London Stock Exchange Group Plc, seeking to attract block traders back to its markets from dark pools, proposed an intraday auction for its most liquid stocks.
LSE is consulting customers on adding a daily 2 p.m. auction to the two existing ones. The intraday auction would cover stocks listed in the FTSE 100 Index, FTSE 250 Index, some smaller companies and the International Order Book, where LSE offers shares from more than 44 countries.
“Recent feedback from a broad range of market participants has indicated that an intraday auction would be a welcomed addition to the options available for executing orders,” LSE said in its consultation today. “Feedback we have had focused in particular on the advantages of trading larger-sized orders in a price-forming environment.”
Public exchanges have lost business to dark pools, where investors can trade big blocks with potentially less risk of having news of their orders move the price. Dark pools don’t publicly publish stock bids or offers. In November, European Union negotiators reached a breakthrough on how much equity trading can occur on the private platforms.
“The auction is price-forming, with a transparent price, and everyone comes in and participates,” Brian Schwieger, LSE’s head of equities, said in an interview today. “You have all the orders coming in, we bring them all together and then come up with a single price for everyone.”
LSE’s electronic trading opens and closes with an auction. The average order size during an auction is about 30,000 pounds ($49,900), Schwieger said, compared with an average 5,000 pounds to 7,000 pounds during continuous trading.
Responses to the consultation must be in by April 17.