NX User Guide
Version 1.0
July 2010
Table of Contents
1. Introduction ............................................................................................................................................... 3
2. NX Subscribers ......................................................................................................................................... 3
2.1. Subscribers ......................................................................................................................................... 3
2.2. Connectivity ....................................................................................................................................... 4
3. Covered Securities .................................................................................................................................... 4
4. Trading ...................................................................................................................................................... 4
4.1. Order Types ........................................................................................................................................ 4
4.2. Order Duration ................................................................................................................................... 5
4.3. Crossing Logic ................................................................................................................................... 5
4.4. Other Execution Restrictions.............................................................................................................. 6
4.5. Hours of Operation ............................................................................................................................. 6
4.6. Trade Reporting.................................................................................................................................. 6
4.7. Lot Sizes ............................................................................................................................................. 7
4.8. Clearly Erroneous ............................................................................................................................... 7
5. Order Display and Fair Access ................................................................................................................. 9
6. Settlement and Clearing ............................................................................................................................ 9
7. Fees ........................................................................................................................................................... 9
8. Miscellaneous ........................................................................................................................................... 9
8.1. System Maintenance........................................................................................................................... 9
8.2. Conflict Management ....................................................................................................................... 10
8.3. Confidentiality .................................................................................................................................. 10
8.4. Surveillance ...................................................................................................................................... 10
8.5. Additional Reference ........................................................................................................................ 10
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1. Introduction
NX (“NX”) is Nomura’s automated crossing platform. In the United States, NX will be operated by
Nomura Securities International, Inc. (“Nomura” or the “Firm”), a U.S. broker-dealer registered
pursuant to Section 15(a) of the Securities Exchange Act of 1934 (“Exchange Act”), as amended, with
the Securities & Exchange Commission (“SEC” or the “Commission”), and member firm of the
Financial Industry Regulatory Authority, Inc. (“FINRA”). NX was registered with the SEC in [TO BE
DETERMINED] as an alternative trading system (“ATS”) pursuant to Regulation ATS.
In these Policies, words in the singular include the plural and in the plural include the singular. Headings
are for ease of reference only and do not form part of the User Guide. References to statutory provisions
shall include any amendment, modification or re-enactment or re-making thereof and any provisions
made after the date hereof. To the extent there is a conflict between this User Guide, the Policies and/or
the NX Subscriber Agreement, the Policies shall prevail.
2. NX Subscribers
NX may only be accessed directly by other U.S. registered broker-dealers that register with Nomura as
Subscribers (“Subscribers”). Subscribers will generate orders to NX from their own order management
system, which will transmit such orders via FIX1 to Nomura through a specific channel, which feeds into
Nomura’s FIX interface. Once the Subscriber order is received by Nomura, the interface routes the order
directly to NX.
Additional liquidity for NX will be provided from Nomura’s own trading desks and the Firm’s general
client order flow trading through the Firm’s algorithmic trading platform or smart order router. Nomura’s
algorithmic and smart order router products automatically access NX to seek liquidity for an order prior to
sending the order (or a portion thereof) to an external market center for execution.2
2.1. Subscribers
Each Subscriber to NX shall be required to:
Execute the NX Subscriber Agreement;
Confirm to Nomura, the clearing firm for all NX transactions, its arrangement
for the clearing and settlement of its NX transactions. The Subscriber will either
be (i) a self-clearing broker-dealer, in which case Nomura will clear and settle
directly against the contra-party clearing broker, (ii) a non-clearing brokerdealer or institution that will direct Nomura to settle and clear its NX
transactions with its designated clearing broker, including a prime broker, or
1
FIX is the Financial Information eXchange Protocol, a messaging standard developed specifically for the real-time
electronic exchange of securities transactions. FIX is a public-domain specification owned and maintained by FIX
Protocol, Ltd.
2
Nomura will offer its brokerage clients the choice to bypass NX, permitting the client’s order to route to an
external market center for execution (“Opt-Out”). Nomura will document the client’s choice to Opt-Out via the
client’s profile in Nomura’s FIX interface. Nomura’s FIX interface will automatically append, to all inbound orders
from such client, a FIX flag noting the client’s choice to Opt-Out to ensure that the client’s orders do not interact
with NX.
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agent bank, or (iii) a non-clearing broker-dealer or institution that will direct
Nomura to “give-up” its NX transactions to another clearing broker or agent
bank. For Subscribers that are self-clearing broker-dealers, Nomura will look to
establish a QSR or arrange for correspondent clearing (via Forms 9-A and 9-B)
with the Subscriber (contra-party) broker-dealer. For Subscribers interested in
establishing a “give-up” arrangement, Nomura will look to complete the
customary Attachment 2 (Give-Up) agreement; and
Coordinate with Nomura to establish direct connectivity to NX.
