A P P E N D I X I
CHAPTER 4 - TRADING, SETTLEMENT & CENTRAL SECURITIES DEPOSITORY
1.0 To be valid, bids and offers must be made :
(i) during the trading session;
(ii) to all members generally and without discrimination; and
(iii) in the manner prescribed by these Bye-laws and the Rules and Procedures established by the Exchange for the Malta Automated Trading System (MATS).
1.1 To be valid, an order must specify :
(i) the name or symbol of the listed security;
(ii) whether the order is to buy or to sell;
(iii) the number of shares or stock to be traded
(iv) explicit instructions regarding the trading price;
(v) any conditions which must be met prior to the order becoming effective, if any; and
(vi) the MSE Account Number of the underlying client on whose behalf the order is being effected.
Tick Sizes and Trade Ranges
2.0 Orders must be entered within the defined tick sizes as specified by the Exchange. All trades shall be executed within the trade ranges as may be set by the Exchange. The Exchange shall have the right to adjust tick sizes and trade ranges in the light of market conditions. Any trades effected at prices which are outside any stipulated trade range will be cancelled.
Definition of Orders
3.0 Allowable orders are the following :
(i) Limit Order
An order which has a specified price when it is posted for execution.
(ii) Market Order
An order which does not have a specified price when it is posted for execution. This type of order must be executed promptly at the best prices obtainable and will have priority over limit orders at the same price levels and assumes an initial price limit value normally based on the price most advantageous in the market. A Market Order trades through a range of prices starting at the best price in the market. The range of prices which a market order can go may be limited by the Exchange.
Market Orders require a current market price, and therefore are not accepted until the market is Opened.
(iii) Range Order
A Range Order is a limit order that allows for a range of prices within which trading can occur. A Range Order goes beyond the best market on the opposite side into the depth of that market.
(iv) Time in Force Restrictions (TIF)
Orders are allowed to have time restrictions which limit the period the order is available to trade. The order will be automatically removed after close for the day is stipulated. Orders with the following conditions are allowed :
(a) Day
(b) Open
(c) Good to Date (Day-Month-Year) (GTD)
(d) Good for Week (GTW)
(e) Good for Month (GTM)
(f) Fill or Kill (FOK) – The order is executed in whole or part, or cancelled within a defined period of time after being received. As soon as the portion of the order which can be executed immediately is completed, any remaining portion of the order not executed is cancelled or killed. If no match for all or part is possible, then the order is not posted on the market. A Fill or Kill Order may be entered in the pre-opening period. In this case, the order will only exist until the security is opened. The order may participate in the Open to whatever extent possible. Any remaining volume after the open will be cancelled.
Disclosed and Undisclosed Volumes
4.0 An order may specify the total volume and may specify a lesser amount that is disclosed to the market.
4.1 A disclosed volume may be entered for an order. The disclosed volume may not exceed the total volume. For an order where disclosed volume is not specified, it is implicitly equal to the total volume.
4.2 Undisclosed volume amounts are private; they are only seen by the Member entering the order. All other Members will see an indication that an undisclosed volume is present. When fills have reduced an order to the point where there is no remaining undisclosed volume, the indicator will no longer appear.
4.3 If an order can be filled on initial entry, it will be filled to the extent of the total volume of the order. A partial fill will result in the remaining order volume being posted with the full original disclosed volume provided sufficient volume remains.
4.4 The disclosed quantity acts as the roll-in quantity upon the original order entry. Roll-in quantity cannot be changed except by changing the disclosed quantity. A change in the disclosed volume will not change the total or remaining volume.
4.5 An increase in disclosed volume will cause a new time stamp and change in queue priority. A decrease in disclosed volume will not cause a new time stamp.
4.6 Partial fill diminishes current volume without replenishment from undisclosed volume unless there are no further orders behind at the current price level. Where no orders exist behind the traded order, the disclosed quantity will be automatically rolled up to the full disclosed amount. When there are orders queued after the disclosed volume, the total disclosed volume must be traded before a new roll-in quantity is brought in. Once the total disclosed volume is traded, another amount equal to the disclosed volume will be rolled-in with a new effective time stamp.
