Stock Auction Network Expands Trading Hours
February 21, 2012
The AX Trading Network has expanded its hours to start at 8:00 a.m. and end at 5:00 p.m., Eastern Time.
The operator of an alternative trading system that allows equity buyers and sellers to call their own five-minute auctions said the expansion is meant to help AX members conduct more off-hours business.
Hours previously were 9:30 a.m. to 4:00 p.m., Eastern Time.
The extra hours will let buyers and sellers trade around earnings announcements and other events that often occur before or after the market closes.
“The AX is designed to help members find liquidity in tough-to-trade stocks and the reality is that just about all stocks are tough trade in pre and post market hours, even many large and midcap stocks,” said AX Trading CEO Kevin Callahan. “The AX allows institutional investors to trade where they want to trade rather than simply following the vagaries of a highly volatile and very thin market quote that is often driven by flickering quotes from high-frequency traders.”
Callahan, previously a managing director for sales at JonesTrading, launched the network in 2010 as a means for dealers in tough-to-trade stocks to address two tactical issues.
The first is the so-called “prisoner’s dilemma” where buyers and sellers don’t want to reveal their trading intentions.
The second is the growing need for human traders to outmaneuver the behemoth high-frequency computer trading systems used by funds and other institutional investors to trade millions of shares in seconds.
Ax’s model involves the use of five-minute electronic call auctions. A call auction is a method of trading in which all limit orders are matched at a single clearing price.
In such an auction, a dealer wanting to buy or sell shares initiates an order to the network or through Ax’s strategic partner, Credit Suisse AES.
The initiator then decides the amount of information to reveal: i.e. blind, with only stock symbol or size; or disclosed with other details such as side, price range, initiator identity, etc.
The dealer then decides whom to invite. The dealer can use a public auction in which invitations are sent to all Ax members or private auctions to members meeting selected criteria. The invites are then set out via the Financial Information Exchange messaging system, Bloomberg, email or the network’s own sytem. .
Invitees have five minutes to view the disclosed information and send orders either back through the network or to Credit Suisse. Once the auction ends, all orders are closed at a single clearing price that maximizes the amount traded.
To help drum up interest in the network, Ax hired earlier this month John King as managing director and head of sales. King previously was with Liquidnet, the large block dark pool that serves institutions. King launched the Midwest region of its business in 2001 and Liquidnet Canada in 2006.
