London Stock Exchange (LSE) has made changes to the way smaller stocks are traded to help improve liquidity, particularly for block trades.
LSE’s SETSqx trading service, which covers over 1,000 securities outside of the FTSE 350, has from Monday seen an enhanced auction process for less liquid stocks with the addition of an additional trading session after the close.
Scheduled auction uncrossings take place at 09:00, 11:00, 14:00 and 16:35, with the auction call period reduced to ten minutes before each event and five minutes for the closing auction.
Orders can be entered throughout the day but will only be visible during auction call periods.
After the closing auction there is now a closing price crossing session, which will provide an additional opportunity to trade at the closing auction price.
Ian-Patrick Lauder, part of the equity markets team at LSE, said: “The SETSqx trading service performs a vital role for smaller securities, bringing liquidity to less traded stocks.
“The changes we are implementing will enhance the choice investors have in executing trades against market maker Firm Quotes, or in auctions, and will help create an environment where investors are able to trade large sizes in the auctions as well as continuing to interact with market makers throughout the trading day.”
Refinements to SETSqx follow a consultation launched late last year, which asked market participants how to better provide liquidity and block crossing opportunities in the secondary market for small-cap stocks.
LSE has also recently examined the possibility of introducing an intra-day auction on its main market to boost block trades and increase its attraction to institutional investors. It hopes to make further announcements on the new auction in the coming weeks.
Brian Schwieger, head of equities at the London Stock Exchange Group, added: "The changes we've introduced to SETSqx, alongside our consultation on introducing an intra-day auction and improvements to block trading on Turquoise, are part of our longer term strategy to improve block trading opportunities outside of dark pools. We want to come up with solutions which not only help investors today but will continue to be pertinent in a post-MiFID II world."