Next up in our Leaders in Trading 2023 Editors’ Choice Awards write up series, we bring you the shortlisted candidates for Best Innovation at the Close, recognising those venues going above and beyond to support participants when trading at the Close.
Upwards of 30% of volumes now take place in the Closing Auction in Europe. This Editors’ Choice category – which is new to Leaders in Trading 2023 – is designed to celebrate those venues most committed to innovating the final portion of the trading day to help their clients meet the new demands of the market as this trend continues to develop.
Among the key players in this landscape, The TRADE has selected Aquis Exchange, Cboe Global Markets, SIX Swiss Exchange, and LSEG’s Turquoise for the 2023 shortlist, following various individual achievements over the last 12 months.
Aquis Exchange
Aquis Market at Close has gained significant traction over the course of the last 12 months, now operating in 14 markets and representing 5% of all value traded across Europe in the Close. It is now the largest alternative closing auction mechanism in Europe.
Aquis’ MaC operates according to a sequential four-phase execution process. According to the exchange, MaC minimises user risk by rejecting or cancelling orders for a stock if the market-of-listing auction for that stock is extended or cancelled. While clearing and settlement on the mechanism takes place in the same way as other executions on Aquis, members can also choose to enable clearing suppression for trades matched against themselves.
In the past year, Aquis added a third client to the MaC and launched a new pricing model aimed at giving members the option to trade at 0.1bps. “This opens up the offering to the wider market, with particular appeal for smaller firms,” the venue confirmed. As an alternative to the primary exchanges, the MaC brings greater competition to the closing auction sphere. The venue claims that clients save 80% of the costs of trading in the close on the primary when using the MaC.
Cboe Global Markets
Launched in Summer 2020, Cboe Closing Cross (3C) is a mechanism aimed at allowing traders to continue trading after market close in Pan-European markets for a 25-minute window. It’s designed as an alternative to closing auctions which have continued to surge in popularity, particularly in Europe, in recent years.
Cboe Closing Cross allows members to enter limit orders into frequent or periodic auctions that run every 15 seconds. The system claims to avoid the complexity and costs associated with other end of day trading sessions, instead offering a “one stop solution for customers looking to execute their post close trading activities across 18 European markets.”
Unlike other closing mechanisms available it does not utilise order lock ins, allowing for greater flexibility around cancellation at any time which reduces risk for users. It also boasts full order book transparency including pre-trade in its data feed and indicative crossing summaries, meaning all market participants can see in price and size or quantity in real-time for all price levels that are predicted to execute in the cross.
In the US, Cboe has a separate alternative to primary market closing auctions and off-exchange venues for execution of Market-On-Close (MOC) orders, named Cboe Market Close (CMC). Also launched in 2020, members can route MOC orders to CMC, where they are pre-matched with other MOC orders at 3:49 pm Eastern Time. CMC will publish its matched shares following the cut-off time. The trades are then executed when the official closing price is published, saving participants from paying closing auction fees charged by the primary listing market on orders that are not price forming.
SIX Swiss Exchange
SIX Swiss Exchange launched a new functionality to protect asset managers from market impact when executing large orders at the Close, in April. Named the Closing Auction Volume Discovery (AVD), the new functionality is built on SIX’s dark pool SwissAtMid and has a hidden order type that supports discrete submission of liquidity into the auction that was previously withheld or place on alternative venues. The new functionality brings the hidden liquidity into the SIX Swiss Exchange order book where it’s executed if it’s flagged.
This liquidity AVD automatically checks whether there is a buyer on the other side of the market that wants to buy or sell the shares. If a match is found at the closing price, the two counterparties will be automatically matched without impacting the closing price. If a match is not found then there is no trade, but the order is still never disclosed to the market.
The exchange claims the new offering enhances speed of execution, meaning firms can now execute in one session as opposed to taking four or five days to unwind. Speaking to The TRADE at TradeTech Europe 2023 Simon Mason, head of equity products for UK and Ireland at SIX, said the new dark order is designed to help buy-side users minimise their market impact while also still making the best of the Closing Auction.
Turquoise
Launched in 2020 as part of a collaboration between the London Stock Exchange Group and not-for-profit group Plato Partnership, Turquoise Plato Trade At Last is a mechanism whereby investors can seek further liquidity following the closing auction of LSEG’s primary market – or the relevant European primary market for their securities.
The Trade At Last mechanism allows traders to submit firm and conditional orders for an additional ten minutes after the closing auction has completed its price formation process and published the official closing price at 4.35 pm.
This is done via a dark undisclosed execution channel. “We are able to do this whilst respecting the necessary price formation process of the primary venue,” the exchange group confirmed. Turquoise Plato Trade At Last recorded the most active day of the year so far on 20 April with €5.4mn traded through the functionality and recorded its second largest ever trade on 14 August. In H1 2023, over €53 million (single) were executed on Turquoise Plato Trade at Last, 47% higher than the total value traded in the whole of 2022.
