Product expires, and the Final Settlement Price is calculated.

Final Settlement Prices (FSP)

The final settlement price of a Product calculated when the Product expires.

FIX Establishes the following three messaging protocols:

Market Data: Anonymous Market-by-Price; aggregated quantity and price of all Orders/Quotes activity at 50 best price levels, as well as trade activity and administrative messages. Order Entry: Access to Order Management and Trade Registration on the Central Order Book and Trade Registration Facility, respectively.

FIX Reference Data: All delivery months/ expiries and strikes

available for trading with associated last trade date.

Implied Order Implied liquidity determined from related Resting Orders on the Market.

Individual Trading Representative (ITR)

A specific individual user authorised by the relevant Participant to trade on the Market.

Instrument The unique identifier for the individual elements of a Product; which include the NLX product code, delivery month, strike and put/call.

ITCH Establishes the following two messaging protocols:

Auxiliary Market Data: Reference Data, Trade Registration activity, Cancel Trades, RFQs, Post-trade and administration information.

ITCH Market Data: Anonymous Market-by-Order; quantity and price of all Orders /Quotes activity at all price levels, matched trades and Pre-trade information.

Limit Order An Order in the COB which specifies a maximum purchase price or minimum selling price.

Long Term Interest Rate Products where the maturity of the underlying is greater than one year (e.g. Long Gilt Futures).

Lot Size Volume increment specified by the Market. For all Products, the minimum lot size will be 1.

London Time Greenwich Mean Time (GMT) with adherence to British Summer Time (BST). BST begins on the last Sunday of March and ends on the last Sunday of October, during which time clocks are advanced

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from GMT by one hour (GMT +01:00).

All references to time in these Trading Procedures, and the Rule Book are references to London time;

Market Has the meaning given to it in the NLX Rule Book.

Market Data The data available to participants as described in Appendix E.

Market Half Day A day on which the Market is open until 1pm only.

Market Holiday A day on which the Market is not open for business generally.1

Market Notice Has the meaning given to it in the NLX Rule Book.

Market Order An Order entered into the COB to sell or buy an Instrument at the best available price. The volume specified in that Order may trade against volume available through Resting Orders on the Central Order Book.

Market-To-Limit Order An Order entered into the COB to sell or buy an instrument only at the best price, if any volume of that Order remains unmatched, the Order is converted into a Limit Order at the matching price.

NLX Official An appointed individual in the Market Operations team of NLX with specific authorization to manage relevant Market Operations procedures.

Notice Period For Long Gilt Products, the period during which the Seller can give notice to make physical delivery of the underlying bonds.

Off Order Book The process of Order matching outside of the Central Order Book where Orders are executed as bi-lateral Trades.

Off Order Book Trade Registration

The facility for Order matching outside of the Central Order Book.

Open Session Has the meaning given to it in paragraph 4.1 of these Trading Procedures.

Opening Hours Means the period beginning with the time at which the System is available and ending at the End of Day (as described in paragraph 4.1 of these Trading Procedures).

Order Has the meaning given to it in the NLX Rule Book.

OTC Model Price The theoretical settlement price based on OTC equivalent markets.

Participant Has the meaning given to it in the NLX Rule Book.

Post Close Session Has the meaning given to it in paragraph 4.1 of these Trading Procedures.

Pre-defined Strategy An NLX specified Strategy that is defined and recognised by the System.

Pre Open Session Has the meaning given to it in paragraph 4.1 of these Trading Procedures.

Preliminary Settlement A provisional indication of the Daily Settlement Price, sent out to Participants of the Market before the Daily Settlement Price is finally

1 To be considered further since there may be some days where the Market is open generally but may

be closed for certain Products (i.e. trading cannot take place for certain products).

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Price determined.

Price Limits The specified margin above and below the Reference Price of a Product outside of which Orders will be rejected in order to protect Participants from executing Trades at erroneous price levels.

Price, Pro Rata Priority Orders ranked on price and then timestamp of the order arriving at the Matching Engine. However, matching is based on price and then volume associated with the resting Order.

Price, Time Priority Orders are ranked by price and then timestamp of the order arriving at the Matching Engine and the matching of orders is based on price and then time of Order entry.

Product A product listed on the Market.

Product Holiday Means a day on which the Market is open for business generally but is not open for trading in the relevant Product.

Quotes Symmetrically bid and ask orders in a single expiry of a product by a single participant

Reference Price Defined in Paragraph 4.8.

Request For Quote A broadcast made by a Participant to other Participants of the Market indicating an interest in a price quotation of a specific Instrument or Strategy.

Resting Order Buy or sell Orders entered in the COB which have not been matched or cancelled.

Rule Book The legally binding document between the Operator and Participants that, amongst other things, sets out the terms on which the Market provides trading services to Participants.

Short Term Interest Rate Products listed on the market where the maturity of the underlying is less than one year (e.g. Euribor® Futures).

Strategy A Trade consisting of the simultaneous execution of two or more Trades in Instruments with different Expiry/ Delivery months and/ or Strike.

System Has the meaning given to it in the NLX Rule Book.

Time of Agreement The time when a Trade is agreed. This must be recorded for the registration of Off Order Book Trades.

Time of Trade Execution The time when a Trade entered into the COB is automatically matched or when an Off Order Book trade is registered.

Trade

Trade Cancellation

Has the meaning given to it in the NLX Rule Book.

The facility made available by an NLX Official when a Trade has been executed at an aberrant price, and will be cancelled as more fully described in paragraph 4.12 of these Trading Procedures.

Trading Hours The Trading Hours for each Product are set out in "Chapter 4" and "Appendix G: Product Specification" of these Trading Procedures.

Trading Session The period of the Business Day during which Orders may be entered into the System; this includes the Pre Open and Open Sessions.

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Uncross The event when the Pre Open Session ends and Crossed Orders in

the COB are matched based on the Equilibrium Price determination.

Volume Weighted Average Price (VWAP)

The sum of each price traded within a defined period, multiplied by its associated volume, divided by the total volume.

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1 Executive Summary

NASDAQ OMX/NLX Group Inc. ("NASDAQ OMX"), through its UK subsidiary NASDAQ OMX NLX Limited (the "Operator"), operates a European MTF called NASDAQ OMX NLX (“NLX” or the "Market") which is positioned to compete in the rapidly changing market for pan-European derivatives. Initially the Market facilitates trading in both the short and long end of the European and UK interest rate yield curves and offers both futures and options products which may be transacted both in the Central Order Book (COB) and Off Order Book.

The Operator has engaged LCH.Clearnet to provide Central Counter Party (CCP) services. This trading and clearing partnership provides an innovative new offering that addresses the needs of clients and traders seeking an optimal environment for the automated, electronic execution of European Interest Rate products on one platform, which are then centrally cleared, using an innovative VaR Risk Management system, in a single clearing pool at LCH.Clearnet.

1.1 Introduction

In particular, in addition to an overview of the Market, these trading procedures set out binding rules for Participants relating to:

Participant Hierarchy

Trading on the Market

Registration of Off Order Book Trades

Orders and Validity

Implied Orders

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2 Overview of the Market

2.1 Market structure

The Market offers a wide variety of interest rate products across two services:

Central Order Book

Off Order Book Trade Registration

All trades are cleared by LCH.Clearnet

2.2 Interest Rate Products listed

The following products will initially be listed on the Market and may be executed in the Central Order Book or Off Order Book:

Futures:

3 month Euribor® Futures

3 month Sterling Futures

Long Gilt Futures (4 %)

2 year Schatz Futures (6 %)

5 year Bobl Futures (6 %)

10 year Bund Futures (6 %)

It is expected that Options on the above futures Products will be listed on the Market shortly after go-live.

An up to date list of all products listed on the Market can be found in Appendix G: Product Specifications.

