BATS Chi-X Europe has launched inter-book orders, letting members hunt for liquidity more efficiently across both of the multilateral trading facility’s (MTF) lit and dark order books.
The trading venue will start by offering a remove order type that allows users to first send aggressive orders to either CXE – the former Chi-X Europe order book – or BXE – the former BATS Europe book and their dark equivalents – in the order they want. Members would then have the option to rest the residual part of their order on one of the MTF’s lit markets.
Titled respectively as Lit Sweep and Dark Sweep, the order types will initially offer quicker order processing when scanning for liquidity across BATS Chi-X Europe order books compared to smart order routers, as well as offering latency advantages for those members that do not use co-location, i.e. the practice of placing servers close to an exchange’s core matching engine with the aim of reducing latency.
Using the order types will not incur any further costs and trading fees will be based on the book where each execution takes place.
“Currently, if a smart order router wants to remove liquidity from both of our order books, they need to send an order to one book, wait for the response, then send another message to the other book,” Mark Hemsley, CEO, BATS Chi-X Europe, told theTRADEnews.com. “This new order type allows you to look across both books in one go, while defining the sequence of the order.”
Further benefit from the inter-book order type will come when BATS Chi-X Europe adjusts the execution pricing on BXE and CXE.
“Once we have the order types in place, our plan is to review pricing on the BATS Chi-X Europe order books so there are different incentives to provide or remove liquidity on each book,” he said. “Members will then be able to use inter-book order types in a way that is better suited to their trading strategies.”
Currently, BXE offers a rebate of 0.18 basis points for adding liquidity, and charges 0.28 bps for removing liquidity, while CXE offers a 0.2 bps rebate for passive orders and charges an aggressive order fee of 0.3 bps.
According to Thomson Reuters data, BATS Chi-X Europe represented 21.7% of European equity trading in September.