Order destinations including 'Dark' Markets

Order destinations including 'Dark' Markets

Dark markets/pools are execution venues that are not transparent (ie `in the dark’) until a trade occurs. Unlike the `lit’ market where you can see the bids and offers for a stock before you trade, dark pools publish no information ahead of a trade. Dark markets are venues that typically sit at the mid-point between a stock’s bid and offer. For example, if Telstra is $4.52 bid and $4.53 offered, the mid-point is $4.525.


ASX launched its dark market– or anonymous mid-point matching service – in 2010, called Centre Point. ASX developed Centre Point to give investors greater choice of, and control over, their trading orders in a fragmented market, where multiple execution venues exist. Trading in Centre Point has grown steadily since its launch.  Cboe also has a dark market, know as Mid-Point, which offers the same benefits, and operates in much the same way as Centre Point.


There are a number of reasons trading in dark markets has become so popular. Firstly, and most importantly, the dark markets offer price improvement. Buyers of Telstra, in our earlier example, would generally prefer the better price of $4.525 at the mid-point rather than pay the offer price of $4.53. There are no guarantees of an execution at $4.525 but by checking Centre Point there is the potential to get a better fill on your order at $4.525, before you pay $4.53.


Secondly, for larger orders, dark markets protect the value of the information in the order. When executing large orders, minimising information leakage and price impact produce the optimal outcome. Putting a large order into the `lit’ market signals your intention to buy or sell. By executing in the dark markets, no information or signals are sent to the market until after the trade is executed.  All trades are still reported real-time, the same as orders in the lit market.

All orders placed through your Marketech Focus platform, by default, are routed to the live market by an order router that automatically checks for the best price available on either the ASX or Cboe markets, including both Centre Point and Mid-Point markets.  If the order does not execute immediately it will rest in the ASX lit market.  In addition, FocusPro subscribers can now also select specific destinations for your orders.

 

Simply click the button, as highlighted above, and select the preferred destination for your order as outlined below:
  1. Default: Route the order to the best available price in all available markets
  2. ASX: Route the order exclusively to the ASX market
  3. ASX Centre Point: Route the order exclusively to the ASX Centre Point market
  4. Cboe: Route the order exclusively to the Cboe market (available via optional Cboe data upgrade)
  5. Cboe Mid-Point: Route the order exclusively to the Cboe Mid-Point market (available via optional Cboe data upgrade)
In this way, if orders do not execute immediately, they will rest in the destination market until transacted (or cancelled).  As the Centre Point and Mid-Point markets are anonymous, your orders will not show in the Depth, however you will see the destination suffix added to the end of the stock code in your Orders list, as highlighted below.  
 


Please note:
  1. Both Centre Point and Mid-Point orders are limited to Day Only expiry;
  2. As anonymised markets, you are unable to see any volume on the Centre Point or Mid-Point markets, and as such there are no guarantees of execution;
  3. The ability to select Cboe order destinations is available with the optional Cboe data upgrade.

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