New Trading Platform for ASX 24 Market

Participants Compliance Briefing

February 2017

Agenda

• Introductions

• Key System Changes

• Rule Changes Overview

• Questions

Summary of Key System Changes

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• Session State changes

• Limit Order and Market to Limit Order functionality

• New Allowed Time Conditions

• Pre-Trade Risk Management Controls

• Removal of the Message Facility

• Account Identifier cannot be updated on trades

• Unintentional Crossing Prevention (UCP)

• User Defined Combinations (UDCs) replace Custom Market Orders (CMOs)

Connectivity Diagram

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TPS = Transactions Per Second

Rule Changes

Rule ChangesGENERAL

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• Procedures follow Rules rather than having their own section

• References to “Exchange” have been changed to “Market Operator”

• The Message Facility no longer exists. Expression of Interest (EOIs) and Request for Quotes (RFQs) are entered using the Request for Quote Facility

• References to de-listed contracts have been removed

• Rules related to grains transition or grains tender process are no longer relevant and have been removed

• Addition of new definitions as well as the deletion of redundant definitions

SECTION 2 - PRODUCTS

DETERMINATION OF DAILY SETTLEMENT PRICE

• 2500.1 - Removal of any references to an “Interim” Daily Settlement Price (DSP)

• Note there is no change to the objection process on the DSP

Rule Changes

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SECTION 3 – TRADING RULES

CANCELLATIONS AND DEALING DISPUTES

• Procedure 3200.10 – some updates to the procedure for trade cancellations to reflect functional changes to the spread order algorithm.

• Improvements result in leg prices being closer to the real-time market.

• Note there is no change to the process for requesting a trade cancellation.

Rule Changes

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NOW FUTURE NTP STATE

SYCOM will not adjust leg prices before executing outside the AOT.

Under the NTP if a leg is outside the AOT it will adjust the leg prices to within the AOT whilst maintaining the net price. If it cannot satisfy all prices some may still be outside the AOT.

SECTION 4 – ORDER ENTRY AND EXECUTION, DISPLAY, REPORTING AND SERVICES

ORDER ENTRY AND EXECUTION

• 4013 - table detailing session state parameters, removal of the “Levelling” phase

Rule Changes

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Session State/Phase Description

Pre-Open A period of 10 minutes prior to the Open in respect of a particular Futures Contract or Option Contract during which bids and offers may be entered into the system.

Open Open Trading where orders on all contract types can be entered, overlapping orders from the Pre-Open (auction) will be matched at the equilibrium price. New orders can be matched and trades can be executed.

Close Trading day is over and the Market is closed, no orders can be entered or modified at this time.

Maintenance Relevant orders are purged. Expired instruments are deleted (including day only UDC contracts), the trading business day is incremented and pre-trade risk limits are reset.

SECTION 4 – ORDER ENTRY AND EXECUTION, DISPLAY, REPORTING AND SERVICES

ORDER ENTRY AND EXECUTION

• Order types available in NTP will be:

• UDCs replace the ASX Trade24 Custom Market Order (CMO) for trading multiple leg strategies.

• UDCs cannot be created where there already exists a MOD.

• At the end of each trading session all UDCs are deleted.

Rule Changes

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Standard Orders Strategy Orders

Limit Market to LimitMarket Operator Defined

(MOD)User Defined Combination

(UDC)

SpreadOrders

StripOrders

Fixed Leg Price

Combinations

Net Leg Price Combinations

SECTION 4 – ORDER ENTRY AND EXECUTION, DISPLAY, REPORTING AND SERVICES

ORDER ENTRY AND EXECUTION

4020 - Limit order and Market to Limit order functionality

Limit Order

• Requires the user to enter an order with a volume and limit price specified

Note New Behaviour - Limit price can be priced aggressively to cross the

spread at any price within the allowed user defined Trading Protection Limits

(TPL) or (Anomalous Order Threshold) (AOT) limits. Behaves as a sweep

order type and will fill level by level adhering to the limit price

Market-to-Limit

• Requires the user to enter an order with volume but without a price

• Where there is volume on the opposing side of the order book, the order

will fill immediately at the touch price, any remaining volume on the order

will rest passively at the executed limit price in order book

Rule Changes

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SECTION 4 – ORDER ENTRY AND EXECUTION, DISPLAY, REPORTING AND SERVICES