4.7 Undisclosed volume is taken into account in any calculation of the opening price.
4.8 Only the disclosed volume and an indicator showing that there is an undisclosed amount is public.
Special Terms
5.0 Special Terms attached to an order affect the priority with which an order is considered for processing. The terms are such that the order is not shown as part of the Regular order book but are maintained in a Special Terms order book that can be viewed separately from the Regular order book. Special term orders can be entered during Pre-Open but are not traded until the market is Opened. Special term orders are not taken into account in any calculation of the opening price. Allowable special terms are the following :
(i) All or None (AON)
The total volume of the order must be traded in entirety, or not at all.
(ii) Minimum Fill (MF)
The minimum volume must be filled in entirety, but any residual original volume of the order may be traded in any partial trade sizes after the original minimum volume is traded.
(iii) Minimum Block (MB)
The minimum volume of shares must be filled in entirety. After each trade, an additional block of shares will be disclosed with either the original minimum block volume or the remaining volume for the order, whichever is less.
5.1 At a single price limit, all limit orders (i.e. orders without special terms) must be satisfied before any special term trades are completed. If all possible orders in the Regular order book have to be filled, an incoming order will be checked against the Special Terms order book. If the fill restrictions can be met, the trade will be made automatically.
5.2 There is no relative priority assigned to the special terms themselves. Special terms orders are matched in the queue priority sequence, which is based in part on time of entry.
5.3 When an incoming order trades through a price range, special term order(s) retain their price priority and will be filled if their restrictions can be met by the available balance of the incoming order.
5.4 Two orders posted in the Special Terms order book will match automatically if all their terms exactly match.
5.5 If All or None is specified for an order with undisclosed volume, the All or None condition is applied to the disclosed volume only. As undisclosed volume amounts are tolled in, each will have the All or None condition.
Alteration of Orders (Change Former Order – CFO)
6.0 A stockbroker may change the terms of an order already entered in the trading system in the following manner :
(i) If the security or the order type (buy or sell) needs to be changed, the order must be cancelled and re-entered.
(ii) If any of the following changes are effected, a new effective time stamp will be given to the order :
(a) change in price;
(b) increase in disclosed volume;
(c) removal of a special term;
(d) a change in the underlying client.
(iii) If any of the following changes are effected, the order will keep its original effective time stamp :
(a) decrease in disclosed volume;
(b) changes in undisclosed volume;
(c) changes in the time in force description;
(d) changes in the special terms.
The change of any other component of an order not mentioned above will not cause a new effective time stamp to be given to the order.
Cancellation of Orders
7.0 An order can be cancelled as long as it had not yet been matched. During trading, Members can remove groups of orders or all of their orders from the trading system.
Priority of Orders for Execution – Queue Priority
8.0 Orders that cannot be immediately executed are queued for future execution in a specific order based on a queue priority. The factors used to determine the queue priority in order of consideration are :
(i) Price
The price on an order determines its primary priority for execution. An order can be specified with a limit price or a market price. For both buy and sell, the higher priority price is defined as the better price, i.e. a buy order at a higher price will take priority over other buy orders at a lower price and a sell order at a lower price will take priority over other sell orders at a higher price.
A market order being queued at a limit price will be treated the same as if it had been entered as a limit order at that price.
(ii) Special Terms
Orders with special terms (AON, MF, MB) are treated with a lower priority than similar orders without special terms. The least restricted orders should trade first. Special term orders are removed from the normal time priority and are given last priority within a single limit price. Multiple special term orders at a single price are treated in time priority amongst themselves.
(iii) Time of Entry
(a) The time of entry of an order governs its priority on a First In First Out (FIFO) basis. Orders entered in the MATS are given a time stamp noting their actual date and time of entry. At a single limit price, the earliest time of entry takes priority in the queue.
(b) An order entered prior to the current trading session is given priority in the queue over orders entered during the current trading session for trades that take place after the Open. During Pre-Open and for the purpose of At the Open (Opening Algorithm), orders from the previous trading session will be treated in the same way as if they had been entered in the Pre-Open.
(c) All new orders entered in the current trading session during Pre-Open are considered equal in time priority for the purpose of At the Open (Opening Algorithm).
(d) If any portion of an order remains unfilled after the At the Open (Opening Algorithm) its time priority will be based on the actual time of entry during Pre-Open.
(e) An order that participates in a fill that does not entirely deplete the current disclosed volume (i.e. is partially traded) will retain its effective time of entry and its position in the queue.
(f) When undisclosed quantities are included in an order, a new effective time stamp will be given when undisclosed volume is rolled-in to the disclosed volume. Roll-in occurs when disclosed volume is reduced to zero (vide Disclosed and Undisclosed Volumes section).