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3 Participant Hierarchy

Participant

Designated

Representative

ITR ITR ITR

Figure 1 Participant Hierarchy

3.1 The Designated Representative

Each Designated Representative will be issued with at least one ITR username, FIX Order Entry Port and a valid password (the "ITR connection details") by the NLX Market Operations team. The NL X Market Operations team will generally direct all queries in relation to business submitted under these ITR connection details to the relevant Designated Representative.

The Designated Representative is obliged to ensure, that all business activity conducted using the allocated ITR connection details is in compliance with the Rule Book and these Trading Procedures. The Designated Representative must also have the ability to alter or cancel any Orders submitted using such ITR connection details. The Designated Representative is responsible for the competence of any person utilising these ITR connection details.

The Designated Representative or a nominated alternate must be contactable by the NLX Market Operations team at all times while these ITR connection details are being used.

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4 Trading on the Market

4.1 Session States

The table below shows the relevant session times for the Market on a normal Trading Day. All times set out below are London Time.

For more information, see Appendix A.

Table 1 Trading Sessions on the Market

London Time System available

Start of Day Continuous Trading

Daily Settlement

Price Calculation

Market Close

End of Day

Pre Open Session

commences

Open Session

commences

Post Close Session

commences

Post Close

Session ends

Euribor® Futures

05:00 06:00 07:00 16:15 21:00 22:00

Sterling Futures

05:00 07:00 07:30 16:15 18:00 22:00

Long Gilt Futures

05:00 07:30 08:00 16:15 18:00 22:00

Bund/ Bobl/ Schatz Futures

05:00 06:00 07:00 16:15 21:00 22:00

Euribor® Options

05:00 06:00 07:02 16:15 18:00 22:00

Sterling Options

05:00 07:00 07:32 16:15 18:00 22:00

Long Gilt Options

05:00 07:30 08:02 16:15 18:00 22:00

Bund/Bobl/ Schatz Options

05:00 06:00 07:02 16:15 18:00 22:00

4.2 Pre Open

To commence the Pre Open Session a market message is sent out to all Participants subscribed to Market Data indicating the start of the Pre Open Session.

During the Pre Open Session, Participants may submit, modify or cancel orders for Products with specified expiries, delivery months and strategies listed in the Central Order Book (COB). All Orders are submitted to the System, time-stamped and ranked Market-by- Price and then Market-by-Time. During the Pre Open Session, Participants also have the ability to create Strategies consisting of up to four options Products. All possible combinations of futures calendar spread, butterfly and condor strategies are predefined in the System.

During the Pre Open Session, Participants are not able to execute Off Order Book Trades on any of the Products listed on the Market.

Orders submitted during the Pre Open Session shall remain in the COB unmatched, until the Uncross which occurs at the end of the Pre Open session.

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During the Pre Open Session, the market is transparent; all submitted or modified Orders with associated volume are disseminated to subscribed Participants. Implied Orders are not calculated or disseminated during the Pre Open session.

The Equilibrium Price (EP) is calculated and disseminated after every update throughout the Pre Open Session.

All Orders will be disclosed to Participants with their actual price during the Pre Open Session and a crossed Order Book will be disseminated. Order information will be available both as Market-by-Order (MBO) information via ITCH and as Market-by-Price (MBP) information via FIX. MBO information enables Participants to see individual Orders in the Central Order Book. The Market will disclose the full market depth at order level over ITCH. MBP information enables Participants to see aggregated volume and prices for each price level. The Market will disseminate aggregated volume over the top fifty price levels over FIX.

Table 2 Example Schedule for a EURIBOR® Futures Pre Open session with Open at 07:00 London Time

Pre Open Uncross

06:00 – 07:00 07:00

Order Management Order management

Order entry: Limit, Market-to-Limit and Stop Orders with associated valid time-in-force conditions GFD, GTC, GTD and IOC. Quotes with valid time-in-force GFD.

Volume and Limit Price displayed

Auto matching No Uncross Algorithm

Equilibrium Price Equilibrium Price (EP) calculated and disseminated after every update. Crossed orders matched on Central Order Book at Uncross. EP at Uncross disseminated as Opening Price.

No

ITCH Multicast Market Data

Anonymous Market-by-Order; quantity and price of all added, updated and removed Orders/Quotes.

EP and associated quantities.

Anonymous Market-by-Order; quantity and price of all added, updated, removed and executed Orders/Quotes.

FIX Unicast Market Data

Anonymous Market-by-Price; aggregated quantity and price of all added, updated and removed Orders/Quotes if contributing to/removed from 50 best price levels.


Anonymous Market-by-Price; aggregated quantity and price of all added, updated, removed and executed Orders/Quotes if contributing to/removed from 50 best price levels.


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4.3 The Uncross

During the Pre Open Session, a two sided auction is organised, which ends with the Uncross, where Orders entered during the Pre Open Session on both sides of the Central Order Book are uncrossed automatically at the Equilibrium Price.

Before the Uncross is performed, a check is made for whether or not it is needed (i.e. if there are any crossed prices). If the Uncross is not required, the session change is made without executing the Uncross and the BBO is established. The Opening Price is then established by the first match completed at the Uncross or in the Open Session (if there is no Uncross).

The Equilibrium Price is the price at which the most quantity will execute with the lowest imbalance. Hence, following the Uncross there are no crossed prices left in the Order Book. Executions at the Uncross are labelled as such in the FIX and ITCH Market Data protocols.

The Equilibrium Price will include the following Order Types:

Limit Orders

Market-to-Limit Orders

Quotes

The following are excluded from the calculation of the Equilibrium Price:

Untriggered Stop Orders

Implied Orders

Fill-or-Kill Orders

For the Market, the following methodology is used to calculate Equilibrium Price:

Maximize Executed Quantity – subject to the following, the Equilibrium Price shall be the

price at which the execution of most quantity will occur.

Minimize Surplus Quantity – if there is more than one price at which the most Orders will be executed, then, subject to the following, the Equilibrium Price will be the price which would lead to the lowest imbalance.

Let Market Pressure decide - if there is more than one price at which the same lowest

imbalance is possible, subject to the following, the Equilibrium Price shall be determined by market pressure.

Choose Price Closest to Reference Price - if there is more than one price which would be determined by market pressure, the Equilibrium Price shall be the price closest to the Reference Price.

Note: It is possible to calculate Equilibrium Prices in Strategy Order Books, based on strategy orders entered directly into the Strategy Order Book. This is determined in the same way as equilibrium calculations for the Single Order Book with one exception; instead of the price closest to a Reference Price being selected for the Equilibrium Price in step four, the average of the highest and lowest eligible price is chosen as Equilibrium Price.

Any crossed order matched at the Equilibrium Price sets the Open Price in the Open Session. The Central Order Book then moves from no-matching (during the Pre Open Session) to continuous matching (during the Open Session).

At the end of the Pre Open Session, the System will remove unmatched or partially matched orders placed during the Pre Open Session with Time-In-Force set to IOC. Partially matched Market-to-Limit Orders with Time-In-Force set to GFD, GTD or GTC are converted to Limit Orders with price equal to the Equilibrium Price.

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If trigger conditions are met by the Uncross, Stop Orders are triggered and executed. Stop Orders can be triggered by the Equilibrium Price, but do not contribute to the calculation of the Equilibrium Price.

Once the Uncross is complete in the outright markets, the Strategy Order Books are uncrossed at their respective Equilibrium Price. Immediately following the Uncross of Strategy Orders, Implied Orders are activated for the Open session based on the outright BBO.

4.4 Open Session - Continuous Trading

Ranking for all Orders entered prior to the Uncross and during continuous trading are based on Price and then Time.

Matches are allocated based on Price and then Time, for Price, Time Priority, or Price and then the associated volume for Price, Pro Rata Priority, as per the relevant Product specification.

Orders (with time conditions GTC and GTD) entered prior to the current trading day will keep their Time Priority.

Table 3 Example Schedule for Market Open and Close for EURIBOR® Futures

Open Post Close

07:00 – 21:00 21:00 – 22:00

Order Management

Unexecuted Limit and Stop Orders with Time-in-Force GFD, GTC and GTD following the Uncross enter continuous market, IOC Orders are cancelled. Unexecuted Quotes with Time-in-Force GFD enter continuous market.

