[ THOUGHT LEADERSHIP | CBOE ]
approach the risk of price slippage remains .
The benefit VWAP-X brings is being able to achieve a more consistent execution outcome , allowing participants to perfectly match agreed volume at the VWAP without either incurring spread costs . The service is designed to encourage interactions between natural buyers and sellers with a common execution objective and benchmark .
The exchange-regulated nature of the service also confers many benefits . Orders will be executed at a standardised VWAP price methodology , utilising price data from Cboe , other pan-European markets and the listings exchange . All trades are also executed as ‘ offbook , on-exchange ’ transactions through either Cboe ’ s UK or Dutch exchange , published on our market data feeds and then sent to clearing under Cboe Europe ’ s interoperable clearing model .
Natan Tiefenbrun
for activity during and after the VWAP matching cycle . In line with all other exchange activity , Cboe Europe ’ s market supervision team will also be responsible for surveillance of participants ’ use of the service .
Natan , what are the benefits and why now ? Customers understand the benefits of achieving the VWAP price without incurring any spread cost or slippage . In Europe , many brokers pursue this through algorithms which follow a volumebased trading schedule , meaning they participate in proportion to anticipated market volume , with child orders fed into the market progressively ; but with this
Stephen Berte
Stephen , how might the model evolve in the future ? It ’ s important to say that we ’ re launching initially with a relatively straightforward VWAP model in Europe , but we ’ re already excited about how this might evolve given the long list of additional features participants are already asking for . Whilst we ’ re starting with Europe our plans are to introduce this functionality to the global BIDS platforms , both the BIDS platform in the US , and the Cboe BIDS platforms in Canada , Australia and Japan .
At launch , Cboe BIDS VWAP-X in Europe will be accessible only by sell-side participants , which can use their existing Cboe BIDS Europe connectivity to submit VWAP indications of interest . As with our current point-intime block crossing platforms , we do hope to be able to allow direct order entry by the buy-side through the BIDS Trader GUI . In time , we may be able to use this service to contest for other types of flow which remains strongly tied to the listings exchanges .
How will matching happen in Cboe BIDS VWAP-X ?
• VWAP-IOIs are submitted to the Cboe BIDS Europe system to identify potential matches .
• Once a match is found , the firms are invited to ‘ firm-up ’ their IOI within a specified time period .
• Once all firm-ups are received , eligible orders are matched with an agreed quantity , and a matching cycle then begins to determine the interval-VWAP execution price .
• The trade is executed on-exchange through the applicable Cboe exchange .
• The trade is sent to clearing under Cboe Europe ’ s interoperable clearing model .
• The trade is reported through the Cboe CXE or Cboe DXE market data feed as an off-book , on-exchange , trade in real time and uniquely identified with the new sub-MIC codes of XWAP ( CXE ) and VWAP ( DXE ).
Issue 81 81 // thetradenews .. com // 33