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Cboe Global to Introduce Quote Depletion Protection Tool

Zacks Equity Research
·4 min read

Cboe Global Markets, Inc. CBOE is set to come up with a new feature known as Quote Depletion Protection (QDP), designed to provide protection and enhance the efficiency of its Midpoint Discretionary Order (MDO). The launch is expected in mid-June 2020.

Developed by CBOE in 2012, MDO is a blended order type that integrates the features of Primary Peg, Midpoint Peg and Discretionary orders. It allows participants to trade more often with maximum price improvement. MDOs can be used by members to post displayed or non-displayed liquidity at the National Best Bid/National Best Offer for Buy/Sell orders with a discretionary range extending to and including the NBBO midpoint. While executed at the NBBO, MDOs are charged 0.03 cents per share and are free for executions in the discretionary range. MDO is available on Cboe EDGX or EDGA Equities Exchange.

The newly launched QDP is designed to eliminate discretion for a limited period to prevent participants from trading in undesirable situations like buying right before price declines or selling right before price rise.

Quote Depletion Protection is designed to abate potential adverse selection risks and enhance trading outcomes.  It is intended to track significant executions of orders that constitute the best bid on the EDGX or EDGA exchange. Further, market participants will be able to enter MDOs with an offset instruction to the NBBO, which is intended to help participants in specifying aggressive pegged prices for MDOs resting on the order book. This process will enhance flexibility.

The use of MDO with QDP is an excellent choice for algorithms that are passive in nature. With this innovative product solution in the works, the company is looking forward to bring new tools to enhance the experience for all types of investors.

CBOE Global continues to explore the development of index and other high margin derivative products to trade on its exchanges.  Through strategic relationships and internal development, it intends to develop proprietary products that meet the needs of the derivatives industry.  In 2019, it  leveraged relationships to extend its product offerings by launching or extending existing new products or services, such as Monday expiring options on XSP, mini-SPX option contract, SPX option expirations related to the 2020 presidential election, development of a future on AMERIBOR, a Cboe Closing Cross to provide post-close trading services at Cboe Europe and developing new benchmarks on MSCI Emerging Markets and EAFE indices.

Shares of this Zacks Rank #2 (Buy) company have underperformed the industry in the past year. The stock has lost 6.9% against the industry’s increase of 8.7%. Nevertheless, its diversified product portfolio and strong liquidity position should drive the stock going forward.

Other Stocks to Consider

Some other top-ranked stocks in the finance sector are MarketAxess Holdings MKTX, Green Dot Corporation GDOT and Deutsche Boerse AG DBOEY.

MarketAxess sports a Zacks Rank #1 (Strong Buy). It operates an electronic trading platform that enables fixed-income market participants to trade corporate bonds and other types of fixed-income instruments worldwide. The company delivered a positive surprise of 3.70% in the last reported quarter.

Green Dot operates as a financial technology and bank holding company in the United States. The company delivered a positive surprise of 20.21% in the last reported quarter. It carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Deutsche Boerse operates as an exchange organization in Europe, the United States, and the Asia-Pacific.  The company delivered a positive surprise of 15.38% in the last reported quarter. It carries a Zacks Rank #2.

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