US buy-side traders can now schedule their own stock auctions and invite other members in advance, using new functionality devised by trading venue operator AX Trading.
The AX Trading Network has launched a trader-initiated call auction system that allows traders to determine what information to share about their auction – if any – as well as whom to invite. The intention of the platform, launched in November 2011, is to help traders reduce information leakage in an open small-cap trading environment, according to AX CEO Kevin Callahan.
AX scheduled auctions can only be triggered by an order with a minimum of 25,000 shares, routed to the AX market. As with on demand auctions, the initiator of the scheduled auction can determine whether to run a blind or disclosed auction and what types of counterparties to invite.
Invitations to trade are sent out notifying members that the auction has been scheduled and indicating the time of the auction. Once opened, the auction sits on the AX system for five minutes. Participants receive a message indicated that there is interest in a particular stock, but not whether the initiator is a buyer or seller. Recipients may send in an order of at least 10,000 shares. At the end of the five minutes, either the trades are matched or the auction expires.
“The scheduled auction adds a new dimension to the AX trading process,” said Callahan. “The scheduled auction is clearly not for every trade. But for especially large or especially illiquid trades, our members were looking for us to provide a way to create a more unique liquidity event so that they could give participants more advanced notice of the auction in order to consider their level of interest and participation.”