On-order-book Trading

On-order-book Trading

Regulated Trading in a Fair and Transparent Environment

Three Distinct Market Models

On the Swiss Stock Exchange, the market model defines the trading process and determines how orders and quotes are carried out and how each exchange trading period is structured. It also determines which matching rules apply.

Our On-Book Matcher (OBM) supports the three market models: Central Limit Order Book (CLOB), Quote Driven Market (QDM) and Price Validation Market (PVM). All three can be accessed via a single connection.

We maintain one or more order books for each security that classify and manage all orders according to price and the time at which we receive them.

Your Benefits on the Swiss Stock Exchange

Market Control: Promoting Transparency, Efficiency and Liquidity

The Swiss Stock Exchange controls trading and thereby promotes the transparency, efficiency and liquidity of the securities market with the aim of treating investors and participants equally within their peer groups, and of protecting investors. Market Control monitors the integrity of the market on an ongoing basis. If it identifies mistrades, it will declare these null and void. In extraordinary situations, Market Control may institute all measures which it deems necessary to maintain trading that is as fair, efficient and orderly as possible or to suspend trading entirely or in part.

About This Service

The Swiss Stock Exchange distinguishes between on-exchange and off-exchange trading. On-exchange trading is divided into on-order-book trading and off-order-book trading. Trades conducted via the order book are designated as: "on-exchange, on-order-book trade", as "on-exchange trade without pre-trade transparency” or as "on-exchange, hybrid trade".

We offer different order and quote validities for different orders and trading interfaces which have various functions for on-Exchange trades executed either via the order book or away from the order book.

Market Models

Central Limit Order Book (CLOB)

With this market model, participants trade on the basis of orders and quotes. At the close of trading there is a closing auction for Shares and Investment Funds, but not for CHF Bonds and Rights and Options. Trading can be stopped depending on the reference price. Prices are calculated according to the CLOB price calculation method.

Whcih segments is the CLOB trading model used for?

  • Blue Chip Shares
  • Mid-/Small Cap Shares
  • Secondary Listed Shares
  • Bonds - CHF
  • Investment Funds
  • Rights and Options

Standard Trading Interface (STI)

The Standard Trading Interface (STI) provides Price Taker Users (PT) with a simple way of entering, amending and deleting the following orders: Normal order, Iceberg order, Limit Plus order and Iceberg Plus order. Participants may enter Normal and Iceberg orders during all trading periods. If an order is entered in post-trading, its expiry date must be in the future. Limit Plus and Iceberg Plus ordes can only be entered with validity good-for-day. In addition to the functions for on order book trading, the Standard Trading Interface (STI) offers participants various functions for off order book trading. Details are provided in the On Order Book Functionality Guide and the Off Order Book Functionality Guide.

OUCH Trading Interface (OTI)

The OUCH Trading Interface for Volatile Orders allows participants who engage in high-frequency trading to place, amend or delete the following orders: Normal order, Iceberg order, Limit Plus order and Iceberg Plus order. Participants can enter Normal orders and Iceberg orders during all trading periods with the exception of post-trading. Limit Plus and Iceberg Plus ordes can only be entered with validity good-for-day. The OUCH Trading Interface (OTI) does not provide participants with any functions for off order book trading. Detailed information is provided in the On Order Book Functionality Guide.

Quote Trading Interface (QTI)

The Quote Trading Interface (QTI) allows market makers and liquidity providers to enter, change or cancel quotes. The securities segments for market making and liquidity provision are: Bonds - CHF, Bonds - Non CHF, Exchange Traded Funds (ETF), Exchange Traded Structured Funds (ETSF), Exchange Traded Products (ETP), Sponsored Funds an Structured Products. Participants may enter their quotes at any time on a given business day. These quotes then expire at the end of the business day. Detailed information is provided in the On Order Book Functionality Guide.

Resources

The Swiss Stock Exchange defines price steps and assigns securities to those individual price steps. The criteria by which securities are allocated to these price steps, or alternative price steps, are set out in the relevant Annex to the "Trading Parameters" Guideline. The Price Step Overview provides all details.

The Swiss Stock Exchange may investigate trades on the exchange. If it identifies mistrades, it will declare these null and void. The exchange may investigate specific trades on request or at its own discretion.

When can an investigation be carried out?

  • If the parties concerned have doubts about the validity of the trade in question.
  • If at least one of the two parties requests a decision as to the validity of the trade.

When does the exchange declare a trade null and void?

  • If the price of the trade deviates significantly from the market price.
  • If fair and orderly trading is not guaranteed.

How does the exchange proceed in the event of a suspected mistrade?

The exchange establishes an appropriate market price for the trade in question. It then decides whether the effective price deviates significantly from the market price and thereby represents a mistrade. Although the exchange is entitled to ask other parties for their opinion, its decision is final.

Provided the market price is fair, any trade executed on the basis of incorrectly entered information for orders or quotes remains valid.


How long does the exchange take to make decisions on mistrades?

In principle, the Swiss Stock Exchange takes decisions about mistrades on the same trading day. There are different deadlines for the different trading segments. In exceptional cases, these deadlines may vary, in which case the exchange will tell the relevant parties when they can expect a decision.


If the exchange is unable to make a decision within the relevant deadline, a mistrade cannot be confirmed. In exceptional cases where justified, the exchange may extend the deadlines.

