Swiss Block Service Guide / Six Swiss Exchange

Swiss Block – Discover the value of the pool Service Guide

Discover the value of the pool Traders and investors searching for the ultimate neutral dark pool of liquidity in Swiss Blue Chip equities need look no further than Swiss Block.

Contents Non-displayed services are complementary liquidity venues

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An infinite pool of liquidity

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International investment pool

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Swiss Block – Constituents

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Service overview

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Matching process

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Application process

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Non-displayed services are complementary liquidity venues

Dark pools are non displayed order books that provide liquidity that is not displayed on our order book. This is useful for any market participant wishing to move larger numbers of shares without disclosing its interests to the open market.

The reasons for the growing popularity of these services include the following: – Not all transactions are suited to the public limit order book. Institutional investors value the ability to execute promptly, anonymously and in bulk – Non-displayed services provide the opportunity for price improvement – Smart order routing applications and algorithms increasingly recognise non-displayed services as liquidity destinations – Recent technology advances, including FIX, have demystified linking to multiple venues

According to reports from the international consultancies Celent, TABB and AITE, non-displayed liquidity execution represents 10 % of US equity trading today and is predicted to rise to over 15 % by 2010. Swiss Block has been developed to reflect the diversification of trading strategies and demand for additional solutions in Swiss Blue Chip trading. Complementing our existing public limit order book, the service delivers investors and intermediaries with a number of important benefits, helping them to get wholesale business executed, with minimal market impact at improved prices.

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An infinite pool of liquidity Swiss Block provides an infinite pool of liquidity, matching buyers and sellers, in a neutral environment.

As an exchange based facility, supervised by the Swiss Financial Market Supervision Authority (FINMA), Swiss Block offers all of the benefits of trading on SIX Swiss Exchange, including our dual Central Counter-Party (CCP) model for post trade processing. In addition, Swiss Block customers can realise additional key benefits including:

Benefits Minimising information leakage Reduce concerns that any indication of a large block trading interest prior to its execution may have a detrimental impact on the price achieved or the ability to complete the transaction. Reducing market impact Execute at the midpoint reference price as orders are not disseminated to the market.

Pass-through orders Unexecuted orders can be forwarded directly to SIX Swiss Exchange (see also page 6). MiFID compliant Swiss Block uses the MiFID reference price pre-trade transparency waiver. Once an order is executed the details are distributed to the public immediately.

Price Improving Obtain beneficial execution at the midpoint reference price. Users are able to obtain price improvement compared to the best publicly quoted prices.

“As an exchange based facility, supervised by the Swiss Financial Market Supervisory Authority (FINMA), Swiss Block offers all of the benefits of trading on SIX Swiss Exchange, including our dual CCP model for post trade processing.” 3

International investment pool Swiss Block combines the proven technology of NYFIX Euro Millennium™ with SIX Swiss Exchange’s deep liquidity pool.

Owned and operated by SIX Swiss Exchange, Swiss Block has been developed in partnership with NYFIX, Inc. (NASDAQ: NYFX), one of the industry’s leading dark pools. With a global network of FIX based market participants already in place, NYFIX is the ideal partner for SIX Swiss Exchange. As a major player in the non-displayed liquidity space, NYFIX provides a wealth of experience and a global network of market participants. By combining SIX Swiss Exchange’s own members with NYFIX’s global FIX community, we will ensure that Swiss Block is the pre-eminent venue for the non-displayed trading of Swiss Blue Chip equities. SIX Swiss Exchange is offering Swiss Block in the context of a complementary liquidity service in addition to our existing public limit order book.

Swiss Block – Neutral proposition for wholesale trading

SIX Swiss Exchange

Wholesale Flow

SIX Swiss Exchange Members Conventional Flow

NYFIX Euro Millenium™

Swiss Block Pass-Through Orders

Swiss Block Executions

SIX Swiss Exchange Public Limit Order Book & Post Trade Service

CCP CSD

“NYFIX Euro Millennium™ is a hybrid market system, enhancing traditional auction markets by combining the electronic execution technology of an ECN with the liquidity of traditional primary markets. Robust and high performance technology, combined with proven market understanding, makes NYFIX the ideal partner for SIX Swiss Exchange.” 4

Swiss Block – Constituents

Scope Swiss Block provides trading in the Swiss Blue Chip Segment on SIX Swiss Exchange. This includes: – The 30 constituents of the SLI Swiss Leader Index®. These are the largest and most liquid Swiss stocks and include the SMI Swiss Market Index® securities, and – Some former constituents of the SLI/SMI® which remain traded in the Swiss Blue Chip Segment Rights issues on Swiss securities traded on SIX Swiss Exchange are not included in the service.

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Service overview Order types Swiss Block includes two order types – Conditional orders and Pass-through orders, all executing at the midpoint reference price of the public available best bid and offer (BBO).

Conditional orders These always remain within the Swiss Block service and participate in all matching cycles until they are fully executed or withdrawn. A single matching cycle within Swiss Block is an attempt by the system to match/pair current orders that reside within it. Partially executed Conditional orders may remain within the Swiss Block service depending on the fill criteria even if partial execution reduces the order to a level below the minimum value. All unexecuted Conditional orders will be terminated at the end of each trading day. Conditions may be applied to: – Price, e.g. pegged to mid-price – Minimum Execution Size condition – Market price, e.g. maximum or minimum spread thresholds – Fills, e.g. minimum fill In addition, a number of eligibility conditions control whether an order is active and eligible for matching within Swiss Block (e.g. Spread limits and Price limit collars). Order matching constraints allow members to control how their orders execute against other orders within Swiss Block, for example Minimum Execution Size. This constraint enables Swiss Block participants to protect their order against smaller executions in the liquidity pool.

