Exhibit A
A description of classes of subscribers (for example, broker-dealer, institution, or retail). Also describe any differences in access to the services offered by the alternative trading system to different groups or classes of subscribers.
Convergex Execution Solutions LLC (“CES”) is the sponsor of Vortex. Registered broker-dealers and institutions that are customers of CES are eligible to become subscribers to Vortex (“Subscribers”). As customers of CES, all Subscribers will be subject to the existing credit criteria currently set in place by CES’s credit committee. While retail customers are not permitted to trade directly through Vortex, they may have indirect access to the system through their broker-dealers who are Subscribers.
All classes of Subscribers have equal access to Vortex services.
Exhibit B
a. A list of the types of securities the alternative trading system trades (for example, debt, equity, listed, Nasdaq NM), or if this is an initial operation report, the types of securities it expects to trade. Note whether any types of securities are not registered under Section 12(a) of the Exchange Act of 1934 (“Exchange Act”).
Vortex accepts orders in all National Market System (“NMS”) stocks as defined in Regulation NMS.
b. A list of the securities the alternative trading system trades, or if this is an initial operation report, the securities it expects to trade. Note whether any securities are not registered under Section 12(a) of the Exchange Act.
A list of NMS stocks can be found on the following websites: • www.nyse.com
• www.nasdaq.com • www.batstrading.com
Exhibit C
Name, address, and telephone number of counsel for the alternative trading system.
Steven P. Heineman General Counsel Convergex Group, LLC 1633 Broadway, 48th Floor New York, NY 10019 Telephone: (212) 468-7796 Facsimile: (212) 468-7799
With a copy to: Laura S. Pruitt, Esq. Alston & Bird LLP 950 F Street, N.W.
Washington, D.C. 20004-1404 Telephone: (202) 239-3618 Facsimile: (202) 654-4908
Exhibit D
Copy of the constitution, articles of incorporation or association, with all amendments, and of the existing by-laws or corresponding rules or instruments, whatever the name, of the alternative trading system. If this information is publicly available on a continuous basis on an Internet site controlled by the alternative trading system, the alternative trading system may indicate the location of the Internet web site where such information may be found in lieu of filing such information with the Commission.
Attachment D1: Amended Certificate of Formation of ConvergEx Execution Solutions LLC (sponsor of VortEx) (formerly BNY ConvergEx Execution Solutions LLC), previously provided with the Initial Operation Report on Form ATS for VortEx, filed October 9, 2007.
Attachment D2: Limited Liability Company Agreement of ConvergEx Execution Solutions LLC (sponsor of VortEx) (formerly BNY ConvergEx Execution Solutions LLC and, before that, BNY Brokerage LLC), previously provided with the Initial Operation Report on Form ATS for VortEx, filed October 9, 2007.
Attachment D3: Certificate of Amendment to the Certificate of Formation of BNY ConvergEx Execution Solutions LLC, dated November 30, 2011, changing its name to ConvergEx Execution Solutions LLC, previously provided with the Amendment to the Initial Operation Report on Form ATS for VortEx, filed January 6, 2012.
Attachment D4: Amended and Restated Limited Liability Company Agreement of BNY ConvergEx Execution Solutions LLC dated as of January 1, 2009, previously provided with the Amendment to the Initial Operation Report on Form ATS for VortEx, filed January 30, 2015.
Attachment D5: Certificate of Merger, dated December 11, 2009, merging NYFIX Millennium, L.L.C., with and into BNY ConvergEx Execution Solutions LLC (including the Agreement and Plan of Merger, dated as of December 11, 2009, between BNY ConvergEx Executions Solutions LLC, and NYFIX Millennium, L.L.C.), previously provided with the Amendment to the Initial Operation Report on Form ATS for VortEx, filed January 30, 2015.
Attachment D6: Second Amended and Restated Limited Liability Company Agreement of ConvergEx Execution Solutions LLC, dated as of November 13, 2014, previously provided with the Amendment to
the Initial Operation Report on Form ATS for VortEx, filed January 30, 2015.
