Aequitas’ NEO Exchange has filed with its regulator a proposal to launch a dark order book.

NEO Exchange has announced and published the proposed amendments with the Ontario Securities Commission (OSC) to its extant trading policies in accordance with Schedule 5 to its recognition order, as amended.

First of these is the implementation of a separate dark book (NEO-D). The previously-approved Dark Book has not been launched, and prior to doing so a NEO representative told Traders Magazine that it “re-thought” some of the features and functionality. In introducing NEO-D, NEO is proposing to launch something that looks slightly different than what was originally intended. To assist in reviewing the amendments to the Trading Policies, which reflect what has technically changed, here is a summary of the key features of NEO-D:

• All trading will occur at the midpoint
• All orders will be immediately executable upon entry (subject to order constraints)
• All participants will be able to enter passive orders, but liquidity taking will be restricted to orders from NEO TraderTM accounts
• The matching priority will follow the same sequence as NEO-N (see above), except that there are no DMM benefits (or obligations) in NEO-D
• NEO plans to implement a no rebate fee structure for NEO-D (i.e., take-take)

“We believe that the combination of our unique matching priorities, simple order types and greater certainty around the type of flow to be interacted with will create a differentiated dark pool in Canada to the benefit of natural investors,” NEO said in its filing. “A dark book was always part of the vision and it will soon be a reality, designed to once again focus on natural investors. “

Only NEO Traders will be able to submit active orders and matching priority will be given to 1) price 2) broker 3) NEO Trader and 4) HFT.  Size-time priority will be used to rank orders.

Other Proposed Amendments include:

Changes to matching priorities across all NEO Exchange trading books so that the market maker volume allocation will no longer have priority over NEO Trader Orders, to reduce unnecessary intermediation;

Removal of references to certain functionality that was originally contemplated but never implemented.

A copy of the NEO Exchange notice including the Proposed Amendments to the Trading Policies is published on the OSC website at www.osc.gov.on.ca.