Clearly Erroneous Trade Policy

OpenYield Trading LLC (“OpenYield”) offers access to trading on the OpenYield ATS for the purposes of matching orders for fixed income securities between two subscribers (“Subscribers”) to the OpenYield ATS. OpenYield will use this Clearly Erroneous Trade Policy (“Policy”) to support its efforts to maintain a fair and orderly market.

OpenYield will follow this Policy to address trade errors and disputes involving or arising from transactions on the OpenYield ATS. OpenYield provides Subscribers with access to the OpenYield ATS solely on the condition that each Subscriber has agreed to abide by OpenYield’s determinations under this Policy.

BY PARTICIPATING ON THE OPENYIELD ATS, EACH SUBSCRIBER AGREES TO BE BOUND BY, AND COMPLY WITH, THIS POLICY.THIS POLICY IS SUPPLEMENTAL TO, AND DOES NOT SUPERSEDE, THE APPLICABLE SUBSCRIBER OR DEALER AGREEMENT ENTERED INTO BY EACH SUBSCRIBER WITH OPENYIELD.

Subscribers that wish to initiate the review of a transaction by OpenYield on a “clearly erroneous” basis must follow the procedures set forth in Section 4 (Request for Review) within fifteen (15) minutes of the execution of the trade.

1. Policy and Definitions

If OpenYield determines, in its sole discretion, that a transaction is a Clearly Erroneous Trade (as defined below) or is impacted by a System Disruption or Malfunction (as defined below), OpenYield may either:

1. cancel the trade; or
2. modify the terms of the trade, provided that any such modification shall be subject to consent by the Subscribers that are parties to the applicable transaction and, if such agreement is not reached, OpenYield may cancel the trade.

A “Clearly Erroneous Trade” is defined as a trade that OpenYield determines, in its sole discretion, was:

1. Executed at a pricing level (e.g., price, spread, yield, discount margin or other applicable pricing convention) that is clearly inconsistent with the current market for that security at the time of execution. OpenYield reserves the right, in its sole discretion, to determine that a trade was not clearly erroneous and should not be canceled when the market for the security at the time of execution of the trade was too volatile or illiquid for OpenYield to discern the then-current or expected market level of the security.
2. Executed on any term (e.g., identification of the security, side, size, benchmark, trading with or without accrued interest) inconsistent with prevailing market practice or that OpenYield believes would have reasonably appeared to the contra-Subscriber to have been entered or calculated in error under the circumstances.
3. Rejected by the relevant clearinghouse or is otherwise incapable of normal settlement and clearing by the relevant clearinghouse; or
4. Deemed to be detrimental to market integrity or inconsistent with just and equitable principles of trade.
   
   

A “System Disruption or Malfunction” is defined as, and where determined by OpenYield in its sole discretion to be, any:

1. disruption, malfunction or technical failure in the OpenYield ATS, including any electronic communications, which results in the OpenYield ATS, or any part of the OpenYield ATS, not operating as intended by OpenYield or a trading instruction being incorrectly processed by the OpenYield ATS;
2. incorporation or use of any incorrect calculation, reference price or reference data by the OpenYield ATS that is incorrect, stale or otherwise erroneous; or failure of any automated trading protocols employed by the OpenYield ATS to correctly apply the trading criteria, defaults or settings entered by the Subscriber.

2. Market Price – Bid-Ask Tolerance Range

The OpenYield ATS employs order-acceptance protocols that incorporate price controls designed to reasonably prevent the entry or maintenance of orders that are outside of OpenYield’s bid-ask tolerance range. Accordingly, any trades executed on the OpenYield ATS will be presumed to be at a pricing level that is consistent with the current or expected market for that security at the time of execution. OpenYield will only find the price of an execution on the OpenYield ATS to be Clearly Erroneous under clause (a) of the definition of a “Clearly Erroneous Trade” (set forth above) where OpenYield determines, in its sole discretion, that one of the following set of events occurred and, as a result, the trade was executed at a price level that was clearly inconsistent with the current market for that security at the time of execution, the OpenYield ATS bid-ask tolerance range was either not available for the instrument at issue, failed to update in the normal course, or was otherwise erroneously calculated.

3. Catastrophic Errors

In the event of a Catastrophic Error (defined below), OpenYield shall have the right to:

• initiate a review of any transaction regardless of whether a party to the transaction has timely requested a review; and
• determine that all transactions impacted by the Catastrophic Error, as determined by OpenYield in its sole discretion, shall be canceled in accordance with Section 6 (Determinations).

A “Catastrophic Error” will be deemed to have occurred, even if such trades may not otherwise be Clearly Erroneous Trades, where:

1. an OpenYield ATS Disruption or Malfunction impacted: a. four (4) or more Subscribers; or
2. ten (10) or more transactions a single Subscriber causes, or is involved in, ten (10) or more Clearly Erroneous Trades in a single day.

4. Request for Review

A Subscriber may initiate the review of any trade to which it was a party pursuant to Section 5 (Review Process) below. Similarly, OpenYield reserves the right to initiate a review of a trade prior to trade settlement, regardless of whether a party to the trade has requested a review.