Attachment D7: Certificate of Merger, dated November 25, 2014, merging LiquidPoint, LLC with and into ConvergEx Execution Solutions LLC, with the name of the surviving entity being Convergex Execution Solutions LLC, previously provided with the Amendment to the Initial Operation Report on Form ATS for VortEx, filed January 30, 2015.
Exhibit E
Name of any entity, other than the alternative trading system, that will be involved in operation of the alternative trading system, including the execution, trading, clearing, and settling of transactions on behalf of the alternative trading system. Provide a description of the role and responsibilities of each entity.
Convergex Execution Solutions LLC (“CES”) serves as the broker-dealer sponsor of, and is responsible for executing all trades matched by, Vortex. All trade executions through the system, as well as the clearance and settlement of all such executed trades, will be handled by CES.
Certain technology and hosting services will be provided to Vortex by Thesys Technologies LLC (“Thesys”) on an outsourced basis. Thesys will provide the electronic platform upon which Vortex will operate, and it is responsible for developing and implementing all changes to Vortex at the direction of CES. Thesys also will provide support services to Vortex, and will have access to Vortex Subscriber information only to the extent necessary to provide the hosting services and related support. Thesys is subject to strict confidentiality requirements and oversight by CES as required by Rule 301(b)(10) of Regulation ATS and described further in Exhibit G to this Form ATS.
Exhibit F
(a) Manner of Operation of the Alternative Trading System
(b) Procedures Governing Entry of Orders into the Alternative Trading System
(c) Means of Access to the Alternative Trading System
(d) Procedures Governing Execution, Reporting, Clearance, and Settlement of Transactions Effected through the Alternative Trading System
(e) Procedures for Ensuring Subscriber Compliance with System Guidelines
(f) Copy of the Alternative Trading System’s Subscriber Manual and any Other Materials Provided to Subscribers
(a) Manner of Operation of the Alternative Trading System
Vortex, which is operated by CES, identifies and executes matching orders from its Subscribers on a continuous basis. Vortex’s hours of operation are 7:00am - 5:00pm ET on days in which the U.S. equity markets are open for trading (excepting holiday hours and market half-days). Subscribers may connect to Vortex at any point after 7:00am, and Vortex will accept Resting Orders (described below) beginning at 7:30am. Vortex will accept IOC Orders (described below) between 9:30am – 4:00pm ET. Vortex matching will only occur during regular market hours (i.e., generally 9:30 a.m. - 4:00 p.m. ET, excepting holiday hours and half-days). Individual securities, however, will not begin trading until trading has opened on the primary listing market for that security.
The ATS accepts orders from Vortex Subscribers that are institutional customers or broker-dealer subscribers of CES. Vortex does not display Subscriber orders to other Subscribers or to third parties, nor does it utilize Indications of Interest (“IOIs”) based on Subscriber orders.
Vortex accepts two basic order types – Resting Orders and Immediate-or-Cancel (“IOC”) Orders. Resting Orders (also known as Day Orders) are Subscriber orders that remain in Vortex until filled, cancelled by the Subscriber at any time, or cancelled by Vortex at the end of the regular trading day. These include “good-til-time” (GTT) orders, which remain in Vortex until the time-in-force expires or cancelled by the Subscriber, whichever comes first. IOC Orders will either receive an immediate complete fill or partial fill if they can be matched through Vortex, or, if not, the unfilled portion of the order will be cancelled back to the submitting Subscriber. The various types of available order constraints are more fully described below in subsection (b).
