Japannext PTS Trading Rules for Bonds
Version 1.2
Updated 1st April 2020
This document explains the trading rules for the bonds trading services of Japannext PTS.
Rule

1. Product Universe

Description• Japanese Government Bonds (JGB) issued by the government of Japan.
• Tradable names are specified by Japannext PTS on a daily basis.
• New issues will be tradable from the business day following the auction.

2. Product Type• Cash JGB only.
• Fixed rate coupon-bearing bonds with maturity periods of 2, 5, 10, 20, 30, and40-years.
– The unit face value of these bonds is JPY 50,000.

3. Post-TradeProcessing• Pre-settlement matching is done through JASDEC (Japan SecuritiesDepository Center) PSMS (Pre-Settlement Matching System).
• All matched trades on JASDEC PSMS are cleared through JSCC (JapanSecurities Clearing Corporation).
• All settlement processing is done through BOJ-NET (Bank of Japan FinancialNetwork System).

4. Participants• A participant must be a registered broker-dealer in Japan and be able tocomplete post-trade processing as described in Section 3.

5. Trading Hours and • Trading hours:Days– Morning session: 08:20 – 11:05 JST– Afternoon session: 12:25 – 18:00 JST• Japannext PTS is open five days a week from Monday to Friday except fornational, observed, and exchange holidays.
• Please refer to the Japannext PTS Holiday Calendar document for the exactdates.
6. Trade Date

• Always actual calendar date of the execution (T).

7. Settlement Date

• One business day after trade date (T+1).

8. Order Placement• Trading participants can place orders via FIX and OUCH order entry ports.
• Orders will be accepted within the trading hours.
• Orders remaining in the order book at the end of the morning session arecarried into the afternoon session.
• Between the morning and afternoon sessions orders can only be canceled.
• Supported order transaction types:– New order creation– Order amendment– Order cancellation• Orders are placed in terms of number of bonds and simple yield.
• Supported order types:

Rule

Description– Limit– Immediate or Cancel (IOC)– Fill or Kill (FOK)– Post-only• Time In Force:– Day: An order submitted to the Japannext PTS execution system whichstays in effect until the end of trading hours.
– IOC: An order submitted to the Japannext PTS execution system with anoptionally specified minimum execution size which executes either in fullor in part upon entry, the remainder of the order is automatically canceled.
– FOK: An order submitted to the Japannext PTS execution system whichmust execute in full upon entry, otherwise the order is automaticallycanceled.
• The capacity of the firm placing the order must be specified as Principal orAgency.
• Orders can be optionally prevented from self-trade upon entry (refer to theSelf-Trade Prevention document for details).
9. Matching Process• Order driven continuous matching:– When a new order's limit yield matches with the ones already resting in theorder book of the execution system, it will be executed at the limit yield of
the order book.
– Order matching takes place within the trading hours.
• Matching priority: Yield-time.
– For sell orders, an order at a higher limit yield has priority over one at alower limit yield.
– For buy orders, an order at a lower limit yield has priority over one at ahigher limit yield.
– For orders with the same limit yield, an order accepted earlier has higherpriority.
– Amending an order's limit yield or increasing its quantity changes itspriority. Decreasing an order's quantity does not change its priority.

10. Lot Size

• Japannext PTS uses a trading lot of 2,000 bonds, i.e. JPY 100 million facevalue.

11. Tick Size

• Japannext PTS uses a tick size of 0.001% for yield.

12. Base Price• Japannext PTS calculates base prices using an interpolated yield curve built
from observed prices around the end of trading hours, whilst also taking intoaccount JSDA (Japan Securities Dealers Association) reference statisticalprices and considerations of issue liquidity.
• Base prices are converted to base simple yields.

13. Price Range• Japannext PTS uses the following price ranges:– Base price ± JPY 3 for bonds with residual maturity of 10 years or less.
– Base price ± JPY 6 for bonds with residual maturity greater than 10 years.
– Residual maturity is the bond maturity date minus the trade date.
• Price ranges are converted to simple yield ranges.

Rule

14. Order
Restrictions

Description• Minimum quantity:– The minimum order quantity is the same as the lot size, i.e. 2,000 bonds,i.e. JPY 100 million face value.
– An order with a quantity less than the minimum quantity will be rejected.
• Maximum quantity:– The soft order quantity limit is 200,000 bonds, i.e. JPY 10 billion facevalue.
– The hard order quantity limit is 2 million bonds, i.e. JPY 100 billion facevalue.
– By default, orders placed via FIX order entry ports have the soft order
quantity limit applied. FIX orders can optionally specify to have the hardorder quantity limit applied.
– Orders placed via OUCH order entry ports have the hard order quantity
limit applied.
– An order with a quantity exceeding the quantity limit will be rejected.
• Yield range:– The limit yield of an order should be within the yield range specified by
Japannext PTS.
– An order with a limit yield outside the yield range will be rejected.

15. Trading Halt

• Japannext PTS may suspend or restrict trading in the following cases:– When the base price is not generated.
– When there are irregular or potentially irregular order flows for the nameand Japannext PTS evaluates that it is inappropriate to continue tradingwith the name.
– When there is a system issue and Japannext PTS evaluates that it isinappropriate to continue trading on its system.
– Any other cases when Japannext PTS evaluates that it is unable to sustain
fair trading.
• A trading suspension or restriction can be done at any time including during
trading hours. Japannext PTS will attempt to notify all participants via e-mailor fax.
• Trading suspension and restriction information may be obtained from market
data vendors in real-time.

16. Market Data• Available via market data vendors.
• Available directly from Japannext PTS.

Appendix 1: Price and simple yield conversions
Simple yield to price conversion:p = (100 + c * T) / (100 + y * T) * 100
Price to simple yield conversion:y = [c + (100 - p) / T] / p * 100
p is clean price, i.e. per JPY 100 face value without accrued interest.
y is simple yield in percent.
c is nominal coupon rate in percent.
T is time to maturity in years.
Time to maturity is the time from the settlement date to the maturity date, calculated based on theconventions Actual/365 Fixed when the maturity date is earlier than the one-year anniversary of thesettlement date and Actual/365 No Leap Year otherwise. If the settlement date is a leap day then the oneyear anniversary is on February 28.

Appendix 2: Settlement amountAccrued interest rate is based on the convention Actual/365 Fixed and defined as:
accrued interest rate = c * d / 365 when d < 183 and c / 2 otherwise
where c is the nominal coupon rate in percent and d is the number of days from the last coupon payment
date (or corresponding date for the first accrual period) to the settlement date. If the settlement date matches
the next coupon payment date then d is zero.
The settlement amount can be expressed in terms of the execution and accrued interest amounts:
execution amount = clean price / 100 * face value
accrued interest amount = accrued interest rate / 100 * face value
settlement amount = execution amount + accrued interest amount
Alternatively, the settlement amount can be expressed in terms of the dirty price:
dirty price = clean price + accrued interest rate
settlement amount = dirty price / 100 * face value