QUESTIONNAIRE PROPOSALS TO REVIEW THE TICK SIZE REGIME IN

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Questionnaire

Proposals to review the tick size regime in the EU

PLEASE RETURN THIS QUESTIONNAIRE BY FRIDAY 29 MAY 2009

Name of the firm: …………………………………………………………………………

Contact details of the person responding to this questionnaire:

Name: ……………………………………………………………………………………...

Position: ……………………………………………………………………………………

Email: ……………………………………………………………………………………....

Introduction

The rationale and objective of this consultation is to assess the feasibility of reducing the number of different tick size regimes across European equity markets and to work out how best to do this. Various European trading venues and firms recognise the benefit of greater uniformity to improve efficiency when trading across multiple venues and markets. These firms have initiated discussions on a possible solution. In order to establish if the objective is feasible and (if so) to find the optimal solution, we are now seeking your feedback on the potential for a harmonised approach across Europe.

When considering the optimal tick size, research suggests that:

A tick size that is too granular is detrimental to market liquidity as it can reduce the volume of shares at each price point and may deter posting of passive orders.
A tick size that is too large is suboptimal as it technically prevents spreads from reducing, increasing liquidity costs.

Identification of the Customer

Customer Type (please tick one):

Prop

(Pure Principal Trading)

Agency Brokers

(Pure Agency Trading)

Wholesale

(Investment / Global Bank)

Market Maker

Retail

(Mainly Retail Order Flow Trading)

Other

Please specify:

Predominant Trading behaviour (please tick one):

Automated trading

(System driven trading decisions, e.g. smart order routers, electronic eye, black box algos, etc)

Non-automated trading

(Non system driven trading decision making)

Instruments directly traded via: connections to venues (please tick one):

International securities

Domestic securities only

Specific Questions

Do you support European-wide harmonisation of tick sizes for equity trading?

Can you explain why?

If you are currently against harmonisation, but a subset of venues across Europe were to harmonise, would you reconsider your position, and under what circumstances?

Which of the following models (Table 1 to 4) would you prefer^¹:

	Stock Prices		Table 1 ²			Table 2
	Lower	Upper	Tick	Tick as % of Price		Tick	Tick as % of Price
	Limit	Limit	Size	Max	Min	Size	Max	Min
Band 1	-	0,4995	0,0001	-	0,02%	0,0001	-	0,02%
Band 2	0,5	0,9990	0,0001	0,02%	0,01%	0,0005	0,10%	0,05%
Band 3	1	4,9950	0,0005	0,05%	0,01%	0,001	0,10%	0,02%
Band 4	5	9,990	0,001	0,02%	0,01%	0,005	0,10%	0,05%
Band 5	10	49,950	0,005	0,05%	0,01%	0,01	0,10%	0,02%
Band 6	50	99,90	0,01	0,02%	0,01%	0,05	0,10%	0,05%
Band 7	100	499,50	0,05	0,05%	0,01%	0,1	0,10%	0,02%
Band 8	500	999,00	0,1	0,02%	0,01%	0,5	0,10%	0,05%
Band 9	1.000	4.995,00	0,5	0,05%	0,01%	1	0,10%	0,02%
Band 10	5.000	9.990,00	1	0,02%	0,01%	5	0,10%	0,05%
Band n…	10.000	etc. etc	5	0,05%	-	10	0,10%	-

	Stock Prices		Table 3			Table 4 ²
	Lower	Upper	Tick	Tick as % of Price		Tick	Tick as % of Price
	Limit	Limit	Size	Max	Min	Size	Max	Min
Band 1	-	0,4995	0,0005	-	0,10%	0.001	-	0.20%
Band 2	0,5	0,9990	0,001	0,20%	0,10%	0.001	0.20%	0.10%
Band 3	1	4,9950	0,005	0,50%	0,10%	0.001	0.10%	0.02%
Band 4	5	9,990	0,01	0,20%	0,10%	0.001	0.02%	0.01%
Band 5	10	49,950	0,05	0,50%	0,10%	0.005	0.05%	0.01%
Band 6	50	99,90	0,1	0,20%	0,10%	0.01	0.02%	0.01%
Band 7	100	499,50	0,5	0,50%	0,10%	0.05	0.05%	0.01%
Band 8	500	999,00	1	0,20%	0,10%	0.05	0.01%	0.005%
Band 9	1.000	4.995,00	5	0,50%	0,10%	0.05	0.005%	0.001%
Band 10	5.000	9.990,00	10	0,20%	0,10%	0.05	0.001%	0.0005%
Band n…	10.000	etc. etc	50	0,50%	-	0.05	0.0005%

Or:

Please provide details of any additional proposed regime either based on modifications of the above or new proposals:

Please explain your rationale:

No changes preferred

Do you see a need for multiple tick size tables by offering different regimes for segments of securities either by geography/market and/or liquidity?

How would you suggest defining the selection criteria (e.g. CESR liquid share list or tradable index constituents or other e.g. hand picking)^²?

What would be your preference on the number of bands available?

Do you have a technical restriction on the number of bands?

What would be your the preference on the maximum number of decimal places? (please tick one)

Can you explain why?

What would be the impact on post-trade infrastructure and the back-office processing (only valid if you have chosen greater than 2 decimal places, please give further details)?

Are there any other technical restrictions that would impede a revision of the regime?

How much notice would members require to implement a revision of the tick size regime?

Please add any further relevant comments on this subject.

1 These tables have been used as the basis for discussion across the venues and the basis for this consultation. The “stock price” columns are based on the price of the order entered in the relevant currency.

² Combined bands shown as shaded area.

2 Please be aware that a change in the set of securities (e.g. index change) may result in an order book purge to align existing orders with the new tick size table (since moving to a larger tick size may render some resident orders invalid).

QUESTIONNAIRE PROPOSALS TO REVIEW THE TICK SIZE REGIME IN - 4 -

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