Notice (N47/99)
LONDON STOCK EXCHANGE
4 August 1999
For the attention of the
chairman/senior partner/compliance officer,
all member firms
N47/99
STOCK EXCHANGE NOTICE
CONFIRMATION OF RULE AMENDMENTS
RULE CHANGES ARISING OUT OF THE EUROPEAN ALLIANCE MARKET HARMONISATION
PROPOSAL
Introduction
1. The European Alliance Joint Briefing and Consultation paper, detailing
proposals to harmonise and develop the order book, was issued for consultation
at the beginning of March 1999. Following the positive market feedback
received by the Exchange, the proposal to implement the harmonisation was
published on 17 June 1999. As a result of these harmonisation changes, a
number of rule amendments are required.
2. All changes will take effect from Monday 20 September 1999.
Amendment of existing order book trading hours
3. The Exchange will amend existing trading hours on the order book to give a
harmonised continuous trading period from 08.00 to 16.30 London time (09.00 to
17.30 Central European Time).
4. Under rule 4.67(a), a member firm may submit orders to, and delete orders
from, the order book only during the periods specified by the Exchange. The
operating hours for the order book will be as follows:
07.50 hours Order book opens. Limit orders can be entered and deleted
but will not execute.
08.00 hours Uncrossing is run and automatic execution for each security
starts when uncrossing is completed for that security. All types of orders
may be entered and limit orders deleted from the time uncrossing is completed
for each security. Calculation of FTSE 100 and 250 Indices begins.
16.30 hours Order book closes for automatic execution. Limit orders
may be deleted but no new orders may be entered to the order book. Calculation
of the FTSE 100 and 250 Indices ceases. The VWAP closing price will continue
to be based on the last 10 minutes of trading, from 16.20 to 16.30 hours.
17.00 hours Order book closes. No orders can be entered or deleted.
5. In view of the liquidity patterns typically observed during the first hour
after the opening of the order book, member firms should make their clients
aware of the inherent risks associated with at best orders, and should
consider the use of limit orders, or, where aggressive order types are
required, Execute and Eliminate or Fill or Kill orders with a limit price.
Amendment of existing non order book trading hours
6. The pre-mandatory quote period, during which prices are regarded as
indicative only, will commence at 07.30 hours, and the mandatory quote period
will commence at 08.00 hours, for the following markets:
(a) domestic equity market securities (order book, SEAQ, SEATS);
(b) AIM market securities;
(c) fixed interest market securities; and
(d) traditional options.
7. In the case of equity convertibles, in order to allow time for the
completion of the uncrossing process and the establishment of an opening price
for the underlying security on which quotes can be based, the mandatory quote
period will commence at 08.05 hours.
8. The mandatory quote period for the gilts market will continue to commence
at 08.30 hours and the international market hours will remain unchanged.
Other rules affected by the change to trading hours
9. Trade reporting and worked principal notification deadlines, as detailed in
rule 8.17(b) and 8.17 (c), will change. Transactions effected, or a worked
principal agreement entered into, outside the trade reporting period, must be
reported or notified by 07.45 hours instead of 08.00 hours. Transactions
effected, or a worked principal agreement entered into, between 07.15 hours
and the revised market opening time of 08.00 hours, must be reported or
notified before 08.00 hours instead of 08.30 hours. Member firms should note
that changes to these two rules are applicable across all markets.
10. Member firms are reminded that all transactions effected between the hours
of 08.00 hours and 17.15 hours for which a trade report, a worked principal
notification or a protected transaction notification is required, must be
submitted within 3 minutes.
11. The operating hours for the Regulatory News Service will also be amended
to align with changes to market hours. Announcements will therefore be
broadcast from 07.00 hours. Member firms should be aware that rule A8.2,
('dealing in a security ex entitlement'), is amended with reference to a
Regulatory News Service release time of 08.00 hours.
12. Announcements intended for release at 07:00 hours should be received by
the Company Announcements Office (CAO) before 17:30 hours the previous
business day to allow any issues to be identified and resolved prior to
release. When announcements need to be sent after this time, it is
recommended that companies or their agents inform the CAO before 19:00 hours
of the intended release.
13. Timing for inter office delivery of securities, as covered by rule 10.8,
remains unchanged.
Adjusting the maximum order size on the order book
14. Rule 4.66(b)(iii) makes reference to the maximum order size submitted to
the order book. The maximum order size on SETS is currently 20 x NMS. This
will be changed to allow an unlimited maximum order size. Member firms are
reminded, however, that in system terms, the maximum order that can be
submitted to the order book is 99999.99 x NMS. Member firms will be required
to review existing safeguards to prevent entry of erroneous orders.
15. There will be no change to the maximum order size for orders entered into
SEATS and AIM market segments. This is currently set at 99.99 x NMS.
Increase of the validity period for a limit order
16. Orders submitted to the order book are currently valid for up to thirty
one calendar days, as defined in rule 4.66(b)(v). This validity period will
be increased to ninety calendar days from the date of submission. Rule
4.66(b)(v) has been amended accordingly.
17. The expiry date on orders entered into the SEATS and AIM segments is
optional and these orders will never expire automatically. They will remain
on the order book until they are executed or deleted by the participant that
entered the order.
Implementation
18. Member firms are reminded the importance of having adequate internal
procedures and controls in place when implementing these changes. Attention
is drawn to existing rules 1.9 and 4.64(b).
19. Amended rules to give effect to this proposal are set out in Attachment 1
to this Notice, with additional wording underlined and deletions struck
through. Hole punched pages for insertion into Stock Exchange Rule Books will
be issued in due course.
A E Scott-Bishop
Head of Regulatory Development
Any queries on this Notice should be addressed to the Market Regulation
department, telephone 0171 797 1615 (STX 31615).
The Company Announcements Office can be contacted between the hours of 06:00
to 19:00 on 0171 797 1743 (STX 31743) or 0171 797 3843 (33843).
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