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Ashton System to Go Live on Philadelphia Exchange by July
By Mark Henderson
The Securities and Exchange Commission's March 24 approval of the Philadelphia Stock Exchange's application to operate Ashton Technology Group's volume-weighted average price trading system (VTS) on its equity trading floor sets the stage for the system's launch by July 1, Fredric Rittereiser, Ashton's CEO, said last week.
VTS is a pre-opening order matching system for the execution of large-sized stock orders at the volume-weighted average price (VWAP). Ashton and Phlx officials have touted VTS as the first system that enables investors to receive a weighted average price execution on a national securities exchange—one that offers anonymity and no market impact. It is aimed primarily at institutions.
Under the operation of VTS, pre-opening matches will be assigned the daily volume-weighted average price determined from all trades occurring during the same day as reported to the Consolidated Tape Association. Following a morning order-entry period, VTS executions will occur at about 9:20 a.m. (local time), with the VWAP calculated and assigned at about 4:20 p.m., according to the Phlx.
Under terms of the one-year pilot program approved by the SEC, the securities eligible for matching though VTS will be limited to the 300 most highly liquid and highly capitalized securities. In its approval order, the SEC said it believed the prices of such large, actively traded securities "are difficult to impact, and that as a result, the system's volume-weighted average price values should be less susceptible to manipulation."
VTS will operate as a separate exchange system made available to Phlx members and their nonmember customers.
The SEC approval order comes over two years after Phlx initially field a rule change to permit the operation of VTS. Rittereiser said the delay in approval was partly the result of Ashton and Phlx having to overcome the agency's market manipulation concerns, "because of the way VWAPs have been abused in the past," and also because of needed surveillance upgrades at the Phlx.
Rittereiser said he expected to have signed on 50 participants—"more than half of which will be institutions, the rest broker dealers"—by the July 1 launch. He said he expected to have more than 100 institutions participating in the system by year-end.
Rittereiser also predicted that "by year end, we'll be doing 20 million shares per day on the system." Referring to the only other system that is currently operating as a facility of an exchange, he said, "there is no doubt that we'll be bigger than Optimark."
ATG
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