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EFFICIENT PRICE FORMATION
IN AUCTIONS
Introduction of functional changes
in INET Nordic Auctions
Nasdaq, a leader and pioneer in the exchange industry introduces a more efficient auction model for cash equities
on Nasdaq Nordic1. The changes are active from November 16, 2015 in the INET Nordic trading system.
Highlights
• One single auction model for all auctions, including
opening, scheduled intra-day (for select instruments) and
closing auctions.
Benefits
• Reduced Equilibrium price volatility.
• Robust price formation process in the opening auction.
• Individual orders are not displayed in the public data feed.
• A more optimal trading model for the scheduled
intra-day auction.
• Pre-trade transparency via real time Net Order
Imbalance Information (NOII) including:
• Possibilities to trade larger blocks more efficiently,
especially in the liquid closing auction.
• Equilibrium price (EP) or Best Bid and Ask for
uncrossed books
• Paired quantity
• Short randomization at the end of all auctions
strengthens auctions credibility and mitigates
gaming possibilities.
• Imbalance
• Imbalance direction
INET Auction details2
All auctions are divided into by two phases:
order management and uncross.
• During the order management orders will enter the
auction Order book. Orders can be sent as Limit
Orders or Market Orders with Time In Force (TIF)
conditions. There are also possibilities to tie an Order
to a specific auction by submitting special auction
Orders types utilizing the Cross trade flags. Limit
On Close (LOC) is such an example that will be
activated automatically in the closing auction.
Do not miss out
participating in this
auction liquidity pool:
About 20% of the total
electronic Order book
turnover is traded at
Nasdaq Nordic in auctions.
The average trade size is
roughly four times higher
than for Lit Order book
continuous trading
(June 2015).
• The time of the uncross is randomized with a short
period at the end of the order management stage.
1 For the purposes of this document Nasdaq Nordic represents the common offering by Nasdaq Copenhagen, Nasdaq Helsinki, Nasdaq Iceland, Nasdaq Stockholm, Nasdaq Tallinn, Nasdaq Riga and Nasdaq Vilnius. Nasdaq Copenhagen, Nasdaq Helsinki, Nasdaq Iceland, Nasdaq Riga, Nasdaq Stockholm, Nasdaq Tallinn and Nasdaq Vilnius
are respectively brand names for NASDAQ OMX Copenhagen A/S, NASDAQ OMX Helsinki Ltd, NASDAQ OMX Iceland hf., NASDAQ OMX Riga AS, NASDAQ OMX Stockholm
AB, NASDAQ OMX Tallinn AS and AB NASDAQ OMX Vilnius.
Note that the information in this fact sheet is based on the functionality being introduced November 16, 2015 in the INET Nordic trading system.
2 Nasdaq Nordic Market Model gives the complete view on the auction functionality. The information in this fact sheet should give the reader an introduction and
overview on the main features of the auction service.
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Nasdaq Nordic main markets and their respective time schedules (CET) for the opening and closing auction:
Opening
Random Uncross
Closing
Random Uncross
Nasdaq Copenhagen
08:45-09:00
09:00:00-09:00:05
16:55-17:00
16:59:30-17:00
Nasdaq Helsinki
08:45-09:00
09:00:00-09:00:05
17:25-17:30
17:29:30-17:30
Nasdaq Stockholm
08:45-09:00
09:00:00-09:00:05
17:25-17:30
17:29:30-17:30
During the auction no individual orders will be published.
Pre-trade transparency will be available via Real time Net
Order Imbalance Information (NOII).
Auction example
Below follows an example on how an auction price is being calculated.
State of the order book with respective order quantities per price
(for information that will be available publicly, please see below.
Buy
Price
Sell
Net order Imbalance information (NOII)
103
400
Equilibrium price (EP)
101
100
102
300
Paired quantity
250
200
101
200
Imbalance50
300
100
50
400
99
500
98
600
97
Imbalance direction
Buy
This is the public information given
during the order management stage
On each price level volume is aggregated, and number of paired shares are calculated
Acc Buy
Buy
Price
Sell
Paired
Acc Sell
Imbalance
Direction
103
400
950
0
-950
Sell
102
300
550
100
-450
Sell
200
101
200
250
250
50
Buy
300
100
50
50
50
550
Buy
1000
400
99
0
0
1000
Buy
1500
500
98
0
0
1500
Buy
2100
600
97
0
0
2100
Buy
0
100
100
300
600
The auction algorithm maximizes traded volume, and publishes NOII in real time.
The price leading to most shares traded is 101.
DISCLAIMER
While this fact sheet has been prepared on the basis of the best information available, Nasdaq Nordic Member Rules (NMR) is the legally binding document
between Members and Nasdaq Nordic. The purpose of this fact sheet is solely to provide guiding information for trading Members.
© Copyright 2015. All rights reserved. Nasdaq and Directors Desk are registered trademarks of The NASDAQ OMX Group, Inc.
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