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SNAPSM Auction FAQs

Triggering SNAPSM Auctions

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When will SNAPSM Auctions be available?

Participant- and Exchange-initiated SNAP Auctions have been approved by the SEC. CHX SNAP Auctions are now available.

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When can a SNAPSM Auction occur?

A SNAP Auction can take place in a given security any time during the regular trading session that occurs: (1) at least five minutes after the first published quote by the primary market in that security after the start of the regular trading session, a regulatory trading halt, or a Limit Up / Limit Down trading pause; (2) at least five minutes before the scheduled end of the regular trading session; and (3) at least one minute since the end of the most recent SNAP Auction in that security.

Assuming no trading halt, Limit Up / Limit Down trading pause, or other unusual circumstances related to a security, CHX could process more than 360 SNAP Auctions in a given security during a trading day.

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Can CHX process SNAPSM Auctions in multiple securities simultaneously?

Yes. CHX can operate SNAP Auctions in multiple securities simultaneously and independently without interfering with open trading in any of approximately 8200 other securities eligible for trading on CHX each day.

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Who can request a SNAPSM Auction?

Any CHX market participant can request a Participant-initiated SNAP Auction by submitting a Start SNAP Order to CHX at an appropriate time.

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What is a Participant-initiated Start SNAPSM Order?

A Start SNAP Order is a simple limit order submitted with an order modifier that requests a SNAP Auction. When CHX accepts your Start SNAP Order, a Participant-initiated SNAP Auction begins.

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What is an Exchange-initiated SNAPSM Auction?

Exchange-initiated SNAP Auctions can be activated as a result of periodic CHX polling of SNAP eligible symbols. Polling only occurs at the same times that a Participant-initiated SNAP Auction could begin. CHX expects that each symbol for potential SNAP Auction inclusion will be polled no more often than once each minute and no less often than once each five minutes.

Learn more about Exchange-initiated SNAP Auctions.

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What other requirements must be met before a SNAPSM Auction will begin?

Several requirements must be met before any SNAP Auction will begin. If any one requirement is not met, a SNAP Auction will not be triggered, and there will be no information published to indicate that a SNAP Auction had been requested.

The requirements are:

  • The security must be open for trading at the time CHX receives the Start SNAP Order. 
  • There must be a two-sided protected quotation in the security at or within the Limit Up / Limit Down Price Bands at the time CHX receives the Start SNAP Order. 
  • There must be a previous last sale price in the security although it does not have to be from the current trading day.
  • The Start SNAP Order must be of a certain minimum size. The minimum size is determined based on the limit price of the Start SNAP Order as shown in the table below which can also be found in CHX Article 1, Rule 2(h)(1)(A)(i). 
     

    Limit Price

    Minimum Size

    From

    To

    0.0001

    0.9999

    100,000

    1.00

    4.99

    50,000

    5.00

    24.99

    25,000

    25.00

    49.99

    20,000

    50.00

    99.99

    10,000

    100.00

    499.99

    5,000

    500.00

    ----

    2,500

     

    Special Issues

    Minimum Size

    Berkshire Hathaway, Inc. (BRK-A)

    100


     
  • The Start SNAP Order must be marketable or hypermarketable at the time it is received by CHX. CHX will not initiate a SNAP Auction based on a Start SNAP Order seeking to buy shares below the NBO or seeking to sell shares at a price above the NBB.
  • If the Reg SHO Rule 201 short sale restriction is in effect for the security at the time the Start SNAP Order is received, CHX will not initiate a SNAP Auction based on a Start SNAP Order seeking to make a short sale.
  • CHX outbound routing services must be operational for the security at the time the Start SNAP Order is received. 
  • There cannot be a SNAP Auction already underway in the same security. If CHX receives a new Start SNAP Order when there is already a SNAP Auction underway in the same security, depending on the state of the SNAP Auction already underway and on instructions included in the new Start SNAP Order (see below), CHX will either reject the new Start SNAP Order or attempt to convert the new Start SNAP Order into a SNAP Auction Only Order (AOO) and include it in the SNAP Auction.
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Are there any parameters that require a minimum execution size to take place in a SNAPSM Auction?

