IT – INET Nordic – REMINDER - Implementation on Auction Only Market Segments for certain less liquid shares (6/18)

As communicated earlier in (89/17), following requests from market participants, Nasdaq Nordic has decided to implement Auction Only Market Segments for certain less liquid shares on Nasdaq Stockholm and First North Sweden. The model may be expanded to other Nasdaq Nordic markets at a later stage.

The background for the implementation is that it is common for Issuers in Sweden to have multiple classes of shares listed at Nasdaq Nordic, with differing free float, turnover and other liquidity measures between the classes.

Ideally, the share price should not differ significantly between the different classes of shares since they represent the same proportion of the company equity and the same right to dividends. If the price differs, due to e.g. differentiated voting rights, the relative difference is typically stable over time.

However, Nasdaq Nordic has observed extreme trading in certain shares at prices not reflecting a fair market value, compared to the other share classes of the same company. In extreme situations prices of one class have been several times higher than the other. Current Volatility Halt mechanisms, effective in preventing other forms of disorderly trading patterns, do not effectively restrict trading where the price of one of the share class does not reflect a fair value.

In order to reduce the risk for disorderly trading, Nasdaq Nordic plans to introduce a modified market model for shares fulfilling the pre-set criteria. The modified market model is comprised of an Auction Only trading model were continuous trading has been replaced by three auctions during the trading day.

Auction Only Market Segments

The following new Market Segments will be activated from January 22 in production:

GCF production ID codes will be presented when available

These two Market Segments will have three auctions per day:

1. Opening auction, following the normal opening schedules as per today.

2. After randomization plus 1 second of continuous trading, the order book will CET 09:00:06 move into a Scheduled intra-day auction that uncrosses at the same time as other scheduled intra-day auctions uncrosses at approximately CET 13:35.

3. After yet another randomization and continuous trading phase of 1 second the order book CET 13:35:06 moves into the Closing auction with an uncross at about CET 17:30.

Criteria for shares to be traded on the Auction Only Market Segments

In order to be moved the Auction Only Market segments, all of the following criteria must be fulfilled:

• The share must be one of several classes of shares (A, B, C) that are listed for the same company, with one share class dominating in terms of liquidity. The share shall be ranked 2nd or lower, among the parallel share classes, in terms of average turnover during the previous quarter.
• The share may not be a Preference or Interim share.
• The share may not be subject to a Market Maker/LP program.
• The share must have less than 30 MEUR in Free float adjusted average Market Cap at the end of each quarter.

Nasdaq Nordic has identified the following shares fulfilling the above criteria (Nasdaq Nordic is planning to evaluate eligible shares on a quarterly basis):

Legal and Market Model

The INET Nordic Market Model will be updated, effective as of launch of the service in production and changes will be available before the effective date. 

Time Schedule

• INET Test (NTF), GCF TST4 – Currently in test
• INET Production – January 22, 2018
   

Questions and feedback

For further information and feedback concerning this information, please contact Anders Green, +46 8 405 67 52, anders.green@nasdaq.com.

Best regards,

Nasdaq Nordic

Nasdaq Nordic represents the common offering by Nasdaq Copenhagen, Nasdaq Helsinki, Nasdaq Iceland and Nasdaq Stockholm. Nasdaq Copenhagen, Nasdaq Helsinki, Nasdaq Iceland and Nasdaq Stockholm are respectively brand names for Nasdaq Copenhagen A/S, Nasdaq Helsinki Ltd, Nasdaq Iceland hf. and Nasdaq Stockholm AB.