Nasdaq MiFID II Functionality Activation Guide

for INET and Genium INET

Version 1.2

October 25, 2017

Copyright © 2017. Nasdaq, Inc. All rights reserved 2 (14)

Date Version Description of change 2017-10-12 1.0 Initial version 2017-10-13 1.1 Duplicate lines in the Commodities table

were removed 2017-10-25 1.2 Updated date regarding MMO enhancements

(new date is December 1st)

LEGAL DISCLAIMER

The content of this document is subject to change without notice. Nasdaq makes no representations

or warranties with respect to the information and disclaims all liability for any use made of the

contents of this document. Nasdaq assumes no responsibility for any errors or omissions. Nasdaq

does not provide legal advice. This document is provided for information purposes only, does not

constitute legal advice and should not be relied upon for that purpose. For a more detailed

explanation of the issues highlighted in this document, please contact your legal counsel. Professional

legal advice should be obtained before taking or refraining from taking any action as a result of the

contents of this document. For information regarding the impact of the areas discussed herein and

steps that a counterparty must take in preparation of the pending compliance dates, counterparties

are advised to contact their legal counsel. You and your legal counsel are encouraged to actively

review and monitor regulations applicable to you.

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Contents 1 Summary ...................................................................................................................................................................... 4

2 Reference to Nasdaq’s published documents ............................................................................................... 5

3 Order entry: implementation and timeline ................................................................................................... 6

4 Cash Equities: implementation and timeline ................................................................................................ 7

5 Equity Derivatives: implementation and timeline...................................................................................... 9

6 Fixed Income: implementation and timeline ............................................................................................. 11

6.1 Fixed Income Derivatives: implementation and timeline ........................................................... 11

6.2 Fixed Income cash: implementation and timeline ......................................................................... 12

7 Commodities: implementation and timeline ............................................................................................. 13

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1 Summary

In order to comply with the regulatory changes introduced by MiFID II and MiFIR, Nasdaq

Nordic1 will continue to adapt its Rules, trading systems and exchange services until January 3,

2018. By November 20, 2017, Nasdaq Nordic will have released all MiFID II functionality in

production of its trading systems, INET and Genium INET. However, not all functionality will be

activated by the last release date.

Nasdaq published the document

This document is available on the Nasdaq Technical Information, INET Nordic, Enhancement

page.

The objective of this document is to inform members and market participants on the timelines

associated with the activation of the new functionality for each of Nasdaq Nordic’s markets, as

well as the updates to the market models.

The scope of this document includes functional changes introduced by Nasdaq Nordic and

assumes that members will have completed all relevant readiness activities. Member readiness

activities are completed by members in the Member Portal. Detailed information can be found

on the member readiness webpage.

1 For the purpose of this document Nasdaq Nordic refers to, either each individually or all together, Nasdaq Copenhagen A/S, Nasdaq

Helsinki Ltd, Nasdaq Iceland hf. and Nasdaq Stockholm AB. Nasdaq Nordic may also include Nasdaq Baltic that respectively refers to

Nasdaq Riga AS, Nasdaq Tallinn AS and AB Nasdaq Vilnius. Nasdaq Copenhagen, Nasdaq Helsinki, Nasdaq Iceland, Nasdaq Riga,

Nasdaq Stockholm, Nasdaq Tallinn and Nasdaq Vilnius are respectively brand names for Nasdaq Copenhagen A/S, Nasdaq Helsinki

Ltd, Nasdaq Iceland hf., Nasdaq Riga AS, Nasdaq Stockholm AB, Nasdaq Tallinn AS and AB Nasdaq Vilnius.

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2 Reference to Nasdaq’s published documents

Regulatory documents

Member rulebooks will be amended prior to the application of MiFID II.

Nasdaq Nordic distributed early drafts of the member trading and clearing rules last Spring.

Rulebook drafts are distributed on the legal and regulatory web pages.

Technical information

The details of functionality changes are published on the Technical information webpages and

via IT-Notices. It is strongly recommended to subscribe to IT Notices for relevant markets.