Resting Orders can match against other Resting Orders or IOC Orders, but IOC Orders can only be matched with Resting Orders. All transactions in Vortex are executed at or within the prevailing National Best Bid and Offer (“NBBO”), with price improvement shared between contra parties when possible (as described below in
subsection (d)), except where otherwise permitted by Rule 611 of Regulation NMS. Vortex will use a combination of direct market feeds and a high speed SIP market data feed in calculating a Regulation NMS-compliant NBBO for purposes of matching within the system. Trading halts will be based on information from the SIP, and if a direct feed from any exchange goes down, Vortex will “back fill” that exchange’s protected quotes from the SIP to calculate the NBBO, or switch to using the SIP completely as the provider of the NBBO to Vortex.
(b) Procedures Governing Entry of Orders into the Alternative Trading System
Subscribers may enter orders into Vortex directly, by means of direct electronic connections to Vortex, or indirectly, through any third party order management or order routing system utilizing the FIX protocol. Orders also may come into Vortex through CES smart routers with access to the system or through a CES trading desk on behalf of a Subscriber. As noted above, Subscriber orders may be IOC Orders or Resting Orders. IOC Orders sent to Vortex are cancelled back to the Subscriber if not immediately executed in full or in part. Resting Orders are submitted to Vortex for a specified period of time, and are not routed to other market centers by Vortex. Subscribers may customize their orders by, among other things, establishing various price and quantity-related matching constraints.1
There are essentially five (5) pricing instructions for orders submitted to Vortex: market, limit, midpoint peg, primary peg and market peg. A midpoint peg essentially means that the Subscriber wants to receive an execution price of the midpoint of the NBBO, a primary peg means that the Subscriber is willing to buy at the NBB or sell at the NBO, and a market peg essentially means that the Subscriber is willing to buy at the NBO or sell at the NBB (i.e., cross the market). In addition, a Subscriber may, but is not required to, add a limit to a pegged order (e.g., midpoint, limit of $10). Vortex does not accept sub-penny orders, except with respect to orders for shares priced below $1.00, as permitted by Rule 612 of Regulation NMS.
Subscribers also may include minimum execution quantity constraints. Quantity-related matching constraints include Aggregate Minimum Quantity, which specifies the minimum number of shares that must be matched in either a single trade or in the aggregate. For example, if an order to sell 10,000 shares has a minimum quantity of 2,000 shares, and there are two resident buy orders of 1,000 shares each, the sell order will execute in two lots of 1,000 shares each. Subscribers also may specify Minimum Block Quantity, which is the minimum quantity that must be matched against an order in a single match for that order to receive any executions. Using the example above, the sell order would not execute as there is no single order that meets the Minimum Block size of 2,000 shares.
1 In addition, Vortex offers a “Cancel on Disconnect” feature that will cancel all open Subscriber Resting Orders in the event that a subscriber’s FIX connection to Vortex becomes disconnected for any reason.
Subscribers may further specify how the remaining quantities of their orders should be handled once the specified minimum quantities have been executed by Vortex. For instance, at the direction of the Subscriber, once the remaining quantity of a Subscriber order is less than the specified minimum quantity, the remainder of the order may be (i) treated as a regular Resting Order without a quantity restraint, (ii) cancelled back to the Subscriber, or (iii) restricted to executing as a single execution.
Vortex accepts short sale orders from Subscribers in compliance with Regulation SHO. After a circuit breaker has been triggered under Rule 201 of Regulation SHO, however, such short sale orders will not be executed at a price at or below the then-current NBB during the duration of the circuit breaker condition.
Vortex also offers Subscribers functionality to prevent a Subscriber’s own orders from crossing with one another. Subscribers may utilize this functionality on a firm-wide basis or as otherwise designated by the Subscriber.2
Vortex only executes in round lots. Therefore, orders for less than a round lot will not be accepted and mixed-lot orders will only execute in round lots, canceling back any remainder to the Subscriber.
Resting Orders received prior to the opening of trading are eligible to participate in the Opening Cross at the option of the Subscriber. Any eligible Resting Order not executed in the Opening Cross will remain in the system for continuous matching in a Regular Match in accordance with the Order’s instructions.
