Innovative Design To Promote Liquidity Formation
- Continuous trading 8:00am to 5:00pm
- Matching priority: price/broker/size-time
- Take-make fee model
- Speed bump for Latency Sensitive Traders
- Market-by-price data feed
The NEO BOOK™ is another transparent and protected Aequitas NEO Exchange trading book, with a focus on restoring confidence in sustainable and sizeable liquidity provision.
A number of innovative features in the NEO Book™ are designed to promote liquidity formation while creating disincentives for some of the prevalent predatory trading strategies prevalent in the market today.
The patent pending size-time matching priority favours those willing to commit size to the order book for a reasonable period of time. These committed orders will receive priority over smaller ‘fleeting’ orders, leading to reduced order fragmentation and larger fill sizes. Larger fill sizes boost confidence for liquidity providers looking to post sizable orders, which ultimately benefits all liquidity seeking investors.
Size-Time Matching Priority
The size-time matching priority is an allocation methodology utilized in the NEO Book™ to determine in which sequence orders will trade when there are multiple potential matches at a given price. First if any single resting order can completely fill the incoming order, that order will trade. If more than one resting order can fill the incoming order completely (or if no resting order can fill it completely) the highest overall size-time ranking score among those resting orders will determine which trades first. The size time ranking is calculated as a weighted average of three different order rankings: the remaining resting order size, the priority time-stamp and time of the last partial fill. The weighting used for the calculation is subject to change and will be published by notice to members.
SIZE-TIME RANKING EXAMPLE WITH EQUAL WEIGHTING
|SEQ ID||Priority Time||Time of Last Fill||Remaining Size||Priority Time Rank||Last Fill Rank||Size Rank||Overall Score|
A technical 'speed bump' imposed on Latency Sensitive Trader (LST) orders looking to take liquidity out of the NEO Book™ is another key feature. LST take orders will be subject to a randomized time delay between 3-9 milliseconds, effectively preventing predatory strategies relying on a defined time to market, and leveling the playing field for participants without a speed advantage. This ‘speed bump’ duration provides protection for liquidity providers, increasing confidence in their ability to avoid such predatory trading strategies, while being small enough to not impact other non-predatory LST strategies.
Pre-trade prices are displayed with all volume aggregated per price level, creating an additional level of comfort by offering pre-trade anonymity for liquidity providers looking to post sizable orders.