There is an optional minimum SNAP execution size condition on the Participant-initiated Start SNAP Order message which instructs CHX that a SNAP Auction should be abandoned if the projected number of shares to be executed is fewer than the minimum number of shares required to initiate the SNAP Auction as shown in the table above. This optional minimum SNAP execution size condition provides the CHX Participant initiating the SNAP Auction the ability to minimize information leakage if the SNAP Auction would result in a small number of shares being executed. The CHX Participant initiating the auction must affirmatively select the optional minimum SNAP execution size condition.

For example, assume that a CHX Participant submits the following Start SNAP Order: BUY 50,000 XYZ 30.00 SNAP. The table above indicates that the minimum Start SNAP Order size at a price of $30.00 is 20,000 shares. CHX will begin the SNAP Auction. At the point where CHX can determine the projected number of shares to be executed, CHX will determine if this parameter has been set. If CHX projects that fewer than 20,000 shares will be executed as a result of the SNAP Auction, then CHX will cancel the auction.  

CHX believes that some market participants would want to use the optional minimum execution size condition under the following circumstances:

For example, if 5,000 shares are to be matched, and if the Start SNAP Order was marketable or hypermarketable at the time it was received, it is most likely (but not certain) that the SNAP Auction would be priced at or above the NBO. If 5,000 shares are executed at or above the NBO price as a result of the SNAP Auction, this would leak information about the unexecuted remainder of the Start SNAP Order. It would be clear that at least 15,000 shares were not executed and potentially remain available for purchase. However, if at least 20,000 shares are executed as a result of the SNAP Auction, regardless of price of the SNAP Auction, there would be no certainty as to whether any unmatched buying interest remains in the marketplace.

Note: There is no guarantee that the Start SNAP Order will execute this minimum size. It is possible that more aggressively priced orders will participate in the SNAP Auction.

The default setting for this parameter is Off.

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How is a Start SNAPSM Order handled if received when a SNAPSM Auction is already underway?

If CHX receives a new Start SNAP Order when a SNAP Auction is already underway and the SNAP Auction Order Acceptance Period is still underway (i.e., CHX is still receiving new orders to participate in the SNAP Auction already underway), it is possible for the new Start SNAP Order to participate in the SNAP Auction. There is an optional parameter available on the new Start SNAP Order which, if set, will make the new Start SNAP Order eligible to participate in the SNAP Auction already underway if the order meets the size requirement for a SNAP Auction Only Order (AOO)

  • If the new Start SNAP Order meets this requirement, it will be included in the current SNAP Auction regardless of its side or limit price. At the end of the SNAP Auction already underway, any unexecuted balance of the new Start SNAP Order – which has been converted to a SNAP AOO – will be cancelled and sent back to the order sender.
  • If the new Start SNAP Order does not meet this minimum size requirement, it will be rejected.

If CHX receives a new Start SNAP Order when a SNAP Auction is already underway and the SNAP Auction Order Acceptance Period has ended (i.e., CHX is no longer receiving new orders to compete in the SNAP Auction already underway), regardless of any parameter, a new Start SNAP Order will be rejected.

The default setting for this parameter is On.

Starting and ending a SNAPSM Auction – Notifications

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How can I know if CHX is currently operating a SNAPSM Auction in a security?

When either a Participant- or an Exchange-initiated SNAP Auction is triggered, CHX will do the following:

  • Publish a Zero Bid and Offer on the appropriate SIP: 0.00 – 0.00; 0 x 0. The SIPs have approved the use of quote condition 4 to accompany this quote to indicate that SNAP Auction is underway at CHX.
  • Publish a message on the CHX Book Feed indicating that a SNAP Auction is underway.

When CHX completes a SNAP Auction and has resumed open trading as a fully lit marketplace, CHX will do the following:

  • Publish a new quote on the appropriate SIP without this special quote condition code. 
  • Publish a message on the CHX Book Feed indicating that open trading is underway.

Gathering available information from CHX during a SNAPSM Auction

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What information will CHX publish during a SNAPSM Auction?

