During the two minute auction, continuous trading of all SETS equities, the largest and most liquid shares listed on London Stock Exchange, will be paused allowing the whole market the opportunity to take part in the auction process.

How the auction works:
The process will be like that used in London Stock Exchange’s opening and closing auctions. At the commencement of the auction call at 12:00, all orders that have been submitted for that specific auction will be injected immediately. Orders may then be entered, modified and deleted during an auction call, but no automated execution occurs.

Throughout the entire period London Stock Exchange will only disseminate the most up to date indicative auction uncrossing price & size and not the full orderbook. This will be updated whenever orders are added, deleted or modified. At the end of the auction period, the balance of buy and sell orders will be used to calculate the uncrossing price and continuous trading will recommence.

By allowing large orders to be placed without their size being shown to the whole market, the auction enables institutional investors to input larger blocks of shares without revealing their position. In addition, the auction allows private investors to trade alongside professional fund managers at a fair market price.

Brian Schwieger, Head of Equities, London Stock Exchange said:
“This is a very significant change to the trading day, following a detailed consultation with market participants. The auction will allow participants to place orders in a truly confidential, yet price-forming environment via a well understood mechanism. Its introduction is in direct response to demand from buy-side participants for neutral, infrastructure-led solutions for MiFID II friendly alternatives to dark pools and a midday benchmark.”

As with the current opening and closing auction, there will be no additional fee or extra direct cost imposed on customers in order to take part in the auction. The auction will apply to all SETS equity securities.