BlockMatch Rulebook

September 2015

BLOCKMATCH RULEBOOK Sept 2015

BlockMatch is a Multilateral Trading Facility (MTF), operated by Instinet Europe Limited (IEL),
which is authorised and regulated by the UK Financial Conduct Authority (FCA) (BlockMatch),
pursuant to the Markets in Financial Instruments Directive (MiFID).

By placing an Order

(whether directly, or indirectly via IEL) on BlockMatch, a Direct Access Client will be a user in
BlockMatch and such action will be evidence of the Direct Access Clients acceptance of these
rules. All Orders submitted to BlockMatch and all resultant executions will be subject to, and in
accordance with, this Rulebook as well as the terms of the client agreement between the Client
and IEL (the Agreement).

BLOCKMATCH RULEBOOK Sept 2015

Definitions
For the purposes of this Rulebook, the following capitalised terms shall, unless specifically
provided otherwise, have the following meanings:
Agreement

means the Instinet Europe Limited Client Services Agreement pursuant to

which IEL provides brokerage services to a Direct Access Client

Backwardation

means a situation whereby the offer price of a given security on any order book
(as referenced by the EBBO)

is lower than the bid price any order book

referenced by the Instinet Europe Consolidated Book

Best Bid

the best bid of the EBBO, being the highest bid price of the reference markets
contributing to the EBBO

Best Offer

the best offer of the EBBO, being the lowest offer price of thee reference
markets contributing to the EBBO

Clearly

a trade which is regarded as erroneous as determined by IEL

Erroneous Trade

Client

client of IEL, including a Direct Access Client

Direct

approved client of IEL to whom IEL has agreed to provide direct electronic

Access Client

access to BlockMatch

FCA Rules

means the rules, regulations and procedures of the FCA (or any successor
entity which regulates the conduct of the Operator) contained in the FCA
Handbook from time to time

IEL

means Instinet Europe Limited

BLOCKMATCH RULEBOOK Sept 2015

Market of

the regulated European market or non-European equivalent on which

Reference

the relevant security is officially listed, and where a security is listed on multiple
trading venues, the Market of Reference shall be the Primary Exchange

MIFID

means the Directive 2004/39/EC of the European Parliament and of the Council
of 21 April 2004 on markets in financial instruments, and the Commission
Directive 2006/73/EC of 10 August 2006

MTF

means a multilateral trading facility as defined in the FCA Rules

Operator

means IEL, when acting in its role as the operator of the BlockMatch MTF

Order

an instruction by a Client to buy or sell a security which has been submitted to

IEL for execution on BlockMatch

Order Book

electronic real time register of all pegged orders that have been submitted to
BlockMatch

Primary

the venue of primary listing of the underlying security

Exchange

Primary

the mid point of the primary exchange listing order book

Midpoint

Prohibited

any practice which could be construed as contravening the Market Abuse

Practices

Directive (2003/6/EC of the European Parliament and Council)

Qualifying

means a venue that has been assessed by the Operator as being appropriate

Venue

for inclusion in the calculation of the EBBO

Rules

the rules set forth in the Rulebook

Rulebook

this BlockMatch Rulebook

BLOCKMATCH RULEBOOK Sept 2015

Securities

means the securities admitted to trading on BlockMatch as determined by the

Operator

Trade

an executed Order

Trade Data

means a platform authorised by the FCA for the dissemination of pre & post

Monitor

trade data

Transaction

means in respect of any Order, the execution of such Order in full or in part
resulting in an agreement between buyer(s) and seller(s) to deliver Securities
against payment

BLOCKMATCH RULEBOOK Sept 2015

1.

Authorisation, Admission and Application of the Rules

1.1

No Direct Access Client shall be able to place Orders on BlockMatch unless it:
(a) meets the Eligibility Criteria set out in Rule 1.2
(b) has a valid and effective Agreement in place.

1.2

BlockMatch will only be accessible, whether directly or indirectly, by Direct Access

Clients who:
(a) are classified by IEL as a professional or eligible counterparty as defined
under MiFID;
(b) satisfy IELs on-boarding procedures, including, without limitation, know
your client and credit risk;
(c) satisfy, at all times, the requirements set out in Rule 3.4;
(d) meet the technical specifications and standards required by IEL and/or the
Operator from time to time
(e) have confirmed to IEL, in a manner satisfactory to IEL, that they have
agreed to be bound by these Rules.