Visit the INET enhancements page for all details regarding updates on our platform for Cash

Equities.

The platform for non-Equities is Genium INET and information regarding enhancements can be

found here.

Prior to system upgrades in November, trading application conformance testing will be

conducted for all systems connecting to INET and Genium INET. Details related to this

mandatory activity are available here.

MiFID II information

Relevant information regarding MiFID II can be found on our MiFID II microsite. In this

microsite, there is specific information about our APA service, our ARM service, our Auction on

Demand service, as well as implementation information from all asset classes.

For the latest information for members on the implementation of the new Order Record Keeping

requirements, consult our implementation guide available here.

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3 Order entry: implementation and timeline

Nasdaq will implement a number of changes to order entry. The changes to the API fields will be technically implemented on November 20, 2017 and the fields will then become mandatory as communicated in previous IT Notices.

Functional Change Technical Go Live Legal Go Live

Client ID November 20, 2017 January 3, 2018

Execution Decision Maker November 20, 2017 January 3, 2018

Investment Decision Maker November 20, 2017 January 3, 2018

Member Portal short codes administration November 20, 2017

Short Code Reconciliation Process November 20, 2017 January 3, 2018

Order Capacity November 20, 2017 January 3, 2018

Trader ID November 20, 2017

The ‘Order Record Keeping’ fields (the first three rows in the table above) will need to be populated with short code values. The ORK fields also include the Party Role and Party Role Qualifier. For more details, please consult our Order Record Keeping implementation guide. During the technical go-live period, these fields can be filled with any permitted short code value (including reserve short codes where applicable). During this period, short codes will not be required to be mapped up to a specific long code value. As of the 3rd of January, all ‘Order Record Keeping’ fields will need to be populated with the actual short codes and mapping to their respective long code will become required. The mapping of long codes will be done in the Member Portal short code administration database. The Party Role and Party Role Qualifier fields will be required when applicable from November 20th. For technical reasons, as well as to provide an opportunity for members to establish technical connectivity towards Member Portal application, Nasdaq will activate the Member Portal short codes administration database in production on November 20. Nasdaq will start performing the daily short code reconciliation process on January 3, 2018, to ensure that long codes values have been mapped according to the law. The Order Capacity field will become mandatory for Genium INET users on November 20. However, where applicable, MiFID I requirements will continue to apply until January 3. The Trader ID field will be a mandatory field introduced on November 20 on the Derivatives and Commodities markets. The Trader ID field need will need to be populated by members on all orders and trade reports. Trader IDs are issued by Nasdaq.

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4 Cash Equities: implementation and timeline

INET Nordic Market Model document for functionalities for trading of equities on the regulated will have an effective date of January 3, 2018 and will be available to members and ISVs in the middle of November.

The market model will include the relevant updates to market model and functional changes activated in preparation for, or when MIFID 2 applies. Key updates include:

Changes to pre- and post-trade transparency regimes

Changes to tick sizes

New pre-trade control controls

Volatility guard and auction safeguard activation

On-exchange trade reporting guidelines to be incorporated to market model and

discontinuing a separate reporting guideline document.

Here is a timeline for the implementation of functional changes for equities and securitized derivatives in INET, where applicable:

Functional Change Date

Throttling September 18, 2017

New MiFID II related reference data added to GCF/ TIP November 20, 2017

MMO enhancement (mechanism to manage volatility for securitized derivatives) and related removal of opening auction

December 1, 2017

MiFID II Large in scale thresholds for non-displayed orders

January 3, 2018

Minimum value for reserve orders January 3, 2018

MiFID II deferred publication thresholds January 3, 2018

MiFID II Tick size regime January 3, 2017

MiFID II pre-trade control: Max order price limits January 3, 2018

MiFID II pre-trade control: Max order value limits January 3, 2018

MiFID II pre-trade control: Max order volume limits January 3, 2018

Volatility guards added for all INET equity instruments January 3, 2018

Auction safeguards (extension) activated for all INET segments where opening and /or closing auction