In all circumstances, the trade will remain the obligation of the Subscribers that are the parties to the transaction until OpenYield notifies such Subscribers in writing that the trade has been adjusted or canceled pursuant to this Policy.

5. Review Process

To request a trade review, a Subscriber that is a party to the applicable transaction must notify OpenYield by telephone at (908)409-3542 or via email to erroneous@openyld.com within fifteen (15) minutes of the matching of the trade. Review requests must include the following information:

• Order ID(s)
• Issuer Name and CUSIP/ISIN
• Number of bonds
• Price(s)
• Side (bought or sold)
• Factual basis for believing that the execution is either a Clearly Erroneous Trade or the result of a OpenYield ATS Disruption or Malfunction

In determining whether a trade is either a Clearly Erroneous Trade or impacted by a OpenYield ATS Disruption or Malfunction, OpenYield will utilize any information, and consult with any relevant parties, that in its sole discretion it deems adequate or appropriate, including, without limitation:

• Trades on the OpenYield ATS or publicly-reported trades which occurred prior to and following the alleged error trade;
• Indicative pricing available on the OpenYield ATS or sourced from third parties;
• Input from independent third-party participants on the OpenYield ATS to determine the expected level for the security traded at the time in question;
• Whether any material news had been disseminated by or about the particular security or the issuer of the security prior to the time of execution, as well as the timing of such news dissemination;
• Whether any material economic news that impacted either specific markets or the markets in general had been disseminated prior to the time of execution, as well as the timing of such news dissemination;
• OpenYield’s in-house market knowledge and expertise; and 
• The promptness of the trade review request.

6. Determinations

Each request under this Policy will be considered on a case-by-case basis by a principal of OpenYield. At the time that a review is properly initiated under this Policy, OpenYield will promptly notify the appropriate persons at the counterparty to the trade by phone or electronic communication that such review has been initiated. OpenYield will use its commercially reasonable efforts to resolve any trade review within four (4) business hours of the time that the trade review is commenced. OpenYield will notify the involved parties of any final determination by an electronic communication. All decisions by OpenYield pursuant to this Policy are final and not subject to further review or appeal. The party requesting a trade review may withdraw its request prior the time OpenYield notifies the parties to the transaction of its final determination.

Upon the communication by OpenYield of any final determination of a trade review, each Subscriber shall promptly implement the results of the determination. If the final determination by OpenYield is that a transaction shall be canceled, OpenYield and each affected Subscriber shall cancel the transaction at issue and amend any previously submitted transaction reports, as applicable, in accordance with market convention (unless both Subscribers have agreed to modify the terms of the trade in accordance with Section 1 of this Policy). If the final determination by OpenYield is that a transaction shall stand, the relevant Subscribers shall take such steps as may be necessary to settle such transactions in accordance with market convention.

In no event can resolution of trade errors or disputes occur under this Policy after the trade has settled.

7. Voluntary Accommodations

A Subscriber may request that OpenYield attempt to reach a mutually agreed upon trade adjustment, cancellation or reversal with one or more counterparties, although OpenYield will be under no obligation to do so. In such an instance, OpenYield solely facilitates such requests by contacting the counterparty Subscriber for assent to voluntarily adjust, cancel or reverse the subject transaction; however, OpenYield will not have any discretion over the actions of counterparties in this regard.

8. Subscriber Responsibilities

Subscribers are responsible for ensuring the accuracy and completeness of all information transmitted to the OpenYield ATS. Accordingly, Subscribers should:

• Inspect, or employ tools or processes designed to review each order prior to submitting it to the OpenYield ATS;
• Use available software warnings and protections;
• Review trade details promptly after execution; and

An assertion that a Subscriber made a mistake in entering an order or that a Subscriber failed to pay attention or update a quote, may not be sufficient for OpenYield to determine that a trade is considered a Clearly Erroneous Trade.

OpenYield provides no assurances or guarantees that a price adjustment or cancellation will be provided and, as a result, a trade will stand unless and until OpenYield notifies the Subscribers in writing (by email) that the trade has been adjusted or canceled.

9. Refusal to Abide by OpenYield Determinations; Disputes

Use of the OpenYield ATS constitutes acceptance of OpenYield’s right to cancel or adjust any trade as described in this Policy. OpenYield shall not be liable for losses or damages arising as a result of OpenYield’s action or inaction pursuant to this Policy. Each Subscriber shall reimburse OpenYield for any losses, costs or expenses OpenYield incurs as a result of such Subscriber’s failure to abide by OpenYield’ determinations under this Policy.

10. Amendments to the Policy

OpenYield may amend, modify, supplement, or replace this Policy upon notice to Subscribers, without Subscribers’ explicit affirmative consent, upon 14 days’ advance notice of the effective date of the amendment, modification, supplement, or replacement of the Policy. Such notice may be made by letter, e-mail or notice on the OpenYield Website, or other platform established and made available for Subscriber communications describing the relevant changes.