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SARON: Trading, Order Handling and Market Conduct on SIX Swiss Exchange

SARON · Work through your exam, one topic at a time.

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Trading, Order Handling and Market Conduct on SIX Swiss Exchange

This domain tests the mechanics of the SIX order book and the conduct rules that sit around it: order types and validity, trading phases and price determination, priority, and the abuse prohibitions enforced by SIX Exchange Regulation and FINMA.

Order handling

  • Order types: market, limit, stop (stop-market and stop-limit), and hidden/reserve orders. Validity: day, GTC/GTD, IOC and FOK.
  • Phases: pre-opening, opening auction, continuous trading, closing auction, post-trading. Auctions determine the price that maximises executable volume; ties are broken by the smallest surplus and then by proximity to the reference price.
  • Priority in continuous trading is price, then time. Best execution and diligent execution of client orders are separate obligations from exchange matching rules.

Conduct

  • Insider trading and market manipulation are criminal offences under the Financial Market Supervision Act; FINMA's Market Abuse Ordinance operationalises them. SIX Exchange Regulation investigates and sanctions breaches of exchange rules, including ad hoc publicity duties for issuers.
  • Off-order-book transactions in listed securities must be reported to SIX and must satisfy the price and minimum-size conditions in the rules; unreported or mispriced off-book prints distort the tape.

Worked example

Bids: 100.10 for 500, then 100.00 for 800. Asks: 100.20 for 600. A market sell order for 1,000 executes 500 at 100.10 and 500 at 100.00, average 100.05, leaving 300 on the 100.00 bid. A trader who assumes the whole order fills at 100.10 overstates proceeds by CHF 250 per CHF 1,000,000 of notional; slippage across price levels is the point being tested.

Traps

  • Assuming a market order fills at a single price; it walks the book.
  • Confusing stop and stop-limit: a triggered stop-market order can fill far from the stop, a stop-limit may never fill.
  • Expecting the unfilled part of an IOC order to rest in the book; it is cancelled.
  • Forgetting that GTC orders are affected by ex-date adjustments and corporate actions.
  • Treating exchange matching rules as sufficient compliance with best execution.