Once CHX has announced the beginning of a SNAP Auction, the only information that CHX will provide prior to resuming open trading is:

  • Execution reports sent only to the parties who executed orders as part of the SNAP Auction or during the process of resuming open trading as a fully lit marketplace and;
  • Trade reports sent to the appropriate SIP.

In particular, CHX will not:

  • Disclose the presence of any order at CHX during the SNAP Auction process until CHX resumes open trading as a fully lit marketplace. The CHX Book Feed will provide no such information, and CHX will not publish a protected quote. Unlike auctions on other national securities exchanges, CHX will not provide any information about imbalances, projected auction price, or projected auction size during a SNAP Auction. Publishing such information is a known source of information leakage and SNAP Auctions have been designed to avoid this.

    Certain orders are not eligible to participate in a SNAP Auction. Any such order present in the CHX Book prior to the start of a SNAP Auction will be cancelled only after CHX has gone dark. This prevents information leakage which would indicate whether these orders will be included in the SNAP Auction.

    Certain liquidity providing orders – SNAP Auction Only Orders (AOOs) – may have been resting fully undetectable at CHX for hours. These orders are activated for inclusion in a SNAP Auction only after CHX has gone dark, and any unexecuted portion of an AOO is removed from the CHX Auction Book (either cancelled if marked One-and-Done or made inactive and undetectable while waiting for a subsequent SNAP Auction, depending on the type of SNAP AOO) before CHX returns to open trading and displays the contents of the CHX Book on the CHX Book Feed. Thus AOOs are undetectable, unpingable, and only eligible to be matched in the dark period of a SNAP Auction.
  • Disclose the time when the SNAP Order Acceptance Period will end, (i.e., when CHX will close the SNAP Auction to new eligible orders). The SNAP Auction Order Acceptance is designed to minimize gaming opportunities by randomizing its length between 475 and 525 milliseconds. CHX wants to attract serious buyers and sellers to SNAP Auctions and minimize gaming potential.
  • Show the time when CHX will return to open trading. After the randomized SNAP Auction Order Acceptance Period concludes, CHX prices the SNAP Auction based on the orders in the SNAP CHX Book and protected quotes published by all other market centers. CHX then sends orders to trade against protected quotes elsewhere. CHX waits up to 200 milliseconds to get a response from other market centers. Only then does CHX complete the SNAP Auction process, report executions to order senders, report trades to the SIP, and begin the transition to open trading as a fully lit market. Because the time to do this is variable, there is yet another randomizing factor introduced which further minimizes gaming opportunities related to SNAP Auctions.

From announcement of the start of a SNAP Auction until the return to open trading, CHX expects a SNAP Auction to take less than one second to complete.

Cancelling orders during a SNAPSM Auction

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I have an order resting in the CHX Book at the start of a SNAPSM Auction.  Can I cancel it after the SNAPSM Auction begins?

No. If CHX receives a request to cancel any order during a SNAP Auction, the cancel is queued until the end of the SNAP Auction. Cancels are handled in First In / First Out (FIFO) sequence prior to CHX returning to open trading.

CHX has developed the Cancel on SNAP Auction order modifier to provide orders senders the ability to submit an order to CHX which is only eligible to match during open trading. If a SNAP Auction occurs, CHX will automatically cancel a resting order marked Cancel on SNAP Auction so that it is not captive to a SNAP Auction. 

A CHX Participant may set a firm default for this cancel parameter. If the Participant does not elect a default setting, CHX will set the firm default so that orders will not be cancelled at the start of a SNAP Auction.

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What if I send an order to CHX during a SNAPSM Auction? Can I cancel that order before the SNAPSM Auction takes place?

No. This is another design feature intended to reduce gaming opportunities.  CHX has designed SNAP Auctions to provide a means for market participants with a serious interest in buying or selling shares to have a safe place to meet, minimizing many of the problems found in other trading environments. 

Market participants with a serious buying or selling interest should find SNAP Auctions a safe place to send their orders. They can protect themselves in many ways.

