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 2
An infinite pool of liquidity 3
International investment pool 4
Swiss Block – Constituents 5
Service overview 6
Matching process 7
Application process 8

1
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 intermediar-
ies with a number of important benefits, helping them to get wholesale business
executed, with minimal market impact at improved prices.

2
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 Super-

vision 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 det-
rimental 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 com-
pared 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

NYFIX
Wholesale Swiss Block Euro
Flow Millenium™
Pass-Through Swiss Block
SIX Swiss Orders Executions
Exchange Members

Conventional SIX Swiss Exchange

Flow 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.

5
Service overview

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

Conditional orders Pass-through 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 sys-
tem 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 exam-
ple Minimum Execution Size. This constraint enables Swiss Block
participants to protect their order against smaller executions in the
liquidity pool.
These only participate in a single match-
ing cycle within Swiss Block for com-
plete 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 out-
side SIX Swiss Exchange continuous
trading is forwarded to the SIX Swiss
Exchange public limit order book with-
out an attempt to match within Swiss
Block.
Pass-through orders are only valid for
the current trading day or less. Unex-
ecuted orders are cancelled by the sys-
tem 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 minimum-
threshold, the order can remain within the service.

Swiss Block Member

Pass-Through Orders Conditional Orders

Forwarded Pass-
SIX Swiss Exchange Through Orders
Swiss Block Immediate Trade
Public Limit Order Book Matching Logic Publication (XM)
Buy Sell Midpoint Reference Execution
20.10 20.12 20.11
Reference Price Feed Market Data Feed

6
Matching process

Order matching Post trade processing

Swiss Block offers continuous, real-time matching
of orders, on a price priority basis. Executions are on-
exchange on SIX Swiss Exchange:
– 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
After matching, SIX Swiss Exchange’s standard post
trade processes apply:
– 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 Own Trades

Orders Trades Slips

SIX Swiss Exchange Members

SIX Swiss Exchange
Public Limit Order Book &
Existing Member Connectivity
Post Trade Service

– Clearing & Settlement

– Publication

7
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 – There is no additional application fee or
over the NYFIX Global Services network. 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.
– 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).
– The standard basis point rate for a Swiss Block
trade is set out in Section 10 of the Swiss Blue
Chip Segment Directive 9.
– There is a trading fee cap of CHF 5,000 each
side/leg.
– Billing is conducted on a monthly basis.

– All trades matched in Swiss Block are separately

identified in the Market Data feed (Trade Type
Code XM).

8
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
salesmemberrelations@six-group.com
SIX Swiss Exchange Ltd
Selnaustrasse 30
P.O. Box 1758
CH-8021 Zurich
www.six-swiss-exchange.com

SIX Swiss Exchange Ltd

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