Cboe has introduced new periodic auction book (PAB) to lit sweep order types, which will allow participants to sweep the local Cboe PAB or dark book, before sweeping the local Cboe lit book – in an effort to improve liquidity targeting for users.
The new order types are available in the Cboe UK and Cboe NL PABs effective today, The TRADE can reveal.
“In keeping with our innovative ethos, we’re launching four new sweep order types which allow our participants to target liquidity in up to three of our execution mechanisms (dark, periodic auction and lit) through a single order,” said Natan Tiefenbrun, president of Cboe Europe, speaking exclusively to The TRADE.
“This makes it very simple and efficient for our participants to access greater size or price improvement opportunities, before accessing Cboe’s Lit order books.”
The new sweep order types will allow participants to access the dark, PAB and lit order books without the need to submit multiple orders, alongside the benefit of potential latency saving by eliminating the need to have separate orders.
For several years, Cboe has offered dark/lit sweep order types which are used by participants to capture price improvement on orders destined for lit books. For the first time, the new sweep orders will allow participants to check for liquidity in Cboe’s PAB before targeting liquidity on the local Cboe lit book through a single order.
The launch will also help expand use cases of PAB to additional phases of a broker’s smart order routing (SOR), while delivering execution quality benefits more widely.
“Historically, most brokers have integrated periodic auctions into the liquidity seeking phase of their SORs, but not into the passive posting or spread-crossing phases. With these order types, we’re trying to attract both spread-crossing and passive posting flows. We already see more than 20% of spread-crossing orders finding price improvement in PAB,” Tiefenbrun told The TRADE.
“What we’re saying to participants is that, before they cross the spread in the Lit, there’s a very good chance that there is price improvement and/or larger size that they could access in the periodic auction. These sweep order types will make it much easier and convenient to do that, without having to do a significant amount of software development. We’ve designed this so that we can enable it for clients with minimal changes on their side.”