UNITED STATES: CBOE Receives Regulatory Approval to Launch Periodic Auctions for U.S. Equities Trading

Tuesday March 30 2021

On 29^th March 2021, Cboe Global Markets, Inc. (Cboe: CBOE), announced that it has received approval from the U.S. Securities and Exchange Commission (SEC) to introduce periodic auctions on Cboe BYX Equities Exchange – bringing to the U.S. equities markets a new, innovative intraday auction mechanism based on a reimagining of a process that it first launched in Europe. Cboe expects to launch U.S. periodic auctions in the third quarter of 2021.

Cboe’s U.S. periodic auctions are designed to allow market participants to access frequent, price-forming auctions throughout the course of the trading day, thereby helping them find liquidity in a short time-frame with low market impact, while prioritizing price and size. Periodic auctions of one-hundred milliseconds will be initiated when there are matching auctionable buy and sell orders available to trade in the auction. The message identifying when an auction is available will be randomized, helping to mitigate any potential adverse selection. Periodic auctions will not interrupt trading in the continuous market and will execute at a price level that maximizes volume executed in the auction, including any orders posted on the BYX order book.

As block-sized liquidity continues to increase off-exchange with the use of conditional orders, Cboe believes U.S. periodic auctions could provide market participants with an on-exchange alternative to off-exchange electronic block trading by enabling them to trade in size, while reducing market impact. In addition, Cboe expects U.S. periodic auctions to help facilitate price discovery and enhance liquidity and market quality in all equity securities, particularly thinly-traded securities trading on Cboe BYX Equities Exchange.

Cboe Europe Periodic Auctions – a lit order book that independently operates frequent auctions throughout the trading day – was the first of its kind when it launched in 2015 and has become a highly valued trading mechanism that aims to deliver better execution outcomes. It continues to be the largest European periodic auction, accounting for over 80 percent of all periodic auction activity, or approximately 3 percent of notional value traded on European equities exchanges, with an average daily traded notional value of €1 billion in 2020.

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