CLSA Limited
ALP Japan“Crossing Engine”
User Guidelines

Version 1.0
Dec 2023

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A. GENERAL
1.

Introductiona.

CLSA’s ALP (hereafter referred to as “Crossing Engine”) is a continuous, anonymous ordercrossing and automated trade reporting system which seeks to cross buy orders with sell orders,
and report successful cross trades to the ToSTNet.

b.

The purpose of this document i s t o provide guidance to clients of C LSA who are “users” of the
Crossing Engine or 3rd party ALPs i.e. whose orders may be routed to the Crossing Engine or 3rdparty ALPs for crossing.

c.

Prior to routing orders to the Crossing Engine or 3rd party ALPs, users are advised to familiarize
themselves with the information contained in this document.

d.

This document is subject to change from time to time, due to the update of relevant rules andregulations by the Tokyo Stock Exchange (TSE).

e.

Users should contact their regular CLSA sales-trading contact with any queries related to the
Crossing Engine or this document.

B. TRADING AND OPERATIONAL MATTERS

1.

Client Tier Preferencesa.

Crossing Engine recognises a set of pre-defined tiers and each client is designated to a specifictier based on the type of order flow from the client as mentioned below.

Client Tier
Institutional
Liquidity Provider
Principal
Broker Dealer
Aggregator
b.

Value
I
L
P
B
A

Each client can choose the crossing preference for their orders i.e. to cross with the orders
from clients belonging to a particular tier or group of tiers.
Example: A Liquidity provider client (“L”) can choose to cross only with Institutional (“I”) and
Broker Dealer (“B”) orders. Crossing Engine will cross the client orders only with the orders
from clients belonging to “I” and “B” tiers.

2.

Client Exclusiona.

A client can restrict his/her orders from interacting with the orders from a client or list ofclients irrespective of the tier they belong to.
Example: A Liquidity provider client (“L”) who is willing to cross with Aggregator (“A”) orders,can still restrict their orders from crossing with a specific “client/clients” orders belonging to“A” tier.

3.

CLSA Principal Flow
Orders in which the CLSA group of companies have any interest (“Principal Flow”) can be routed to the
Crossing Engine Internal Order Book for crossing, Principal Flow includes:2a.

Where CLSA is trading as principal in the transaction;b.

Where a group company of CLSA is trading as principal in the transaction;c.

Any account in which CLSA or its group companies have an interest;d.

The account of any employee or agent of CLSA, or its group companies; ore.

Client facilitation orders

However, the agency orders will always have better priority over the principal orders for crossing at any
given point of time (please refer Section D-2).
4.

Opt-in/Opt-out Arrangement

a.

b.

5.

CLSA Crossing Enginei.

High Touch Users may opt-out of routing their orders to the Crossing Engine for crossing by
notifying CLSA in writing of their desire to Opt-out by emailing clsa_alp_optout@clsa.com.

ii.

Electronic Trading Users may opt-in to routing their orders to the Crossing Engine for crossing.

iii.

Users may request to opt-out their cash desk orders but opt-in their electronic trading orders,or vice versa.

iv.

Users may specify that their orders do not cross with orders from another user if these orders
originate from another broker’s ALP.

v.

Users may opt-out individual orders by indicating as such on the relevant FIX tag in the ordermessage.

Routing to 3rd party ALPsi.
ii.

CLSA has established FIX connectivity with other licensed ALPs as detailed in table 1 below .
By default user orders will not be routed to 3rd party ALP’s.

iii.

Users may request that their orders are eligible for routing to 3rd party ALP’s.

Supported Securities
Securities listed on the Chi-X Japan, SBI Japannext, and the TSE.

6.

Crossing Sessionsa.

The Crossing Engine will operate during the continuous trading hours of the TSE. The Crossing
Engine will not operate during the pre-open session, during the lunch break, or any period that is
not deemed as continuous trading by the TSE.

b.

The Crossing Engine will cease crossing orders 15 seconds before the close of the AM continuous
trading session, and 15 seconds before the close of the PM continuous trading session to allow the
Crossing Engine sufficient time to report any crossed trades to the ToSTNet. The Crossing Engine
will not start crossing orders until 15 seconds after each session opens to avoid the volatility thatis common at the exchange open. These time-periods may be changed from time to time by CLSA.

c.

Furthermore, if a stock has not opened during the continuous trading session or it has entered into
the intraday volatility auction during the continuous trading session, the Crossing engine will not3cross the order for that stock until stock entres into the continuous trading session on the exchange.
d.

7.