The criteria for eligibility and the decision to allow subscription lies solely at Nomura’s
discretion.
2.2. Connectivity
Direct connectivity to NX is provided to Subscribers via a FIX Protocol interface with a full
range of network vendor options. Nomura’s FIX specifications will be provided by the Firm to
all Subscribers. Only after a successful FIX certification test will the Subscriber be eligible
(assuming all other eligibility requirements by the Subscriber have been met) to send orders to
NX.
3. Eligible Securities
NX offers trading in equity securities, as defined in Section 3(a)(11) of the Exchange Act, that are also
NMS securities, as defined by Rule 600(b)(46) of Regulation NMS, except listed options (each, a
“Security”).
Below are website links to a listing of the eligible Securities NX trades.
http://www.nasdaqtrader.com/dynamic/SymDir/nasdaqlisted.txt
http://www.nasdaqtrader.com/dynamic/SymDir/otherlisted.txt
4. Trading
4.1. Order Types
NX will accept both limit and market orders, but only with a time-in-force until the end of the
trading day (i.e., NX will not accept “good ‘til cancelled” (“GTC”) orders). NX will accept
limit orders whether or not such orders are marketable at the time of receipt, posting nonmarketable limit orders to NX’s limit order book. NX’s limit order book will be undisplayed,
that is, orders in the book will not be displayed or accessible to anyone other than NX support
personnel who have a need to view such information in order for Nomura to carry out its
responsibilities and obligations regarding the operation of NX..
In addition to limit and market orders, NX will accept the following order types:
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Market on Open;
Market on Close (“MOC”);
PEG (pegged either to the bid, offer or midpoint of the national best bid
and offer (“NBBO”) spread); and
Immediate or Cancel (“IOC”).
NX will not accept indications of interest or, as previously mentioned, GTC orders.
4.2. Order Duration
With the exception of MOC orders, NX will automatically cancel any order (or portion thereof)
that has not been executed by the end of the regular trading day (i.e., 4:00:00PM (ET)).
4.3. Crossing Logic
Upon receiving an order, NX attempts to match an order on a price-time priority basis where
there is contra-party interest equal to or better than the NBBO. NX monitors the NBBO at the
time of order receipt to determine whether an internal match is priced at or better than the
NBBO. If there is contra-party interest that meets this criteria for an order, NX will execute the
order up to the contra-party’s posted quantity or until the incoming order is fully executed,
whichever is less.
NX seeks to maximize crossing rates and provide price improvement to both sides of the trade.
As such, NX executes all orders at a price equal to or better than the NBBO. For example,
(assume that the NBBO for XYZ is 10.00 – 10.01 and, for the sake of simplicity, that only two
orders (one buy order and one sell order) are on NX ATS at any given time):
A Subscriber enters a midpoint-PEG order to buy 1000 shares of XYZ at a limit price of
10.30. NX receives a market order to sell 1000 shares of XYZ. Although the midpointPEG order is posted at 10.005 (the midpoint of the NBBO), NX will price improve both
orders by executing the orders at 10.0025 (i.e., the midpoint between the inside bid and the
posted midpoint-PEG order).
A Subscriber enters a midpoint-PEG order to buy 1000 shares of XYZ at a limit price of
10.30. NX ATS receives a midpoint-PEG order to sell 1000 shares of XYZ at a limit price
of 9.95. Because both orders are posted at 10.005 (i.e., the midpoint of the NBBO), NX
will cross the orders at 10.005.
A Subscriber enters an order to buy 1000 shares of XYZ at a limit price of 10.00. NX
receives a market order to sell 1000 shares of XYZ. NX will execute the orders at 10.00.
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NX simultaneously receives a market order to buy 1000 shares of XYZ and a market order
to sell 1000 shares of XYZ. NX will price improve both orders and execute the orders at
10.005
If there is no contra-party interest in the limit order book for an order, then NX, in accordance
with the instructions of the Subscriber that entered the order, either will post the order to the
limit order book or cancel the order (or remainder thereof).
4.4. Other Execution Restrictions
NX executions shall not represent the first execution in the subject security for the day,
nor will they establish a new daily high (or low) reported price in the subject security.