Pass-through orders These only participate in a single matching cycle within Swiss Block for complete or partial execution before being routed to the SIX Swiss Exchange public limit order book (“SIX Swiss Exchange plob”). Pass-through orders have no minimum order size and take the form of most of the existing SIX Swiss Exchange order types, which are: Limit, Market, Fill or Kill and Immediate or Cancel (Accept). A Pass-through order entered outside SIX Swiss Exchange continuous trading is forwarded to the SIX Swiss Exchange public limit order book without an attempt to match within Swiss Block. Pass-through orders are only valid for the current trading day or less. Unexecuted orders are cancelled by the system at the end of each trading day.

Conditional orders have a pre-defined minimum value as defined in SIX Swiss Exchange’s Traders Guide. Where a Conditional order is partially executed to take the remaining size below the minimumthreshold, the order can remain within the service.

Swiss Block Member Pass-Through Orders

SIX Swiss Exchange Public Limit Order Book Buy 20.10

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Sell 20.12

Forwarded PassThrough Orders

Reference Price Feed

Conditional Orders

Swiss Block Matching Logic Midpoint Reference Execution 20.11

Immediate Trade Publication (XM) Market Data Feed

Matching process Order matching

Post trade processing

Swiss Block offers continuous, real-time matching of orders, on a price priority basis. Executions are onexchange on SIX Swiss Exchange:

After matching, SIX Swiss Exchange’s standard post trade processes apply:

– A real time continuous series of matching cycles identifies orders for matching. A matching cycle is initiated whenever a new order is entered for the security or when there is an update to market data for the security on SIX Swiss Exchange – Swiss Block securities have a fixed tick size for matching Conditional orders within Swiss Block. This tick size allows for matching at tighter spreads – with order tick sizes of 4 decimal places

– As soon as orders are matched within Swiss Block, the member receives an own trade message and a trade slip message. SIX Swiss Exchange’s usual post trade processes apply, including publication, clearing and settlement arrangements – The order originator receives messages such as the trade slip through the connection from where the original order has been sent

– Eligible orders are matched within the Swiss Block service at the mid point-price on SIX Swiss Exchange’s public limit order book

Swiss Block – Service overview

SIX Swiss Exchange Members

FIX interface to Swiss Block Orders

Own Trades

Trades Slips

SIX Swiss Exchange Swiss Block Pass-Through Orders SIX Swiss Exchange Members Existing Member Connectivity

Own Trades

Trades Slips

SIX Swiss Exchange Public Limit Order Book & Post Trade Service

– Clearing & Settlement – Publication

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Application process Swiss Block is open to all professional market participants (Buy- and Sell-Side).

Access As a member of SIX Swiss Exchange: – Members can access the service via the NYFIX FIX Network and may place orders in the service for their own account (as principal) or on behalf of a customer – A network agreement with NYFIX Global Services is required to access the Swiss Block service – A unique member ID is allocated for the service on completion of the Swiss Block application form

Technical Impacts of Swiss Block

Swiss Block Fees

– Members connect to Swiss Block via FIX 4.2 over the NYFIX Global Services network.

– There is no additional application fee or membership fee for joining the service.

– Existing SIX Swiss Exchange members using Swiss Block receive a new Member ID exclusively used for orders routed to and through Swiss Block.

– The standard basis point rate for a Swiss Block trade is set out in Section 10 of the Swiss Blue Chip Segment Directive 9.

– SIX Swiss Exchange members that are already NYFIX Euro Millennium™ users can just program against the delta interface to Swiss Block (a FIX 4.2 interface as defined by NYFIX Global Services Ltd). – All trades matched in Swiss Block are separately identified in the Market Data feed (Trade Type Code XM).

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– There is a trading fee cap of CHF 5,000 each side/leg. – Billing is conducted on a monthly basis.

Contact If you would like further details on Swiss Block or any other exchange related topic, please contact the Account Management.

SIX Swiss Exchange Ltd Selnaustrasse 30 P.O. Box 1758 CH-8021 Zurich T +41 58 854 23 76 F +41 58 854 24 76 www.six-swiss-exchange.com [email protected]

SIX Swiss Exchange Ltd Selnaustrasse 30 P.O. Box 1758 CH-8021 Zurich www.six-swiss-exchange.com

SIX Swiss Exchange Ltd None of the information contained herein constitutes an offer to buy or sell a financial instrument that is traded on SIX Swiss Exchange Ltd. SIX Swiss Exchange Ltd is liable neither for the completeness and accuracy of the information given, nor for any loss incurred as a result of action taken on the basis of information provided in this or any other SIX Swiss Exchange Ltd publication. SIX Swiss Exchange Ltd expressly reserves the right to alter prices or product composition at any time. SIX Swiss Exchange Ltd is a joint-stock company under Swiss law. It operates a securities exchange which is licensed and supervised by the Financial Market Supervisory Authority FINMA. SIX Swiss Exchange Ltd is a stock exchange recognised in France, Italy, the Netherlands and the United Kingdom. It may also operate in Austria, Finland, Germany, Sweden, Belgium and Luxembourg. SIX Group, SIX Swiss Exchange, SPI, Swiss Performance Index (SPI), SPI EXTRA, SPI ex SLI, SMI, Swiss Market Index (SMI), SMI MID (SMIM), SMI Expanded, SXI, SXI LIFE SCIENCES, SXI Bio+Medtech, SLI, SLI Swiss Leader Index, SBI, SBI Swiss Bond Index, VSMI and SWX Immobilienfonds Index are registered or deposited trademarks of the SIX Group Ltd or of SIX Swiss Exchange Ltd, and their usage is subject to licence. © SIX Swiss Exchange Ltd, July 2009