Cboe aims to introduce periodic auctions for trading of US equities

Maria Nikolova

The offering is designed to allow market participants to access frequent, price-forming auctions throughout the course of the trading day.

Cboe Global Markets, Inc. has announced its plans to introduce periodic auctions for the trading of US equities, subject to regulatory approval.

Cboe’s new periodic auction is designed to allow market participants to access frequent, price-forming auctions throughout the course of the trading day, thereby helping enable them to find liquidity in a short time-frame with low market impact, while prioritizing size and price. The mechanism also includes a unique feature which randomizes the message identifying when an auction is available, helping to mitigate any potential adverse selection.

Cboe intends to introduce periodic auctions on its Cboe BYX Equities Exchange.

Cboe expects its planned U.S. offering to improve execution quality for market participants sourcing intraday liquidity in the public markets, and in particular, for those that are seeking to trade in size, including block-like executions, or to access liquidity in thinly traded securities. As market participants increasingly turn to off-exchange venues to meet their various liquidity needs without displaying their orders, Cboe’s U.S. periodic auction is designed to provide a competitive, on- exchange alternative for participants to execute order flow with reduced market impact.

Cboe’s European offering – a lit order book that independently operates frequent auctions throughout the day – accounts for over 70% of all periodic auction activity, or approximately 2.4% of notional value traded on European equities exchanges, with an average daily traded notional value of more than €1 billion during the first half of 2020.

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