  • Using a SNAP Auction Only Order (AOO) assures that your buying or selling interest cannot be seen or otherwise detected other than matching – and the matching of SNAP AOOs are only possible during a SNAP Auction. Described below, based on the order sender’s preference, SNAP AOOs can either be cancelled at the end of the first SNAP Auction in which the order is eligible to match (One-and-Done) or can remain in effect for the trading day (Day). An order sender who wants to respond to a SNAP Auction with a SNAP AOO can mark it One-and-Done.
    • If the One-and-Done SNAP AOO is received in time to participate in a SNAP Auction already underway, assuming it meets all requirements, it will be eligible to match during the current SNAP Auction and any unexecuted balance will be cancelled at the end of the SNAP Auction. The SNAP Auction is designed so that a SNAP AOO will be detectable. This measure helps avoid information leakage. 
    • If the One-and-Done SNAP AOO is received after the SNAP Auction Order Acceptance Period, it will not be eligible to participate in the SNAP Auction currently underway. It will be eligible to participate in the next SNAP Auction for the security if another SNAP Auction takes place.
  • Using any other eligible order type and marking it Cancel on SNAP Auction allows CHX to cancel the order immediately if it receives such an order while a SNAP Auction is underway. This provides a safe way to submit orders when the order sender really does not want to risk inability to cancel the order due to a SNAP Auction.
  • During the SNAP Auction, it is possible that the NBBO will change. This can affect algorithmically-priced SNAP AOOs which are pegged to the NBB, NBO, or NBBO Midpoint. All SNAP AOOs can be submitted with an overriding limit price which assures that the pegging algorithm will not result in a price more aggressive than the order sender is willing to accept. This is a design feature of SNAP Auctions to protect order senders from undesired consequences.
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How are cancel/replace orders handled during a SNAPSM Auction?

A:  Cancel/replace orders are handled similarly to cancels during a SNAP Auction. They are queued for processing after the SNAP Auction and before CHX returns to an open trading state.

Understanding SNAPSM Auction Only Orders (AOOs)

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What are SNAPSM AOOs?

AOOs use a new order modifier designed specifically to neutralize the speed advantage that some market participants have. AOOs are held by CHX away from the CHX Book. They are completely undetectable and ineligible for matching until a SNAP Auction occurs. 

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Are AOOs really indications of interest?

No. AOOs are activated immediately upon the start of a SNAP Auction in the associated security. Unlike an indication of interest, once a SNAP Auction begins, an AOO in that security cannot be cancelled.

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Who can submit AOOs?

Anyone who can submit an order to CHX can submit an AOO.

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When will CHX accept AOOs?

CHX will accept AOOs from the start of the Early Trading Session (currently 6:00 am Central Time) until five minutes prior to the close of the Regular Trading Session (currently 3:00 pm Central Time).

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What is the time in force of an AOO?

An AOO can either have a time in force of One-and-Done or Day.

A One-and-Done AOO is eligible to participate in only one SNAP Auction. After that SNAP Auction is completed, any unexecuted portion of a One-and-Done AOO is cancelled back to the order sender. A One-and-Done AOO may be deactivated and participate in a subsequent SNAP Auction if the current SNAP Auction in which it is participating prematurely ended.

A Day AOO is eligible to participate in multiple SNAP Auctions on the trading day on which it was submitted. After each SNAP Auction is completed, any unexecuted portion of a Day AOO is removed from the CHX Auction Book and stored in a manner whereby it cannot be detected or matched. If there is a subsequent SNAP Auction in that security, the unexecuted balance is eligible to participant in that SNAP Auction.

All AOOs are cancelled at the end of the trading day. CHX does not accept any orders with a time in force longer than the current trading day.

The default setting for this SNAP AOO parameter is Day Order.

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What form can an AOO take?

An AOO can be a simple limit order. It can also be algorithmically pegged to the NBB, NBO, or NBBO Midpoint (Pegged AOO). Furthermore, a Pegged AOO can also have a limit price which should not be exceeded. Pegged AOOs provide protection against intraday price swings to assure that a resting Pegged AOO placed early in the trading day should not result in an execution more aggressive than the AOO’s limit price.

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How do I specify parameters for a Pegged AOO buy order?

Pegged AOO buy orders have certain differences from pegged orders offered elsewhere. There are good reasons for each of these differences.