The table below details the operation of the Crossing Engine during the various TSE trading
sessions.
TSE Trading Session

Time (JST)Crossing Engine Operation

Before AM Pre-Opening

Before 08:00

Will not cross

AM Pre-Opening

08:00 – 09:00

Will not cross

AM Continuous Trading

09:00 – 11:30

Crossing permitted from 09:00:15 – 11:29:45

Lunch Break

11:30 – 12:05

Will not cross

PM Pre-Opening

12:05 – 12:30

Will not cross

PM Continuous Trading

12:30 – 15:00

Crossing permitted from 12:30:15 – 14:59:45

Market Close

After 15:00

Will not crossOrder Routing and Execution Methodology
a. Orders from user or ALP usermay route to Crossing Engine or 3rd party ALPs or the exchange via
CLSA order management and execution system as per their instructions. .
b. CLSA Smart Order Router (SOR) has the functionalityto allow user and ALP users to opt-out fromcrossing in as per order basis via FIX Tag Crossing Indicator “0 – Do not cross”.

8.

Cross Preferences
Users may route orders to the Crossing Engine and 3rd party ALPs via the client’s own FIX enabled trading
system. The FIX message may include an identifier in a FIX Tag to instruct whether or not the order
may be considered for crossing in the Crossing Engine.
FIX Tag
Crossing
Indicator

Name

Description

0

Do Not Cross

Bypass the Crossing Engine, routing orders directly to the
Exchange. These orders can only be traded in the exchange order
book.

1

Can Cross2

Cross Only

3

Cross Mid

Route the order to the Crossing Engine or 3rd party ALPs, which willcross the order if there is a matching order or if the opportunity for across arises. If there is no immediate match, the Crossing Engine will
route the order to the exchange. If a cross is found within the
Crossing Engine or 3rd party ALPs, a trade cross report will be sent to
the ToSTNet.
Route the order to the Crossing Engine or 3rd party ALPs only. The
order will not be routed to the exchange under any circumstances forcrossing. The order will be crossed if and when there is a matchingorder in the Crossing Engine or 3rd party ALPs under which
circumstances a cross trade report will be sent to the ToSTNet.
The order may be crossed in the Crossing Engine or 3rd party ALPs or
be routed to the exchange. If crossed in the Crossing Engine or 3rdparty ALPs, the order crossing price will be the mid-point between thebest bid and the best ask prices, or better, if that price is within thelimit price of the order.

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FIX Tag
Crossing
Indicator

Name

Description

4

Cross MidInternal

Route the order to the Crossing Engine or 3rd party ALPs only. The
order will not be routed to the exchange under any circumstances forcrossing. The order crossing price will be the mid-point between thebest bid and the best ask prices, or better, if that price is within thelimit price of the order.

5

Does not exist

6

Near Touch

7

Near Touch
Internal

The order may be crossed in the Crossing Engine or 3rd party ALPs or
be routed to the exchange. If crossed in the Crossing Engine or 3rdparty ALPs, the order crossing price will be the best bid price for a buy
order, and the best ask price for a sell order, if that price is within thelimit price of the order.
Route the order to the Crossing Engine or 3rd party ALPs only. The
order will not be routed to the exchange under any circumstances forcrossing. The order crossing price will be the best bid price for a buy
order, and the best ask price for a sell order, if that price is within thelimit price of the order.

If a client has not “opted in”, the FIX Tag Crossing Indicator will be considered ineffecitive and theorder will not be considred for the crossing in the Crossing Engine or 3rd party ALPs.
9.

Crossing Mechanism
Order types 1, 3 and 6 (Section B-7) are routed to the Crossing Engine first to check for liquidity, if
there are no crossing opportunities, the orders are then routed to the exchange. If there is liquidity
in the Crossing Engine but it was insufficient to fill the whole order, the liquidity available in the
Crossing Engine would be crossed first and the remaining unfilled order would then be routed to theexchange. However, any unfilled portions of the order in both cases will continue to be available to be
crossed in both the Crossing Engine Internal Order Book and exchange. Please see below illustrations
for details.
Illustration 1 – No crossing opportunities in Crossing Engine
1.

10:15 am JST – Prior to order receipt
Crossing Engine Internal Order Book
Price

Volume (‘000)

Price

Bid

Volume (‘000)
Ask¥30.0020¥30.1080¥29.9590¥30.1570

Volume (‘000)

Price

Exchange Order Book
Price
Bid

2.

Volume (‘000)
Ask¥30.0040¥30.1020¥29.9550¥30.1530

10:16 am JST – Sell order of 150,000 shares @ ¥30.05 is routed to the Crossing Engine withFIX Tag Crossing Indicator = 1.

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No crossing opportunities available and hence order remains in the Crossing Engine Internal
Order Book.

Crossing Engine Internal Order Book
Price

Volume (‘000)

Price

Bid

3.

Volume (‘000)
Ask¥30.0020¥30.05150¥29.9590¥30.1080

10:16 am JST – Order is also routed to the exchange
Exchange Order Book
Price

Volume (‘000)

Price

Bid

Volume (‘000)
Ask¥29.9540¥30.05150¥29.9050¥30.1020

Illustration 2 – Partial crossing opportunities in Crossing Engine
1.

