NASDAQ OMX Iceland (the Exchange) will on September 29, 2008 implement
mid-price matching in its equity markets. Mid-price matching refers to the
matching of orders at the mid point between the best displayed bid and ask
offers in the order book, i.e. the mid price. Mid-price matching is enabled by
the introduction of so-called mid-price orders, which are not visible in the
order book and will only match at the mid-price.
The introduction of invisible mid-price orders is aimed at increasing liquidity
in NASDAQ OMX Iceland's equity markets. Mid-price orders afford market
participants the opportunity to reduce the market impact of large orders, the
risk of front running and counterparty search cost. NASDAQ OMX Iceland expects
that this will lead to increased order volume which will in turn increase
equity trading on the Exchange and reduce trading costs.
In order to safeguard the quality of the mid-price matching, it will only be
enabled in a given order book if the spread in the order book does not exceed a
pre-defined upper limit. Thus, mid-price matching in a given order book may at
different times within the same trading day be either enabled or disabled. The
spread in this context is calculated as follows:
(Best ask - Best bid) / Best bid
The spread calculation is only based on displayed orders. Mid-price orders also
have to satisfy size conditions determined by the Exchange. The upper spread
limits, determining whether mid-price matching is turned on or off, and the
minimum mid-price order size are different for large cap companies and all
other companies. Information on the size and spread conditions can be found in
the table below.
Large caps Other shares
Minimum size ISK 50,000,000 ISK 25,000, 000
Maximum spread 1% 2%
• Mid-price matching is enabled in continuous trading, as long as the spread
condition above is satisfied.
• Mid-price orders have to be entered in multiples of two round lots (i.e.,
two shares since the round lot for all shares in the Icelandic market is one
share). Orders marked as mid-price orders are rejected if they are below the
minimum size given above and if they are not multiples of two round lots.
• Mid-price orders can be either limit orders or market price orders.
• Other orders can match against mid-price orders but only on entering and if
and only if they satisfy the minimum size condition for mid-price orders.
If a non-mid-price order is not matched against a mid-price order, or only
partially, it is transferred to the order book and will not attempt another
match against mid-price orders.
• Mid-price matching can be triggered by a new incoming order hitting an
existing mid-price order as well as by a change in the spread resulting in a
match between existing mid-price orders.
• If a mid-price order is partially filled and the remaining part does not
fulfill the minimum size requirement for mid-price orders, the remainder,
nonetheless, continues to be invisible.
• Partial execution of mid-price orders can be avoided by an “All or None”
condition.
• Same post-trade information is disseminated for trades that are the result
of mid-price matching as for other trades. The trades will be
distinguishable through the use of a new trade type (MIDP).
Mid-price matching will be introduced on NASDAQ OMX Iceland's Main Market (OMX
ICE Equities), the Alternative Market (OMX ICE Alternative Market), the market
for ETFs (OMX ICE Fund Units) and First North Iceland.
With further increase of liquidity in mind, NASDAQ OMX Iceland is also planning
to introduce non-displayed orders which satisfy MiFID's large in scale
criteria. The implementation is subject to the Icelandic Financial Supervisory
Authority's (FME) approval which has not been given. Large in scale
non-displayed orders will be implemented on NASDAQ OMX's exchanges in Helsinki,
Stockholm and Copenhagen. For further information on the implementation of
non-displayed orders, please see a separate announcement at the following link:
http://www.omxnordicexchange.com/frettirogtolfradi/markadstilkynningar/Article/?
msgId=672392&lang=is