Bloomberg: Aquis joins Goldman, UBS with stock auction instead of dark pool

April 27, 2018

By Viren Vaghela

Aquis Exchange Ltd. plans to operate an auction service for trading stocks, the latest company to adopt the innovation even as regulators vow more scrutiny. The London-based bourse is looking to start its auction on demand next month, the company said in an interview. It becomes at least the seventh firm to offer such a service as an alternative to dark pools, which hide orders until they have been matched.

“There’s customer demand for auctions, so we have to be there,” said Alasdair Haynes, chief executive officer at Aquis Exchange. “On a personal level, I have a concern that it’s possible to keep orders in the dark on a lit book.” Aquis’s plan comes amid mounting scrutiny about the auctions. Robert Ophèle, chairman of the Autorité des Marches Financiers, on Wednesday accused Cboe Global Market Inc.’s service of pre-arranging trades. Steven Maijoor, chairman of the European Securities and Markets Authority, said that he was probing the practice.

About 30 percent of activity in Cboe’s periodic auction is broker priority trades, the company said by email responding to the French regulator’s comments.

Periodic auctions provide traders with a legitimate way of hiding orders until there is enough interest to trigger a buying or selling process. That allows fund managers to avoid moving the market to their detriment, as could happen on a stock exchange. These auctions have sprung up as a workaround to a cap on dark trading in stocks imposed by Europe’s revised MiFID II rule.

Cboe Europe’s periodic auctions book set a new one-day record on Tuesday of 1.08 billion euros ($1.31 billion) in terms of notional traded value.

Goldman Sachs Group Inc., UBS Group AG, Investment Technology Group, Nasdaq Inc. and the London Stock Exchange Group Plc’s Turquoise platform all operate, or plan to launch, periodic auction services.

With assistance from Will Hadfield.

To contact the reporter on this story:
 Viren Vaghela in London at vvaghela1@bloomberg.net

To contact the editors responsible for this story:
 Ambereen Choudhury at achoudhury@bloomberg.net 
Darshini Shah, Jon Menon