10:15 am JST – Prior to order receipt
Crossing Engine Internal Order Book
Price

Volume (‘000)Price¥30.0020¥30.1080¥29.9590¥30.1570

Volume (‘000)

Price

Bid

Volume (‘000)
Ask

Exchange Order Book
Price
Bid

2.

Volume (‘000)
Ask¥30.0040¥30.1020¥29.9550¥30.1530

10:16 am JST – Sell order of 150,000 shares @ ¥30.00 is routed to the Crossing Engine withFIX Tag Crossing Indicator = 1.
Only 20,000 shares are crossed in the Crossing Engine. Remaining quantity in the Crossing
Engine Internal Order Book, 130,000 shares, is routed to the exchange for execution.
Crossing Engine Internal Order Book
Price

Volume (‘000)Price¥29.9590¥30.00130¥29.9080¥30.1080

Volume (‘000)

Price

Volume (‘000)40¥30.00

Bid

Volume (‘000)
Ask

Exchange Order Book
Price
Bid
¥30.00

Ask

6

130

¥29.953.

50¥30.1020

10:16 am JST – Remaining quantity is routed to the exchange.
40,000 shares are matched in the exchange order book. Remaining quantity in the exchangeorder book is 90,000 shares. Remaining quantity in the Crossing Engine Internal Book will
also be updated. However, order priority remains unchanged in the Crossing Engine.
Crossing Engine Internal Order Book
Price

Volume (‘000)

Price

Bid

Volume (‘000)
Ask¥29.9520¥30.0090¥29.9090¥30.1080

Volume (‘000)

Price

Exchange Order Book
Price
Bid

Volume (‘000)
Ask¥29.9550¥30.0090¥29.9070¥30.1020

10. Minimum and Maximum cross sizea.

The FIX message may include an identifier in a FIX Tag to specify the minimum number of sharesthat may be crossed in the Crossing Engine Internal Order Book. If this identifier is not included
then the minimum number of shares will be one board lot.

b.

The Crossing Engine will not cross a single trade or order in value more than ¥10,000,000,000.
These limits may be changed as necessary by CLSA from time to time.

11. Tick boundarya.

The Crossing Engine will accept an order that does not align with the exchange tick boundaries.
The Crossing Engine will store orders in the Crossing Engine Internal Order Book with theprice limited to at most four decimal places.

b.

Where an order contains a price instruction (i.e., not ‘Market’ orders), should the price not lie
on a exchange tick boundary and the order cross indicator is set to either “Can Cross”, “CrossMid” or “Near Touch” the price will be rounded to a tick boundary before being sent to theexchange. Buy orders will be rounded down to the nearest tick boundary, while sell orders will be
rounded up. Orders designated “Cross Only” will be held in the Crossing Engine Internal Order
Book at the original price limit.

12. Order Crossing Mechanicsma.

The Crossing Engine Internal Order Book is a continuous order matching system. Order crossing
will occur under the following circumstances:
i.
ii.
iii.
iv.

b.

When a new order is received by the Crossing Engine;
When the limit price of an existing order is amended;
Where there is a change in the best bid price or best ask price in the exchange ; andBy the periodic running of a timer.

Orders from different users are continuously executed in price and time priority. An order enteredinto the system at an earlier time must be executed in full before an order from a different user,
at the same price, entered at a later time is executed.
i.

For buy orders, the Crossing Engine will search for a sell order with a limit price lower thanor equal to the limit price of the buy order. The search is conducted such that the lowest

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priced sell orders are checked first. If a sell order is found then the two orders may crosssubject to further restrictions (outlined in Section C-1). The number of shares that may
cross will be the lower of either the unfilled quantity of the buy order, or the quantity of
the available sell order.
ii.

For sell orders, the Crossing Engine will search for a buy order with a limit price higher thanor equal to the limit price of the sell order. The search is conducted such that the highest
priced buy orders are checked first. If a buy order is found then the two orders may crosssubject to further restrictions (outlined in Section C-1). The number of shares that may
cross will be lower of either the unfilled quantity of the sell order, or the quantity of theavailable buy order.

c.

The Crossing Engine will only cross orders if the client tier of one order is in the cross tiers of the
opposite order and vice versa.

d.

The Crossing Engine will only cross orders if the client exclusion list of one order does not containthe client of opposite side order and vice versa.

e.

The Crossing Engine will only cross orders at a price between the current best bid and best offer
price on the exchange.

f.

The Crossing Engine will only cross orders at a price between the current day high and day low
prices on the exchange.

g.

When the Crossing Engine has determined that two orders may be potentially crossed, thecross is then subject to a series of validations rules (outlined in Section C-1). Should any
one of the validation rules fail, then a cross will not be performed.

h.

