TradeTech: Is innovation in the Close going in the wrong direction?

During a panel discussion at the recent TradeTech 2022 in Paris, panelists expressed concern that the extension of the closing auction should not be the focus of trading venues going forward. .

Panelists noted that the close has evolved to include increased broker internalization and the involvement of more sophisticated market makers. However, in light of the growing attention in the final minutes of the day, panelists were divided in their opinions on how to innovate the auction going forward.

“We are seeing interest in the closing auction. It’s a recurring dialogue. Over the past 10 years it feels like we are now operating a bifurcated market and the nature of continuous session liquidity is so different,” said Euronext Head of Liquidity and Derivatives Simon Gallagher.

“One thing that exchange operators need to ask themselves is do we have the right parameters? Is five minutes too long? Should it be three or two minutes? lots for uncross? We have huge data that participants should optimize.”

However, other panelists suggested that in light of previous recent attempts to shorten market hours, this was not the direction the move in the close should be headed.

“We are here in mental health awareness week and not too long ago we were talking about shortening market hours and in fact we are extending them. I don’t see this as a good step forward,” said Jeremy Ellis, T Rowe Price’s head of equity trading for Europe.

Other panelists noted the fractional levels of volumes traded in pan-European markets compared to the United States, despite already extended market hours.

“If you couldn’t find the other side of a trade at 4:30 p.m. and you couldn’t find it in the auction, what makes you think it’s going to magically appear,” said a panelist.


Given the growing share of order flow taking place at the close, Euronext’s Gallagher has been asked to consider pricing-related changes.

Panelists noted that while Turquoise’s Trade At Last did not attract critical mass, Aquis’ Market at Close (MaC) saw market share increase as an alternative method of interacting with the Close using a lesser cost.

“I think that’s something Euronext should look at. We support Aquis as an innovator and fee compression, the real benefit is in fees. As an exchange operator, not just Euronext, if you look at your cost model, I think that would reduce some of the competition,” said Brian Gallagher, Head of Electronic Trading at Exane BNP Paribas.

“The [are] no problems with customer-to-customer correspondence [on Aquis MaC] and pre-trade transparency means concerns about fragmentation mean users are able to re-aggregate volume with the theoretical uncrossed volume that occurs on the main exchange, whereas with an SI it is not available.

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