UPDATED: Cboe Waits on Closing Approval
If the regulator does not kick the can down the road, The US Securities and Exchange Commission should make its decision whether to approve Cboe Global Market’s Bats Market Close, today, November 17.
Cboe Global Markets filed its application for its proposed close on May 16, which has generated approximately 60 comment letters and eight SEC meetings for and against approval.
“We’re optimistic” about approval, said Chris Concannon, president and COO of Cboe Global Markets during a presentation at Futures of Financials 2017 conference hosted by Bank of America Merrill Lynch. “But the SEC can extend (its decision date) out further, and I would expect them to do that.”
The Bats Market Close would accept market-on-close orders from clients at 3:35 pm, match the orders, and execute them at the closing price from the stock’s primary market. Any order that Cboe Global Markets could not match the exchange would return to the broker, who would then forward it on to the close.
Critics of the close claim that introducing the Bats Market Close would impair price discovery, increase fragmentation and potential market manipulation, and undermine the confidence in the closing auctions.
From a trader’s perspective, the opposing arguments do not make sense, according to Ed Tilly, chairman and CEO of Cboe Global Markets who also presented at the conference.
“If you fight through the smoke, you will see that this is not anything different than what goes on today,” he noted. “If a paired order is paired, it really is not affecting price discovery. The imbalances are, but matched orders are not. And we’re only talking about matched and paired orders, not imbalances.”
Although adding the new order type would contribute to the exchange operator’s top-line growth, Concannon also commented that the proposed offering already had affected the major listing exchanges since the exchange operator made its filing.
“We are not seeing our competitors increasing the fees for the closing cross in their various primary markets, he said. “I think that would result in a considerable negative reaction, which would spill over into the debate about market close.”
UPDATE: The SEC has decided to postpone announcing its decision regarding the Bats Market Close until January 17, 2018.
“The Commission finds it appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider this proposed rule change, the issues raised in the comment letters that have been submitted in connection therewith, and the Exchange’s responses to the comments,” the regulator noted in a prepared statement released on November 17.
New industry roundtables may lead to new pilots.
Are regulators pushing a market-structure solution to an investment problem?
Competing consolidated tapes will lead only to a mess.
Disused exchange medallions may spring back to life.
The proposal raises dissemination caps and adds large-trade delays.