January 3, 2018

MiFID II trading capacities automatically allocated to Order capacities

January 3, 2018

MiFID II post trade flags automatically allocated for Manual Trade Types

January 3, 2018

Most relevant market in terms of liquidity introduced for Nordic@Mid trading

January 3, 2018

New note codes for stressed market conditions, exceptional circumstances and double volume cap mechanism

January 3, 2018

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MiFID II market making monitoring January 3, 2018

Order-to-Trade regime January 3, 2018

Pre- and post –trade rules changes for warrants and certificates

January 3, 2018

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5 Equity Derivatives: implementation and timeline

The market model document (version 2.0) for Equity derivatives will have an effective date of

November 20, 2017, the first trading day of the Genium INET MIFID 2 release. A first draft

version will be available to members and ISVs in mid-October.

Version 2.0 of the market model will include the relevant updates to market model and

functional changes activated in preparation for, or when MIFID 2 applies. Key updates include:

Changes to off-book trading procedures

Introduction of cross trades procedures

Changes to market safeguards & control mechanisms

Changes to market maker functionality

New order attributes & trader access policy

Stressed market & exceptional conditions policy

Policies on kill functionality and order throttling

An updated version 2.1 of the document will have an effective date of January 2, 2018 and

include updates to relevant appendixes with configuration and business parameters that apply

from this date.

Here is a timeline for the implementation of functional changes for Equity Derivatives in Genium

INET:

Functional Change Date

New on-exchange trade report types & attributes, time of agreement

November 20, 2017

Multi-leg trade reports November 20, 2017

Number of orders added to market-by-level data November 20, 2017

Legacy quote messages decommissioned (OMnet) November 20, 2017

Cross request message November 20, 2017

Circuit breaker triggering info November 20, 2017

Segment MICs November 20, 2017

Eligible market making quotes/orders December 1, 2017

Stressed market quotation parameters December 1, 2017

Tick size update – SEK options December 1, 2017

Updates to order price limits December 1, 2017

Cross trades conditions (rules) January 2, 2018

Maximum order volume limits January 2, 2018

Maximum order value limits January 2, 2018

Circuit breakers active for all index derivatives January 2, 2018

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Functional Change Date

Minimum block trade size validation January 2, 2018

Revised deferral thresholds January 2, 2018

Minimum reserve order value January 2, 2018

Theoretical reference prices (price limits) January 2, 2018

Order-to-trade ratio regime January 2, 2018

Off-exchange trade report types (OTC) January 2, 2018

More information on the details of functional changes is available on the Technical Information‘s

web page and will be available in the draft of the Market Model in early October at the latest.

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6 Fixed Income: implementation and timeline

6.1 Fixed Income Derivatives: implementation and timeline

Key updates for the upcoming release include:

• Removal of pending state for Generic Rates Instruments.

• Updates to the Exchange Rulebook and trade report types to support on exchange

trade reports

• Introduction of a Market Model for Fixed Income Derivatives

The market model document (version 01) for Fixed Income Derivatives will have an effective

date of January 3, 2018. Some of the functionality will take effect on November 20, 2017, see the

below table. The market model is expected to be available at the end of October. Below are

timelines for the implementation of functional changes

Standardized Fixed Income Derivatives in Genium INET:

Functional Change Date

Change of OMnet API/FIX Trade report Codes for NTFI and EXFI November 20, 2017

Multi-leg trade reports – Technical Implementation November 20, 2017

Time of Agreement field – Technical Implementation November 20, 2017

New Trade report types OTFI and SI January 3, 2018

Deferred Trade Publication January 3, 2018

Trader ID validation on EXFI January 3, 2018

Generic Rates Instruments in Genium INET:

