Euronext has confirmed that it is set to introduce Auction Volume Discovery (AVD) order type for equities later this year.
Vincent Boquillon
The move comes off the back of increased demand for liquidity at auctions according to the trading venue, aimed at facilitating additional liquidity which is currently untapped during auction periods for clients.
Speaking exclusively to The TRADE at the TradeTech Europe conference in May, Vincent Boquillon, head of equity trading at Euronext, discussed the key innovations when it comes to the upcoming AVD order type, asserting that “it’s been over a decade since we’ve seen true innovation in the auction space.”
He explained: “AVD is a fully integrated, non-disclosed order type that enables interaction with the auction imbalance, without impacting price formation or leaking information […] Our goal is to protect the integrity of the closing price as a benchmark, while allowing for greater interaction and block execution opportunities.”
Read more – Enhancing auction liquidity: Euronext’s Vincent Boquillon on the upcoming launch of Auction Volume Discovery
Specifically, Euronext AVD orders will: send a non-displayed order during the day; trade at either the opening or closing auction price; capture the auction imbalance after the regular auction process has occurred; trade against other ADV order without price impact to allow users increased block trading opportunities; and access untapped auction imbalance which are not available via MTFs.
In addition, through this offering the price determination process at auction remains unchanged, and information leakage is prevented.
Speaking to The TRADE about the importance of transparency in fragmented markets, Boquillon said: “Price discovery depends on a shared, transparent foundation […] When bilateral trading grows in a space that lacks harmonised rules, transparency or even consistent data, it becomes very difficult for the wider investment community to navigate and evaluate liquidity.
“[…] It’s not just about exchanges versus bilateral platforms. The market needs healthy competition within each model to thrive.”
Euronext’s move follows that of SIX Swiss Exchange which launched its ADV functionality back in 2023, as exclusively revealed by The TRADE at the time.
The functionality is built on SIX’s dark pool – SwissAtMid – and includes a hidden order type that supports discrete submission of liquidity into the auction that was previously withheld or place on alternative venues.
Speaking to The TRADE in July 2024, Simon McQuoid-Mason, head equity products and quant research at SIX Swiss Exchange, explained that “the fairly ubiquitous use of participation caps in closing auctions” was a key driver for SIX innovating to introduce the Auction Volume Discovery (AVD) order type.