Continuous trading with auctions
Deutsche Börse Xetra: "Continuous trading with auctions" is the service for trading liquid securities:
- Continuous trading ensures the immediate execution of purchase and sale orders at the current market price for all market participants.
- In addition, in three auctions a day – at the beginning of main trading, at midday, and at the end of main trading – liquidity is concentrated on Xetra, and this way, the price level of a major exchange is determined.
- Auction prices serve in particular institutional investors, investment banks and pension funds as a reference for valuing portfolios and trading positions.
- Finally, during Trade-at-Close, market participants can trade at the official closing price for a limited period of time after the closing auction.
Trading time: 9:00 a.m.-5:35/5:40 p.m.
Tradable instruments: Equities, ETFs and ETPs
How the service works
The "continuous trading with auctions" service combines the trading models "Auction", "Continuous Trading" and “Trade-at-Close”.
The main trading phase begins with an opening auction. In this way, liquidity is concentrated and the opening price is determined by taking into account as many orders as possible. Continuous trading begins on conclusion of the opening auction. All executable orders are executed immediately at market prices.
The intraday auction – conducted as a rule around midday – interrupts continuous trading. It enables liquidity to be concentrated in the middle of the trading day. On its conclusion, continuous trading is resumed.
In the opening and intraday auctions all executable orders are executed so as to prevent a “crossed” order book, i.e. there are no purchase and sale orders that overlap in terms of price, enabling continuous trading to continue. All Market Orders and Limit Orders that were not executed, or only executed in part are taken into in continuous trading.
In the closing auction, liquidity is concentrated at the end of the main trading phase and the day’s closing price determined. Closing prices frequently serve as the basis for evaluating portfolios, which is why the closing price is calculated based on the market with the help of liquidity concentrated in an auction.
Trade-at-Close is triggered after the closing auction for DAX, MDAX and SDAX and lasts for a maximum of five minutes. The remaining order imbalance from the closing auction can transfer to Trade-at-Close and market participants can also participate by entering new orders.
Continuous trading
In continuous trading competing buy and sell orders from several parties can interact. Trading is , i.e. the buy and sell orders are placed in a central limit order book.
- Pre-trade information:
The order book is open. The first ten limits, the number of orders per limit and the order volumes accumulated for each limit are displayed.
As a matter of principle, in trading, the customer behind an order remains anonymous. - Post-trade information:
Following execution of the orders, all transactions are published immediately. For each transaction, the price, volume, and time of the transaction are displayed.
Should a central counterparty settle the transaction, the customer behind the transaction also remains anonymous afterwards. In the case of transactions in which no central counterparty is involved, the name of the customer is visible.
- Order prioritisation:
In continuous trading, all orders are sorted in the order book in accordance with price/time priority.
- Pricing:
The following basic principles apply for pricing in continuous trading:
- Should an order be inputted into an order book in which there are only limit orders on the opposite side, the price is determined by in each case the highest buy and the lowest sell limit in the order book.
- Should a market order be inputted into an order book in which there are only market orders on the opposite side, execution is performed at the reference price. The reference price is in each case the last price determined in an auction or in continuous trading.
- If, in continuous trading, there are non-executed market orders in the order book and these are executed against incoming limit orders, pricing is based on the reference price. If a price cannot be determined at the midpoint, the limit of the incoming order determines the price.
- Execution of orders:
Every new order (except stop orders) or quote placed in the central limit order book is immediately examined to see whether it can be executed against orders or quotes on the other side of the order book. Orders which can be executed immediately are executed at once against one or several orders on the other side. Depending on the price limit of the incoming orders and the orders in the order book, execution can be performed at different prices.
Execution is performed in accordance with the time/price priority, i.e. the order with a higher buy limit and lower sell limit are executed first. Market orders have priority over limit orders.
Should there be several orders with one limit, the order with the highest time priority is executed first.
Auction
In auctions buy and sell orders are collected in a central limit order book. As such the order book bundles liquidity in a security through the mechanism of price determination at a particular point in time.
The auction begins with the call phase, followed by price determination. A minimum duration is defined for the auction’s call phase in which participants can enter orders and quotes as well as modify or delete their own orders/quotes.
The call phase ends randomly, to avoid price manipulation.
- Pre-trading information:
The order book is only partly open during the outcry phase: Aggregated information on the respective current order situation is published on an ongoing basis.
When orders match such as to enable a transaction to be executed, the indicative auction price is shown. This is the price that would result for the auction if the price determination were to take place at this point in time.
Moreover the executable volume for the respective auction price, on which side there is an and the volume of overhang are published. Where determination of an indicative price is not possible, the best buy or sell price for the order including the corresponding volumes is shown.
Trading is anonymous, meaning the order originator is not shown. - Post-trading information:
Following completion of the auction, the auction price, the volume executed in the auction and the time of price determination are immediately published.
Where a transaction is executed via a central counterparty the originator of the transaction also remains anonymous in post-trading. For transactions not involving a central counterparty, the name of the originator is visible.
- Prioritisation of orders:
In the auction, all orders are collected in the order book according to price/time priority. - Price determination:
The auction price is determined in accordance with the principle of highest volume transacted. The auction price is the price at which the highest executable order volume and lowest overhang are evident. - Order execution:
Owing to the sorting of orders by price/time priority, orders with a higher buy or a lower sell limit have priority for execution. Here market orders have priority over limit orders. Where several orders have the same price limit, the order with the highest time priority is executed first.
The price/time priority rules ensure that a maximum of one limited or unlimited order is partially executed at the auction price.
Trade-at-Close
Trade-at-Close is an additional opportunity to trade at the official closing price. During Trade-at-Close, orders are matched continuously at fixed price, the closing auction price. Participation in Trade-at-Close is conditional to an opt-in flag set up to True on a Trader ID level and/or on order level.
- Pre-trade information:
During Trade-at-Close the order book is open, thus displaying the only possible matching price – the closing auction price - and the accumulated order volumes and the number of orders in the book. - Post-trade information:
Following orders execution, all transactions are published immediately. For each transaction, the price, volume, and time of the transaction are displayed.
- Order prioritisation:
During Trade-at-Close, all orders are sorted in the order book in accordance with time priority only. Hence the price limit specified for limit orders determines if the order will participate or not to Trade-at-Close but does not subsequently infer on the execution priority. Similarly, market orders do not have priority over limit orders in the order book as time priority applies identically to all orders. - Pricing:
Transactions take place at fixed price: the closing auction price. This does not affect the price limit specified for participating limit orders. - Execution of orders:
After the closing auction, unexecuted market orders and limit orders with price limit better than or equal to the closing auction price and which are opted in will roll over from the closing auction to Trade-at-Close. New orders (only market orders and limit orders with price limit better than or equal to the closing auction price and which are opted in) can be entered during Trade-at-Close to participate in the session. Each new order is immediately checked for execution against orders on the other side of the order book.