ORDER ENTRY AND EXECUTION

Pre-trade risk management controls

• NTP will introduce mandatory pre-trade risk management for all Users accessing ASX 24 market; and

• ASX’s Administration and Risk Terminal will allow ASX 24 Participants to:

• Manage user access to products

• Set up shared order groups

• Set account limits against real-time net positions- net long positions, net short positions and max order volume. Account limits are now hard limits, with low-level and high-level warning messages as positions increase.

• Set Trading Protection Limits (TPLs) – maximum price deviation from current market. TPL is a hard limit.

Rule Changes

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SECTION 4 – ORDER ENTRY AND EXECUTION, DISPLAY, REPORTING AND SERVICES

ORDER ENTRY AND EXECUTION

Mandatory order requirements

• 4021(e) “Client Identifier” has been replaced with “Account Identifier”, the unique identifier assigned by a Trading Participant to each Client or principal account.

• The way NTP processes trades requires a change regarding account identifier requirements.

• Under NTP, participants will still have a ten minute period after order entry to record the client identifier subject to certain provisions under Rule 4021(e).

Rule Changes

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NOW FUTURE NTP STATE

ASX 24 Trading Platform permits an account

identifier to be recorded/updated:

1. when the order is entered;

2. whilst the order remains active; and

3. for a period of 10 minutes after trade

execution.

NTP will permit an account identifier to be

recorded/updated:

1. when the order is entered; and

2. whilst the order remains active

There is NO functionality to amend trades to

record the account identifier.

SECTION 4 – ORDER ENTRY AND EXECUTION, DISPLAY, REPORTING AND SERVICES

ORDER ENTRY AND EXECUTION

Mandatory order requirements

• A participant must ALWAYS enter the Account Identifier at the time of entering an Order into the Trading Platform unless:

• The order represents an Aggregated Order (preferably enter SPLIT);

• The order is a Principal Order in which case the Account Identifier should relate to the principal account; or

• Where the participant can demonstrate to ASX’s satisfaction that circumstances existed that prevented the participant from entering an Account Identifier at the time of order entry. The participant must within10 minutes update the Account Identifier if the order remains active or if the order has executed then centrally record the Account Identifier in its system with the corresponding Order identifier.

Rule Changes

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SECTION 4 – ORDER ENTRY AND EXECUTION, DISPLAY, REPORTING AND SERVICES

ORDER ENTRY AND EXECUTION

• 4021(b) - Optional order requirements: Time Conditions specify how long the order remains in effect and can be applied to both Limit and Market-To-Limit order types. In the absence of a Time Condition being specified the order is defaulted to Good For Day. The following Time Conditions are supported:

Rule Changes

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Code Time Condition Details Change

GFD Good For Day Order is valid for current session Default Time Condition

GTC Good Till Cancel Order remains live until contract expiry No change

FOK Fill Or Kill Order is filled immediately if the order can be fully filled if not the order is cancelled

No longer a 20 second wait to execute the order

IOC Immediate Or Cancel Order fills against available quantity any remaining unfilled volume is subsequently cancelled

New time condition

GTD Good Till Date Order remains in the order book until a specified date New time condition

GTT Good Till Time Order remains in the order book until a specified time in the current session

New time condition

SECTION 4 – ORDER ENTRY AND EXECUTION, DISPLAY, REPORTING AND SERVICES

ORDER ENTRY AND EXECUTION

• 4021(b) - Optional order requirements: Time Conditions

# Not permitted during auctions

*Orders purged on change of session state

Rule Changes

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Order Type /TIF Futures Options Spreads UDC’s Pack, Bundles & Strips

