Aquis Exchange’s new VWAP matching service is set to go live in the first quarter of next year, The TRADE can reveal.
Named Aquis VWAP Match, the new service will initially launch in Q1. It will use conditional indication of interests (IOIs) and use a VWAP period of five minutes.
Members will be able to submit IOIs at a volume weighted price using all the major reference markets for that calculation.
“Once both parties agree to firm up, that will trigger the VWAP period,” Aquis Exchange’s head of sales, Sakeena Lalljee, tells The TRADE. “At the end of that period, that’s when the volume weighted average price will be known based on lit trades that have taken place in that window.”
The new service will have the market identifier code (MIC) AVXE in the UK and AVEU in Europe and volumes will be printed under the off-book on-exchange bucket.
Read more – Aquis Markets unveils conditional order functionality on UK and EU platforms
“It’s a very important thing for us to have distinct codes because feedback from the market is that people want to be able to distinguish between where these trades are happening in that off-book on-exchange space,” adds Lalljee.
In terms of regulatory approvals, the service has received a non-objection from the UK’s Financial Conduct Authority (FCA) and Aquis Exchange is in the process of working with regulators in Europe.
It is set to initially cover a stock universe of about 400-500 liquid names, in order to provide a more mindful and less “broad-brush” approach to roll-out, Lalljee says.
“We’ve looked at the stocks where there is the greatest demand from our clients to use this functionality,” she explains. “That’s what made most sense for us and what we think makes sense for the design of this product.”
The service will rival that of competitor Cboe which launched its Cboe BIDS VWAP X offering in the UK in October, as revealed by The TRADE. Cboe’s European iteration is still awaiting regulatory approval by EU regulators, The TRADE understands.
When asked why Aquis had opted to launch this service now, Lalljee confirmed that several factors had fed into the exchange’s decision, namely the continued growth of passive investment, increasing client focus on latency and the layered development of other linked products that the exchange had launched in the last year.
Read more – Aquis Exchange relaxes eight-year ban on proprietary trading firms
“It’s [VWAP Match] a mechanism that allows people to smooth out volatility in prices or to trade at a forward-looking price,” she says. “It makes sense right now on the back of other things that we’ve been doing in the past few years. We’ve already had our benchmark cross trade capture report service live for a few years now. That allows members to bring pre-agreed trades that they’ve matched themselves onto a lit exchange.
“We launched conditional orders at the start of this year and Aquis VWAP Match allows us to bring elements of both those things together. It’s quite a natural evolution of what we do. In terms of USPs, we made the rule change on our lit book towards the end of last year and there’s an element of that that we’re bringing into VWAP Match as well.”
Aquis relaxed its eight-year ban on proprietary trading firms at the end of last year. As part of the rule change, liquidity providers were given a choice as to whether they would like to have their orders open for anyone to trade with – including prop firms – or whether to keep them limited to client facilitating flow only.
The VWAP Match venue set to go live in Q1 will flip this rule, Lalljee says.
“It will give broker members and client facing members the option of whether they only want to trade with other types of flow like this or whether they are open for anyone to trade with their orders,” she explains.