Order Entry, Quoting, Cancel and Cancel/Replace allowed.

Orders are disseminated.

Off Order Book Trade Registration.

Unexecuted Limit Order, GTC, GTD, can be amended or deleted. GTC, GTD Orders are entered back into the market at Pre Open of next Trade Day.

Order Cancel messages.

Auto matching Yes No

Equilibrium Data

No No

ITCH Multicast Market Data

Anonymous Market-by-Order; quantity and price of all added, updated, executed and removed Orders/Quotes.

No, Market-by-Order.

Auxiliary Multicast Market Data

Off Order Book trades, cancel trades, RFQs and Settlement Prices.

FIX Unicast Market Data

Anonymous Market-by-Price; aggregated quantity and price of all added, updated, removed and executed Orders/Quotes if contributing to/removed from 50 best price levels.

Off Order Book trades, cancel trades, RFQs and Settlement Prices.

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4.4.1 Automatic Order Matching

Resting buy or sell Orders entered into the Central Order Book are matched against a corresponding incoming sell or buy Order in the Central Order Book, to create a matched trade.

Each incoming Order is immediately checked for execution against Resting Orders on the opposite side of the Order Book. Orders can be executed in full or in part in one or more steps.

Buy orders submitted into the Central Order Book with a buy price higher or equal to the sell Order with the lowest price (crossing prices), will be matched into one or more trades depending on the volume of the incoming Order and the volume and the price of the resting sell Order(s).

The match price is determined by the price of the Resting Order in the Central Order Book. The matching process will attempt to fill as much as possible of the volume of the incoming sell or buy Order until the limit of the crossing prices is passed.

4.4.2 Matching Priority for Products

Orders entered in the Central Order Book will be matched according to the relevant priority and allocation rules, see Table 4 below.

4.4.2.1 Best Price Setter definition

The Best Price Setter is the first Order that offers a higher bid or a lower offer price in the prevailing market and betters the market price in the Central Order Book with an Order or Quote. The ITR which has established the best price level remains Best Price Setter at the given price level during the entire trading session (until executed) even if a new better price level has been established.

4.4.2.2 Price, Pro Rata Priority Algorithm definition for STIR and Schatz Futures

The following defines the Price, Pro Rata Algorithm used on the Market;

For the STIR and Schatz Futures at the given price level:

1. If a Best Price Setter exists, then allocate 30% of the incoming Order (rounding calculated quantity up) to the Best Price Setter, then:

a. If the incoming Order quantity remains after the initial allocation to

the Best Price Setter equals or exceeds 10 lots, then:

i. first allocate the remaining part of the incoming Order according to Price, Pro Rata Priority (rounding calculated quantity down) to all remaining Resting Orders, based on total remaining quantity after the initial allocation to the Best Price Setter; and

ii. then allocate any remaining part of the incoming Order according to Price, Time Priority beginning with any Resting Order(s) that was/were not allocated any quantity in the previous step; or

b. If the incoming Order quantity after the initial allocation to the Best

Price Setter is less than 10 lots, then allocate [any] remaining part of the incoming Order according to Price, Time Priority of all remaining Resting Orders, or

2. If no Best Price Setter exists, then:

a. If the incoming Order quantity equals or exceeds 10 lots, then:

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i. first allocate the incoming Order according to Price, Pro Rata (rounding calculated quantity down) of all remaining Resting Orders; and

ii. then allocate the remaining part of the incoming Order according to Price, Time beginning with the Order(s) that was/were not allocated any quantity in the previous step; or

b. If the incoming Order quantity is less than10 lots, allocate only

according to Price, Time.

See Table 4 below for more details.

4.4.2.3 Price, Pro Rata Priority Algorithm definition for STIR and Schatz Options

For the STIR and Schatz Options at the given price level;

1. First allocate the incoming Order according to Price, Pro Rata Priority (rounding calculated quantity down); and

2. Then allocate the remaining part of the incoming Order according to Price, Time beginning with the Order(s) that was/were not allocated any quantity in the previous step

See Table 4 below for more details.

4.4.2.4 Price, Time Priority Algorithm definition for LTIR Products

LTIR Products, except Schatz Futures are ranked and allocated according to Price, Time Priority.

Table 4 Matching Priority for Products

Product Product Priority 1 Priority 2

Short Term Interest Rates

Including Schatz

Futures Price Pro-rata

Long Term Interest Rates

Futures Time

Short Term Interest Rates

Including Schatz

Options Pro-rata

Long Term Interest Rates

Options Time

All Orders and/or Quotes are public during the Trading Session. Order information will be available as Market-by-Order (MBO) information via ITCH, and as Market-by-Price (MBP) information via FIX.

MBO information enables Participants to see each individual Order in an Order Book. MBP information enables Participants to see the aggregated volume at each price level. The Market will disseminate the top fifty price levels over FIX and the full depth over ITCH.

All Orders and matched Trades are disseminated as real-time market data; all matches are anonymous i.e. counterparty information is not published.

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4.5 Post Close

At Market Close, auto-matching ceases and the session transitions to the Post Close; all GFD Orders and Quotes are automatically cleared from the Central Order Book. New orders cannot be submitted during the Post Close Session.

During the Post Close Session, ITRs can modify and cancel any GTC and GTD Orders in the System.

At the end of the Post Close Session, Order management ceases and the System is set to Closed.

During the Post Close Session all Order updates are only disseminated to the respective ITR. Order information is not available via ITCH or FIX.

Table 5 Example Schedule for EURIBOR® Futures Post Close

Market Close Post Close Session

21:00 21:00 – 22:00

Order Management

Auto-matching ceases.

GFD Orders and Quotes automatically cleared from the Central Order Book.

GTC and GTD Orders in the Central Order Book can be modified and cancelled.

Auto matching No No

Equilibrium Data

No No

4.6 Closed

GTC and GTD Orders remain in the Central Order Book and information is only available to their respective ITR. Participants can remain logged in until the System is closed.

4.7 Trading and Matching Halts and Restoration of Trading

Trading may be suspended by NLX Market Operations either for technical or regulatory reasons, or for reasons outside the Operators control. The Operator shall provide Participants with information on Trading and Matching Halts and the subsequent restoration of trading by system broadcast and/or a Market Notice or any other method that The Operator deems appropriate.

Trading will be restored by the Operator when the Operator deems that it can be restored in an orderly manner. This may include the requirement to reduce or extend the current Trading Session, or not restoring trading until a subsequent Trading Day.

Any changes to the timing of the Daily Settlement Prices or the method of the determination of the Daily Settlement Prices that may be required will be made at the discretion of the Operator.

4.8 Price Limits

Throughout the Open Session, Price Limits for all Products will be calculated from a Reference Price; with the same margin allowed above the Reference Price for Bid Orders/Quotes and below the Reference Price for offer Orders/Quotes.

The Reference Price for each discrete Expiry / Delivery month will be generated as follows:

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During the Pre Open Session, Price Limits will not be activated.

At commencement of the Open Session, the Reference Price will be last traded price from the previous trading session following the release of the Daily Settlement Price. If there was no matched trade after the release of the Daily Settlement Price of the previous trading session, then the Reference Price shall be the Daily Settlement Price.

During the Open Session, the Reference Price for a Product is defined as:

The last traded price, or bid price if the bid price is greater than the last traded price, or ask price if the ask price is lower than the last traded price.

Both Outright and Implied Orders will be disclosed to the market if they are at or within the current Price Limits. If Implied Out orders are outside the price limit, they will be displayed at the Price Limit.

Buy orders with prices lower than the lower Price Limit and sell orders with prices above the upper Price Limit are allowed to enter the system. On the other hand, buy orders with prices above the upper Price Limit and sell orders with prices below the lower Price Limit will be rejected. Orders with prices equal to the Price Limit will be accepted.