Like pegged buy orders offered elsewhere, Pegged AOO buy orders can be pegged to the NBB (primary pegged), the NBO (market pegged), or the NBBO Midpoint. 

However, unlike pegged buy orders offered elsewhere, primary and market pegged AOOs have somewhat different characteristics.

  • No offset. The pegged value is set to equal the NBB (primary) or NBO (market). If an optional limit price is included with the AOO, the algorithmic price is the lesser of the pegged value and the limit price.
  • Positive offset. The pegged value is set to equal the NBB (primary) or NBO (market) plus the specified number of minimum trading increments permitted. This differs from pegged orders offered elsewhere in two ways:
    • The pegged value can be hypermarketable, i.e., greater than the NBO. This is done by design to allow aggressive buyers to search for significant liquidity at and through the NBO price. (A hypermarketable pegged value would not work properly outside of an auction environment because it would forever chase the NBO price higher in a positive feedback loop. It is, however, workable in the context of a single price SNAP Auction.)
    • The price increments are not in pennies. This change has been introduced in anticipation of the upcoming Tick Test Pilot Program.  Minimum price increments below $1.00 are $0.0001. Minimum price increments above $1.00 will be in increments of $0.01 or $0.05 (for certain Tick Test Pilot Program securities) or at another value in exceptional cases such as very high priced securities.
    If an optional limit price is included with the AOO, the algorithmic price is the lesser of the pegged value and the limit price.
  • Negative offset. The pegged value is set to equal the NBB (primary) or NBO (market) minus the specified number of minimum trading increments permitted. This differs from pegged orders offered elsewhere because price increments are not in pennies. This change has been introduced in anticipation of the upcoming Tick Test Pilot Program.  Minimum price increments below $1.00 are $0.0001. Minimum price increments above $1.00 will be in increments of $0.01 or $0.05 (for certain Tick Test Pilot Program securities) or at another value in exceptional cases such as very high priced securities.

    If an optional limit price is included with the AOO, the algorithmic price is the lesser of the pegged value and the limit price.

    AOO buy order pegged to the NBBO Midpoint can also have an optional limit price. If an optional limit price is included with an AOO buy order pegged to the NBBO Midpoint, the algorithmic price is the lesser of the pegged value and the limit price.
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How do I specify parameters for a Pegged AOO sell order?

Pegged AOO sell orders have certain differences from pegged orders offered elsewhere. 

Like pegged sell orders offered elsewhere, Pegged AOO sell orders can be pegged to the NBO (primary pegged), the NBB (market pegged), or the NBBO Midpoint. 

However, unlike pegged sell orders offered elsewhere, primary and market pegged AOOs have somewhat different characteristics.

  • No offset. The pegged value is set to equal the NBO (primary) or NBB (market). If an optional limit price is included with the AOO, the algorithmic price is the greater of the pegged value and the limit price.
  • Positive offset. The pegged value is set to equal the NBB (primary) or NBO (market) plus the specified number of minimum trading increments permitted. The pegged value is set to equal the NBO (primary) or NBB (market) plus the specified number of minimum trading increments permitted. This differs from pegged orders offered elsewhere because price increments are not in pennies. This change has been introduced in anticipation of the upcoming Tick Test Pilot Program.  Minimum price increments below $1.00 are $0.0001. Minimum price increments above $1.00 will be in increments of $0.01 or $0.05 (for certain Tick Test Pilot Program securities) or at another value in exceptional cases such as very high priced securities.

If an optional limit price is included with the AOO, the algorithmic price is the greater of the pegged value and the limit price.

  • Negative offset. The pegged value is set to equal the NBO (primary) or NBB (market) minus the specified number of minimum trading increments permitted. This differs from pegged orders offered elsewhere in two ways:
    • The pegged value can be hypermarketable, i.e., less than the NBB.  This is done by design to allow aggressive sellers to search for significant liquidity at and through the NBB price. (A hypermarketable pegged value would not work properly outside of an auction environment because it would forever chase the NBB price lower in a positive feedback loop. It is, however, workable in the context of a single price SNAP Auction.)
    • This differs from pegged orders offered elsewhere because price increments are not in pennies. This change has been introduced in anticipation of the upcoming Tick Test Pilot Program. Minimum price increments below $1.00 are $0.0001. Minimum price increments above $1.00 will be in increments of $0.01 or $0.05 (for certain Tick Test Pilot Program securities) or at another value in exceptional cases such as very high priced securities.