Orders residing in Vortex may be cancelled at any time by the originating Subscriber or by the CES Trade Support Desk at the originating Subscriber’s request (e.g., when the Subscriber’s connection to the ATS fails).
Visibility/Display of Subscriber Orders
Vortex is a non-display, anonymous trading system. Vortex does not display Subscriber orders to other Subscribers, any internal CES Trade Desk, order router or other third parties. Vortex does not use IOIs. Just as with any other Subscriber or third-party order router sending orders to Vortex, the only information that any CES-operated smart router receives from Vortex is information relating solely to the orders sent by that smart router into Vortex (i.e., confirmations of fills or notifications of cancels). No CES-operated smart router receives any information relating to any other orders residing in Vortex.3
2
For example, if a Subscriber has several different aggregation units that send orders to Vortex, the Subscriber may decide which of those units will be subject to the self-crossing prevention functionality. 3 Consequently, CES’ smart router sends orders to Vortex to find liquidity on a blind basis, just like any other non-CES smart router.
(c) Means of Access to Alternative Trading Systems
Registered broker-dealers and institutions that are customers of CES are eligible to become Subscribers to Vortex. (As customers of CES, all Subscribers are subject to the existing credit criteria currently set in place by CES’s credit committee.) Subscribers may submit orders electronically to Vortex via the Internet or dedicated lines by means of any Subscriber-selected order management system or execution management system platform utilizing the FIX messaging protocol. Smart routers, including those operated by third parties as well as by CES, also may route orders to Vortex. (As noted above, the access that a CES smart router has to Vortex, however, is no different than the access by any other smart router.) Subscribers also may send orders to CES’s sales traders to be entered in Vortex on their behalf. Vortex, however, does not route orders out to other trading venues; rather, all orders in Vortex, whatever the source, are either executed (in whole or in part) or cancelled/routed back only to the submitting Subscriber. Orders do not flow back and forth automatically between Vortex and Millennium, another ATS operated by CES.
(d) Procedures Governing Execution, Reporting, Clearance and Settlement of Transactions Effected Through the Alternative Trading System
Executions
Vortex will not execute any trades in a security until trading in the particular stock has opened on the primary market for the security.
Opening Cross: For the Opening Cross, Vortex crosses marketable Resting Orders on the system immediately following the Primary Market opening at the Opening Price on that Primary Market. Orders are matched, at the Opening Price, in order, based on the time of entry.4 After the Opening Cross, the remaining unmatched Resting Orders will participate in Regular Matches via normal matching rules.
Regular Matches: Following the Opening Cross, all executions occur at or within the NBBO as disseminated by the respective Securities Information Processor. Orders are executed on a price/time priority basis; however, order constraints as listed above (e.g., Minimum Quantity or Self-Match prevention) may result in executions out of time. Once the system matches two orders based on price/time priority, it then determines whether price improvement is available under the terms of those orders. Sometimes price improvement will not be available, such as when an execution occurs at
4 Cancel/replace of a Resting Order will result in a new priority except in the case of reducing only the size of the Order.
the NBB or NBO (e.g., a market buy order trading against a primary peg sell order will execute at the NBO). In other instances, price improvement may be possible under the terms of the orders, and in that case, Vortex will share price improvement between contra parties by executing at the mid-point of the prices specified in the two orders.
The following examples illustrate the sharing of price improvement, when possible. For the following examples, assume a market of 10 x 12.
1. Example 1: Buy Limit and Sell Market
a. A Buy Limit order entered with a price of 11 is on the book.
b. A sell market order is entered, priced by the system at the current bid of 10.
c. The orders would execute at 10.50, the mid-point of the limit price and current bid, sharing price improvement.
2. Example 2: Buy Market and Sell Market Peg
a. A Sell Market Peg is on the book, priced by the system at the current bid of 10.
b. A Buy Market order is entered, priced by the system at the current offer of 12.
c. The orders would execute at 11, the midpoint of the current NBBO, sharing price improvement.