Implied bids with prices lower than the lower Price Limit and implied offers with prices above the upper Price Limit are generated. Conversely, the price of an implied bid order shall be constrained to the upper Price Limit, while an implied offer shall be constrained to the lower Price Limit.

Attempts to enter Orders and Quotes during the Open Session outside the prevailing Price Limits for the relevant Product will be rejected by the System. Strategy Limit Orders, and both Single and Strategy Market and Market-to-Limit Orders are not validated against price limits. The Operator will send a message to that Participant via the relevant ITR connection to inform him of the rejection. The permitted spreads for Price Limits for each Product will be determined from time to time by the Operator. The spreads maybe adjusted to reflect market conditions with the objective of preventing the execution of any Orders submitted to the System with manifest pricing errors and/or at unrepresentative price levels. The current Price Limit spreads for each Expiry / Delivery month for each product is published in Appendix C: Price Limit Spreads.

4.9 Request for Quote and Pre-Negotiated Cross Transactions

A Request for Quote (RFQ) is a broadcast message sent by an ITR to all Market Data subscribers, calling for a price in a specific Product. The initiator of an RFQ can specify an expiry /delivery month or strategy (Pre-defined or Tailor Made) and various indications of interest such as side and quantity. An RFQ is sent to all Participants anonymously.

When an RFQ is published, responding Participants may enter or update their Quotes or Orders in the Central Order Book; Trades will be matched in the Central Order Book using the normal matching rules defined in Section 4.4 Open Session - Continuous Trading.

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The execution of pre-negotiated business and cross transactions is supported for all NLX Products.

Matching business can be secured via pre-negotiation within the same Participant, with other participants or with Clients.

The pre-negotiation and / or execution of a client order must comply with the Spirit of the Rules, Section 3.1 of the NLX Rule Book and cannot be detrimental to the interests of the client.

The separate buy and sell orders which have been secured by pre-negotiation may be submitted to the Central Order Book provided the following:

An RFQ must first be entered into the relevant expiry month or strategy, where a no bid and / or offer is present.

The matching business may be entered into the Central Order Book after a period of 5 seconds for futures business has elapsed and no more than 30 seconds after the RFQ has expired

No bids or offers should be entered into the Central Order Book to avoid the RFQ procedure.

4.10 Strategies

Calendar Spreads, Butterfly and Condor strategies are predefined across all listed delivery months for futures Products.

The System currently supports strategies of up to four legs, for Options, which can be created by an ITR throughout a Trading Day. Strategy Order Books are integrated into a Single Order Book, creating the Central Order Book, via Implied Orders.

Strategy Orders are stored in the specific Strategy Order Book until they are executed, either by an outright Order or directly, in a strategy to strategy match. For a Strategy Order to match, all expiry months associated with the Strategy must be matched in full for the Trade to be completed.

4.11 Settlement Prices

An innovative approach to determining Daily Settlement Prices (DSPs) and Final Settlement Prices (FSPs) has been adopted as set out below.

4.11.1 Daily Settlement Price (DSP) – Futures Products

Daily Settlement Prices for futures Products are calculated as specified below at 16:15, and disseminated shortly afterwards. All markets will continue to trade until the specified Market Close for each Product. After Market Close, the Daily Settlement Prices will be sent to the Clearing House, LCH.Clearnet.

For Futures DSP calculations the Volume Weighted Average Price (VWAP) of trades executed within the last minute prior to the settlement calculation time are used. This price will be combined with the equivalent OTC market price for the same period (the OTC Model Price) in a pre–determined weighting.

The Volume Weighted Average Price (VWAP) is calculated as follows:

∑ (Price of Trade x Volume of Trade)/Total volume of Trades in the Period

For example, if four trades were completed one minute prior to the DSP calculation time, the VWAP would be calculated as follows:

Trade 1 Trade 2 Trade 3 Trade 4

Price 98.85 98.55 98.7 98.6

20

Lots 10 50 60 50

Price*Lots 988.5 4927.5 5922 4930

∑ (Price x Volume) = 16768

Total Volume = 170

∑ (Price x Volume)/Total Volume=98.64

4.11.1.1 Daily Settlement Prices Weighting Rules for Futures Products

The weighting between the calculated VWAP from the relevant futures market and the OTC Model Price is determined as follows, subject to the constraint that the DSP must fall in the range between and including the COB lowest Best Bid to highest Best Offer during the final minute prior to 16:15.

Providing five trades or more have taken place in the final minute of trading prior to 16:15, the DSP is calculated using 100% VWAP Price;

If 2 to 4 Trades have taken place the DSP is calculated as follows:

50% VWAP of trades in the final minute

50% OTC Model Price

If 1 or no trade has taken place, the DSP is calculated as follows:

100% OTC Model Price

In the event that a Daily Settlement Price cannot be determined either from trading activity or from the OTC Model Price, the Operator reserves the right to set the Daily Settlement Prices at its absolute discretion.

4.11.2 Final Settlement Prices (FSP) - Futures Products

The Final Settlement Price for Euribor® and Sterling Futures Products are determined as per the Product specifications, see Appendix G: Product Specification. In short, the Euribor® Futures FSP is based on the 3 month EBF EURIBOR® Offered Rate and the Sterling FSP based on the 3 month ICE LIBOR

1 Offered Rate.

The Final Settlement Price for Long Term Interest Rate Futures Products will be determined as follows, subject to the constraint that the FSP must fall in the range between and including the COB lowest Best Bid to highest Best Offer during the final minute prior to the Last Trading Time.

Providing five trades or more have taken place in the final minute of trading prior to the

1 ICE LIBOR is a trade mark of ICE Benchmark Administration. ICE BENCHMARK ADMINISTRATION LIMITED MAKES

NO WARRANTY, EXPRESS OR IMPLIED, EITHER AS TO THE RESULTS TO BE OBTAINED FROM THE USE OF ICE LIBOR AND/OR THE FIGURE AT WHICH ICE LIBOR STANDS AT ANY PARTICULAR TIME ON ANY PARTICULAR DAY OR OTHERWISE. ICE BENCHMARK ADMINISTRATION LIMITED MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE FOR USE WITH RESPECT TO THREE MONTH STERLING FUTURES.

21

Last Trading Time, the FSP is calculated using the following weightings:

100% Volume Weighted Average Price (VWAP) of trades in the final minute

If between two and four trades have taken place, the FSP is calculated as follows:

50% VWAP of Trades in the final minute of Trades in the final minute

50% OTC Model Price

22

If one or no trade has taken place, the FSP is calculated as follows:

100% OTC Model Price

Final Settlement Prices will be displayed on the System and/or any additional data vendor system determined by the Operator.

In the event that a Final Settlement Price cannot be determined either from, a data provider, trading activity or from the OTC Model Price, the Operator reserves the right to set the Final Settlement Prices at its absolute discretion.

4.11.3 Daily Settlement Prices on Market Half Days

On Market Half Days, a full set of DSPs will be calculated for all Products at 12:00 hrs. London Time, using the standard methodology. The Market will close at 13:00 hrs. London Time.

4.11.4 Daily Settlement Prices Dissemination

All DSPs may be disseminated on a provisional basis in the FIX and ITCH Market Data protocol. After provisional dissemination, the NLX Market Operations team may amend the Settlement Prices to ensure they are consistent with the market

In the event that a DSP cannot be determined either from a data provider, trading activity or from the 3

rd party provider, the Operator reserves the right to set the DSPs at its

absolute discretion.

The DSPs will then be sent to the Clearing House LCH.Clearnet

4.12 Trade Cancellations

The Price Limit system set out in Section 4.8 is designed to prevent the submission of Orders with significant pricing errors, and eliminate the need for manual intervention by an NLX Official to invalidate Trades. However, in some circumstances an NLX Official may conclude that a Trade has been executed at an aberrant price and will cancel the Trade.

