In a bid to enhance the appeal and competitiveness of its derivatives market, the Bourse de Montréal Inc. is proposing a new order type intended to bolster market quality and liquidity.
The ule changes would allow it to offer a new guaranteed cross auction for crossing equity and ETF options, and automating contingent option trades.
“Our proposed auction mechanism will differ from the current option crossing procedure by allowing market participants to compete to improve the execution price of a liquidity seeker,” the MX said in a notice proposing the change.
The new functionality is expected to lead to better market quality and liquidity by enabling price improvement and increasing interactions in the central limit order book, it said.
At the same time, the exchange is also proposing to automate contingent options trades to ensure these trades are executed electronically and can be used with the new auction mechanism.
“In today’s rapidly evolving financial markets, it is crucial for the Bourse to remain ahead of innovative functionalities and try to eliminate manual interventions, as much as possible, in order to remain competitive with its peers,” it said in the notice, adding that the innovation could attract global participants.
A number of exchanges in the U.S. and elsewhere already offer auctions that allow price improvement, it noted.
The exchange said it expects to implement the proposed changes, which require regulatory approval, on March 29, 2024.
The proposals are out for comment until Dec. 9.