MidPoint Match

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The International Securities Exchange offers the Midpoint Match (MPM) [1] facility that allows U.S. stock traders and investors to buy or sell equities at the exact midpoint of the bid and ask price (National Best Bid and Offer) versus having to buy at a higher ask price and sell at a lower bid price. This is a platform currently unique to ISE (on the exchange side) and is aimed at helping professional traders and investors minimize trading costs.

Various brokerage firms are including ISE's MidPoint Match in their proprietary trading platforms as an additional routing destination for price improvement.[2][3][4][5]

Displayed and Non-Displayed Volume

As of September 2007, the exchange was trading approximately 6,000 securities on both MidPoint Match (termed a "dark pool" or a "nondisplayed pool of liquidity") and the ISE's Displayed Market, the second piece of ISE Stock Exchange's platform (an electronic, visible market). An aggregated daily volume for both MidPoint Match and the integrated Displayed Market are reported by ISE.

Stocks on Displayed Market

ISE's Displayed Market offers trading in the common stocks and ETFs listed on the NYSE, NYSE Arca, NASDAQ and Amex.

Liquity Pool Alternatives

Orders sent to the ISE Stock Exchange's Displayed Market have exposure to three liquidity pools:

  • First, they receive exposure to the non-displayed MidPoint Match order book and may be automatically executed with price improvement.
  • Second, if no match is found, orders are exposed in the Displayed Market.
  • Finally, if necessary, orders are routed out to achieve the best price.

Solicitation of Interest Order

Also unique to the ISE Stock Exchange is a Solicitation of Interest (SOI) Order. Unlike the MPM order, it carries the ticker symbol of an SOI order to broadcast to market participants that an order is present. There are certain caveats for SOI use[6], which traders should be explore. Benefits include the potential for elevated execution priority over other order types for a 10-second period, additional order flow in names being traded. Additionally, SOI can serve as a trigger mechanism to generate algorithmic responses.

References

  1. Web article. International Securities Exchange. (article not found as of Feb 2008)
  2. Instinet Adds ISE Stock Exchange's MidPoint Match to Nighthawk. Instinet.
  3. Midpoint Match Product Highlights. Interactive Brokers.
  4. Midpoint + Pegging. BATS Trading.
  5. Townsend Analytics Goes Live with Expanded Connection to ISE. Townsend Analytics.
  6. Order Types. International Securities Exchange.