A Trade may be deemed to be aberrant by an NLX Official when:

(a) The automated Price Limits are not operational, and the NLX official concludes that the traded price would have been outside the Price Limits if they had been functioning; and

(b) The NLX official concludes that the prevailing Price Limits are not in line with fair value in the relevant Product.

Fair value may be determined by observing bids, offers and trades that were entered into the relevant Product, in either/or the same or neighbouring expiries, before and after the trade in question.

When a trade is cancelled the counterparties to the trade will be informed as soon as possible by telephone and by a broadcast message from the System, and at the latest before the close of the relevant Product. Data vendor services will be notified of any volume correction.

23

5 Registration of Off Order Book Trades on the Trade Registration Facility

The following Trade Registration types are available for Off Order Book Trades:

Block Trade

Asset Switch

Exchange For Physical (EFP)Trade

Each Trade Registration type will have a unique flag which will be used as an identifier for Trade Registration.

Trade Type FIX Unique Flag

Block Trade 1

Exchange for Physical 2

Asset Switch (Futures) 13

Off Order Book Trades on the Trade Registration Facility may be organized and submitted during the Continuous Matching Session of the relevant Product.

Trade Registration can be affected for single delivery months / expiries and strategies.

5.1 Block Trades

All Products are designated as Block Trade Products for the Market.

The Block Trade Registration Facility allows Participants to organize and execute trades considered large in scale compared to the average aggregated volumes at the BBO.

Participants are permitted to organize Block Trades, providing they are a Block Trade Executing Participant or have in place arrangements for the execution of the Block Trade Product(s) via a Block Trade Executing Participant.

A Block Trade Executing Participant is a Participant holding the appropriate trading right entitling him/her to trade the relevant Block Trade Product.

Further details with regard to arranging Block Trades, including Block Trade Thresholds, are available in Appendix H to these Trading Procedures.

5.2 Asset Switch Trades

The Asset Switch Facility is available for all Interest Rate Futures Products. Asset Switch Trades allow Participants to take opposing positions in, or transfer exposure between, two different Products simultaneously.

The Asset Switch Facility may be used for all strategies of Interest Rate Futures Products.

Participants are permitted to organize Asset Switches, providing they are an Asset Switch Executing Participant or have in place arrangements for the execution of Asset Switches via an Asset Switch Executing Participant.

An Asset Switch Executing Participant is a Participant holding the appropriate trading right entitling him/her to trade the relevant Asset Switch Product.

Further details with regard to arranging Asset Switch Trades are available in Appendix I to these Trading Procedures.

5.3 EFP Trades

An EFP Trade allows Participants to arrange and execute Trades involving a future or options Product and a corresponding ‘physical’ leg. The corresponding physical leg can be a variety of cash and OTC (Over-The-Counter) assets – which may include:

24

Deliverable cash bonds

Non-deliverable cash bonds

Forward Rate Agreements (FRA)

Vanilla OTC swaps

Sale and Repurchase Agreements (Repos)

OTC interest rate options

Non NLX listed Short Term Interest Rate or Long Term Interest Rate Futures Contracts

All Products are designated as Exchange for Physical Products on the Market. Exchange for Physical Participants are permitted to organize EFP Trades, providing they are an EFP Trade Executing Participant or have in place arrangements for the execution of EFP Product(s) via an EFP Trade Executing Participant.

An EFP Trade Executing Participant is a Participant holding the appropriate trading rights entitling them to trade the relevant EFP Product.

Further details with regard to arranging EFP Trades are available in Appendix J to these Trading Procedures.

25

6 Orders and Validity

The following Order types, attributes and validities are available on the Market.

6.1 Order types

The following Order types, time-in-force and time conditions are available for all Products:

ID Order Types GFD (Good-for-

Day) GTC (Good-till-

Cancel) GTD (Good-till-

Date) FOK (Fill-or-

Kill) (IOC)

Immediate or Cancel

1. Limit Order × × × × ×

2. Market Order

× ×

3. Market-to- Limit Order

× × × × ×

4. Stop Order × × × × ×

1. Limit Order

A Limit Order stipulates a maximum purchase price or minimum selling price. If not fully matched, the remaining volume of the Order is retained in the Order Book. The orders in the Order Book are ranked in descending buy-price order or ascending sell-price order and then by time priority.

If the price specified by a Limit Order is not valid according to the permitted tick sizes, it will be rejected. The System will only execute Limit Orders at prices equal to or better (less than a maximum purchase price / greater than a minimum selling price) than the specified limit price.

Limit Orders can be matched in part or in their entirety unless a FOK condition is attached to the Order in which case the Order must match in full or not at all.

2. Market Order

Market Orders are accepted only during the Open session. A Market Order is an Order to sell or buy at the best possible price(s) and is therefore entered without a price. During continuous trading the time condition for a Market Order is always fill-or-kill (the order is matched in full or not at all) or immediate-or-cancel (any remaining volume not filled will be cancelled). Market Orders are never registered in the Central Order Book.

This means that as long as there is an Order on the opposite side of the Central Order Book the Market Order will be matched irrespective of the price level.

3. Market-to-Limit Order

A Market-to-Limit Order is an Order to sell or buy at the best market price. If the Order is partly matched, the remainder is converted into a Limit Order priced at match price. In contrast to a normal Market Order, the Market-to-Limit Order only executes at the best price level and, therefore, does not trade through volume available in the Central Order Book.

Market-to-Limit Orders entered in a non-matching session state (i.e. Pre Open Session) form part of the Uncross. If the Equilibrium Price is established and the Market-To-Limit Order is matched, any quantity remaining after the Uncross will be stored in the Central Order Book as a Limit Order, at the Equilibrium Price. When the Equilibrium Price is established but the Market-To-Limit Order is not matched, the Order is automatically deleted.

26

During continuous matching (i.e. Open Session) a Market-to-Limit Order is immediately removed from the market if no match can be executed, e.g. if no Order exists on the opposite side of the Central Order Book. If the Market-to-Limit Order is partly matched, the remainder is converted into a Limit Order, and rests in the Central Order Book.

4. Stop Order

A Stop Order is an Order with the trigger condition being the last traded price. Stop Orders generate a Market Order, Market to Limit Order or Limit Order in the Central Order Book once their trigger has been met.

6.1 Time Conditions

1. Good for Day (GFD)

A GFD Order is valid until the Market closes. A GFD Order is active for the Business Day, and any non-executed portion will be cancelled upon the transition to the Post Close, i.e. when the Market closes.

2. Good Till Cancelled (GTC)

The system supports GTC (Good till Cancelled) Orders in markets that have no specified limit to the maximum number of days an Order is allowed to stay in the book. A GTC Order will retain its original chronological order based on original entry time into the System.

3. Good till Date (GTD)

A GTD Order is valid until a specified date in the future, up to a maximum of 255 days. If the Order is not matched during the Business Day it will be inserted again in the Central Order Book the next morning when the System opens. A GTD Order will retain its original chronological order based on original entry time into the System.

6.2 Time-in-Force

1. Fill-or-Kill (FOK)

A FOK order is not stored in the Central Order Book at any time. If a FOK Order is not matched in full on entry, the order is cancelled. FOK orders can only be entered during continuous trading.

2. Immediate or Cancel (IOC)

An IOC Limit or Market-to-Limit order will match with all the resting volume on the other side of the order book, up to the limit price, and cancel all the remaining volume. An IOC Market Order will match all available resting volume on the other side of the order book irrespective of the price, and then cancel any remaining unmatched volume of the IOC order.

6.3 Ranking of Orders

Orders are ranked by Price and Time. However depending on the Product Specification, Orders are matched either by Price, Time Priority or Price, Pro Rata and Time Priority.

6.4 Order Modification

The time priority of an Order is retained if the volume is reduced, and lost if the volume is increased or if the price is modified.

6.5 Tick Sizes

Tick size is the smallest allowed price movement for a specific Product and, thereby, is the smallest possible difference between the buy and sell price in the Central Order Book. If the price specified by a Limit Price is not valid according to the allowed tick sizes, it is rejected by the System. See Appendix D for the minimum tick size for each Product.

