The SNAPSM Auction Cycle
Curious about how a SNAPSM Auction works?
To activate a Participant-initiated SNAPSM Auction, simply send a Start SNAP Order to CHX. If your order meets the requirements, CHX will immediately initiate your Participant-initiated SNAP Auction, and the auction cycle begins.
The SNAPSM Auction Cycle in Six Steps
When you initiate a SNAP Auction:
- CHX temporarily withdraws its published quote in XYZ from the National Market System (NMS) and goes dark. No CHX quote data for XYZ is published until your SNAP Auction is completed.
- CHX temporarily suspends real-time order matching in the CHX Book, allowing buy and sell orders for XYZ to accumulate during the SNAP Auction without matching.
- CHX automatically cancels resting orders marked Cancel on SNAP Auction. Participants sending these orders do not want them included in a SNAP Auction.
- CHX queues orders to cancel and cancel/replace for XYZ. No other order can be cancelled or changed until the SNAP Auction is completed.
- CHX publishes the start of each SNAP Auction using the SIP data feeds. CHX will do so by publishing a quote message with bid and offer prices of 0.00, bid and ask sizes of 0, and a quote condition code of 4.
- CHX publishes the start of the SNAP Auction in XYZ on its private CHX Book Feed which is available at no cost.
The transition from open trading to your SNAP Auction period happens in a flash.
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.
When a symbol is polled, CHX will determine whether three sources of liquidity would result in sufficient size to create a SNAP Auction.
- Resting orders in the CHX Order Book – which are not to be cancelled at the start of a SNAP Auction.
- SNAP Auction Only Orders currently held by CHX.
- Protected quotations at other market centers.
Exchange-initiated SNAP Auctions begin when two conditions are met regarding the minimum projected execution size (MPES) and projected execution size (PES) of the Exchange-initiated SNAP Auction. The conditions relate to PES both including and excluding shares projected to be matched at other (“away”) market centers.
- CHX calculates MPES for a Participant-initiated SNAP Auction based on the current NBBO midpoint. For example, if the NBBO is 49.99 bid – 50.01 offered, the NBBO midpoint would be 50.00. The MPES for a Participant-initiated SNAP Auction based with a limit price of 50.00 to start a SNAP Auction is 5,000 shares (250,000 / 50.00).
- The first requirements to start an Exchange-initiated SNAP Auction is:
PES INCLUDING AWAY ≥ MPES
- The second requirements to start an Exchange-initiated SNAP Auction is:
PES EXCLUDING AWAY ≥ 80% of MPES
If, when a given security is polled by CHX and both of these requirements are met, an Exchange-initiated SNAP Auction will begin. This SNAP Auction will then proceed exactly as if it had been triggered by a Participant-initiated Start SNAP Order. In broadcasting the start of a SNAP Auction, CHX will not disclose whether the 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 within the NBBO by resting SNAP Auction Only Orders.
Once the SNAP Auction timer begins, CHX continues to accept new inbound limit orders and SNAP AOOs for inclusion.
The SNAP Auction Order Acceptance Period lasts only 475 to 525 milliseconds. This helps create a safe, randomized environment for legitimate buyers and sellers, and discourages gaming.
When the SNAP Auction Order Acceptance Period ends, new orders are no longer eligible for inclusion. All new orders are held for processing during the transition back to the open trading state.
To complete the SNAP Auction, two conditions must be met:
- XYZ must still be open for trading (i.e., a regulatory trading halt has not occurred)
- CHX outbound routing services must be available to send any required Satisfaction Orders to honor protected quotes elsewhere.
If either condition is not met, the SNAP Auction does not proceed. CHX transitions back to an open trading state.
If both conditions are met, CHX algorithmically prices and activates all SNAP AOOs held as dormant including those orders that arrived during the SNAP Auction Order Acceptance Period.
CHX then determines the single price at which the SNAP Auction will take place.
CHX sends all Satisfactions Orders required to comply with Reg NMS and waits to receive responses.
CHX anticipates that all responses to Satisfaction Orders will be received within 25 milliseconds. Under no circumstances will CHX wait more than 200 milliseconds for these responses.
CHX matches auction eligible orders remaining in the CHX Book at the SNAP Auction Price based on the price/time priority of those orders.
To transition back to the open trading state:
- CHX evaluates the unexecuted portions of SNAP AOOs. Based on order sender instructions, these are either cancelled or are held as dormant and await a subsequent SNAP Auction in XYZ.
- CHX resumes real-time matching of orders.
- CHX re-processes all remaining orders to assure they can be accepted based on the current protected quotation for XYZ. Each order is reaccepted into the CHX Book, routed away, or cancelled.
- CHX processes all queued orders, including new inbound orders, orders to cancel, and orders to cancel/replace for XYZ held during the SNAP Auction. Each is processed in the sequence received.
- When all queued messages have been processed, CHX calculates its new Reg NMS-compliant quotation and publishes it to the SIP and CHX Book Feed.
- CHX updates the CHX Book Feed to show current displayable CHX Book contents and to note that the SNAP Auction in XYZ has ended.
CHX resumes operating as a fully lit market after having been dark for XYZ for less than one second.