If an optional limit price is included with the AOO, the algorithmic price is the greater of the pegged value and the limit price.

AOO sell order pegged to the NBBO Midpoint can also have an optional limit price. If an optional limit price is included with an AOO sell order pegged to the NBBO Midpoint, the algorithmic price is the greater of the pegged value and the limit price.

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Where can I find examples of Pegged AOO orders?

Examples of Pegged AOOs can be found here.

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When are Pegged AOOs priced for inclusion in a SNAPSM Auction?

After a SNAP Auction is triggered and the SNAP Auction Order Acceptance Period has completed (another 475 to 525 milliseconds), CHX takes a market snapshot to establish the market state at the time the SNAP Auction is priced. The NBBO at this time is used to price any Pegged AOOs.

CHX immediately establishes the SNAP Price based on all SNAP Auction eligible orders held at that time by CHX and any protected quote(s) in other market centers.

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Can any market participant detect the presence or price of any SNAPSM AOOs before or after they are priced?

No. CHX goes completely dark before any SNAP AOOs are added to the SNAP CHX Book. The SNAP CHX Book is designed to be invisible to any party other than CHX. All SNAP AOOs are either cancelled or removed from the SNAP CHX Book awaiting another SNAP Auction before CHX returns to being a lit market.  There is absolutely no visibility of any SNAP AOO.

If a SNAP AOO participates in a SNAP Auction, no market participant – other than the party that submitted the SNAP AOO and received an execution report – has any way to know that any SNAP AOO was involved in the auction. All that is known publicly is that certain trades took place at CHX at the SNAP Price during the SNAP Auction. There is no way to discern whether those orders were submitted in response to the start of the SNAP Auction as limit orders or whether those orders were SNAP AOOs submitted either prior to the SNAP Auction or during the SNAP Auction. Furthermore, there is no way to discern whether those orders were completely filled or partially filled, and there is no way to discern whether those orders were cancelled – while CHX was fully dark – or survived the SNAP Auction to be included in any subsequent SNAP Auction.

Terminating a SNAPSM Auction

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Once a SNAPSM Auction is triggered, is it certain that the SNAPSM Auction will continue to completion?

No. There are several circumstances under which a SNAP Auction will commence but will not result in auction completion. At the end of the SNAP Auction Order Acceptance Period, CHX will terminate a SNAP Auction without matching any orders if: (1) a regulatory trading halt has been declared in the security; (2) a Limit Up / Limit Down trading pause has been declared in the security; (3) CHX’s outbound order routing services are no longer available; or (4) the Participant submitting the Start SNAP Order requested that the SNAP Auction be terminated if a minimum number of shares is not projected to be executed as a result of the SNAP Auction. 

Satisfying protected quotation(s) of other market centers

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Does CHX honor protected quotations of other market centers if a SNAPSM Auction is priced through protected quotes at one or more market centers?

Yes. All protected quotes from other market centers are integrated into determining the SNAP Price. To the extent that the SNAP Price would trade through one or more of those protected quotes, CHX will send ISO satisfaction orders to the other market centers to comply with SEC Rule 611.

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How does CHX determine which orders to route to other market centers to comply with SEC Rule 611?

Orders routed to comply with SEC Rule 611 may receive a better price than the SNAP Price. To incentivize market participants to submit their most competitively priced bids or offers to a SNAP Auction, CHX will route the most competitive buy orders to satisfy offers at other market centers and route the most competitive sell orders to satisfy bids at other market centers. This gives the most competitive orders held by CHX the greatest possibility of being executed at a price better than the SNAP Price.

CHX waits up to 200 milliseconds for other market centers to respond to these routed orders so that any unexecuted shares can be returned to the SNAP CHX Book and remain eligible to match at the SNAP Price even if though they were not executed at another market center.