27

7 Implied Orders

The Market offers Implied-Out Order generation; these are automatic prices generated by the System [which are derived from converting a Strategy into its component Trades.]

Implied-Out Orders advertise the liquidity available in the marketplace, and increase the possibility of Strategy Order execution. Implied Orders are generated during the Open Session, which has continuous matching.

Implied-Out Orders are determined from a combination of Strategy Resting Orders and individual delivery month Orders. The aggregated implied out orders on the BBO is disseminated on the ITCH and FIX market data, as such differentiating them from single orders.

28

06:30

Pre Open

06:30

Pre Open

Appendix A: Session States for Markets

The futures Products initially listed on the Market are:

3 month Euribor® Futures

3 month Sterling Futures

Long Gilt Futures (4 %)

2 year Schatz Futures (6 %)

5 year Bobl Futures (6 %)

10 year Bund Futures (6 %)

The figures below detail the session schedules for each individual market. All times are London Time.

Euribor® Futures

07:00

Open

21:00

Close

06:00 Pre Open

10:00 16:15

FSP/ LTT DSP

05:00 22:00

Sterling Futures

07:30

Open

18:00

Close

07:00

Pre Open

11:00 16:15

FSP/LTT DSP

05:00 22:00

Long Gilt Futures

08:00

Open

18:00

Close

07:30

Pre Open

11:00 16:15

FSP/LTT DSP

05:00 22:00

Bobl/Bund/Schatz Futures

07:00

Open

21:00

Close

06:00 Pre Open

11:30 16:15

FSP/LTT DSP

05:00 22:00

29

06:30

Pre Open

00:00

Pre Open

00:00

Pre Open

06:30

Pre Open

Euribor® Options

07:02

Open

18:00

Close

06:00

Pre Open

10:00

LTT

10:45

Exercise

16:15

DSP

05:00 22:00

Short Sterling Options

07:32

Open

18:00

Market Close

07:00 Pre Open

11:00 11:45 16:15

LTT Exercise DSP

05:00 22:00

Long Gilt Options

08:02

Open

18:00

Close

07:30 Pre Open

10:00

LTT

10:45

Exercise

16:15

DSP

05:00 22:00

Bobl/Bund/Schatz Options

07:02

Open

18:00

Close

06:00

Pre Open

16:15 17:00

DSP/LTT Exercise

05:00 22:00

30

Appendix B: Markets and Trading Functionality – An Overview

Product Product Code

Price, Time Matching Algorithm

Price, Pro Rata Matching Algorithm

Continuous Trading

Reporting Block Trades

Reporting Asset Switch Trades

Reporting EFP Trades

Implied Trading

Pre- defined Calendar Spreads

Pre – defined Condors

Pre- defined Butterflies

All Strategies

Euribor® Future

NI × × × × × × × × ×

Sterling Future

NL × × × × × × × × ×

Long Gilt Future

NR × × × × × × × ×

2 year Schatz Future

NS × × × × × × × ×

5 year Bobl Future

NB × × × × × × × ×

10 year Bund Future

NU × × × × × × × ×

Euribor® Option

NI × × × × × ×

Euribor® 1-Year Mid Curve Option

NK × × × × × ×

Sterling Option

NL × × × × × ×

Sterling 1-Year Mid Curve Option

NM × × × × × ×

Long Gilt Option

NR × × × × × ×

2-year Schatz Option

NS × × × × × ×

5-year Bobl Option

NB × × × × × ×

10-year Bund Option

NU × × × × × ×

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Appendix C: Price Limit Spreads

Short Term Products (Futures):

Price Limits for STIRs

Euribor®

(1 tick = 0.005)

White Quarterlies 14 ticks above and below

White Serials 14 ticks above and below

Reds 14 ticks above and below

Greens 24 ticks above and below

Blues 24 ticks above and below

Golds 28 ticks above and below

Purples 28 ticks above and below

Sterling

(1 tick = 0.01)

White Quarterlies 7 ticks above and below

White Serials 7 ticks above and below

Reds 7 ticks above and below

Greens 12 ticks above and below

Blues 12 ticks above and below

Golds 14 ticks above and below

Purples 14 ticks above and below

Long Term Products (Futures):

Price Limits for LTIRs

Bunds and Gilts 1st

Expiry 37 ticks above and below

32

(1 tick = 0.01)

2nd


3rd


Bobls

(1 tick = 0.01) 1

st Expiry 27 ticks above and below

2nd


3rd


Schatz

(1 tick = 0.005) 1

st Expiry 37 ticks above and below

2nd


3rd


Appendix D: Minimum Tick Size

Futures Minimum Tick Size

Euribor® Futures 0.005

Sterling Futures 0.01

Long Gilt Futures (4 %) 0.01

2 year Schatz Futures (6 %) 0.005

5 year Bobl Futures (6 %) 0.01

10 year Bund Futures (6 %) 0.01

33

Appendix E: Market Data and Price Concepts

In this appendix, a brief description of the Market Data available to Market Members and Market Data vendors is set out.

Pre-trade information

All Pre-trade information is anonymous and available as:

- Market-by-Order data providing the full Order depth on the ITCH multicast protocol.

- Market-by-Price data providing the aggregated quantity and of the 50 best price levels on the FIX unicast protocol.

- EP and associated quantities on both the ITCH multicast, and the FIX unicast protocol.

- Request for Quotes are provided on both the Auxiliary multicast, and the FIX unicast protocol

Post-trade information

All Post-trade information is anonymous and available as;

- Information on each auto-matched Trades provided on both the ITCH multicast, and the FIX unicast protocol

- Information on each reported Off Order Book Trade provided on both the Auxiliary multicast, and the FIX unicast protocol

- Trading Statistics provided on the FIX unicast protocol for outright order books including: o Open Price o Low Price o High Price

o Aggregated Trade Volume

- Settlement Prices and Open Interest provided on both the Auxiliary multicast, and the FIX unicast protocol

Price Concepts

Last Traded Price

The Last Traded Price is defined as the last matched Trade in the Central Order Book during trading.

High and Low Prices

High and Low prices are calculated on the basis of the Trades which update the Last Traded Price and are thus the highest price and the lowest price, respectively, among the Trades which have updated the Last Traded Price for the current Business Day.

Open Price

The Open Price is defined as the first traded price on the current Business Day. If the Market is crossed in Pre Open, this will be the Equilibrium Price at the Uncross.

33

Appendix F: Position Accounts

The Market has defined the following Position Accounts hierarchy structure:

Position Account Type Description

Unallocated Account (U)

Gross

Unallocated Account is used to allocate trades which do not have a valid segregation type at the time of Trade Acceptance. Such trades can be subsequently moved to other Position Accounts by using Internal Give-ups.

House Account (H)

Net

House Account is used to hold proprietary positions of the ITR.

Market- Maker Account (M)

Net

Market-Maker Account is used by ITR to separate the positions arising out of Market-Maker trades.

Non-Segregated Account (N)

Gross

Direct Non-Segregated Client Account is used by the ITR as an Omnibus, without detail account to aggregate positions of multiple clients in a single account.

Segregated Client Account (S)

Gross

Segregated Client Account is used by the ITR as an Omnibus, with Detail account to segregate client positions.

34

Appendix G: Product Specification

Futures Product Specification

All times are London Times

Three Month EURIBOR® Interest Rate Futures

Product Code NI Unit of trading Interest rate on three month unsecured interbank deposit of

€1,000,000.

Contract Months Twenty four Quarterly delivery months and four serial months, so that twenty eight delivery months are available for trading, with the nearest six delivery months being consecutive calendar months.

Price quotation 100.00 minus the interest rate.

Minimum Tick Size and Value 0.005 (€12.50)

Last Trading Day Two business days prior to the third Wednesday of the delivery month.

Last Trading Time On the Last Trading Day, trading in the front delivery month will stop at 10:00.