Limit

Market-To-Limit#

GFD

GTC

FOK#

IOC (FAK)#

GTD (Good Till Date)

GTT (Good Till Time) * *

SECTION 4 – ORDER ENTRY AND EXECUTION, DISPLAY, REPORTING AND SERVICES

ORDER ENTRY AND EXECUTION

4021(b) - Optional order requirements: Unintentional Crossing Prevention

• Optional service that allows Trading Participants to assign a unique crossing key to orders

• The unique crossing key allows Participants to identify wash trades

• In the event that two opposing orders with the same crossing key for the same member firm are entered, the resulting trade creates an internal booking report to the trading firm

• These trades are not reported to the market through the FIX Market Data and Market Data protocols and does not affect, open, high or low prices or market volume. The internal booking reports support Participants administrative activities including accounting and back office processes

• All internal booking trades are reported through to Genium Clearing and are charged the headline fee

• The crossing key is a 4 byte integer and can be applied to outright, spread and UDC orders

Rule Changes

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SECTION 4 – ORDER ENTRY AND EXECUTION, DISPLAY, REPORTING AND SERVICES

ORDER ENTRY AND EXECUTION

• 4022(a) - Strip Order requirements now all located under the same rule (Bank Bill & Energy)

• 4022(b) - User Defined Strategy Orders (previously Custom Market Orders) no longer require an RFQ unless they are a Pre-Negotiated Order

• 4022(b) - The maximum volume ratio on a User Defined Strategy Order has increased from 50 to 150

• New Bank Bill Butterfly Market Operator Defined Spreads (commodity code = FL)

• A Butterfly order consists of buying/selling a quarter month, selling/buying the next quarter month and buying/selling the next quarter month. The ratio for the 90 Day Bank Bill Futures Contract Butterfly is 1:2:1

Rule Changes

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SECTION 4 – ORDER ENTRY AND EXECUTION, DISPLAY, REPORTING AND SERVICES

4820 - TRADE REPORTING

• Block Trade table has been re-formatted

• 5 minute notification requirement for Block Trades removed. Registration requirements remain the same, however, participants now have 10 minutes from the time of trade agreement to register the trade.

• No change to the timing of registration requirements for Block Trades agreed during the night session, registration between 8:30am and 9:30am next Business Day.

• No requirement to send a market message for block trades in energy products

• 4820 - Strategy option orders with 7 or more legs now executed via Block Trade facility

• Once approved Block trades will be reported to the market via the trading platform

Rule Changes

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SECTION 4 – ORDER ENTRY AND EXECUTION, DISPLAY, REPORTING AND SERVICES

POSITION REPORTING

• DBOR Rule (3500) moved to Rule 4840

• Procedure has been amended to clarify ASX’s expectations for complete and accurate reporting.

• Participants will breach Rule 4840 whether they under-report or over-report open positions in the Daily Beneficial Ownership Report.

• This will alleviate the need to breach participants under Rule 6704 (incomplete, inaccurate, misleading information) for over-reporting open positions.

Rule Changes

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• Review the proposed rule amendments and consider the impact to your Participant

• Ensure operational procedures and training material have been updated

• Consider what training needs to be provided to staff and clients

• Consider whether your Participant may use the optional UCP functionality and if so how the crossing key will be applied

• Consider set-up of account structure, limits and Trading Protection Limits

Next steps for Participants

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• Clearing Participants are asked to consider the impacts of NTP in relation to the feed of trade data into the Genium clearing system.

• http://www.asx.com.au/documents/products/asx24-ntp-considerations-for-clearing-participants-v1.1.pdf

NTP Considerations for Clearing Participants

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• http://www.asx.com.au/services/ntp.htm

• http://www.asx.com.au/services/ntp/document-library.htm

Website contains:

• Technical Specifications

• System Documentation

• Testing Information

• User Guides & Release Notes

• Project Updates

• Webinar Presentations

NTP Website & Document Library

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Questions

Thank you