3. Example 3: Buy Market and Sell Midpoint Peg
a. A Sell Midpoint Peg is on the book, priced by the system at 11, the midpoint of the current NBBO.
b. A Buy Market order is entered, priced by the system at the current offer of 12.
c. The orders would execute at the midpoint of the orders, 11.50, sharing price improvement.
4. Example 4: Buy Limit and Sell Limit
a. A Buy Limit order entered with a price of 11 is on the book. b. A Sell Limit order is entered with a price of 10.50.
c. The orders would execute at the midpoint of the orders, 10.75, sharing price improvement.
5. Example 5: Buy Market and Sell Primary Peg
a. A Sell Primary Peg is on the book, priced by the system at 12. b. A Buy Market order is entered, priced by the system at 12.
c. The order would execute at the current offer price of 12. There is no price improvement.
No executions occur in locked or crossed markets or in securities experiencing a regulatory trading halt. In addition, during the period in which a circuit breaker has been
triggered under Rule 201 of Regulation SHO, short sale orders will not be executed at a price at or below the then-current NBB.
Reporting
Subscribers will receive electronic notification of their trades promptly.
All orders and trades are reported to the FINRA OATS reporting system and NASDAQ FINRA TRF as required by rule.
Vortex will report trade capacity on executed trades as specified by the Subscriber. For example, while Vortex only acts as agent for both sides of a trade executed in the ATS, a Subscriber may be acting in a principal capacity and that Subscriber’s trades will be reported as such.
Clearance and Settlement
Trades executed in Vortex will be sent through CES’s existing back office (DML) infrastructure for clearing and settlement via DTC (for buy-side Subscribers) and NSCC (for sell-side Subscribers). Subscribers will receive confirmations and monthly statements on their Vortex activity in accordance with applicable rules.
(e) Procedures for Ensuring Subscriber Compliance with System Guidelines
Vortex has built-in compliance functionality for ensuring Subscriber compliance with the system guidelines. First, CES monitors the system on a continuous basis to ensure that the system is operating properly. In this regard, the system provides alerts to the ATS trade support desk covering, among other things, excessive order values and orders with limit prices exceeding 10% outside the then-current market, as well as executions at prices that violate limit prices, market order executions at prices outside the prevailing market, and potential trade-throughs. Second, CES maintains an audit trail for significant events that occur in the system to enable it to reconstruct the events leading up to any trades or problems. All Vortex orders and transactions are traceable to a particular Subscriber through a unique client identifier within the system. Vortex also reviews activity within the ATS for suspicious Subscriber activity and activity detrimental to other Subscribers, and will take appropriate action where necessary.
Vortex also has implemented market access and credit checks pursuant to SEC Rule 15c3-5. These checks include, but are not limited to, Subscriber buying power, “Fat-Finger” checks to minimize incorrect order instructions, and maximum order size.
Vortex’s operations are monitored and surveilled by CES supervisory and compliance personnel. The Vortex desk is supervised on a day-to-day basis by a
registered principal of CES (a Desk Supervisor) who sits at the desk. The Trade Support personnel and Desk Supervisor, have the ability to monitor the ATS to ensure that it operates smoothly and that its Subscribers comply with system guidelines. In addition, the Firm employs an individual, the Control Supervisory Support Officer (“CSSO”), whose primary role is to support the various Desk Supervisors with their functions as such. In addition to supporting the Vortex desk, the CSSO also works with the other trading desks on the trading floor, physically located on a post overlooking the entire floor. He is available to assist any desk (with help from additional Trade Support personnel) when assistance is needed and reports directly to the Director of Trading Operations. The Firm also employs a Trading Surveillance Analyst, who is a member of the Compliance Department. Collectively, the Analyst and CSSO review trade and exception reports relating to Vortex (as well as the rest of the Firm’s trading desks) in accordance with CES’s written supervisory and compliance procedures.5
(f) Copy of Alternative Trading System’s Subscriber Manual and any Other Materials Provided to Subscribers
Vortex does not have a Subscriber manual. CES personnel help train Subscribers on the use of Vortex.