NX will not execute transactions outside of regular market hours (again, with the
exception of MOC orders), during unusual market conditions, if the Primary Listing
Market for the security is closed for any reason, Nomura loses its market data feed, in the
event that NX experiences a service interruption, during a regulatory halt, or where
otherwise required by regulatory authority or pursuant to any compulsion of law, order,
judgment, decree, or any rule, regulation or request of or by any government, court,
administrative or regulatory agency or commission, other governmental or regulatory
authority or any self-regulatory body (including any securities or commodities exchange
or FINRA).
Nomura, at its sole discretion, sets limits for each Subscriber regarding notional value of
the order and share amount, and configures such limits into the Subscriber’s profile
within the Firm’s FIX engine. Upon receipt of an order from a Subscriber, but before the
order enters NX, the Firm’s FIX engine will validate that the order does not exceed the
established limits, as well as confirm recognition of the symbology used in the order.
In the event that a Subscriber attempts to transmit an order to NX where the
characteristics of the order do not meet the FIX specifications of orders acceptable by
NX, NX will promptly reject the order and transmit a rejection notice to the Subscriber.
4.5. Hours of Operation
NX will be available for trading during the hours of 9:30:00AM – 4:00:00PM (ET); however,
order entry to NX will be permitted from 8:00:00AM through 3:59:59PM (ET). One exception
to the trading hours will be for MOC orders, which NX will execute promptly at such time that
the subject security’s primary listing market disseminates a closing price (and any remaining
imbalance is cancelled accordingly). Also, with the exception of MOC orders, NX will
automatically cancel any order (or portion thereof) that has not been executed by the end of the
trading day (i.e., 4:00:00PM (ET)).
4.6. Trade Reporting
NX will report trades to the Nasdaq TRF using Nomura’s MPID as executing broker.
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For Subscribers that are registered US broker-dealers, NX will require such Subscribers to
establish a QSR relationship with Nomura as confirmation that Nomura will assume the trade
reporting obligation for both parties.
4.7. Lot Sizes
NX accepts only round lot orders. Mixed or odd lot orders will be rejected.
4.8. Clearly Erroneous
To determine if a transaction executed on NX is clearly erroneous when there is an obvious
error in any term, such as price, number of shares, or identification of the security, Nomura will
generally apply the Numerical Guidelines as defined under FINRA Rule 11890.
Procedure
If a Subscriber receives an execution of an order that was submitted erroneously to NX, the
Subscriber may request the transaction be reviewed pursuant to this NX Clearly Erroneous
Transactions Policy. Subscribers should submit requests as soon as practicable, but no later
than 30 minutes after execution.
All requests should be submitted in writing to
[nxats@us.nomura.com] and must include the following information: time of transaction,
symbol, number of shares executed, price(s), side and the factual basis for believing that the
trade is clearly erroneous.
Nomura will unilaterally determine whether to review a transaction if Nomura determines based
upon its sole discretion that the circumstances warrant such review. If Nomura determines that a
material term of a reviewed transaction is clearly erroneous, Nomura has the authority to declare
the transaction null and void, or to modify one or more terms of the transaction. A final
determination generally will be made within an hour of submission of a request. In all cases, a
final determination will be made prior to the open of the next trading day following the request.
Nomura will promptly provide oral notification of a determination to the parties involved in a
disputed transaction. Each request will be considered on a case-by-case basis.
Ruling Resolution Criteria
A transaction executed may be found to be clearly erroneous only if the price of the transaction
to buy (sell) that is the subject of the complaint is greater than (less than) the Reference Price by
an amount that equals or exceeds the Numerical Guidelines set forth below. The execution time
of the transaction under review determines whether the guidance threshold is Regular Trading
or Pre-Opening and Late Trading Session.3
Reference Price:
Regular Trading Hours
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Pre-Opening and After Hours
Although NX currently does not offer executions outside regular market hours, pre-market and late trading
sessions numerical guidelines for clearly erroneous are included herein for purposes of potential future application.
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Circumstance or Product
Numerical Guidelines
(Subject transaction’s
% difference from the Reference
Price):
Trading Session Numerical
Guidelines (Subject transaction’s
% difference from the Reference
Price):
Greater than $0.00 up to and
10%
including $25.00
20%
Greater than $25.00 up to
and including $50.00
5%
10%
Greater than $50.00
3%
6%
MultiStock Event – Filings
involving five or more,
but less than twenty,
securities whose
executions occurred
within a period of five
minutes or less
10%
10%
30%
30%
Numerical Guidelines multiplied by
the leverage multiplier (e.g. 2x)
Numerical Guidelines multiplied
by the leverage multiplier (e.g. 2x)
Multi-Stock Event –
Filings involving twenty
or more securities
whose executions
occurred within a period
of five minutes or less
Leveraged ETF/ETN
securities
Source: FINRA Rule 11890
The Reference Price will be equal to the consolidated last sale immediately prior to the execution(s) under
review except for:
1) Multi-Stock Events involving twenty or more securities, due to the number of affected
transactions immediate finality maybe necessary to maintain a fair and orderly market.
