TradeTech: Is innovation at the Close heading in the wrong direction?

Several speakers agreed the potential change to the length of the Close was in the wrong direction, considering previous attempts to shorten market hours.

During a debate at the recent TradeTech 2022 in Paris, panellists expressed concerns that the extension of the Closing Auction should not be the focus for trading venues in the future.

Panellists noted that the Close had evolved to include increased broker internalisation and participation from more sophisticated market makers. However, in light of the growing focus on the final few minutes of the day, panellists were divided in their views on how to innovate the Auction going forward.

“We are observing interest in the Closing Auction. That’s a recurring dialogue. Over the last 10 years it’s like we’re now operating a bifurcated market and the nature of liquidity of the continuous session is so different,” said Euronext’s head of cash and derivatives, Simon Gallagher.

“One thing exchange operators need to ask themselves is do we have the right parameters? Is five minutes too long? Should it be three or two minutes? Do we have the batching algorithm for the uncross? We have huge data available that participants should optimise.”

However, other panellists suggested that in light of previous recent attempts to shorten market hours, this was not the direction the evolution of the Close should be headed in.

“Here we are in mental health awareness week and it wasn’t too long ago that we were talking about shortening market hours and actually we’re extending them. I don’t see that as a good step forward,” said T Rowe Price’s head of equity trading for Europe, Jeremy Ellis.

Other panellists noted the fractional levels of volumes traded in the pan-European markets in comparison with the US, despite already having extended market hours.

“If you couldn’t find the other side of a trade by 4:30 and then can’t find it in the auction, what makes you think it’s going to magically pop up,” said one panellist.


Considering the growing portion of order flow taking place at the Close, Euronext’s Gallagher was asked if he would consider any changes to do with pricing.

Panellists noted that while Turquoise’s Trade At Last hadn’t attracted critical mass, Aquis’ Market at Close (MaC) had seen increasing market share as an alternative method for interacting with the Close using a lower cost model.

“I think it is something Euronext should look at. We are supportive of Aquis as an innovator and the fee compression, the real benefit is on the fees. As an exchange operator, not just Euronext, if you looked at your cost model I think it would slash some of the competition,” said Brian Gallagher, head of electronic trading at Exane BNP Paribas.

“There [are] no issues with client-to-client matching [on Aquis MaC] and pre-trade transparency means concerns around fragmentation means users are able to re-aggregate the volume with the theoretical uncrossed volume that’s happening on the primary exchange, whereas with an SI this isn’t available.”