What must happen within the specified deadline?

  • The party concerned declares a mistrade;
  • SIX makes a decision regarding the mistrade;
  • SIX extends the deadline.

How are mistrades or deadline extensions communicated?

If the exchange decides that a mistrade has occurred or extends the deadline, it notifies the relevant participants via a number of channels of communication:

  • Via the Newsboard of the SIX website
  • For participants: in the form of news alerts via the Standard Trading Interface (STI)

The participant responsible for the mistrade covers the costs of the above procedure.

Trading segment

Trading Capacity

Deadline

Shares

Client and own-account transactions

Within 30 minutes of execution

Structured Products

At least one of the parties concerned has marked its order as a client transaction

Both of the parties concerned have marked their orders as own-account transactions

Within 30 minutes of the close of trading on the relevant trading segment

Within 30 minutes of execution

Bonds

Client and own-account transactions

Within 30 minutes of the close of trading on the relevant trading segment

Investment Funds & ETF

 

Within 30 minutes of execution

Should an extraordinary situation arise, the Swiss Stock Exchange, as a part of its market steering activities, may take all measures it deems necessary to preserve the fairest and most orderly trading possible. Further information in this regard can be found in the Trading Rules and Directive 3: Trading.

Intervention in the opening of trading

The exchange may delay the opening of trading by a predefined amount of time if a number of criteria are met.

  • Delay Open
    If the theoretical opening price deviates sharply from the reference price, a Stop Trading condition is automatically triggered and the opening is delayed by 5 or 15 minutes. The limits for deviation and the length of time for which trading is stopped are set out in the Trading Guide.
  • Delayed Opening "No Quote"
    If at the opening there are no quotes on the order book even though executable orders exist on both sides of the market, the opening is automatically delayed. Trading in the affected securities will be postponed. The exchange specifies the length of the delay (Stop Trading Duration) in advance.

Trading interruptions

The exchange may intervene in continuous trading by halting trading in a security for a specified period of time. This can happen for different reasons.

  • Non Opening
    The exchange will not open trading in a given security as long as long as the auction procedure does not result in the execution of all unlimited orders on the book (Non Opening). In this status, it is also not possible to calculate a theoretical opening price (TOP).

    The order book remains open and the opening procedure is restarted with each change in the order book. The Non Opening condition lasts until all unlimited orders can be executed.
  • Stop Trading
    The Stop Trading condition depends on the probable next paid price for a security. If this deviates by n% or more from the reference price, the exchange halts trading in this security for 5 or 15 minutes. The security will be revalued for reopening or go into Non Opening status.
  • Stop Trading "No Quote"
    If there are no quotes in the order book even though executable orders exist on both sides of the market, the exchange imposes a Stop Trading condition for a predefined period of time (Stop Time Duration).
  • Stop Trading "Price Validation"
    If an incoming order can be executed against a resting quote in the order book or vice versa, there will be a short interruption in trading during which both the market maker/liquidity provider and clients can validate the price of their order or quote before they are matched.
  • Avalanche Stop Trading
    The criteria for an Avalanche Stop Trading condition relate to a predefined period of time (Avalanche Time) and a predefined price range (Stop Trading Range). If the next trade during this period of time would potentially deviate from the reference price by an amount that is higher than the predefined price range, the trade is not executed. The exchange halts trading in the security concerned for a predefined period of time (Stop Time Duration).

Suspension

In extraordinary circumstances, the exchange may also temporarily suspend trading in a security. The duration of the suspension is decided on a case-by-case basis and should be as short as possible. In the event of a suspension of trading, participants and the exchange must consider various aspects.

  • The issuer that submitted the original listing application for the security in question may apply to the exchange for a suspension in trading. Where possible, this should take place at least 90 minutes before the opening of trading.
  • When assessing the imposition and duration of a suspension, the exchange must weigh a number of interests. The public interest lies in having an open, transparent market and continuous pricing. On the other hand, there is the interest of ensuring that all participants are treated equally with regard to price-sensitive information.
  • In the case of securities with a secondary listing and any related derivatives, the exchange also takes into account the decisions of the other major trading exchanges.
  • Moreover, in terms of equity securities with a secondary listing, the exchange also takes into account the decisions of the other major trading exchanges.
     

The participant must report the operation of algorithmic trading to the Exchange and must flag orders generated by such algorithmic trading. It must use a separate identification for each algorithm and must also indicate the traders who initiated these orders.

The participant must record the orders generated by algorithmic trading, and must keep the orders that have been sent, including any cancellations, on file.

The details are laid down in the "Trading" and "Alternative Trading" directives.

The Exchange determines those trading segments in which trading is supported by market makers, and may admit one or more market makers for each security.

The market maker undertakes to ensure a liquid market for the securities in question by performing the following functions for a given period within trading hours:

  1. providing bid and ask prices;
  2. offering minimum bid and ask volumes; and
  3. not exceeding a maximum bid-ask spread.

Only participants that have entered into a market maker agreement are subject to market making provisions. The details are laid down in the "Trading" directive.

In the "Quote Driven Market (QDM)" market model and in the Price Validation Market (PVM) market model there are separate agreements for the following market segments:

  • Certificates on alternative investments
  • Actively managed certificates
  • ETFs
  • ETSFs
  • Investment Funds (with assets above CHF 100 million)
  • Sponsored Funds
  • Sponsored Foreign Shares