Continuous Auction with Specialist
Deutsche Börse offers the continuous auction with Specialist trading model for trading securities at the Frankfurter Wertpapierbörse (FWB®, the Frankfurt Stock Exchange):
- Specialists ensure the high quality of trading at Deutsche Börse Frankfurt.
- Investors benefit from Specialists through additional liquidity, attractive trading spreads and low partial order execution levels.
- The continuous auction with Specialist service increases the appeal of Deutsche Börse Frankfurt as a national and international trading venue, in particular for small and mid-caps.
Trading times: Equities, ETFs, ETPs, retail funds: 8:00 a.m.–10:00 p.m.
Bonds: 8:00 a.m.–5:30 p.m.
Tradable instruments: Equities, bonds, ETFs, ETPs, retail funds.
For each security, there is exactly one specialist.
Continuous auction with a Specialist begins with the pre-call phase, which is followed by a freeze phase. Pricing then takes place.
During the pre-call phase all market members can place, change and delete orders. Furthermore, the Specialist can place, change and delete orders.
During the freeze phase, the order book is frozen. During the freeze phase, the system collects order inputs, changes and deletions in a “suspended portfolio” until the freeze is lifted, whereupon they are immediately processed.
During the freeze phase, the Specialist can place, change and delete orders in his own name or for other market participants.
- Pre-trading information:
During the pre-call and freeze phase, the order book is partially closed, i.e. only the Specialist’s standard quote is visible. Only for the Specialist the order book is open in all phases, i.e. he can see every order and the customer behind it. - Post-trading information:
On conclusion of the auction, the auction price, the volume executed in the auction, and the time of pricing are published immediately.
- Prioritisation of orders:
All orders are collected in accordance with price/time priority. - Price determination:
The auction price is determined according to the modified principle of highest volume transacted on the basis of the order book established at the end of the freeze phase and within a spread defined by a matching quote or at precisely the matching quote’s buy or sell price. - Order execution:
Orders are executed continually in accordance with price/time priority.
For orders to be executed there has to be a change from the pre-call phase to the freeze phase. Initiated by the Specialist, this change occurs regularly only if orders can be executed against one another or against the Specialist’s standard quote.
By inputting the matching quote, the Specialist concludes the freeze phase and triggers pricing. As such, he plays a pivotal role in determining the time of pricing and order execution.
Because orders are sorted in accordance with price/time priority, orders with a higher buy and lower limit have priority with regard to execution. Market orders have priority over limit orders. Should there be several orders with the same price limit, the order with the higher time priority is executed first.
The regulations governing price/time priority ensure that, at most, one limited or unlimited order is executed in part at the auction price.
The Specialist’s duties
In the continuous auction with Specialist model, the Specialist guarantees the high quality of trading by carrying out the following duties:
- Ensuring continuous market information by inputting Standard Quotes during the entire trading period:
In the Standard Quotes, the Specialist takes the order book and any possible reference market into account. In each Standard Quote, the Specialist must consider the maximum spreads and minimum quote volume agreed with the Frankfurt Stock Exchange. - Initiation of price determination in the case of executable order book situations by inputting a Matching Quote:
There is an executable order book situation, if: (1) an order can be executed against another order; or (2) against the Specialist’s Standard Quote; or (3) the Stop Limit of a Stop Order has been reached by the Standard Quote. Through the Matching Quote, the Specialist defines the spread within which the trading system calculates the price in accordance with the principle of highest executable volume. This way, the Specialist ensures that orders are only executed at market prices. - Provision of additional liquidity to bridge a lack of offer or demand for the execution of an order
- Avoidance of partial order execution