Why are the Cboe orders sitting above the ASX orders?

Sometimes you will notice that orders, that were placed after yours, will enter the full depth (Cboe data & ASX data) above you, at the same price. And more often than not, they will transact before you, even though they were placed after yours. 

This is all due to the different function of the secondary exchange, Cboe, and the function of the ‘ASX Best - Smart Order Router’ - that the majority of Australian market participants use to place orders onto the markets. Many investors can also choose which exchange to route their orders through, or cross orders up in-house (XT) even if they are not at the front of the queue, so the answer is never cut and dry.

There are two separate exchanges in Australia for ASX listed companies, and each has a different set of functions. For example, the ASX allows orders to remain on the market overnight, whereas the Cboe exchange purges all orders each night.  This means that all of the orders in the ‘market depth’ on Cboe are brand new every day, and any new orders that are placed on the Cboe exchange will sit above the orders on the ASX (even though they are on a different exchange), and be more likely to trade before an order on the ASX.

The ‘best execution price’ in Australian share trading is normally referring to the function of the ‘ASX Best Smart Order Router’, that places your orders on the market. And the ASX Best router always checks the Cboe market first. 

The ASX Best router at Openmarkets takes 4 distinct steps each time you place an order, in order to ensure you are getting the best price. You can see these steps in many of your transactions, but checking the order logs: 

1. It checks the Cboe mid-point (for any volume at a price better than the market price shown in the depth)
2. It then checks the ASX centrepoint
3. Then the Cboe normal market
4. Then the ASX normal market

So, if you choose to put your order on the Cboe exchange, you will be matched with any orders going through the ASX Best router before an ASX order at the same price, or with any other order that has specified the Cboe market for the trade. 

This is why we visually represent the Cboe orders on top of the ASX orders at the same price, as the ASX Best router will transact on Cboe orders before ASX orders, regardless of the time that those shares were placed on the market.

If however, you choose to sit on one exchange or the other, and someone specifically selects the other exchange as their destination (and not the ASX Best router), your trade will not match with the other order.

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