Final Settlement First business day after the Last Trading Day.

Trading Platform and Hours NLX, 07:00 – 21:00

Matching Algorithm Central Order Book utilizes a price, pro-rata priority trade matching algorithm.

Trade Registration Services Block Trading, EFP Trading, Asset Switch

Final Settlement Price (FSP) The FSP shall be determined as 100 – FSP Rate. The FSP Rate is defined as the European Banking Federation’s Euribor® Offered Rate (EBF- EURIBOR®) for three month Euro deposits at 11:00 Brussels time (10:00 London time) on the Last Trading Day, rounded to three decimal places, except for the case when it is an exact uneven multiple of 0.0005, in which case it will be rounded to the nearest lower third decimal (e.g. an EBF EURIBOR® of 1.6335 becomes 1.633).

Settlement Criteria Cash settlement based on the FSP.

Clearing LCH.Clearnet

35

Three Month Sterling Interest Rate Futures

Product Code NL

Unit of trading Interest rate on three month unsecured interbank deposit of £500,000.

Contract Months Twenty four Quarterly delivery months, and two serial months, so that twenty six delivery months are available for trading, with the nearest three delivery months being consecutive calendar months.

Price quotation 100.00 minus the interest rate.

Minimum Tick Size and Value 0.01 (£12.50)

Last Trading Day Third Wednesday of the delivery month.


Final Settlement First business day after the Last Trading Day.

Trading Platform and Hours NLX , 07:30 – 18:00

Matching Algorithm Central Order Book utilizes a price, pro-rata priority trade matching algorithm.


Final Settlement Price (FSP) The FSP shall be determined as 100 – FSP Rate. The FSP Rate is defined as the ICE London Interbank Offered Rate (ICE LIBOR) for three month sterling deposits at 11:00 London time on the Last Trading Day, rounded to three decimal places, except for the case when it is an exact uneven multiple of 0.0005, in which case it will be rounded to the nearest lower third decimal (e.g. an ICE LIBOR of 1.6285 becomes 1.628).

Settlement Criteria Cash settlement based on the FSP.


36

Long Gilt Futures

Product Code NR Unit of Trading £100,000 nominal value notional Gilt with 4% coupon.

Delivery Months The Three closest Quarterly delivery months .

Price quotation Per £100 nominal

Minimum Tick Size and Value 0.01 (£10)

First Notice Day Two business days prior to the first calendar day of the delivery month.

Last Notice Day First business day after the Last Trading Day.

Last Trading Day Two business days prior to the last business day in the delivery month.


Delivery Day Any business day in delivery month ( seller’s option).

Maturity Range of Deliverable Gilts 8 years and 9 months to 13 years.


Matching Algorithm Central Order Book applies a price, time priority trade matching algorithm.


Final Settlement Price (FSP) The price determined as per the Trading Procedures at 11:00 of the front delivery month on the last trading day. The invoicing amount for each Deliverable Gilt will be calculated by the conversion factor methodology.

Settlement Criteria Physical delivery can be made from any Gilt in the delivery basket published by NLX. The provisional deliverable basket will be published by NLX and finalized on the tenth business day prior to the first Notice Day of each delivery month. The choice of which bond to select from the deliverable basket lies with the Participant holding a short position in the future at delivery. All gilt issues included in the basket will have the following characteristics:

Coupon in a 1% - 7% coupon range Inc.

Principal and interest both Sterling denominated.

Semi-annual fixed rate payments.

Fully paid on or before the Last Notice Day of the

delivery month

Principal outstanding of £1.5 billion or more of

fungible issues

Having a period to redemption as specified. Holders of long positions may be delivered against during any day in the Notice Period. Full criteria of selection for deliverable bonds can be found in the Product Terms.


37

Schatz Futures

Product Code NS

Unit of Trading €100,000 nominal value notional Schatz with 6% coupon

Delivery Months The three closest Quarterly delivery months.

Price quotation Per €100 nominal

Minimum Tick Size and Value 0.005 (€5)

Last Trading Day Two business days prior to the Delivery Day in the delivery month.


Delivery Day The tenth calendar day of the front delivery month, if this day is a business day; otherwise, the business day immediately following that day.

Maturity Range of Deliverable Schatz 1.75 to 2.25 years


Matching Algorithm Central Order Book utilises a price, pro-rata priority trade matching algorithm.


Final Settlement Price (FSP) The price determined as per the Trading Procedures at 11:30 of the front delivery month on the Last Trading Day. The invoicing amount for each deliverable Schatz will be calculated by the conversion factor methodology.

Settlement Criteria Physical delivery of a bond selected from the basket of approved deliverable bonds of the Federal Republic of Germany as published by NLX. The choice of which bond to select from the deliverable basket lies with the Participant holding a short position in the future at delivery.


38

Bobl Futures

Product Code NB Unit of Trading €100,000 nominal value notional Bobl with 6% coupon

Delivery Months The three closest Quarterly delivery months






Maturity Range of Deliverable Bobl 4.5 to 5.5 years


Matching Algorithm Central Order Book utilizes a price, time priority trade matching algorithm.


Final Settlement Price (FSP) The price determined as per the Trading Procedures at 11:30 of the front delivery month on the Last Trading Day. The invoicing amount for each deliverable Bobl will be calculated by the conversion factor methodology.



39

Bund Futures

Product Code NU Unit of Trading €100,000 nominal value notional Bund with 6% coupon

Delivery Months The three closest Quarterly delivery months.






Maturity Range of Deliverable Bunds 8.5 to 10.5 years


Matching Algorithm Central Order Book utilizes a price, time priority trade matching algorithm.


Final Settlement Price (FSP) The price determined as per the Trading Procedures at 11:30 of the front delivery month on the Last Trading Day. The invoicing amount for each deliverable Bund will be calculated by the conversion factor methodology.



40

Appendix H: Block Trades

Block Trade Facility Definition

The Block Trade Registration Facility allows Participants to organize and execute Trades considered large in scale compared to the average aggregated volumes at the BBO.

Authorization for Execution

Only Trade Registration Executing Participants.

A Trade Registration Executing Participant is a Participant holding the appropriate Trade Registration right.

A participant may Register Block Trades via a Trade Registration Executing Participant.

When May Block Trades be organized / executed

A Block Trade may be organized only during the Open Session of the Futures or Options Products concerned, as published by the Operator in these Trading Procedures and from time to time by Notice.

Block trading contracts

All Products which have been defined as Block Trade Products by the Operator.

Block Trades may be executed in Predefined Strategies as listed on the NLX Market.

Minimum Volume Thresholds for Block Trades are detailed below.

Fair Value Participants must ensure that the price of any Block Trade being quoted represents a fair cost for that trade. A Participant quoting a price for a block trade must make it clear to the potential counterparty(ies), that the price is a Block Trade price.

Reporting Requirements

Once verbal agreement of the Block Trade has been reached the Block Trade Executing Participant must submit the details of the Block Trade, to the Operator via the Trade Registration Facility as soon as practicable, however:

a. If the Block Trade is not dependent on the execution of a related transaction in the OTC markets or on any other trading venue; within five minutes

b. If Block Trades are dependent on the execution of a related transaction in

the OTC market or on any other trading venue; or during extremely volatile market conditions; within fifteen minutes.

In the event that a Participant, due to no technical connectivity is unable to electronically report a Block Trade Order directly or via their Independent Software Vendor (ISV), the Registration Details of the Order may be submitted to be Trade Registration Facility via the NLX Block Trade Request Form. This form is available on www.nlx.co.uk. All fields in this form must be completed and emailed to [email protected]. After the Participant has also telephoned NLX market operations to validate the Registration Details, NLX market operations shall submit the trade on behalf of the participant to the Trade Registration Facility.

http://www.nlx.co.uk/

mailto:[email protected]

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Registration Details

For each Block Trade Order, the following details must be recorded via the Trade Registration system, by the Block Trade Executing Participant:

Name of Contract Recognized Combination (if applicable) Price by leg Volume by leg Time of organization of Trade Name of authorized Participant submitting the trade Match ID

All information to be retained by the executing Participant for 5 years

Trade Confirmation

The Block Trade must be authorized and confirmed by an NLX Official.

