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Sample SNAPSM Strategies

These strategies are hypothetical examples that illustrates possible outcomes and should not be used to make investment decisions. These discussions and materials are for educational purposes only and are not intended to provide investment advice.

 

Example #1:
Aggressive acquisition or liquidation of a position.

Possible strategy: Initiate a SNAP Auction with a marketable or hypermarketable limit price for some or all of the required size. Periodically initiate additional SNAP Auctions to complete the balance of the larger transaction.

BUY 50,000 XYZ 30.25 SNAP

Advantage: Making other buy side participants aware of your buying/selling interest and attracting them as a natural contra party to participate in subsequent SNAP Auctions if they have interest in the other side of your trade.

Disadvantage: Information leakage about your buying/selling interest in the absence of a natural contra party may result in adverse price movement. This must be weighed against the desire to be aggressive.

 

Example #2:
Desire to acquire or liquidate a position entirely passively over a period of time in response to more aggressive contra parties.

Possible strategy: Place pegged SNAP Auction Only Orders (Pegged AOOs) at CHX at one or more prices to respond to a more aggressive contra party which may result in an Exchange-initiated SNAP Auction. In effect, this strategy makes a buy side participant a passive liquidity provider or another buy side participant thereby increasing the opportunity for two buy side participants to interact in a large transaction without relying solely on more traditional liquidity providers.  Samples of a set of pegged AOOs for a buyer of shares might include:

BUY 10,000 XYZ   Midpoint Pegged   AOO
BUY 20,000 XYZ   Primary Pegged   AOO
BUY 30,000 XYZ   Primary Pegged   Offset = -2   AOO
BUY 40,000 XYZ   Primary Pegged   Offset = -5   AOO

SNAP Price

Shares Purchased at Auction Price

Above Midpoint

0

Midpoint

0 – 10,000

Between Midpoint and NBB

10,000

NBB

10,000 – 30,000

NBB – 1 tick

30,000

NBB – 2 ticks

30,000 – 60,000

NBB – 3 ticks or NBB – 4 ticks

60,000

NBB – 5 ticks

60,000 – 100,000

Below NBB – 5 ticks

100,000

 
Advantage:
AOOs are undetectable and cannot be pinged. No risk of information leakage until an execution occurs during a SNAP Auction (initiated at the request of another market participant) exists.

Disadvantage: Possible information leakage about your passive buying/selling interest may be guessed, but only after one or more of your AOO orders executes in a SNAP Auction. However, your AOOs may be marked One-and-Done (unknown to anyone but CHX and you), so it is speculative to presume that further buying/selling interest remains at CHX.

 

Example #3:
Moderately aggressive desire to acquire or liquidate a position while searching for significant contra party interest.

Possible strategy: Place a relatively small Start SNAP Order after placing series of pegged SNAP AOOs (Pegged AOOs) at CHX at one or more prices to respond to a more aggressive contra party which may respond to your requested SNAP Auction. In effect, this strategy allows the participant to initiate a relatively small, aggressive buy order while simultaneously acting as a liquidity provider for a seller waiting for a buyer to show up. Samples of a set of pegged AOOs for a buyer of shares might include:

BUY 50,000 XYZ   Midpoint Pegged   AOO
BUY 50,000 XYZ   Primary Pegged   AOO
BUY 50,000 XYZ   Primary Pegged   Offset = -2   AOO
BUY 50,000 XYZ   Primary Pegged   Offset = -5   AOO
BUY 25,000 XYZ 30.25 SNAP

When NBBO is 30.21 – 30.25

SNAP Price

Shares Purchased at Auction Price

Above 30.25

0

30.25

0-25,000

30.24

25,000

30.23

25,000 – 75,000

30.22

75,000

30.21

75,000 – 125,000

30.20

125,000

30.19

125,000 – 175,000

30.18 – 30.17

175,000

30.16

175,000 – 225,000

Below 30.16

225,000

 
Advantage:
AOOs are undetectable and cannot be pinged. No risk of information leakage exists until an execution occurs during a SNAP Auction (initiated at the request of another market participant). If significant contra party size shows up, whether you are a buyer or seller is uncertain.

Disadvantage: Possible information leakage about your passive buying/selling interest may be guessed, but only after one or more of your AOO orders executes in a SNAP Auction. However, your AOOs may be marked One-and-Done (unknown to anyone but CHX and you), so it is speculative to presume that further buying/selling interest remains at CHX.