In a twist on its call-auction process, electronic venue AX Trading Network is offering the ability to schedule an auction in advance, giving more parties a chance to participate, and hopefully to provide more liquidity. Traders invited by the auction’s initiator can then take part in the auction at a specific time, either during market hours or during pre- or post-market trading.
AX, which launched last year, has not yet had its first scheduled auction, but the company expects to have some takers for the program in the next few days. Several clients had requested the ability to run scheduled auctions, according to the company.
Kevin Callahan, chief executive officer of AX, said the scheduled auctions are not for every trade. But for especially large or illiquid trades, they create a unique liquidity event so traders can give participants advanced notice and consider levels of interest.
“It gives participants that you invite to the auction more time to prepare and study their interest in participating,” Callahan said. “We’re giving the initiator the tools to publicize their auction and share whatever information they’re comfortable sharing.”
As with on-demand auctions, the initiator of a scheduled auction can determine whether to make the auction blind or to disclose if the host is a buyer or seller. So far, most auctions on AX are blind, but Callahan said as traders become more familiar with the system, they tend to get more comfortable with sharing information.
Auctions on AX run for five minutes, which is generally not enough time to get portfolio managers and analysts involved—unless there is advanced notice. A scheduled auction promises to bring in more participants and to allow those participants to be more fully informed.
Under the system, if an order is canceled then the scheduled auction is canceled and all participants are notified. AX, however, frowns on the cancelling of orders, as it doesn’t want traders to get excited about an auction only to see it get called off.
Traders can also initiate auctions prior to the open or after the close, which Callahan said can allow them to focus on getting big trades done without having continuous market prices moving all over the place.