After all validation checks are performed, the Crossing Engine will then report the crossed
transaction to the ToSTNet. Upon successful reporting, the crosses will be reported to the client.

13. Order cancellation
Users may cancel orders by sending a FIX cancel message. Orders, which have been routed in whole
or in part to the exchange and are cancelled during periods that the exchange does not support
cancellation, will then be cancelled when the exchange reopens.
C.

Crossing Restrictions
1.

The Crossing Engine operates the following restrictions reflecting the trading rules of exchanges orother regulatory considerations:a.

The Crossing Engine will not cross any instrument that is suspended from trading on theexchange.

b.

The Crossing Engine will not cross odd lots.

c.

The crossing price will not have more than four decimal places.

d.

The Crossing Engine will not cross buy and sell orders from the same client.

e.

Other restrictions as deemed to be appropriate by CLSA from time to time.

D. Order Priority
1.

Orders from different users are continuously executed in price and time priority. An order enteredinto the system at an earlier time must be executed in full before an order at the same price entered
at a later time is executed.

2.

Agency orders priority over Principal orders

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a.

3.

If there are orders from both Agency and Principal flow in the crossing engine internal
orderbook at the same price, the Agency orders will always have better priority over principal
orders irrespective of the time they were sent to the crossing engine.

Consecutive User Agency Order Priority
Where multiple agency orders queue in the Crossing Engine Internal Order Book consecutively fromthe same user:a.

Orders that were not sent to the exchange (Section B-8, order types 2, 4 and 7) will be given ahigher time priority relative to orders that were sent to the exchange (Section B-7, order types
1, 3 and 6).

b.

Orders that were sent to the exchange (Section B-8, order types 1, 3 and 6) will be considered
for crossing in reverse time priority when such crossing order results in an improved queue
priority on the exchange for the user.

This order priority only applies to orders from the same user, in the Crossing Engine Internal Order
Book consecutively, at the same price.
E.

Other Dealing Matters
1.

Order aggregation
Orders within the Crossing Engine will not be aggregated with any other orders for crossing.

2.

Fair and orderly operation
CLSA aims to provide a fair and orderly platform for operation of the Crossing Engine:a.

The Crossing Engine is an automated order crossing system, free of human intervention undernormal operation;b.

A “Price Time Priority” methodology is imposed upon all users trading in the Crossing Engine
with the exception of consecutive orders from the same user (Section D-3).

3.

The Crossing Engine is subject to CLSA group policies relating to information technology andregulatory compliance.

4.

Potential conflict of interest
CLSA has implemented a broad set of control measures addressing potential conflict of interests in
the Crossing Engine.

F.

Order confidentiality
The Crossing Engine does not publish indication of interest or any information regarding its order book to
any CLSA trading desk or other market participant. In addition the Crossing Engine will provide users an
option to hold an order within its own internal order book only, and not forward that order to the exchange.

G. Risk disclosure relating to the Use of Crossing Engine
1.

On occasion there may be a time delay before the best bid and best ask price of the exchange isreflected in the Crossing Engine, due to technology or communication delay or interruption related tomarket data or otherwise. In such an event the price crossed in the Crossing Engine may not reflect
the market price on the exchange.

2.

Where users specify “Cross Only” as the crossing identifier, there is no assurance given with regards
to the liquidity of orders in the Crossing Engine. The liquidity of the Crossing Engine may be less9

favorable than the same in the exchange.
3.

CLSA have taken reasonable steps to protect the integrity and confidentiality of orders in the Crossing
Engine to a level we consider appropriate, however leakage of trading information may occur beyond
our reasonable level of system and internal control.

4.

The service of Crossing engine is provided on an “as is” basis and we make no warranty, representationor other assurance in connection with the system, including as to availability, accuracy, completeness,
results, functionality, reliability, performance, timeliness, non-infringement, suitability, quality,
merchantability, fitness for a particular purpose or otherwise. We also do not warrant that accessand/or use of the system will be uninterrupted or error-free.

H. Legal Information
1.

This document is not intended to have any force of law, be it in contract or tort. This document also
does not seek to introduce, and should not be seen as imposing, any obligation or liabilities between
you and CLSA beyond those defined in our terms of business or contractual agreement.

2.

This document/communication is for information purposes only and does not constitute any
recommendation, representation or warranty in respect of the Crossing Engine or 3rd party ALPs. This
is not a solicitation or an offer to buy or sell any financial products or services. This
document/communication is not intended to provide professional, investment, technical or any othertype of advice or recommendation. Before acting on any information in this document/communication,
you should consider whether the Crossing Engine or 3rd party ALPs described herein is suitable for yourparticular circumstances and, if appropriate, seek professional advice.

Version control: V1.0 (Dec 2023)

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