1.3

Each Direct Access Client acknowledges that its placing of an Order (whether directly,
or indirectly via IEL) on BlockMatch constitutes its acceptance of and agreement that it
will by bound and abide by the Rules.

1.4

In placing Orders on BlockMatch on behalf of Clients, IEL agrees to be bound and

abide by these Rules. The Rules apply whenever Orders are placed or executed on
BlockMatch by IEL on a Clients behalf.

2.

Trading Rules

Securities traded on BlockMatch

2.1

The Operator will determine in its absolute discretion which Securities are eligible for
trading on BlockMatch. Among other things, consideration will be given to MiFID
eligibility, compliance and regulatory requirements and commercial viability.

BLOCKMATCH RULEBOOK Sept 2015

2.2

BlockMatch offers trading in equities listed on EU Regulated Markets. BlockMatch

does not support grey market trading nor does it support when issued trading, i.e.
trading in securities that are the subject of an application for listing.

2.3

Securities will trade in the currency of the primary market on which the security is
normally traded.

Hours of Operation
2.4

BlockMatch will be open for business every day that the primary market is open in
respect of the relevant security. BlockMatch will provide a continuous trading service,
between 8am and 4.30pm UK Time, for the duration of the continuous trading period
on the primary exchange.

Order Books
2.5

BlockMatch operates three dark Order Books, which peg to the European
Consolidated Best Bid price, Mid or Best Offer price. The three Order Books operate
completely independently of each other. Upon Order entry, all Orders submitted to
BlockMatch must be specified with the intended book by the use of the following peg
types:

Primary

- pegs to same side of the book as the order (Buy-Best Bid/Sell-Best

Offer)

Market

- pegs to the opposite side of the book as the order (Buy-Offer Bid/Sell-

Best Bid)

Bid

- pegs to the Best Bid Price

Ask

- pegs to the Best Offer price

Mid

- pegs to Instinet European Consolidated mid point

Orders that do not comply with these requirements will be rejected.

Orders
2.6 All Orders submitted to BlockMatch must be Pegged Orders. The user must specify as
designated in Rule 2.5, whether their Order is pegged to the European consolidated
Bid, Mid or Offer price as determined by the Operator. Orders that do not comply with
these requirements will be rejected.

BLOCKMATCH RULEBOOK Sept 2015

2.7

Order parameters supported on BlockMatch are as follows:

o

Limit

Market

Minimum Execution Size

Time in force:

Day

IOC

GTC (accepted but will expire as a day order)

GTD (accepted but will expire as a day order intraday expiration times are
supported)

Order Priority
2.8
Matching priority is based on time (of entry or last revision). If a revision leads
exclusively to a reduction in quantity then time priority shall be maintained.

3.

Continuing Obligations

3.1

Direct Access Clients shall be bound by these Rules, the Agreement and any
amendments to the Rules and Agreement made from time to time, together with
supplementary documentation, guidance and/or notices issued pursuant to these
Rules.

3.2

Direct Access Clients shall be bound by any decision or direction of the Operator
relating to activity on BlockMatch.

3.3

All Orders submitted to BlockMatch are firm and available for execution and when
executed will be binding on the Client even if the Order was placed on behalf of a third
party or through the provision of an automatic order routing facility which enables a
third party to route orders through it directly to BlockMatch.

3.4

A Direct Access Client:

(i) shall at all times have adequate order management systems, procedures and
controls designed to prevent the entry of erroneous orders to the matching engine;

BLOCKMATCH RULEBOOK Sept 2015

(ii) shall not submit Orders to BlockMatch while trading in that security is under
regulatory suspension;
(iii) must have in place adequate systems and controls to ensure their ongoing
compliance with these Rules.
3.5

In addition to Rule 3.4, all Direct Access Clients are responsible for ensuring that:
(i) their staff are adequately trained and supervised to place Orders on
BlockMatch;
(ii) their staff are fit and proper and have a sufficient level of ability, experience and
expertise to trade Securities on BlockMatch; and
(iii) any software, algorithms and business processes used by the Direct Access
Client to facilitate Order placement on BlockMatch are properly deployed and
do not cause any disruptions or introduce viruses into BlockMatch or the
Operators systems.

3.6

Neither the Operator nor IEL will be under any obligation to notify Clients of pending
market events or corporate actions which may impact the pricing of securities.

3.7

A Client shall treat a security as ex or cum a benefit from the time that a security is
marked ex or cum that benefit on the Primary Exchange.

3.8

Each Client shall be responsible for compliance with all legal and regulatory
responsibilities to which the Client is subject.

4.

