Alternative Liquidity Pool Guidelines of SBI SECURITIES Co., Ltd. for Hong Kong

 

     1. Introduction

SBI SECURITIES Co., Ltd.’s (“SBI Securities”) Dark Pool (“Dark Pool”) is an alternative liquidity pool (“ALP”) for Japan Equities, allowing users, including internal SBI Securities trading desks to interact with our liquidity in an automated fashion. The Dark Pool is currently available in Japan, Singapore and Hong Kong (operated by SBI Securities).

These Alternative Liquidity Pool Guidelines of SBI Securities (“ALP Guidelines”) provide comprehensive details on the operation of SBI Securities’ Dark Pool. These ALP Guidelines are applicable to clients of SBI Securities (Hong Kong) Limited (“Clients”) that consent to their orders being routed to SBI Securities’ Smart Order Routing system (“SOR”) and/or Dark Pool.

The latest version of these ALP Guidelines and additional materials containing information on SBI Securities’ Dark Pool can be found on the website of SBI Securities (Hong Kong) Limited.  

   i. Scope of Products

SBI Securities’ Dark Pool supports all equity securities listed on the Tokyo Stock Exchange (TSE) except for Foreign Stocks. However, orders for suspended securities cannot be executed within the Dark Pool.

   ii. Trading Hours

Orders can be matched within the Dark Pool during the continuous trading sessions of TSE. However, orders cannot be matched on or before market open and after the last minute prior to market close (AM and PM).

     2. User Eligibility

Only Clients that are Qualified Investors (as defined in the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission) are eligible to be users of SBI Securities’ Dark Pool and these ALP Guidelines will be brought to the attention of each Qualified Investor prior to any of their orders being routed to SBI Securities’ Dark Pool. Clients must opt in before orders are routed to SBI Securities’ SOR and/or Dark Pool for the first time.

Orders from eligible users who have opted in will be systematically placed within SBI Securities’ Dark Pool.

Eligible users who have opted in can choose to send their orders only to the Dark Pool (and not to the TSE nor Japannext’s Proprietary Trading System (“Japannext PTS”)) by selecting the algorithm strategy “Dark Peg” on their graphical user interface.

     3. Matching Price

All matches occur at mid-price of the Best Bid and Best Offer (“BBO”) of the TSE.

     4. Order Types and Parameters

SBI Securities’ Dark Pool supports the following order types and order parameters:

Market Order: Order can match at any price at the mid-price of the BBO.

Limit Order: Order can match at the limit or better, at the mid-price of the BBO.

     5. Order size

The minimum cross size is the TSE board lot size. There is no minimum executable quantity definition.

     6. Pool Priority

There is only one pool of liquidity and SBI Securities’ Dark Pool continuously matches orders in price, time priority while the stock is in its continuous trading phase on the primary exchange.

Agency orders are not prioritized above principal orders and all counterparties are treated with equal priority.

     7. Additional Information of Order Routing and SBI Securities’ Dark Pool

For Clients who use SBI Securities’ SOR, the SOR splits and executes slices to Japannext PTS and TSE (Multi-sweep). Sliced orders routed to TSE would be submitted to internal matching in SBI Securities’ Dark Pool before being placed on TSE.

The Client has an option to enable the SOR to place its orders on Japannext PTS, if the SOR decides that it can execute the orders at a better price or at the same price as the relevant indication price on the TSE. However, the SOR will not compare with potential prices in the Dark Pool.

     8. Additional Information of Japannext PTS

Japannext PTS is an automated trading system where transactions in Japan-listed securities are executed off-exchange. Japannext PTS provides for pre-trade price and volume transparency. Orders routed to Japannext PTS are only executed at Japannext PTS, and are not routed to an exchange or ALPs. Japannext is 48.8% owned by SBI Holdings, Inc. and is regulated by the Financial Services Agency in Japan as a Financial Instruments Business Operator.

     9. Matching Permissions and Opt-in Arrangements

Users by default are opted-out of interacting with SBI Securities’ Dark Pool entirely. If they opt in, at the moment there is no option to opt out from interaction with either principal or agency flow.

 

     10. Technical Summary

Matching Engine location           :  Toyosu, Tokyo, Japan

Order Entry Protocol                   :  SBI Securities’ Dark Pool supports order entry via FIX.

