Cboe Australia is seeking feedback on the proposed establishment of a new service – Cboe BIDS Australia – under its existing market licence.

Cboe BIDS Australia is a block and large-sized trading execution service that Cboe Australia proposes to offer under its existing Australian Market License. It allows buy-side and sell-side traders to anonymously trade large parcels of equities while minimising information leakage. Cboe BIDS Australia is designed to improve liquidity, deliver better outcomes for traders, and resolve existing inefficiencies that have impeded trading of large parcels of shares in Australia.

Key to Cboe BIDS Australia are Conditional Messages. These are messages submitted by traders that declare a non-firm interest to trade a symbol at a given size and price. Conditional Messages are considered indications of interest (IOIs) for regulatory purposes. Conditional Messages convert to a Firm Order when invited to do so by a matching contra1 through a process called Firm-up.

Since invitations to Firm-up disclose contra trading interest, the Cboe BIDS Australia service includes measures to monitor the rate at which users Firm-up and take action against users that habitually fail to Firm-up (Conditionals Compliance Mechanism). In doing so, Cboe BIDS Australia will be the first trading execution service in Australia with built-in accountability systems for IOIs.

Another key element of Cboe BIDS Australia is Sponsored Access. Access to the Cboe BIDS Australia order book will be available to Cboe Australia Participants as well as eligible institutional buy-side firms (such as asset managers and superannuation funds) (Sponsored Users), provided that they have been approved by at least one Cboe Australia Participant to use Cboe BIDS Australia (Sponsoring Participant).

Sponsored Users will be able to submit Conditional Messages directly to the Cboe BIDS Australia order book using either a direct FIX connection or BIDS Trader, a front-end interface that integrates into existing order management systems or execution management systems. This direct submission prevents premature leakage of the Sponsored User’s trading intentions.

At Firm-up, a Sponsored User must select a Sponsoring Participant to assign to the Firm Order. The Firm Order is then submitted to the Cboe BIDS Australia order book with the selected Sponsoring Participant’s risk limits applied, and the Sponsoring Participant is responsible for that order under the Cboe Australia Operating Rules (Operating Rules) and ASIC Market Integrity Rules (MIRs). The trade is then executed and reported as an on-market trade.

Cboe BIDS Australia allows Block Trades and Trades with Price Improvement (as defined in the MIRs).

Cboe BIDS Australia follows in the footsteps of similar BIDS implementations around the world. BIDS services have demonstrated a proven track record of reliable operations and strong trader support since their inception. BIDS services are the largest block trading venues in the US, the EU and the UK.

Subject to regulatory clearance, Cboe Australia intends to launch Cboe BIDS Australia in February 2023.

These changes require amendments to the Rules and Procedures and these are covered in a consultation paper. The CP also provides a comprehensive overview of Cboe BIDS Australia and includes a draft copy of the Cboe BIDS Australia Service Description.

The consultation period closes on Friday 19 August 2022. Submissions and any queries should be addressed to au.compliance@cboe.com