TeleTrade, as a member of Warsaw Stock Exchange, is eligible to conduct direct trading in financial instruments on the WSE though its technical and organizational infrastructure. Customers of TeleTrade can - by tapping into this infrastructure and sharing the benefits of TeleTrade’s exchange membership, connectivity arrangements, order routing system, risk management system, settlement and custodianship services and record-keeping support - get direct access to the WSE for the purpose of executing their own trades via a remote trading terminal application run on their personal computers. Such service is referred to as Direct Market Access, and it offers the following benefits to the Clients:
- Non-intermediated access to the Exchange venue. The Clients are free to decide themselves on their trades and submit them in real time, directly into the trading book of the Exchange via a trading terminal, at any moment during the Exchange’s working hours. The only layer effectively separating a Client and the marketplace is the system of safety pre-trade filters and risk checks that are embedded into the trading application and TeleTrade’s transmission protocols, and are designed to prevent input errors, excesses of limits and breaches of order placement rules;
- Immediate execution. Clients orders are placed directly into the market via TeleTrade’s connection with the WSE gateway, thus the Clients obtain the shortest order path possible for a non-broker market participant. Clients trades get executed once the matching orders are found in the WSE’s book. Transmission of orders typically is as fast as Client’s internet connections permits, TeleTrade’s servers process up to 20 orders per second into the WSE gateway, while the WSE’s trading system has design throughput of 20,000 orders per second;
- Cost efficiency and transparency. The service has low entry barriers for Clients due to insignificant sign-up costs, no minimum account balances or trading volume thresholds, and no need for any specialized equipment or technical arrangements. The costs are predominantly transaction-driven and therefore fully controlled by Clients;
- Real-time supply of market information. Clients are provided with most up to date market information – current quotes for all available instruments, depth of trading interest at these quotes, record of actual transactions as they are performed – which is broadcasted online from the WSE gateway into the Clients’ trading terminals, under TeleTrade’s Market Data Distribution Agreement with the WSE, and is updated within seconds so as to facilitate informed decision-making by Clients.
- Conditional/deferred order placement and automated trading options. Clients have a variety of order construction options, allowing to specify order type, price splitting and execution scheme, and also conditional and deferred orders, including stop-loss and take-profit orders, so as to precisely address Clients’ particular needs. Sophisticated investors also can benefit from the support of algorithmic trading that a Client can program and adjust using the built-in tools of the trading platform.
TECHNOLOGICAL AND ORGANISATIONAL ARRANGEMENTS
WSE operates on a Unified Trading Platform (UTP) which is a modern and advanced solution sourced from NYSE and represents world-class quality in technology with a design throughput of 20,000 orders per second. UTP is well known to international investors and brokers on the world’s biggest markets as the same platform is used by the NYSE Euronext stock exchanges in New York, Paris, Lisbon, Amsterdam and Brussels.
Connection with the WSE is established via TeleTrade’s own server, physically hosted in Warsaw, and used as a gateway for broadcasting of market data from the WSE to Clients and transmission of orders from the Clients to the marketplace.
Clients’ orders are processed and transmitted via QUIK a flexible trading platform providing online access to the Warsaw Stock Exchange trading system. QUIK is available for free downloading from the TeleTrade’s web-site, and is to be installed, registered and set up by a Client, remotely, on his personal computer. TeleTrade provides guidelines for setting up the QUIK terminals and executing, through its interface, transactions on the WSE. TeleTrade also provides ongoing technical support of the terminals, and assists Clients with any issues related to the installation and functioning of the terminals.
Clients’ orders are submitted from Client’s individual workstations via the QUIK terminal, and are subsequently aggregated by the QUIK server and screened against a set of pre-trade filters and checks designed to prevent input errors, breaches of trading limits and violation of order placement rules. The orders are also monitored by the TeleTrade staff for unwarranted short positions or incidence of orders that technically correct, but apparently devoid of rationale and were likely placed by mistake.
Client’s orders that have successfully passed pre-trade screening are routed to the marketplace and are put on the order book of the Exchange. Upon execution of such orders, Client’s cash and security balances are immediately updated in their trading terminals, reflecting the price and volume of the trade. Simultaneously, information on the transaction is automatically sent from the Exchange to the TeleTrade’s WSE gateway, and, independently, to the Polish financial institution that serves as TeleTrade’s clearing partner and also maintains cash and security balances in the Client’s trading accounts. The clearing partner records the transactions, and updates the centralized registry of the Polish National Depository for Securities with the respective changes in rights to securities and resulting payment obligations.
The transactions are settled within 3 business days, following the T+2 settlement cycle enforced by the National Depository. TeleTrade’s clearing partner that settles Clients’ transactions is a direct member of the National Depository’s Clearing House. The latter guarantees, by its centralised Guarantee Fund, proper settlement of transactions and delivery of securities and therefore reduces the risk of counterparty default.
Information on executed and settled transactions, and also on changes in available securities and cash balances in the trading accounts, is communicated to TeleTrade’s Clients on a daily basis, via trading statements, and is also updated in the Clients’ personal pages in the TeleTrade’s web site.
Assets deposited by TeleTrade’s Clients for trading in regulated markets are maintained in accounts legally segregated from TeleTrade’s own accounts, thus being safeguarded from any claims against TeleTrade. Cash assets are kept exclusively with regulated and duly licensed European credit institutions. Security assets are kept in an omnibus securities account held with a professional custodian, a Polish financial institution that is supervised by Polish Financial Authority and National Depository of Securities.
Structure of arrangements and informational/financial flows for the DMA service:
To support and enhance clients’ trading experience, TeleTrade also provides a range of ancillary services:
- account information – book-keeping for all individual accounts, sending out trading statements, updating clients’ personal page on the TeleTrade web-site
- analytical support of trading – daily reviews of performance and highlights of the Polish stock market
- access to testing accounts and simulated market environment to provide real-life trading experience to novice traders without putting investments at risk
- processing of inbound and outbound payments, currently supporting bank account transfers, moving to introduce online card payment options
- customer/technical support with respect to any trading issues, setting up and use of trading terminals and any other questions related to trading at the WSE
- processing of voice orders to allow Clients submit, withdraw or modify their orders by phone in case of internet outages or emergencies;
- education / informational programs and events devised to increase Clients’ awareness of available trading options, their risks and benefits and educate Clients about trading in financial instruments
BEST EXECUTION & RISK DISCLOSURE
Client order handling and best execution
MiFID requires that firms take all reasonable steps to obtain the best possible result in the execution of an order for a client. The best possible result is not limited to execution price but also includes cost, speed, likelihood of execution and likelihood of settlement and any other factors deemed relevant. TeleTrade addresses requirements of MiFID within the scope of the DMA service according to its Best Execution Policy.
Disclosure of Risks
MiFID and the implementing Directive Di144-2007-02/2012 of the Cyprus Securities And Exchange Commission require that investment firms provide potential Clients with a general description of the nature and risks of financial instruments, and risks involved in relation to the product or investment service offered. TeleTrade addresses these requirements, within the scope of its DMA service, by providing the following disclosures and warnings: