Iraqi Securities Commission Regulatory Rules No. 27 (2022) - Electronic Trading

Iraqi Securities Commission Regulations
2022
Regulatory Rules No. 27
Iraq Stock Exchange
Electronic Trading

Article (1)
Miscellaneous

Trading Hours:

a. The electronic trading system operates in a pattern of sessions:

• Pre-opening session: Orders are entered but not processed immediately. The opening price is calculated at the end of this session.
• Continuous trading session: The electronic trading system can be used from 9:30 AM to 12:00 PM on every working day. The pre-opening session begins at 9:30 AM, followed by a 10-minute opening auction, and the continuous trading session ends at 12:00 PM.

Article (2)
Covering Short Sales

Before accepting any sell order, the electronic trading system ensures the availability of a stock inventory. If the inventory is not used for transaction settlement, the specific stocks are suspended. A sell order is rejected if the account does not have a stock inventory at the moment of order entry.

Article (3)
Trading Unit and Price Increment Unit

A trading unit (quantity) consists of a number of shares. A price increment unit is the minimum value the price can change by (increase or decrease).

a. The trading unit used is one share for all stocks. b. The price increment unit used is 10 fils.

Article (4)
Pre-Opening Session

Order Book:
There is a period prior to opening during which orders can be entered or modified, without immediate processing by the electronic trading system. The purpose of the pre-opening session is to determine the opening price for each security.

Consider the following observations:

a. Orders entered during the pre-opening session are queued but not executed during that session. Execution begins after the continuous trading session starts, and the opening price is calculated. b. Orders with special conditions can be entered before the opening session begins. They are processed by the system but are not listed in the continuous trading session until the opening price is calculated.
c. Market orders are not allowed during the pre-opening session (See Article 12).
d. The opening price is recalculated every time orders are entered during the pre-opening session. The final opening price is calculated at the end of the pre-opening session. e. The trading unit and price increment unit specified by the market are effective during the pre-opening session.

Article (5)
Calculation of Opening Price

Each company's stock has only one opening price at the start of trading. Orders are queued and traded at this price in the market. The opening price is calculated based on available orders in the order book. To determine the opening price, the following criteria are used:

a. The quantity of shares available at each price. b. The remaining quantity of shares after potential matches.
c. The closing price of the previous continuous trading session.
d. The stock price.

Article (6)
Display of Price Data

The price of an order entered in the pre-opening phase is considered confidential. Therefore, the market displays some orders at prices different from their actual prices (at the calculated opening price). The purpose of not disclosing the actual price in the pre-opening phase is to verify the opening of trading for a stock at a possible rate, based on market supply and demand conditions:

a. The calculated opening price during the pre-opening session may change with the entry of new orders to the trading system. b. During the pre-opening session, orders with prices better than or equal to the calculated opening price are queued at the calculated opening price, regardless of the actual order price. Actual prices cannot be viewed except by market surveillance.
c. Orders with actual prices lower than the opening price are queued at their actual prices during the pre-opening session, and after the market opens (e.g., a buy order price lower than the best available buy order price).

Article (7)
Time Priority for Orders Entered After the Pre-Opening Phase

Time priority for orders entered during the pre-opening session is based on the time of entry. For orders that were not fully executed during the transition period between the pre-opening and continuous trading sessions, that time priority is preserved throughout the trading day.

Article (8)
Continuous Trading

When the opening quantity allocation process is complete, the market opens and continuous trading activity begins.

Order priority and fulfillment: The system may reject any valid order entered into the trading system, or execute it immediately in full, or partially execute it and reject the remaining quantity, or partially execute it and queue the remaining quantity, or queue it in full. If all or part of the order does not match the market, it is matched when an incoming order arrives and the quantities are queued accordingly.

In the market, priority is based on the following:

a. Price: A market order that is matched is treated as a specific price order. It is matched with an order having the same price (See Article 12). b. Regular conditions take priority over orders with special conditions. However, orders with special conditions are eligible to match with orders in the order book with regular conditions.
c. Time: Time priority is considered when calculating priority. The order that enters the system earlier has priority over the order that enters later.

When calculating priority in the queue, the following criteria are considered:

a. Price Priority in the Queue:

• Buy and sell orders are considered separately.
• Buy orders with higher prices have priority over other buy orders with lower prices.
• Sell orders with lower prices have priority over other sell orders with higher prices.
  b. Regular conditions have priority over orders with special conditions. Orders with special conditions at the same price level are queued with each other.
  c. If several entered orders have the same price level and the same special conditions, priority is determined by time as the final tie-breaker, applying the "first come, first served" principle.
• Orders with earlier timestamps have priority over orders with later timestamps.
• Modifying a previous order with a modification feature may place a new timestamp on the order, which may change the order's queue priority (See Article 14).

Article (9)
The Market

Orders with special conditions at a price better than the best price in the market. The trading system works to maximize trading matching by attempting to trade orders with special conditions that have a better price in the market. After the incoming order is traded or queued in the market, becoming idle, the trading system attempts to identify other orders capable of trading, especially orders with special conditions that were not queued in the previous session:

a. After each trade, any order with special conditions and a price better than the best price in the market becomes active and attempts to trade. b. When orders with special conditions exist on one side of the order book, priority becomes active for those orders depending on descending price order (highest price first) until all orders with a price better than or equal to the best price in the market are processed.
c. If there are several orders with special conditions on one side of the market (either buy or sell side) and they all have the same price, they become active under the "first come, first served" principle.
d. When the price level in the order book with special conditions is equal to the best price in the regular order book, orders in the order book with special conditions have priority over orders in the regular order book on both sides. e. Active Order Selection: When orders with special conditions exist in the market at a price better than the best price in the market, priority is executed first under the "first come, first served" principle, comparing buy and sell orders at the best price.

Article (10)
Special Fulfillment Conditions

a. All or None (AON): The order is fulfilled in its entirety or not at all. Orders (All or None) can trade with multiple counterparties at the same time. b. The order is rejected if the entire quantity is not executed at the specified price. Minimum Number of Shares for Execution: When this condition is selected, the trade must meet the minimum number of shares assigned. a. The first trade on this order must be with a quantity equal to or greater than the minimum. b. If a quantity of shares remains that did not meet the minimum in the first trade, it is automatically listed in the regular orders book. Minimum for Group: When executing the order with a minimum condition, the listed unit (specified number of shares) must be met for all trades in the group for the entire order.

Article (11)
Types of Orders

Limit Order: An order to buy or sell a number of shares at a specified price, or a better price. The limit order price must be based on the price increment unit specified in Article 3 of these rules.

Article (12)
Market Orders and Price Protection

Market Order: An order without a specified price to trade a security immediately at the best available price in the market. A market order becomes a limit price order once the price is calculated. The system automatically determines the price for the market order based on the specified price protection formula. The price protection feature is used to set limits on market order price movements. This limit reduces the risk exposure to the trader when entering orders.

a. A market order can trade at a series of prices better than or equal to its specified price. b. Market orders are allowed to be entered during the continuous trading session only.
c. The market order is rejected if there are no orders on the counterparty side in the market.
d. The specified price for the market order is equal to the best price in the market.

Article (13)
Modify Order Feature

The "Modify Order" feature is used to make modification(s) to an order in the system.

a. The "Modify Order" feature cannot be used to change the type of stock selected by the trader or the type of order. In any of these cases, the order must be cancelled and re-entered. b. The original order that used the "Modify Order" feature receives a new timestamp and new queue priority if the modification is used on the price, or the investor account number, or adding or removing special conditions.
c. At the stage of selecting or filling the "Modify Order" form, the order is not removed from the order book, and thus trading for the order may occur.
d. If the order was placed or partially executed during the period between entering the "Modify Order" feature and sending it to the system – pressing the enter key – the trader is notified, and it is required to re-confirm the "Modify Order" feature.

