Forefront Communications

Traders Magazine: US Equity Market Prepares For New Orders and Exchanges

STA

Alexandra Hamer

Alexandra Hamer

Jim Toes, chief executive of the Security Traders Association, comments on the US equity markets preparing for new orders and exchanges.

Periodic auctions

In another new order type for the US market, Cboe Global Markets is waiting for SEC approval to launch periodic auctions after success in Europe with the mechanism. Periodic auctions last for very short periods of time during the trading day and are triggered by market participants, rather than the venue, helping them find liquidity quickly with low market impact, while prioritizing size and price.

Adam Inzirillo, head of US equities at Cboe Global Markets, told Markets Media last month: “In the last couple of years, as off-exchange trading volumes have grown, periodic auctions give the public an on-exchange alternative for executing block trades and attracting natural interest.”

The US model will be different by including randomization of the auction message, having no broker preference and allowing displayed orders to become part of the auction. In the European Union, exchange operators may own dark and lit books, but the current US regulatory regime precludes Cboe from owning and/or operating an ATS. Therefore Cboe intends to introduce periodic auctions on its Cboe BYX Equities Exchange.

Jim Toes, chief executive of the Security Traders Association (STA), said in a webinar hosted by Greenwich Associates yesterday that auctions could be an interesting mechanism.

Toes said: “Auctions provide a unique function and are really good for trading thinly traded securities with minimal market impact as they focus liquidity.”

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