Self-match prevention flagging to become mandatory for algorithmic proprietary trading as of 1 April 2020

Release date: 04 Feb 2020

007/2020 Self-match prevention flagging to become mandatory for algorithmic proprietary trading as of 1 April 2020Xetra Circular 007/20

1. Introduction

With this circular, we would like to inform you about an amendment to the Exchange Rules for the Frankfurter Wertpapierbörse (FWB) (hereafter referred to as: Exchange Rules) which requires Trading Participants to mark specific algorithmically generated proprietary orders and quotes with a self-match prevention flag (§ 74 Paragraph 4 of the Exchange Rules).

This flagging obligation will become effective as of 1 April 2020.

2. Required action

The Xetra Trading Members must take all necessary steps to ensure compliance with the new flagging obligation as of the effective date.

3. Details

The Self-Match Prevention functionality (SMP) is a voluntary service offering which has been available since mid-2015. With this functionality, Xetra Members can prevent unintended crossings (self-dealing) (§ 76 Paragraph 1 Number 2 of the Exchange Rules).

For SMP, an optional field (Cross-ID) for orders and quotes exists through which execution against other orders of the same Member with the same cross-ID can be ruled out. By entering different data in this field, Members have the flexibility to define different rules for individual traders, trader groups or sessions. An incoming order intended for SMP can be executed until it meets another order with the same cross-ID on the other side of the order book. As soon as the order meets another order with the same cross-ID, both orders will be reduced by the quantity of the smaller order. The remaining aggressive order can be executed against existing liquidity up to the price level the SMP action took place at (see Xetra circular 031/15 from 28 April 2015).

Usage of SMP as governed in § 76 Paragraph 1 Number 2 of the Exchange Rules is voluntary.

Flagging to become mandatory as of 1 April 2020

As of 1 April 2020, algorithmically generated proprietary orders and quotes, for which the investment decision according to Article 8 of Commission Delegated Regulation (EU) 2017/590 and the execution decision according to Article 9 of Commission Delegated Regulation (EU) 2017/590 have both been determined by the same algorithmic strategy, are required to be entered with the additional execution condition Self-Match-Prevention (SMP) and the same SMP flagging (§ 74 Paragraph 4 of the Exchange Rules) during Continuous Trading.

The flagging obligation only applies for proprietary trading via a computer algorithm, where the latter is responsible for both the investment decision and the execution decision.

In all other application scenarios, the usage of SMP remains voluntary.

Attachment

  • Eighth Amendment Ordinance to the Exchange Rules for the Frankfurter Wertpapierbörse

Further information

Recipients:All Xetra® Members and Vendors
Target groups:Traders, Security Adminstrators, System Administrators, Nominated Persons, General
Contact:client.services@deutsche-boerse.com
Web:www.xetra.com
Related circular:Xetra Circular 031/15
Authorised by:Cord Gebhardt, Michael Krogmann

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