Cboe Europe has secured the support of a range of participants for Cboe BIDS VWAP-X, its new trading service allowing algo traders worried about adverse selection to source and match liquidity at a forward benchmark price. The service is scheduled to launch on 21 October, subject to regulatory approvals.
First announced in July, the service combines two elements, volume-weighted average price (VWAP) trading and trajectory crossing, that have been offered by sell-side firms and brokers for a number of years. Fear of information leakage has given Cboe Europe an opening, and Bernstein, BNP Paribas, BMO Capital Markets, Instinet Europe, Jefferies, KCx and Virtu Financial have already signed up. At launch, the service will be accessible by sell side participants through FIX connectivity.
Natan Tiefenbrun, president, North American and European equities, Cboe Global Markets, said: “This demonstrates that we’ve listened to our participants to meet their needs for an exchange-regulated crossing platform to execute participative volume at an interval-based price. We’re excited to be bringing this first-of-its-kind service to the European equities market and help enhance execution outcomes for end investors.”
Cboe BIDS VWAP-X is an exchange-operated trajectory crossing service for European equities, which allows participants to source and match liquidity at a forward benchmark price. It is being provided as a service of Cboe BIDS Europe, a block trading platform, utilising BIDS’ conditional trade negotiation and execution workflow to match orders based on a standard, exchange-regulated volume weighted average price (VWAP) methodology.
Cboe BIDS VWAP-X will allow market participants to submit conditional VWAP indications of interest (IOIs) into the service – without them being visible in an order book that might tip off other traders and affect prices. Once a potential match is found, firms will be invited to firm-up their IOIs, and after eligible order quantities are matched a standard matching cycle will take place to calculate the interval-VWAP trade price. Trades will be reported as off-book, on-exchange executions in real-time, allowing them to be centrally cleared through Cboe Europe’s interoperable clearing model.
The service will benefit from BIDS’ established protections against information leakage surrounding IOIs, including disclosure and interactions controlled by customisable tools and counterparty score-carding and filtering based on past trading behaviour.
Eric Stockland, co-head of global electronic trading, BMO Capital Markets, said: “Trajectory crossing in EMEA is a major development for the institutional investor because it helps minimise tracking error to benchmark performance and helps mitigate adverse selection faced on other multilateral trading facilities (MTFs) and liquidity pools.”
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