Suspension/termination

4.1

The Operator may in its absolute discretion suspend or terminate a Direct Access
Clients access to BlockMatch and if such an event occurs, the Direct Access Client
shall automatically cease to have access to BlockMatch, either directly or indirectly.
The Direct Access Client shall automatically cease to have access to BlockMatch on
termination of the Agreement for whatever reason. The Operator will notify the Direct
Access Client (directly or indirectly via IEL) of its decision to suspend, terminate or
restrict the Direct Access Clients participation as soon as is reasonably practicable.

BLOCKMATCH RULEBOOK Sept 2015

4.2

A Direct Access Client may terminate its participation in BlockMatch by giving the
Operator at least thirty (30) calendar days written notice.

4.3

Termination shall not give the Direct Access Client the right to claim any
compensation, indemnity or reimbursement whatsoever from the Operator by reason
of such termination, but termination shall be without prejudice to any rights or
remedies available to, or any obligations or liabilities accrued to, either party up to the
date of termination, including without limitation settlement of any outstanding trades
on BlockMatch.

5.

Conduct Rules

5.1

In conducting business on BlockMatch a Client shall not:

(i) commit any act, engage or encourage a third party to engage in any conduct
which creates, or is likely to create, a false or misleading impression as to the
market in, or the price or value of, any security;
(ii) cause or enter into any artificial transaction;
(iii) commit any act engage or encourage a third party to engage in any course of
conduct which is likely to damage the fairness, orderliness, reputation or integrity
of BlockMatch;
(iv) effect a pre-arranged transaction that is designed to give the market a false
view of supply, demand or pricing of a security or index;
(v) input false or misleading data into the system;
(vi) commit any act, engage or encourage a third party to engage in any course of
conduct which causes, or contributes to, a breach of the rules of BlockMatch by
another user;
(vii) commit, engage or facilitate any kind of market abuse as defined by the local
regulator.

6.

6.1

Trade Cancellations

All Trades on BlockMatch are firm and binding. Subject to Rule 3.3, no cancellation or
reversal is possible through the BlockMatch trading system unless otherwise agreed in
one of the circumstances set out in Rule 6.2 below.

BLOCKMATCH RULEBOOK Sept 2015

6.2

The Operator may cancel trades in the following circumstances:

(i) Upon mutual agreement by the counterparties to a Trade;
(ii) Where the Operator has reason to believe that a Trade is a Clearly Erroneous
Trade.

6.3

If a Trade appears to be erroneous in the opinion of the Operator, the Operator may
contact the Client to verify its validity.

6.4

When considering whether to cancel a Trade, the Operator will consider a number of
factors including but not limited to:
(i) the size of the trade; and/or
(ii) the price of the trade.

6.5

Neither the Operator nor IEL will have any liability to any party, including but not
limited to the Client, in respect of any decision whether or not to cancel a Trade.

7.

Maintaining an orderly market

7.1

A Clients access to and use of BlockMatch may be restricted and the Operator
reserves the right to take actions which it in its absolute discretion believes are
necessary to preserve market orderliness or otherwise comply with its regulatory
obligations. The Operator will have no liability to any party, including but not limited to
the Client, in respect of any action taken under this Rule 7.1.

7.2

The Operator may suspend the automatic execution of Orders on the matching
engine in one or more Securities if:
(i) the Operator determines a system problem has occurred or is likely to occur; or
(ii) it is requested to do so by the FCA or a competent authority; or
(iii) it considers in its sole discretion that there has been or is likely to be a threat to
the stability of fair and orderly markets by trading a security; or
(iv) the Primary Exchange of the security has suspended or cancelled trading of the
relevant Security; or
(v) the Operator in its absolute discretion, considers it appropriate to do so; or

BLOCKMATCH RULEBOOK Sept 2015

(vi) the Operator in its absolute discretion considers that a Client has failed, or is
likely to fail, to comply with its obligations under the Rulebook.
(vii) the Operator determines there is Backwardation in one or more Securities which
(viii) is likely to have or has caused a disruption to the matching engine; or
(ix) the Operator determines that the EBBO cannot be calculated due to a technical
market data interruption.

7.4

The Operator reserves the right to suspend matching using the EBBO and to restrict
matching to the Primary Midpoint if it determines this is necessary to maintain an
orderly market or if requested to do so by the FCA or a competent authority. Such an
event would be classified as a notifiable event, and as such notifications would be
disseminated to users via e-mail and /or via the Instinet BlockMatch website.

8.