2) Additional Factors - Nomura may also consider additional factors to determine whether an
execution is clearly erroneous, these factors include but are not limited to:
• FINRA and SEC Rules
• System malfunctions or disruptions
• Volume and volatility for the security
• News released for the security
• Trading in the security was recently halted/resumed
• The security is an Initial Public Offering
• Stock-split, reorganization or any other corporate action
• Overall volatility of general market conditions
• Pre-Opening and After Hours Trading Session executions
• Validity of the Consolidated tapes trades and quotes
• Consideration of primary market indications
• Executions Inconsistent with Trading Patterns
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3) Individual Stock Trading Pauses - In the event a primary listing market issues an individual stock
trading pause in any Security, and regardless of whether the security at issue is part of a multistock event, Nomura will utilize the Trading Pause Trigger Price as the Reference Price for any
transactions that trigger a trading pause and subsequent transactions occurring before the trading
pause went into effect.
5. Order Display and Fair Access
Neither Subscriber order information nor NX’s limit order book will be displayed or accessible to anyone
other than NX support personnel who have a need to view such information in order for Nomura to carry
out its responsibilities and obligations regarding the operation of NX. As a result, Nomura expects to
avail itself of the Order Display (Rule 301(b)(3)(i)) and Fair Access (Rule 301(b)(5)(iii)) exemptions
provided under Regulation ATS.
6. Settlement and Clearing
Nomura will be the settlement counterparty for all transactions executed on NX.
Unless the Subscriber otherwise directs Nomura to give-up its transactions to another broker-dealer or
clearing agent (See, Section 2.1 above), Nomura will clear and settle all NX transactions.
7. Fees
The fees for executing trades on NX will be negotiated with each Subscriber based on volume and quality
of order flow a Subscriber sends or is expected to send to NX. The fee determination will be at the sole
discretion of the Nomura and can be modified at the sole discretion of Nomura.
Nomura will issue monthly invoices (which will include not only the aforementioned fees, but any other
transaction fees, taxes or other charges) to Subscribers as applicable and payment policies will be as per
the terms and conditions in NX Subscriber Agreement.
8. Miscellaneous
8.1. System Maintenance
On a regular basis, NX support personnel will conduct certain reviews designed to test system
performance to ensure proper operation of NX and assess whether system guidelines are being
met.
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8.2. Conflict Management
The operation of NX may involve individuals who have broader responsibilities outside of NX.
This may include members of the Nomura’s Electronic Services Management, IT, Operations,
Compliance and Legal teams.
Nomura will establish appropriate mechanisms and systems to deal with any conflicts that may
arise and maintain those mechanisms and systems in order to safeguard and protect Subscribers’
interests.
Information barriers will be put in place to ensure commercially sensitive information is not
used inappropriately.
8.3. Confidentiality
Nomura has internal policies to manage confidentiality of order information provided by its
clients, including Subscribers. Additionally, Nomura has established informational barriers for
NX so that neither the posted orders on NX nor inbound Subscriber order information are
available to anyone other than NX support personnel who have a need to view such information
in order for Nomura to carry out its responsibilities and obligations regarding the operation of
NX. Informational barriers ensure that neither the posted orders on NX nor inbound Subscriber
order information are available to any member of Nomura trading or sales staff.
8.4. Surveillance
Transactions will be monitored in order to identify breaches of the NX Policies and applicable
laws, rules and regulations.
8.5. Additional Reference
Additional reference material, including the NX Policies manual and NX Subscriber
Agreement, are available at:
[www.nomura.com/americas]
For additional information concerning this User Guide or other technical assistance or questions regarding
NX please contact:
NX Product Management
Amar Vaidya
Executive Director
(212) 667-2486
amar.vaidya@nomura.com
This document has been prepared and/or issued by Nomura Securities International, Inc. (“Nomura”). This document has been approved for
publication in the United States by Nomura, and may not be copied, duplicated, circulated, retransmitted or otherwise without the express written
consent of Nomura. This document is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase
or sale of any security or other product discussed herein.
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© 2010 Nomura Securities International, Inc. All rights reserved.
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