Price optimisation model

Price optimisation model

The “Price optimisation” trading model is a quote-driven mechanism for the continual internalisation of orders and a simultaneous improvement in price compared with the reference market.

 

Market type

The price optimisation model is a bilateral trading model, in which orders placed by a trading participant are always executed against a price optimiser. Trading is quote-driven, as orders are executed exclusively against the price optimiser’s quote.

Market participants act as buyers or sellers. The price optimiser also makes a relative quote.

Transparency

  • Pre-trade information:
    Given that orders are executed immediately in the price optimisation model, they are not displayed prior to execution. Nor are quotes by the price optimiser.
  • Post-trade information:
    Once the orders have been executed, all transactions are published immediately. For each transaction, the price, volume and time are published. The transactions are distinguished as being in the price optimisation model.
    Should a transaction be settled by a central counterparty, the customer behind it remains anonymous in post-trading as well. In transactions where no central counterparty is involved, the name of the customer is visible.

Pricing and order execution

  • Order prioritisation:
    Orders are not prioritised. They are either executed immediately in the price optimisation model or entered in the continuous trading order book.
  • Pricing:
    For an order executed in the price optimisation model there is an improvement in price over the possible execution price in Continuous Trading (volume-weighted average price). The improvement in price must be at least €0.001.
  • Order execution:
    Pricing occurs continuously. All incoming new orders in the price optimisation model are immediately checked to see whether they can be executed. Should order execution be possible in the price optimisation model, it occurs immediately. Should order execution in the price optimisation model not be possible, the order is entered in the Continuous Trading order book. This is the case, for example, if ...
    • the order cannot be executed in full against a visible order on the other side in the Continuous Trading order book or
    • the price optimiser did not input a quote.

Orders can only be executed in the price optimisation model if the security is being traded at the same time in Continuous Trading. Should Continuous Trading be interrupted (e.g. by an auction), there can be no execution in the price optimisation model. In such cases, incoming orders are entered in the auction order book.

Should an order be executed in the price optimisation model at a price at which orders in the Continuous Trading order book are entitled to be executed, these are executed first against the price optimiser. This ensures consistency with regard to the order book.

Possible uses

The price optimisation model can be used in particular for the following purposes:

  1. Internalisation of orders by the price optimiser
  2. Improvement in price over the reference market
 

Market Status

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