BBO Source                                    :  Direct from TSE

Feeds from the Dark Pool           :  The Dark Pool is a completely dark trading venue. There is no outbound market data feed made available internally or externally. SBI Securities’ SOR and trading algorithms do not receive any information about orders resting in the Dark Pool.

Trade Reports                                :  Synchronously to ToSTNet

 

     11. Commissions and Fees

Orders that are executed within SBI Securities’ Dark Pool are subject to the usual negotiated commission rates and standard market charges. There are no additional fees or rebates for providing or taking liquidity in SBI Securities’ Dark Pool.

 

     12. Order Amendment and Cancellation

Unexecuted orders may be cancelled or modified at any time during the trading day. (Such modifications may result in a loss of queue priority). Any unexecuted orders remaining in SBI Securities’ Dark Pool until one minute before market close and will be automatically cancelled.

     13. Aggregation

Orders are not aggregated within SBI Securities’ Dark Pool.

     14. SOR Audit Trails Report

Upon request, regular SOR Audit Trails Report can be made available to the users of SBI Securities’ Dark Pool concerning the transactions that are conducted on their behalf in the ALP. Fill information is provided back to users in real-time with the SBI Securities’ Dark Pool indicated in FIX message Tag 30.

     15. Internal Control Procedures

SBI Securities’ Risk Management Department and Examination Department set the framework for SBI Securities’ minimum standards in relation to internal control procedures.

  • If necessary and subject to internal approval procedure, SBI Securities can cancel orders in the Dark Pool or disable the Dark Pool entirely.
  • The usage capacity is regularly monitored and appropriate capacity planning is conducted.

 

     16. Access to the Dark Pool

Equity Execution High Touch and Direct Market Access (“DMA”) desk – real-time visibility of the execution information on the Dark Pool. No real-time view of the pool.

Facilitation traders – real-time visibility of the execution information on the Dark Pool. No real-time view of the pool.

Compliance – visibility over orders executed on the Dark Pool on a post-trade basis but no view of the pool – to perform surveillance on orders executed on the Dark Pool to ensure adherence with local rules and regulations.

Middle Office – access to post-trade Dark Pool order information but no view of the pool – performance of normal trade booking, confirmation and settlement procedures.

IT specialists – real time access to the Dark Pool system – to monitor the technical health of the Dark Pool platform and provides 1st and (2nd) line support for incident investigation and remediate visibility.

     17. Risks

Interactions in SBI Securities’ Dark Pool should be viewed with the same caution as any other trading venue, lit or dark. Further, SBI Securities do not represent that the Dark Pool is in any way “safer” than any other trading venue.

Although all SBI Securities’ Dark Pool matches occur within the BBO, the SBI Securities’ Dark Pool execution price may not always be better than the price that could have been achieved on the TSE.

As with all trading venues, SBI Securities’ Dark Pool may occasionally be impacted by market data or system delays or outages which may result in users’ orders being delayed or cancelled.

     18. Version Control

These ALP Guidelines will be updated over time as necessary to ensure that they remain comprehensive, accurate and current. The most current version will be published on the website of SBI Securities (Hong Kong) Limited.

 

 

Disclaimer

This material has been prepared by SBI SECURITIES Co., Ltd., Financial Instruments Business Operator in Japan, solely for the purpose of providing information to the clients of SBI SECURITIES Co., Ltd. and/or its affiliates to whom it is distributed. This material is not, and should not be construed as, a recommendation, promotion, solicitation, offer or invitation to buy or sell any securities or related financial products. The final investment decision should be made at the discretion and responsibility of the investor. This material is based on information that we believe to be reliable, but we do not guarantee its accuracy or completeness. In the unlikely event that clients suffer damage due to this material, the source of the information and we shall not be liable for any such damage. This material is protected by copyrights, and clients are strictly prohibited from diverting, reproducing or distributing this material without our permission.

Company name: SBI SECURITIES Co., Ltd. (Financial Instruments Business Operator)

Registration Number: Director-General of Kanto Local Finance Bureau (Kinsho) No. 44

Member associations: Japan Securities Dealers Association, Financial Futures Association, and Type II Financial Instruments Firms Association