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London Stock Exchange: Closing Auction And Closing Price Dissemination - SETS Stocks

Date 10/09/2001

Following a review, the Exchange is making some changes to the closing auction process for SETS securities on 10th September 2001, relating to Price Monitoring Extensions parameters and the length of the potential extension periods. This guidance note highlights the revised timings and details how the closing price will be determined where there is no auction match because of a potential excessive price movement with inadequate volume or no matching orders:
  • If auction matching occurs in the closing auction, then closing prices will be based on the closing auction price. If no execution occurs, the Volume Weighted Average Price ("VWAP") of the last ten minutes of continuous trading will be used. If no automatic trades occurred in the VWAP period, the last automatically executed trade price will be used.
  • Currently the exact time that closing prices are disseminated depends on whether auction execution occurs immediately (at approximately 16.35), or after a Market Order and/or Price Monitoring Extension.
  • Price Monitoring Extensions are triggered by movements away from the Reference Price. (VWAP or if no VWAP period trades, last AT).
The VWAP period commences at 16:20 and lasts for a maximum of 10 minutes. The closing auction call commences at the end of the VWAP period and lasts until approximately 16.35.

The system then determines whether a matching price can be calculated for each SETS security.

The London Stock Exchange Service Announcement describing this change is to be found at http://www.londonstockexchange.com/techlib/ word/ser/Live7501.doc

The service announcement indicates the possible scenarios where an extension may be invoked depending on whether market orders are left unexecuted or if the potential auction matching price is outside the price monitoring tolerance. Up to 3 extensions are allowed, 1 Market Order and 2 Price Monitoring extensions. Note that the second Price Monitoring Extension will be the final extension. If at the end of the auction call (including extensions) the potential auction matching price is still outside the price monitoring tolerance, then a volume check is performed, based on half the Normal Market Size of each security (or a minimum 2500 shares). If the auction match volume is sufficient the auction matching price will form the closing price, otherwise the VWAP is utilised (if no trades occur in the VWAP period, the last AT will form the closing price). Note that the Price Monitoring threshold, before an extension is invoked, is 3% (from Reference Price) for FTSE100 securities (SET1) and 5% for all other securities.