(g) Changing the terms of an order may result in a new effective time stamp and may change the relative priority position of the order in the queue. Whether or not a new time stamp is assigned depends on the nature of the change to the order (vide the Alteration of Orders – Change Former Order (CFO) section).
(iv) Random Factor
In the event that two orders are received at exactly the same time, priority will be assigned using a random factor.
Automated Trading System (MATS)
9.0 The Malta Automated Trading System (MATS) shall consist of a Pre-Opening Stage, At the Open and an Opened Stage for continuous trading. During the Pre-Opening Stage there will be a session for Put-Throughs and Block-Trades.
Pre-Opening
10.0 Prior to the start of regular trading, there shall be a Pre-Opening period during which orders can be entered but are not immediately processed. These orders will be queued in accordance with the Priority of Orders for Execution – Queue Priority.
10.1 During this period, Members can enter orders, change former orders (CFO), cancel orders (CXL) and carry out inquiries on orders already in the system.
10.2 As each order is queued, the system will verify whether the security is expected to open and calculates the opening price in accordance with the Opening Algorithm.
10.3 A market imbalance can be created during the pre-opening period where the best bid is higher than the best offer. In this instance, an opening price chosen will be based on the following criteria in priority order :
(i) maximum volume of shares to be traded;
(ii) minimum imbalance in share volume;
(iii) least net change from last day’s closing price;
(iv) highest share price.
10.4 In the pre-opening period, the actual price entered for a limit order which is better than the current predicted opening price is considered private information to the Member entering the order and to the Exchange. The Member entering the order would see the actual price entered and be able to clearly see that the order is causing an “imbalance”. The Market Official would also see the actual price. For all other Members, the order would be treated as if it had been entered at the currently predicted opening price. However, as the opening price changes, the volume at the previously predicted opening price and the currently predicted opening price will change.
Put-throughs
11.0 Put-throughs in securities should be entered by the Members within the price range dealt in during the last trading session in which that particular security was traded. All put-throughs are day orders and are to be traded as All or None orders.
11.1 Put-throughs are not permitted during the first trading session of dealing in a newly listed security. The Market Official, in consultation with the General Manager, may continue to withhold the trading of put-throughs in a newly listed security if it is considered that the market in that particular security has not yet settled.
11.2 The Put-Through Session is divided into four stages – Posting, Challenge, Resolution and Matching Stages. The duration of each of these stages shall be determined by the Market official. At the start of each stage, a screen message will be sent to all terminals notifying the Members of the change in the stage. The function of the different stages is as follows:
(i) All put-throughs must be entered during the Posting Stage. The Originating Member is allowed to amend or cancel a put-through order until the posting stage is closed.
(ii) During the Challenge Stage, Members other than the originating member, are permitted to challenge a put-through by improving the bid or offer prices or both, resulting in a more advantageous deal to the underlying clients. The challenge price must be better than that posted by the originating member during the Posting Stage, however, it must be within any applicable trade range established by the Exchange. Members are allowed to amend or cancel their own challenges until the Challenge Stage ends. The Originating Member cannot amend or cancel his put-throughs during this stage.
(iii) During the Resolution Stage the Originating Members are granted time to meet any challenges to their put-throughs. At this stage, only originating members are allowed to amend their orders. Put-through orders that had not been challenged during the Challenge Stage cannot be amended or cancelled by the originating Member.
(iv) Once the Resolution Stage ends, Matching of the orders will commence as follows :
(a) If a put-through is not challenged, it will be match as originally entered within MATS.
(b) If a put-through is challenged on one side only, i.e. there was a higher bid price or a lower offer price, and the originating stockbroker amends the order and meets this better price, the order will be matched between the originating clients as originally entered but at the revised price.
(c) If a put-through is challenged on one side only, i.e. there was a higher bid price or a lower offer price, and the originating member fails to meet this better price, a match will occur within MATS between one side of the original put-through and the successful challenge order, at the revised price. If there are two better challenges on the same side, time priority will be used to determine which will match with the original order.
(d) If a put-through is challenged on both sides, two separate matches will occur within MATS. The better bid will be matched against the original offer and the better offer will be matched against the original bid. If there are two better challenges on the same side, time priority will be used to determine which will match with the opposing original order.
(v) At the end of the Matching Stage, Members with unfilled orders on MATS (i.e. original unmatched put-throughs or unmatched challenge orders) are given the option to transfer these orders to the pre-open market. These orders will be assigned a new time stamp at the time of transfer into the regular market.
