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Cboe Europe, a division of Cboe Global Markets, Inc., announced on September 2, 2024, that it has secured support from key market participants for its new trading service, Cboe BIDS VWAP-X. The service, scheduled to launch on October 21 pending regulatory approvals, will allow traders to source and match liquidity at a forward benchmark price.
Early adopters of the service include Bernstein, BNP Paribas, BMO Capital Markets, Instinet Europe, Jefferies, KCx and Virtu Financial.
Natan Tiefenbrun, President of North American and European Equities at Cboe Global Markets, stated, "We are delighted to have secured such a strong group of initial Participants to support Cboe BIDS VWAP-X and are in active discussions with numerous others who are looking to utilise this service at the earliest opportunity. This demonstrates that we've listened to our Participants to meet their needs for an exchange-regulated crossing platform to execute participative volume at an interval-based price. We're excited to be bringing this first-of-its-kind service to the European equities market and help enhance execution outcomes for end investors"
The new service is described as a first-of-its-kind, exchange-operated trajectory crossing service for European equities. It will be provided as part of Cboe BIDS Europe, which is currently the region's largest block trading platform, utilising BIDS' proven conditional trade negotiation and execution workflow to match orders based on a standard, exchange-regulated volume weighted average price (VWAP) methodology.
Cboe BIDS VWAP-X will allow market participants to submit conditional VWAP indications of interest (IOIs) into the service. Once a potential match is found, firms will be invited to firm-up their IOIs, and after eligible order quantities are matched a standard matching cycle will take place to calculate the interval-VWAP trade price. Trades will be reported as off-book, on-exchange executions in real-time, allowing them to be centrally cleared through Cboe Europe's interoperable clearing model.
The service will benefit from BIDS' established protections against information leakage surrounding IOIs, including disclosure and interactions controlled by customisable tools and counterparty score-carding and filtering based on past trading behaviour.
Industry participants have expressed support for the initiative. Eric Stockland, Co-Head of Global Electronic Trading at BMO Capital Markets, said, "Trajectory crossing in EMEA is a major development for the institutional investor because it helps minimise tracking error to benchmark performance and helps mitigate adverse selection faced on other multilateral trading facilities (MTFs) and liquidity pools."
Brian Gallagher, Head of Equity Execution at BNP Paribas, commented on the innovation, stating, "We support innovation in the European market, and we will embrace it when it complements BNP Paribas's liquidity access and enriches our clients' execution experience".
Salvador Rodriguez, EMEA Head of Global Execution Services, Instinet Europe Limited, said: "Benchmark Crossing offers an encouraging innovation in Equity Market Structure in EMEA that should improve the ability for algos to find high quality counterpart liquidity. The approach and implementation should allow for agency algos to trade versus multiple benchmarks at a fair price with a good balance of simplicity, as well as allowing more complex control features based on differing client interaction requirements."
Ben Springett, Head of Electronic and Program Trading, EMEA, Jefferies, said: "Jefferies welcome this innovation enabling us to provide incremental liquidity opportunities to our client base. VWAP crossing mechanisms can unlock liquidity that otherwise wouldn't necessarily meet on a multilateral venue, utilising a mechanism that we have seen prove beneficial for algo performance on a range of benchmarks."
Chris McConville, Global Head of Execution Services and Trading at KCx, said: "KCx welcomes this innovation to the European market. We believe trajectory crossing is a positive disruption to the marketplace and could provide incremental liquidity to our client base."
James Osborne, Global Head of Algorithmic Development, Virtu Financial, said: “Trajectory crossing is more than just a useful feature for VWAP algorithms - it's a unique matching mechanism that can benefit many trading algorithms when utilised in conjunction with target benchmarks. Many of Virtu's US algorithms already leverage elements of trajectory crossing to enhance performance and we look forward to extending the same benefits to our European algorithms with the launch of Cboe BIDS VWAP-X.”
Cboe BIDS VWAP-X is set to launch with sell-side access through FIX connectivity. Customer testing is currently underway as the company prepares for the planned October launch, subject to regulatory approvals.