Trade Publication The Block Trade will be matched using the Executing Participant’s ITR Key.

The following information will be published by NLX when the Block Trade has been reported and approved:

Contract(s) Price by leg Volume by leg

Details of the Block Trade will be broadcast on [NLX] and through Quote Vendors, with a Trade Type of 1.

The cumulative volume of Block Trades executed during the day for each contract will also be published.

Accountability If the Block Trade is later found to contravene the Rule Book or the Trading Procedures, disciplinary proceedings may be instituted.

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Minimum Volume Thresholds for Block Trades

Euribor® Futures Outrights in the first year (white months)

450

Outrights in the second year (red months)

200

Outrights in the third year (green months)

150

Outrights in the fourth year (blue months)

50

Outrights in the fifth year (gold months)

10

Outrights in the sixth year (purple months)

10

Strategies 150% of the highest leg

Sterling Futures Outrights in the first year (white months)

400

Outrights in the second year (red months)

200

Outrights in the third year (green months)

150

Outrights in the fourth year (blue months)

50

Outrights in the fifth year (gold months)

10

Outrights in the sixth year (purple months)

10


Bond Futures Schatz 250

Bobl 100

Bund 50

Gilt 10


Quarterly calendar roll 20

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To support the development of the COB of the NLX futures products, the above block trade thresholds will be reviewed on a monthly basis with the Financial Conduct Authority (FCA) and increased in line with any increase in COB liquidity. Participants will be notified of any changes to the block trade thresholds in a timely manner.

Participants must not aggregate separate Orders to meet the minimum volume thresholds. However, for Options Products only, Participants may aggregate volume on the market maker side

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Appendix I: Asset Switch

Asset Switch Definition

Asset Switch Trades allow Participants to take opposing positions in, or transfer exposure between, two different Products simultaneously.


Only Trade Registration Executing Participants.

A Trade Registration Executing Participant is a Participant holding the appropriate Trade Registration Rights.

A Participant without Trade Registration Executing Rights may Register Asset Switch Trades via a Trade Registration Executing Participant.

When Asset switch Trades be organized / executed

An Asset Switch may be organized only during the Open Session of the Futures or Options Products concerned, as communicated by the Operator in these Trading Procedures and from time to time by Notice. Asset Switch Trades may not be executed in a delivery / expiry month that has never traded.

Asset Switch Trades may not be executed on the Last Trading Day of any delivery / expiry month.

Asset Switch contracts

The Asset Switch Facility is available for all interest rate futures and options listed on the NLX market.

Fair Value Prices allocated to the individual legs must be at the level trading in the relevant markets at the time, and within the high / low recorded in the previous 30 minutes, or within the ‘fair value ‘ high and low as determined by the Operator.


Once verbal agreement of the Asset Switch has been reached. The Trade Registration Executing Participant must submit the details of the Asset Switch, to the relevant NLX Market official via the Trade Registration Facility as soon as practicable and no less than 5 minutes before the close of trading in the relevant contracts.

Hedge Ratios Products of the same duration: Notional value (currency adjusted if applicable)

Products of different durations: Ratio of basis point values.

Registration Details For each Asset Switch Order, the following details must be recorded via the Trade Registration system, by the Trade Registration Executing Participant:

Name of Products Price of each Product Volume of each Product Time of receipt of Order Time of organization of Trade Name of authorized Participant submitting the Trade

All information to be retained by the executing Participant for x years

Trade Confirmation The Asset Switch Trade must be authorized and confirmed by an NLX Official.

Trade Publication The Asset Switch Trade will be matched using the Trade Registration Executing Participant’s ITR Key.

The following information will be published by NLX: when the Asset Switch Trade has been reported and approved.

Name of Products Price of each Product Volume of each Product

Details of the Asset Switch Trade will be broadcast on [NLX] and through

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Quote Vendors, with a Trade Type of 13, for Futures Products and with a

Trade Type of 14, for Options Products.

Enforcement If the Asset Switch is later found to contravene the NLX Rule Book or the Trading Procedures, enforcement proceedings may be instituted.

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Appendix J: Exchange for Physical (EFP) Trades

Exchange For Physical (EFP) Definition

An EFP Trade allows Participants to arrange and execute Trades involving a future or options Product and a corresponding ‘physical’ leg. The corresponding physical leg can be a variety of cash and OTC (Over-The-Counter) assets – which include:

Deliverable cash bonds

Non-deliverable cash bonds

Forward Rate Agreements (FRA)

Vanilla OTC swaps

Sale and Repurchase Agreements (Repos)

OTC interest rate options

Non NLX listed Short Term Interest Rate or Long Term Interest Rate Futures


Only Trade Registration Executing Participants

A Trade Registration Executing Participant is a Participant holding the appropriate Trade Registration right

A Participant may register EFP Trades via a Trade Registration Executing Participant

When May EFP Trades be organized / executed

An EFP Trade may be organized only during the continuous matching sessions of the Futures or Options Products concerned, as published by the Operator in these Trading Procedures and from time to time by notice.

EFP Trades may not be executed in a delivery / expiry month that has never traded.

EFP Trades may not be executed on the Last Trading Day of any delivery / expiry month.

Fair Value Prices allocated to the individual legs must be at the level trading in the relevant markets at the time, and within the high / low recorded in the previous 30 minutes, or within the ‘fair value‘ high and low as determined by the Operator.


Once verbal agreement of the EFP has been reached. The Trade Registration Executing Participant must submit the details of the EFP, to the relevant NLX Market official via the Trade Registration Facility as soon as practicable and no more than fifteen minutes from the time at which the EFP Trade was organized.

EFP Trades must be submitted no less than five minutes before the close of trading in the relevant Products.

Hedge Ratios Appropriate hedge ratios must be used depending on the type and combination of legs of the EFP Trade. I.e. a ratio of basis point values, a duration based method, a combination of price factor and duration and Notional value (currency adjusted if applicable).

Registration Details

For each EFP Trade, the following details must be recorded via the Trade Registration system, by the Trade Registration Executing Participant:

Name of Product Price of Product Volume of Product Time of receipt of Order Time of organization of Trade Name of authorized Participant submitting the Trade

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An individual reference number for the ‘cash’ side of the EFP Trade

The Trade Registration Executing Participant must retain, for potential future audit, the key defining details of the ‘cash’ side of the EFP Trade.

All information to be retained by the executing Participant for x years.

Trade Confirmation

The EFP Trade must be authorized and confirmed by an NLX Official

Trade Publication

The EFP Trade will be matched using the Trade Registration Executing Participant’s ITR Key.

The following information will be published by NLX: when the EFP Trade has been reported and approved:

Name of Product Price of Product Volume of Product

Details of the EFP Trade will be broadcast on [NLX] and through Quote Vendors, with a Trade Type of 2.

Enforcement If the EFP Trade is later found to contravene the Rule Book or the Trading procedures, enforcement proceedings may be instituted.

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Appendix K: Procedure for Unauthorised use of Usernames and Passwords

If a Participant becomes aware of:

1. Any unauthorised disclosure or use of any password assigned to it;

2. Any unauthorised access to the System; or

3. The need to deactivate any password assigned to it,

One of the Participant’s Designated Representatives must notify the Operator’s Market Operations Department on 020 3753 2075 immediately.

The Operator will, in a timely manner, take action in accordance with the Participant’s request which might include one or more of the following:

1. Disconnecting the port

2. Temporarily blocking access to the port

3. Changing the username and password on the port

4. Cancelling the port

5. Cancelling open Orders

6. Running an execution report

Documents

NLX Trading Procedures - Nasdaq, Inc....NLX Official An appointed individual in the Market Operations team of NLX with specific authorization to manage relevant Market Operations procedures