Examining Market on Close Facilities in Europe and the United Kingdom, Part 2

In the latest episode of the Bid Out Podcast, the focus shifts to Europe and the U.K. as market experts delve into the intricacies of market on close mechanisms in the region. This podcast episode marks part two of a three-part discussion series that began with insights from the Americas and will wrap up with a look at the APAC region in the upcoming month.

Joining host Peter Haynes, Managing Director and Head of Index and Market Structure Research at TD Securities, are James Baugh, Managing Director and Head of European Market Structure at TD Securities, and Evan Canwell, CFA, Equity Trader, and Market Structure Analyst at T. Rowe Price in London.

The conversation kicks off with a comparison of the structural differences in closing auctions between Europe and North America. One of the key distinctions highlighted is that in Europe, closing auctions stand alone, following the end of continuous trading, while in North America, the closing auction price discovery occurs before the regular trading session concludes. This variation has a significant impact on how traders utilize these facilities and how liquidity shapes up at the end of the trading day.

Baugh and Canwell delve into the nuances of auction structures in Europe, pointing out that larger marketplaces such as the London Stock Exchange (LSE) and Euronext offer transparent facilities compared to smaller markets that predominantly rely on non-transparent auction models. They further explore some of the advantages and drawbacks of these structural disparities.

The episode also touches on various pressing topics revolving around market structure in the European region. This includes updates on the progress towards a consolidated tape, the ongoing discussions around high market data fees, considerations around implementing an Order Protection Rule, and the anticipated shift towards T + 1 settlement.

As the discussion progresses, the experts dissect the LSE’s Closing Auction, offering insights into how T. Rowe Price leverages the Market on Close (MOC) facility, unique features of MOCs on the continent such as closing times and transparency, and closing auction volume metrics.

This episode of Bid Out Podcast provides a comprehensive exploration of the European market on close mechanisms, shedding light on the critical differences in auction structures, the implications for market participants, and the evolving landscape of market structure in the region. Stay tuned for the upcoming conclusion of this series with insights into the APAC market.