[ T H O U G H T
and receive market impact similar
to a block (LIS) trade.
Second, it’s really a low-tech
book, meaning it doesn’t matter
if you’re the fastest; it’s order size
that matters. And that’s really im-
portant to many buy-side firms.
What type of feedback are you get-
ting from buy-side participants?
We have received overwhelmingly
positive feedback from the Europe-
an trading and investing communi-
ty for providing a product that is an
attractive destination for executing
order flow that was previously
executed on many different types
of trading mechanisms, not just
dark books.
The feedback we’ve been receiv-
ing all along from the buy-side has
been positive. It was nice to see that
reaffirmed in various responses to
the ESMA Call for Evidence for
periodic auctions. Some of the key
attributes that buy-side firms have
highlighted include negating the
speed advantage of low-latency in-
frastructures, achieving best execu-
tion, and of course the low market
impact. It has really been a positive
solution for them, a place to trade
that offers market impact character-
istics of a block venue, but with the
ability to trade more quickly if you
have a short time horizon.
L E A D E R S H I P
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S P O N S O R E D
to understand why it has been
beneficial to the market.
What do you think is the most com-
mon misperception about Cboe’s
Periodic Auctions?
There is a lot of misinformation in
the market about periodic auctions
generally. Our Periodic Auctions
book is comprised of and based on
long-standing market constructs and
guiding principles. It is based on a
true price formation process, and
adheres to the MiFID II pre-trade
transparency requirements for a
lit order book. I think these are the
main points that are misunderstood.
It follows exactly what is
required by MiFID II RTS 1 for pe-
riodic auctions systems, publishing
indicative price and size prior to
an auction. All market participants
are able to see in real time the price
and quantity that is predicted to
execute in the auction. In design-
ing our Periodic Auctions book, we
were very careful to ensure it met
the explicit transparency require-
B Y
C B O E ]
ments set out for periodic auctions
platforms detailed in RTS 1.
As it relates to price formation,
our Periodic Auctions use the same
industry standard price formation
process as for conventional auc-
tions to determine the price based
on all orders before any alloca-
tion of executions takes place. It
facilitates a true auction that takes
into account all orders in the book
when determining the auction
price, so all orders are contributing
to genuine price formation.
What is Cboe Europe’s focus for the
rest of 2019?
Brexit planning obviously tops the
list. But we’re seeing really good
momentum with Cboe LIS, our
block-trading platform, and will
continue to onboard new customers
to further grow that business. And
as the market continues to evolve,
we’ll continue to look for new
opportunities to bring innovation to
the market as we believe that’s what
keeps driving us forward.
Average Price Move in December 2018
Lit vs. Continuous Dark vs. Periodic Auctions vs. Blocks
Periodic auctions have been in the
spotlight over the past year with
politicians and regulators raising
questions. How has Cboe handled
this regulatory scrutiny?
We’ve simply tried to educate
customers, market participants,
and regulators on how our Periodic
Auctions book works and dispel
any misconceptions they might
have about the service. These dis-
cussions have been very positive.
Once people take the time to un-
derstand the functionality and how
it actually works, they really seem
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