March 27, 2018 / 7:57 PM / 9 months ago

Cboe plans Aug. 20 launch of disputed market close order type

NEW YORK, March 27 (Reuters) - Cboe Global Markets said on Tuesday it will begin accepting end-of-day stock market orders on Aug. 20, pending regulatory review, as it tries to muscle in on rivals Nasdaq Inc and the New York Stock Exchange’s most lucrative trading period.

The U.S. Securities and Exchange Commission approved Cboe’s new order type in January, despite strong opposition from Nasdaq and Intercontinental Exchange Inc’s NYSE, both of which appealed the decision, forcing the regulator to take another look at Cboe’s plan. The SEC has yet to announce a final decision.

Nasdaq and the NYSE declined to comment on Cboe’s announcement on Tuesday.

Closing auctions attract trillions of dollars worth of trades in the U.S. stock market as fund managers generally price their assets to the closing prices of listing exchanges and execute most of their orders at that time.

Currently, only Nasdaq and the NYSE have company listings, giving them an effective duopoly on the closing auction process.

Cboe lists its own corporate stock but otherwise lists only exchange traded funds and similar products.

The Chicago-based exchange operator said it plans to offer brokers a new “market on close” (MOC) order type that would give them the same official closing auction prices from Nasdaq and the NYSE for stocks listed on those exchanges but with lower execution fees.

CBOE said the move was in response to frustration voiced by industry participants over rising closing auction prices.

On Jan. 8, the NYSE lowered its fees for MOC orders. The move was to “encourage higher volumes of MOC orders at the close, which should result in a higher level of orders matched and greater liquidity for all exchange auction participants,” NYSE said in a SEC filing.

The incumbent exchanges have said in the past that allowing Cboe to piggyback off their closing auction prices would siphon orders away from the listing markets, distorting prices and making it harder to get trades done.

The Cboe move could also lead to other exchanges adopting similar order types as IEX Group, which operates the Investors’ Exchange, said it might do. IEX has been granted SEC approval to list company stocks but has yet to announce its first listing. (Reporting by John McCrank; Editing by Cynthia Osterman)

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