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In addition to routing for SEC Rule 611 compliance purposes, does CHX route any other orders as part of a SNAPSM Auction?

Yes. To the extent that CHX does not have sufficient liquidity to match all orders eligible to participate in a SNAP Auction and the protected quote of another market center at the SNAP Price would increase the number of shares executed as part of a SNAP Auction, CHX will route to other market centers to obtain the additional liquidity afforded by such protected quotes.

Additionally, when the Tick Test Pilot goes into effect, for securities in Group 3 which are subject to the Trade-At provision, CHX intends – subject to SEC approval – to route orders to satisfy protected quotes of other market centers at the SNAP Price prior to executing nondisplayed shares at CHX at the SNAP Price.

Returning to lit market status after SNAPSM Auction conclusion

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How does CHX return from a dark SNAPSM Auction to operating as a fully lit market?

Assuming that a trading regulatory halt or pause which requires CHX to halt trading is not in effect, CHX will transition the unexecuted remainder of each eligible order from the SNAP CHX Book to the CHX Book for open trading retaining price/time priority. Such orders may post to the CHX Book, execute against resting orders on the CHX Book, be deactivated and queued, be routed away or cancelled, depending on the state of the NBBO at the time of transition and the terms of the order itself. AOOs that are eligible to participate in a subsequent auction would be placed in the inactive AOO queue in the order in which they were originally received by the CHX. After all orders on the SNAP CHX Book have been transitioned, new orders and cancel messages on the FIFO queue would be processed in the order in which they were received.

If a trading halt or pause which requires CHX to halt trading is in effect at the time of transition to open trading, CHX will not initiate the transition to open trading. Please refer to Article 18, Rule 1(c), which details the interplay between SNAP Auctions and halts and pauses.

Protecting against information leakage

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What design steps has CHX taken to minimize or eliminate information leakage in SNAPSM Auctions?

CHX never discloses the side, size, or limit price of the Participant-initiated Start SNAP Order which requests a SNAP Auction nor does CHX disclose whether a SNAP Auction was Participant-initiated or Exchange-initiated. There is no way of knowing whether the auction was started by a marketable/hypermarketable Start SNAP Order or whether it was initiated because of matching opportunities by resting SNAP Auction Only Orders.

