US exchange group Cboe Global Markets has confirmed it will launch its end-of-day matching mechanism on 6 March, shortly after receiving regulatory approval to move ahead with the controversial service.
Cboe said last month that it had been given the green light from the US Securities and Exchange Commission to launch Cboe Market Close (CMC), which allows traders to interact with closing auction liquidity in a cost-efficient manner, bringing competition to closing auctions dominated by incumbent exchange operators.
CMC routes orders to the BZX Exchange for matching at 3.35pm Eastern Time before the closing auction is initiated. The orders are then executed once Nasdaq and NYSE publish their closing price, saving traders from paying closing auctions fees on non-price forming flow, with any unmatched orders sent to the primary exchange closing auctions.
Cboe’s plan to operate CMC was met with fierce rejection from Nasdaq and NYSE when the proposal was filed in 2018. Both exchange groups argued that alternative mechanisms could increase fragmentation, potentially spur manipulative activity, but more importantly, undermine extensive investment that exchanges have poured into end-of-day trading.
Trading in closing auctions has surged globally in recent years, driven primarily by the rise of passive investing and exchange traded funds. Market participants have called on regulators to investigate the increasing costs of interacting at the close, as concerns continue to grow about the monopoly incumbent exchange groups retain on end-of-day trading.
Cboe also introduced an alternative closing auction mechanism in Europe last year, known as Cboe Closing Cross (3C). The exchange operator said at the time of launch that the 3C aims to provide a simple and cost-effective way for traders to execute end-of-day activities, while bringing more competition to the space.