Vortex has prepared a document addressing Frequently Asked Questions about Vortex, the most recent version of which is attached as Attachment F-9. In addition, Vortex has provided technical specifications for Subscribers in a document entitled “Convergex FIX Specification/Vortex ATS Direct Order Routing”, the most recent version of which is attached as Attachment F-10. (Prior versions of these documents were included with the Vortex Form ATS amendment filed on March 27, 2015 as Attachments F-7 and F-8, respectively.) VortEx also provides information regarding the operation of the ATS, including information regarding VortEx “Execution Protocols”, on its website at www.convergex.com.
Copies of prior marketing materials for Vortex were previously included as Attachments F-1 through F-6 to, variously, Vortex’s initial operation report on Form ATS filed on October 9, 2007 and subsequent amendments thereto.
5 It should be noted that Vortex is an agency-only system. CES does not trade on a proprietary basis within Vortex, and Vortex does not execute trades on a principal or riskless principal basis.
Exhibit G
A brief description of the alternative trading system’s procedures for reviewing system capacity, security, and contingency planning procedures.
CES actively monitors the system to ensure that it is functioning properly. In this regard, the system provides various Alerts or Views into various functions of the system to CES personnel on the ATS support desk. For example, the system compiles and displays order-based volumetrics, including, among others, the number of orders (e.g., by type, per second, and response times to IOC orders) and order cancellations by users over various time periods. Based on those figures, Vortex alerts operators when capacity thresholds are threatened.
With respect to system security and confidentiality, access to order and trade information within the system is limited to the support personnel on the CES ATS support desk, with limited access provided to employees of CES’s technology vendor, Thesys. Such access is restricted to authorized personnel using permissioned-based applications for both real-time and historical data. Authorized Thesys personnel are permitted to access Vortex data for support and trouble-shooting issues. Thesys and its employees are subject to strict confidentiality requirements covering system-related information. CES will monitor access to any information within the ATS. Thesys will be subject to regular technology audits to protect against unauthorized access to the system.
CES and Thesys will have systems in place to protect against the misuse by any of its and its vendor’s personnel of ATS-related trading information. For example, CES’s compliance department reviews support personnel personal trading records in accordance with CES compliance policies and procedures for indications that confidential user trade information is being misused. CES IT personnel will employ the same techniques and procedures they use for all CES electronic systems (e.g., appropriate firewalls, filters, password protections, etc.) to protect Vortex from security threats. In addition, Thesys will implement instructions relating to system security provided by CES.
Vortex is subject to CES’s contingency planning and business continuity procedures, which include system back-ups, communication redundancies, alternative data and power sources, and remote office capabilities. It also is subject to internal CES systems control auditing, including audits of general computer controls and information security controls.
We note that Vortex is not subject to the capacity, integrity, and security requirements of Rule 301(b)(6) of Regulation ATS by virtue of subsection (b)(6)(i) of that Rule.
Exhibit H
If any other entity, other than the alternative trading system, will hold or safeguard subscriber funds or securities on a regular basis, attach as Exhibit H the name of such entity and a brief description of the controls that will be implemented to ensure the safety of such funds and securities.
All Vortex Subscribers are institutional and dealer customers of CES, the broker-dealer sponsor of the ATS. Subscribers receiving executions through Vortex do so through CES, which clears and settles all Vortex trades. As a self-clearing broker-dealer, CES complies with Exchange Act Rule 15c3-3 (the “Customer Protection Rule”).
Exhibit I
Attach as Exhibit I, a list providing the full legal name of those direct owners reported on Schedule A of Form BD.
Vortex is owned and operated by Convergex Execution Solutions LLC. Convergex Execution Solutions LLC is registered broker-dealer, a member of both FINRA and the NYSE, and a wholly-owned subsidiary of Convergex Group, LLC.
