Self-Match Prevention (SMP) Enhancements

NZX is making enhancements to the optional self-match prevention (SMP) service to provide additional functionality that assists NZX Trading Participants through exchange technology to manage their obligations with relation to wash trades. Specifically NZX is introducing booking purposes only transaction (BPOT) optionality that prevents a wash trade from occurring but results in a transaction that an NZX Trading Participant can identify.

Key Changes

• Removal of the whitelist and introduction of FIX tags for managing SMP functionality
• Introduction of BPOT functionality

Existing SMP

• While the enhancements to SMP are being developed, the existing SMP functionality will continue to be offered by NZX and available for NZX Trading Participants.
• When the new functionality is launched the existing functionality will be removed.
• All information on the existing SMP functionality can be found here.

Implementation Timeline

The SMP enhancements are currently under development by NZX with a target implementation of Q4 2024.

For more information on the SMP enhancements please contact markets@nzx.com

SMP Documentation

• SMP Functionality Overview - Draft
• SMP Fees

SMP Functionality

There are two types of SMP available to NZX Trading Participants:

• Cancel-Passive SMP, and
• Booking Purposes Only Transaction (BPOT).

Cancel-Passive SMP

Where Cancel-Passive SMP has been chosen for two opposing Orders belonging to the same entity that would otherwise match in the Trading System, the following occurs:

• The passive (older) order is withdrawn from the order book
• The aggressor (new) order remains in the order book and may match against other passive orders.

Booking Purpose Only Transactions (BPOT)

Where BPOT has been chosen for an Approved BPOT Client for two opposing Orders belonging to the same entity that would otherwise match in the Trading System, both the passive and aggressing Order will match and then immediately be withdrawn from the Trading System and a BPOT will arise.

• A BPOT will only be visible to the Participant who placed the relevant Orders and will not be published down any public market data feeds.
• The executing broker will receive a transaction report via the NZX Trading System that the Participant can use to identify a BPOT and manage any additional requirements.
• BPOT are not eligible to be novated and cleared and settled through the Clearing House, and a ‘non-settled’ trade notification will be displayed in the BaNCS system.
• BPOT behaviour is the same across both NZX Central and NZX Dark.

How does the SMP service operate?

SMP Key

• The Participant will be able to enable SMP through the addition of a unique SMP Key on each order that will identify the ‘entity’ to which SMP should apply.

SMP Action

• Participants will then need to specify the SMP Action that is to apply to an Order, being either Cancel-Passive or BPOT.

For SMP to come into effect a match must be made on all three of the following:

• Same Trading Participant on both orders
• Same SMP Key on both orders
• Same SMP Action on both orders (Cancel-Passive or BPOT)

How to enable SMP

NZX Trading Participants can enable SMP by completing the BPOT Approved Client Request Form and submitting this via the NZX Participant Portal. A link to the SMP Service Request Form will be made available on this website closer to the release of the BPOT functionality in Q4 2024.

The recognised Approved BPOT Client jurisdictions are specified below:

• Australia
• Canada
• Hong Kong
• New Zealand
• Singapore
• United Kingdom
• United States of America

Frequently Asked Questions

Q: What is self-match prevention?

A: Functionality for NZX Trading Participants to identify and restrict orders which result in no change in beneficial ownership.

Q: What are the benefits of self-match prevention?

A: The benefits of self-match prevention include:

• Trading Participants are enabled to manage their risk with relation to wash trades
• Removes technical challenges faced by market makers
• Increases market integrity

Q: Is self-match prevention compulsory?

A: No, self-match prevention is an optional, opt-in service for NZX Trading Participants.

Q: How do I enable SMP?

A: SMP is enabled by NZX Trading Participants via the Participant Portal. Access to the Participant Portal is restricted to compliance managers and officers of each NZX Participant.

Q: Do I still need a whitelist to manage my client references?

A: No, with the enhancements to SMP the need for a whitelist has been removed. NZX Participants have the ability to utilise standardized FIX messaging to pass key broker information and the preferred SMP Action (Cancel Passive or BPOT) for each client.

Q: Will cancel-passive self-match prevention be available in both the cash (equity and debt) market and derivatives market?

A: Yes, cancel passive self-match prevention is available to both markets.

Q: Will BPOT be available in both the cash (equity and debt) market and derivatives market?

A: BPOT is available to only the cash (equity and debt) markets not the derivatives market.

Q: What fees apply for SMP?

A: All fees relating to SMP are set out in the NZX Fee schedule.