Reference price trading

Reference price trading

The “Reference Price Trading” model is an order-driven mechanism for continual trading at the midpoint of the reference market.

 

Market type

Reference price trading is a multilateral trading model, in which competing sell and buy orders from several parties can interact. Trading is order-driven, i.e. the buy and sell orders are placed in an order book.

The market participants act as buyers or sellers. The block agent receives the orders, enters them, and executes them.

Transparency

  • Pre-trade information:
    The reference price order book is closed for all participants with the exception of the block agent.
  • Post-trade information:
    Following execution of the orders, the transactions are published immediately. For each transaction, the price, volume, and time are published. Transactions in reference price trading are distinguished as such.

Pricing and order execution

  • Order prioritisation:
    In reference price trading, orders in the order book are prioritised in accordance with volume/time priority.
  • Pricing:
    In reference price trading, orders are executed at midpoint between the currently best visible bid and the offer limit for the relevant security.
  • Order execution:
    Orders are executed continually. All incoming new orders in the reference price trading order book are immediately checked to see whether they can be executed against orders on the other side of the order book, and where applicable executed at once.
    Reference price trading can only be conducted in securities that are at the same time being traded in Continuous Trading. Should Continuous Trading be interrupted, e.g. through an auction, reference price trading can carry on.
    Orders are executed in accordance with volume/time priority, taking into consideration the minimum execution volume defined by the trading participant when inputting the order. The volume/time priority ensures that larger volume orders are executed before those with smaller volumes. Should there be several orders of the same volume with the same price limit, the order with the highest time priority is executed first.

Possible uses

Reference price trading is particularly suitable for block trading, i.e. trading in large-volume orders, which if visible in the market could result in large movements in price.

 

Market Status

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