The Year Ahead for North American Equities

Adam Inzirillo
February 3, 2021

As Head of North American Equities at Cboe, I recently laid out my team's plans for 2021 in a letter to Cboe's customers. Read on to learn about what's in store for North American Equities at Cboe this year.

With the first month of 2021 behind us, I want to share a preview of what Cboe’s North American Equities team has planned for the coming year. First and foremost, we will continue forward with our customer-first approach, which guides every decision we make and pushes us to create better trading solutions for you. While we have always prided ourselves on our pioneering spirit and innovative mindset, innovation will truly be front and center in 2021. We will continue to find new ways to solve your biggest roadblocks and advocate for initiatives that promote fair, efficient and transparent markets.

A Look Back at 2020

2020 was full of challenges, but we still found opportunities to make strides in key initiatives and work toward our goals. Off Exchange Volume printed to the Trade Reporting Facility (TRF) increased throughout 2020, which in turn led to a decrease in on-exchange volume, especially for stocks priced between $50 and $500. Stocks priced under $50 represent nearly 75% of total composite volume where approximately 38% traded off exchange for a total of 29% of Total Market volume. Cboe took this opportunity to properly research these trends and provide the industry with a data-driven educational piece about trends in off-exchange trading.

Cboe’s innovation continued throughout 2020. After a robust, transparent and public comment period, Cboe Market Close (CMC) received SEC approval and launched in early March. CMC was designed to meet widespread industry demand for a competitively priced, on-exchange alternative to participating in primary market closing auctions. In an effort to create an on-exchange alternative to off-exchange electronic block trading, our team also filed to launch Periodic Auctions in the U.S. The concept builds upon our successes in Europe and satisfies investor demand for immediate liquidity and size. In addition, we launched Midpoint Discretionary Orders (MDOs) with Quote Depletion Protection (QDP) to help clients achieve the best price with minimal adverse selection. As a result of our data driven approach and continued dialogue with our clients, recent QDP enhancements have led to a 30% increase in usage week-over-week. Cboe also added MATCHNow and BIDS Trading to its roster, positioning the company to grow its global presence and expand its offerings in 2021.

Our newly formed Equity Execution Consulting team established itself as a neutral industry resource. Our team is keenly aware of the constant evolution of the equity markets and we are here to help you optimize your performance. Throughout the year, we analyzed market trends and shared our insights with you, most recently examining sub-dollar securities. Research from the Equity Execution Consulting team has also driven a number of innovations on Cboe EDGX Equities Exchange, leading to retail growth and participation. In 2021, we will continue to seek solutions and provide valuable, objective content that makes it easier to trade on Cboe markets, as well as other market centers.

Additionally, we engaged in open and honest dialogue with you and advocated for market structure issues we believe in through our work with the Equity Markets Association and Equity Advisory Committees. Most recently, we continued forward with our balanced approach and reviewed our new innovations with SIFMA. Investor feedback and sentiment is crucial for our markets to continue operating efficiently.

Continuing Our Expansion Into Canada

As you may know, Cboe acquired leading Canadian ATS MATCHNow in August. We spent the rest of 2020 integrating our teams and defining how we plan to service the North American equities market as one team. To start, we are looking forward to enhancing MATCHNow Conditional Trading, which already includes a Conditional Order Book tailored to meet the needs of the block trader via large minimum trade sizes. We plan to integrate our technology platforms and expand the unique services and products we can offer in Canada. Additionally, the BIDS acquisition provides us with new design features that will help us disrupt the electronic block market in Canada. Similar to our global approach to Periodic Auctions, we will review our Cboe Large-in-Scale (LIS) model to determine how the BIDS technology and model suits the Canadian electronic block market. We will share more updates during our technology integration call on February 17, 2021.

Supporting the Retail Market

2020 gave way to a welcome surge of new retail trading participants. As a result, we saw record usage of Cboe’s Retail Priority order type, which was designed to reduce time to execution for individual investors (and the firms facilitating their orders) by posting displayed limit orders at the front of the order queue for same-priced orders submitted on Cboe EDGX Exchange. To further support the retail community, we plan to launch early trading on Cboe EDGX soon, which will allow participants around the globe to begin trading at 4 a.m. ET. We appreciate the opportunity to serve these new participants and will continue to embrace retail traders with new services, products and educational resources – not only in equities but across Cboe’s markets.

Making the Most of Market Data

Cboe is dedicated to delivering accurate, cost-effective and reliable data through Cboe One Feed and our EDGX Market Data feeds. Cboe One Feed disseminates quotes that are, on average, within 1% of the National Best Bid and Offer (NBBO), 98.45% of the time. This year, our team will collaborate with Cboe’s Market Data group to gain better insights into needs in the equities market, and develop products and services to fill those needs.

In December, the SEC adopted rules to modernize the infrastructure for the collection, consolidation and dissemination of market data for exchange-listed national market system stocks. We support many of the items included in the SEC Order as they are aligned with Cboe’s Vision for Equity Market Structure Reform, including greater content availability on the SIP, refining round-lot sizes and broadening of odd-lot transparency. We plan to share more of our thoughts with you in the coming months.

Thank you for your choosing Cboe for your equities trading needs. We are looking forward to another year of defining markets with new solutions that improve your experience. As always, please don’t hesitate to reach out to my team or me with questions and ideas. We love hearing from you.