Composition of EBBO

8.1

BlockMatch offers trading in shares of equities listed on EU Regulated Markets. For

each country, the market data constituents the EBBO includes the primary market
where the relevant share is admitted to trading and other qualifying MTFs.

8.2

The Operator reserves the right to remove a Qualifying Venue from the calculation of
the EBBO at any time, if;
(i) the venue ceases to operate entirely; or
(ii) the venue fails to meet with the Operators ongoing order execution quality
performance assessment; or
(iii) the venue fails to maintain a minimum of 2.5% pan European market share*: or
(iv) the technology platform of the venue does not meet with the Operators ongoing
assessment criteria including but not limited to resilience and latency, ownership and
membership structures, clearing arrangements and execution performance.

* The Operator performs two assessments of its composite EBBO, a quarterly review of qualifying venues and a realtime dynamic validation. Each assessment is based on the venue maintaining a minimum of 2.5% pan European
market share. Quarterly reviews are conducted to determine the universe of Qualifying Venues. The dynamic validation
assesses, on a real-time basis, the on order book volume of each security on all qualifying venues, ensuring that only
those reference prices, on those venues that meet the threshold, form the EBBO reference price. A full list of qualifying
venues is available on www.BlockMatch.com.

BLOCKMATCH RULEBOOK Sept 2015

9.

Extraordinary Event

9.1

The Operator shall in its absolute discretion reserve the right to initiate a review of
trading in BlockMatch where there has been an extraordinary event. Extraordinary
events include, but are not limited to, intraday regulatory suspensions or periods of
extreme volatility. In such circumstances, the Operator may consider certain trades
void. For the avoidance of doubt, where a transaction is deemed by the Operator to be
void, no transaction will exist.

10.

Clearing and Settlement

10.1

The Agreement sets out the terms governing settlement of any Trades executed on
BlockMatch.

11.

Confidentiality

11.1

Without prejudice to any provision on Confidentiality in the Agreement, the Operator

will treat all information received from Clients in relation to Orders executed on
BlockMatch as confidential, Where circumstances require it to do so, the Operator may
disclose information to a third party. Such circumstances include:
(i) to co-operate, by the sharing of information and documents and otherwise, with
any authority, body or person having responsibility for the supervision or regulation
of any regulated activity or other financial service or law for enforcement purposes;
(ii) for the purpose of enabling it to institute, carry on or defend any proceedings
including any court proceedings;
(iii) for any regulatory purpose;
(iv) under compulsion of law;
(v) for the protection of investors and the maintenance of high standards of
integrity and fair dealing;
(vi) to other members of our group on a need to know basis; and
(vii) for any other purpose with consent of the person from whom the information
was obtained and, if different, the person to whom it relates.

BLOCKMATCH RULEBOOK Sept 2015

12.

Post trade transparency

12.1

The Operator, as the operator of a regulated MTF, is required to make public details of
Trades executed on BlockMatch on a timely basis or in accordance with the prevailing
rules. The Operator will report post trade information to an appropriate Trade Data
Monitor as determined by the Operator or to a destination where local rules dictate.

13.

Fees and Taxes

13.1

Fees shall be notified to the Client by IEL from time to time and such fees shall be
payable in accordance with the terms of the Agreement.

13.2

A Client shall be liable for the payment of any applicable taxes that arise from the
trading of securities on BlockMatch including but not limited to stamp duty reserve tax.

14.

Data Providers

14.1

For the purposes of these Rules and in particular the determination of reference prices,
the Operator may obtain pricing information in respect of a Market of Reference from
third parties (Data). Any Data obtained by the Operator is used and provided on a
"best efforts" basis. The Operator makes no representations or warranties of any kind,
either express or implied, with respect of the Data. Without limiting the generality of the
foregoing, the Operator gives no warranties or representations about the originality,
accuracy, timeliness, completeness, non-infringement, merchantability and fitness for
any particular purpose of the Data.

14.2

Without prejudice to IELs limitation of liability in the Agreement, the Operator accepts
no liability for any Losses (as defined in the Agreement) suffered by any party,
including but not limited to the Client resulting from the use of the Data.

BLOCKMATCH RULEBOOK Sept 2015

15.

Complaints

15.1

If the Client has a complaint about BlockMatch, the Client should raise the matter with
the Operators Compliance team.

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trademark in the United States and other countries throughout the world. Instinet Europe Limited is authorised and
regulated by the Financial Conduct Authority. This content is made available for informational purposes only and does not
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BLOCKMATCH RULEBOOK Sept 2015