Article (14)
Cancel Order: The cancellation feature cancels a valid or pending order. Once the cancellation feature occurs, the original order cannot be restored.

a. The system uses the cancellation feature to cancel an existing order in the system. b. The cancellation feature is rejected if the order has been traded.
c. The cancellation feature is rejected if the order number is incorrect.
d. If the order was cancelled before obtaining confirmation that the order was partially executed as a result of trading during the period between entering the cancellation feature and sending it to the system, there will be a need for another confirmation of the trader's desire to cancel the remaining quantity of the order.

Article (15)
Suspend / Resume Order

The suspension order is used to transfer a valid order to a suspended status. This order is issued by the market supervisor or the owner of the original order, and the resume feature returns the original order to a valid status. Consider the following observations:

a. The suspension feature is used only to suspend an existing order. b. The trader can use the "Modify Order" feature with the suspended order.
c. The trader can cancel a suspended order.
d. Orders are not entered during the suspension period. e. The suspended order can be re-entered into the register using the "Resume" feature. If the order is resumed, it is treated as an order with a new timestamp and new priority.

Article (16)
Flash Sell Order: A limit price order to sell the entire available quantity, to buy an offer from the market that does not include quantities for an order with a better price in the buy order book with special conditions, until the order with special conditions has a price better than the regular order price, but the system automatically executes the Flash Sell Order with the order at the best price.

Note that the Flash Sell Order is automatically updated by the system if the best price in the market changes and the Flash Sell screen is active.

Consider the following observations:

a. If there are orders in the regular order book on the sell side, the quantity in the Flash Sell Order screen will include the total quantity of the best bid price and located only in the regular order book. b. If there are no orders from the regular order book on the buy side, but there were buy orders with special conditions, the total quantity in the Flash Sell Order screen will include only the total quantity of the best bid price from the order book with special conditions.
c. If the best price in the market changes between pressing the enter key on the order screen and the time the system needs to timestamp the order with the entry time, the original Flash Sell Order is rejected. The reason is that the Flash Sell Order is an All-or-None or Cancel order.
d. The trader may change the attributes of the Flash Sell Order (quantity, stock, best price) before sending the order to the trading system. e. If the quantity of the Flash Sell Order can be fulfilled in whole or in part by an order with special conditions at a better price, the system automatically executes the Flash Sell Order with the order with special conditions.

Article (17)
Flash Buy Order: A limit price order to buy the entire available quantity of the best offer price in the market for a specific company's stock, and execute the order within the order entry screen itself.

a. If there are orders in the regular order book on the sell side, the quantity in the Flash Buy Order screen will include the total quantity of the best offer price and located only in the regular order book. b. If there are no orders from the regular order book on the sell side, but there were sell orders with special conditions, the total quantity in the Flash Buy Order screen will include only the total quantity of the best offer price from the order book with special conditions.
c. If the best price in the market changes between pressing the enter key on the order screen and the time the system needs to timestamp the order with the entry time, the original Flash Buy Order is rejected. The reason is that the Flash Buy Order is an All-or-None or Cancel order.
d. The trader may change the attributes of the Flash Buy Order (quantity, stock, best price) before sending the order to the trading system. e. If the quantity of the Flash Buy Order can be executed in whole or in part by an order with special conditions at a better price, the system automatically executes the order with an order with special conditions.

Article (18)
Order Validity Time Feature.

The trader can enter a certain period of time during which the order is valid until the end of that period. The system provides mechanisms to ensure that time limits for orders are not exceeded. The available validity time features are:

a. Day: The order is valid on the day it is entered until the closing of trading. b. Fill or Kill: This order must be executed in full or in part as soon as it enters the market. If immediate trading is not possible, the order or the remaining quantity is automatically removed from the system.

Consider the following observations:

• All orders with time limits are automatically removed from the trading system when their validity expires.
• If no time limit for validity is entered for the order, the order is treated as a one-day order.

Article (19)
Closing

Closing Status:
The closing status is at 12:30 PM, after the end of the continuous trading session, and no orders or modifications to previous orders can be entered at that time. However, reports on entered orders and trades can be printed.

Article (20)
Closing Price

After the end of the continuous trading session, the system calculates the closing price for each security. The closing price is the weighted average of all trades that took place that day.