Functional Change Date

Removal of unmatched trades EOD November 20, 2017

Clearing Broker Affirmation in MarkitWire November 20, 2017

CCP Acceptance of trades that reduce the margin requirement November 20, 2017

New "Time of Trade" and "Time of Clearing" fields November 20, 2017

Improved reject notifications January 3, 2018

Removal of pending state in pre-novation January 3, 2018

More information on the details of functional changes is available on the Technical Information‘s

web page under Fixed Income in following documents:

Fixed Income Derivatives - Functional Changes November 2017

Generic Rates Instruments - Functional Changes November 2017

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6.2 Fixed Income cash: implementation and timeline

Information will also be available in the draft of the Market Model (version 5.0) for Fixed

Income, which will have an effective date of January 3, 2018. Some of the functionality will take

effect on November 20, 2017, see the below table. The market model is expected to be available

at the end of October.

Functional Change Date

Premium bonds TBD

Post trade information –changes in content November 20, 2017

Negative coupon and increased number of decimals. November 20, 2017

Number of orders in MBL data November 20, 2017

Cancellations and amendments November 20, 2017

Changes to existing Trade report types November 20, 2017

Maximum volume/value January 2, 2018

Price limits/controls January 2, 2018

Deactivate reserve orders January 2, 2018

Circuit breakers January 2, 2018

Amended Trade report types for Cash Fixed Income January 3, 2018

ESMA liquidity and threshold reference data January 3, 2018

Market Maker agreements January 3, 2018

Pre-trade validation January 3, 2018

Deferred publication (new deferral rules) January 3, 2018

In order to spread minimize risk, a few of the new functionalities will be launched on January 2,

one day earlier than the MIFID II go live.

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7 Commodities: implementation and timeline

The market model document (version 3.8) for Nasdaq Commodities Europe will have an

effective date of January 2, 2018. The new version will be available to members and ISVs in

November.

Version 3.8 of the market model will include the relevant updates to market model and

functional changes activated in preparation for, or when MIFID 2 applies. Key updates include:

Changes to Off Order Book Trading Procedures

o Pre-Trade Transparency

o Minimum Block Trade Size Regime

o Deferred Publication

o Package Transactions Regime

o New Trade Types

o Post Trade Flags

Changes to Order Book Trading Procedures

o Cross request message

o Reserve Orders (“Hidden volume”)

o Order Price Limits

o Order Volume and Value Limits

o Order to Trade Ratio (OTR)

o Circuit Breakers, Stressed market and Auction trading states

Changes to Market Making Procedures and Policies

o Market Maker Quote Messages

o Market Maker Quotes and Orders

o Quotation Parameters during Stressed Market

Here is a timeline for the implementation of functional changes for Nasdaq Commodities Europe

in Genium INET:

Functional Change Date

Remove pre-novation for seafood market November 20, 2017

Maximum Order Volume and Value Limits November 20, 2017

Updates to post-trade data flagging and fields November 20, 2017

Number of orders in market-by-level data November 20, 2017

Circuit breakers November 20, 2017

Cross request message November 20, 2017

Minimum size on reserve orders November 20, 2017

Stressed market state November 20, 2017

Intraday prices on seafood market November 20, 2017

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MO96 Quotes November 20, 2017

CFI Code updates November 20, 2017

New trade report types November 20, 2017

Multi-leg trade reports November 20, 2017

TRF procedures: Trade types, time of agreement, package transactions, price interval

January 2, 2018

Minimum block trade size (TRF) January 2, 2018

Deferred publication January 2, 2018

Activation of pre-trade limits for all instruments January 2, 2018

MiFID II Market Making agreements and schemes January 2, 2018

RTS 2 values (LIS, SSTI, part of a liquid market) on all instruments

January 2, 2018

Auction trading state January 2, 2018

Pre-Trade Transparency regime January 2, 2018

Position reporting for Nasdaq Stockholm AB only January 3, 2018

Order to Trade Ratio (OTR) regime February 10, 2018

Position reporting for Oslo ASA only delayed

For more information on the details functional changes, please refer to Technical Information’s

web page. Additionally, the draft of the Market Model will be available in November. Please see

functional change document under Commodities at the Genium INET enhancements page here.