  • Participant-initiated Start SNAP Order Side. When trades resulting from a SNAP Auction are reported, there is no way for anyone outside of CHX to determine whether the SNAP Auction was initiated by a Participant or by CHX. Even if one presumes that it was Participant-initiated, one might then conclude whether the Participant-initiated Start SNAP Order was a buy order or a sell order from the SNAP Price. However, any such conclusion is only a guess.
    • The presence of preexisting SNAP Auction Only Orders, other resting orders at CHX, and orders submitted in response to the start of a SNAP Auction, may result in an execution inside the NBBO. If the total number of shares matched exceeds the minimum size requirement for a Start SNAP Order to result in a SNAP Auction, it may be impossible for any party to know the side of the Start SNAP Order with certainty.
    • A SNAP Auction may result in a SNAP Price at or outside the NBBO.  While one might jump to a conclusion based on the SNAP Price being outside the NBBO, it could be false. If the total number of shares matched and executed as a result of orders routed to other market centers by CHX exceeds the minimum size requirement for a Start SNAP Order to result in a SNAP Auction, it may be impossible for any party to know the side of the Start SNAP Order with certainty.
    • If the number of shares executed at CHX or routed away as a result of a SNAP Auction is fewer than the minimum size requirement for a Start SNAP Order to result in a SNAP Auction, the side of the Start SNAP Order will be apparent. However, any party submitting a Start SNAP Order can protect this from happening by selecting the optional Start SNAP Order parameter which terminates a SNAP Auction if a SNAP Auction is not projected to result in execution of at least the minimum size requirement. If the minimum size requirement is not met, no trades will take place, and no information about the side of the Start SNAP Order will be revealed.
  • Start SNAP Order size. The CHX Participant initiating a Start SNAP Order can avoid revealing the side of the Start SNAP Order by selecting the optional minimum SNAP execution size condition which terminates a SNAP Auction if a SNAP Auction is not projected to result in execution of at least the minimum size requirement. 
    • If the minimum size requirement is not met, the SNAP Auction will be terminated. Since no trades will be executed as part of the terminated SNAP Auction, other market participants will have no indication as to whether the Start SNAP Order was for the minimum size or a greater number of shares.
    • If the minimum size requirement is met and the SNAP Auction is completed with matched trades, there is no indication as to whether or not additional size was sought by the Start SNAP Order except under certain circumstances when certain parties participating in the SNAP Auction may know (with certainty) that the Start SNAP Order was fully filled. Any other party participating in the SNAP Auction will have no certain information regarding the Start SNAP Order. Any party not participating in the SNAP Auction will have no such information regarding the Start SNAP Order.
  • Start SNAP Order limit price. When a SNAP Auction begins, it is typically impossible for anyone outside of CHX to determine whether it was initiated by a Participant or by CHX. A market participant who speculates that the SNAP Auction was Participant-initiated would still have difficulty determining the terms of the initiating Start SNAP Order that resulted in the SNAP Auction had a limit price that was either marketable or hypermarketable at the time the SNAP Auction began. However, until CHX reports trades resulting from a SNAP Auction, there is no way to determine whether the Start SNAP Order sought to buy shares at or above the NBO or to sell shares at or below the NBB.
    • If the Start SNAP Order selects the optional minimum SNAP execution size condition and the minimum size requirement is not met, the SNAP Auction will be terminated. Since no trades will be executed as part of the terminated SNAP Auction, other market participants will have no indication as to whether the Start SNAP Order was for the minimum size or a greater number of shares.
    • If the Start SNAP Order does not select the optional minimum SNAP execution size condition, the SNAP Auction will continue. Trades executed at CHX as part of the SNAP Auction or orders routed to other market centers may provide some information about the Start SNAP Order including the side of that order and, possibly, that some portion of the order was not executed in the SNAP Auction.

Understanding resting orders (from open trading included in a SNAPSM Auction)

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What orders which are resting in the CHX Book during open trading are eligible to participate in a SNAPSM Auction?

Any order which is resting in the CHX Book when a SNAP Auction begins is eligible to be included in a SNAP Auction unless the order is marked Cancel on SNAP Auction as a result of a default setting by the order sending firm or explicit terms of the order present when it is initially submitted to CHX.

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I have a resting order on the CHX Book with certain order modifiers. How does CHX treat my order during a SNAPSM Auction?

Limit orders resting on the CHX Book that are not marked Cancel on SNAP Auction will be handled as routable simple limit orders during a SNAP Auction. To this end, the following modifiers shall be deactivated in the subject security during a SNAP Auction: CHX Only, Post Only, Do Not Route, Match Trade Prevention*, Always Quote, and Reserve Size. However, limit orders marked Do Not Display and Reserve Size will maintain execution priority on the SNAP CHX Book relative to the other limit orders being transitioned to the SNAP CHX Book from the CHX Book. Prior to transitioning orders to the CHX Book, the aforementioned modifiers will be reactivated.

If this deactivation of specified order modifiers is unacceptable to the order sender, the Cancel on SNAP Auction order modifier can be used to assure that the order is cancelled if a SNAP Auction takes place.

* CHX notes that the deactivation of the Match Trade Prevention functionality during a SNAP Auction could result in self trades by a Participant that may subject the Participant to regulatory scrutiny by CHX’s Market Regulation Department. For more information about CHX’s Match Trade Prevention order modifier, see MR-13-10 (November 22, 2013).

Understanding SNAPSM Auction buy side strategies

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How can the buy side use SNAPSM Auctions when seeking to acquire, increase, decrease, or liquidate a block size position?

The best use of SNAP Auctions by the buy side is largely dependent on how aggressive the buy side is in executing a block size transaction. Feedback that CHX has received from the buy side indicates that the best use of SNAP Auctions depends on how aggressive the buy side is in completing its transaction.

The examples below suggest alternative ways that the buy side could use SNAP Auctions to implement a given strategy.

  • 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.