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Rock Street, San Francisco

The Exchange recognizes that clients may wish to participate in the order book price and that firms may fill part of a client’s order from their principal book, or from another client order in the opposite direction to form an ‘agency cross’ on the order book. There are no specific Exchange rules that prohibit a member firm from entering a buy or a sell order to the order book with the intention that they should execute against each other.

Neither there is a general prohibition on a firm executing orders against itself on the order book in circumstances where this is undertaken in pursuit of a real trading strategy and without any misleading intent. Nevertheless, the Exchange monitors all situations where a firm executes against itself, particularly around sensitive times such as the end of the trading day or during index expiry pricing periods, due to the potential for a firm to influence prices in this manner. If it considers it necessary, the Exchange may seek a full and detailed explanation of a firm’s trading strategy in these circumstances.

The intention of the last criteria is to avoid requiring market makers to register to trade in a security when it is likely to enter the index and therefore move to the order book within a matter of weeks In the context of adding new securities to the order book, member firms should note that when FTSE International announces the results of their quarterly review, the Exchange normally adds new reserve securities to the order book with effect from the date they enter the reserve list rather than the date of the announcement. Analyzing the new system

The SETS system has scales in order to manage to overcome increasing volume and provide consistently fast response times. This is good because there is no possibility where the whole system can crash because of the amount of volume that can come from the increased transactions. Moreover it executes and reports trades reliably and provides up-to-the-second online backup of pricing and trade data. This is a grate help for the investors since they can see the past of a security and decide if and how to invest their money judging from its history mainly in the near past but sometimes from further back.

Only the member firms which are authorised to use SETS and SETS participants are those who are able to enter buy and sell orders, either on their own behalf or for their clients. If these orders are not matched automatically with corresponding orders, they are retained on the order book for future execution, or returned – either in full or in part – to the member firms that have given or asked for the shares. Particularly large trades or trades with no standard conditions can be negotiated away from the order book enabling firms which commit risk capital to large trades to continue to do so.

The trading day for SETS securities runs from 08. 00 hours to 16. 30 hours on each Stock Exchange business day. The opening of the market is preceded by an opening auction during which time member firms can enter certain types of orders for execution during an uncrossing, which starts the trading day. The trading day ends with a similar closing auction period. In the SETS system it also exists the fill or kill order system. This system allows participants to enter orders that will be executed either in full or not at all.

If they cannot be satisfied in full, the entire order will be rejected. Unexecuted fill or kill orders do not remain on the order book. A fill or kill order must be entered with a quantity. A limit price could be specified to avoid the worst execution price. If no price is specified, as long as there is sufficient volume on the order book to satisfy the order in full, it will be executed to as many prices as necessary, subject to price monitoring, until the order is filled in full. These orders can not be input during auction call period.

For example if a member firm authorised to use the SETS wants to sell one million securities of Barclays PLC and sets the limit price to i?? 100 per share then all the securities must be sold in a price higher or equal to i?? 100. if this presupposition is not satisfied then no securities will be sold. Equally, if this firm wants to buy one million securities of Barclays PLC with a limit price of i?? 150 this means that the highest price for every share bought must not be over i?? 150.

Whenever, an incoming order, other than fill or kill order, is entered during continuous trading, the potential execution price will be compared with the dynamic base price. If execution of the whole order would cause a pre-determined percentage movement against the dynamic base price, the order will execute down to that level and any remaining part of the order will be placed on the book. This will immediately be followed by a suspension of automatic execution for a period of 5 minutes during which a further auction call period will take place.

In the event that a suspension occurs, member firms may enter market orders and/or limit orders during the auction call period in the same way as the opening auction. There is no price monitoring extension following a suspension but there may be a market order extension. The pre-determined percentage movement for automatic suspensions is i?? 5% Now if a fill or kill order is entered which would execute against a limit order with a price at or outside the relevant base prices, the order will be rejected in its entirety. No suspension of automatic execution will occur in these circumstances.

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