Block Trades
12.0 When a stockbroker receives an order to buy or sell listed securities which in his opinion is of sufficient size to exceed the capacity of the Market and thereby wishes to seek a matching order, eh must consult with the Exchange before attempting to create such a matching order. If the Exchange decides that the proposed bargains is of a size to exceed the capacity of the Market, the Exchange may give permission to the Member to approach other Members to attempt to match the bid/offer in whole or in part, provided always that the Member approaches only other members of the Exchange and/or his own clients.
12.1 The Exchange may, however, taking into consideration the maintenance of an orderly market and the interest of investors, order that such securities be offered for sale pursuant to a public offer by way of prospectus or equivalent offering document. For the purpose of such an offer, and without prejudice to the powers of the Council to require such information as it may consider appropriate in the circumstances, the provisions relating to Listing Particulars in the Listing Rules issued by the Listing Authority, shall mutatis mutandis apply to such prospectus or equivalent offering document.
12.2 An agreement reached between Members regarding block-trades which has been advised to the General Manager is considered binding on both parties and cannot be cancelled.
12.3 The details of the resultant proposed block-trade must be fair to all clients involved and be so decided by the Exchange.
12.4 The General Manager must be given sufficient prior notice in order to be able to advise the Members of such a proposed block trade by the close of business of the day before such block-trade is to be effected. The advice of the General Manager shall include the number of shares and/or nominal amount of the security and the agreed price.
12.5 All block-trades are day orders and are to be traded as All or None orders.
12.6 The block-trade shall be put-through the Market during the Block-Trade Stage which is similar to the Put-through Stage described earlier, except that:
(i) there are two originating Members associated with each block trade;
(ii) the posting of block-trades in the system during the Posting Stage is performed by the Market Official;
(iii) during the Challenge Stage only Members who are not associated with the block-trade can improve the bids and/or the offers; and
(iv) during the Resolution Stage, each originating Member can meet or otherwise his side of the block-trade.
At the Open & Opened Operations
11.013.0
During At the Open, an opening price is chosen in
accordance with the Opening Algorithm. The opening price calculated is
intended to create the highest volume of trades.
131.1 Once the
opening price is chosen, all of the orders that can execute at this price will
take place.
131.2 At the
Open, the aggressive side is designated as the “balanced side”; that is,
the side that will be completely traded in the open.
131.3 When the
bid volume and the offer volume are the same, both sides will be completely
traded. In this case, the side with the earliest order will be chosen as the
aggressive side.
131.4 The
allocation of orders during At the Open is based on the following :
(i)
(i) Allocation at better
than the opening price – Once the opening price is selected, all limit
orders at better than the opening price are fully traded.
(ii) Cross Priority at the opening price or better – Cross priority is applied, starting with the order with the highest queue priority on the side designated as aggressive. This order is fully allocated, first against orders from the same member and then against other orders. This process is repeated for successively lower priority limit orders at the opening price or better.
(iii) Shared Allocation at the opening price – Once all cross priority for limit orders at the opening price or better is completed, any remaining limit orders at better than the opening price are fully allocated. Volume remaining on the designated aggressive side will be fully traded. This volume will be allocated as evenly as possible, in board lots, between the number of remaining orders on the opposite side. The allocation is done in order of the queue priority. If the volume cannot be evenly allocated to the orders, orders at the bottom of the queue will be allocated a lesser volume than those at the top of the queue. Where the number of remaining orders on the opposite side exceed the number of board lots remaining to be allocated, some orders may receive no allocation at all.
(iv) Orders not completely filled – All orders entered during the pre-opening have a time priority based on the actual time of entry. For orders not completely filled during at the open, this time priority is maintained thereafter during the trading day and for subsequent trading days.
(v) Trading done during at the open on the basis of cross priority has no effect at all on the calculation of the trades for the shared allocation of any remaining volume. Shared allocation of remaining volume is done strictly on the basis of the number of orders on the opposite side of the market from the remaining volume on the designated aggressive side.
131.5 At the
completion of the Opening Algorithm, the market will be open for normal
continuous trading. Each new order, revision (CFO) or cancellation (CXL)
will be processed by the system on arrival. If an order cannot be executed
immediately, it will be queued in accordance with the Priority of Orders for
Execution – Queue Priority (Section 8.00).
Close of Trading
12.014.0
New orders and revisions to existing orders can be input
until the closing signal.