Some of Wall Street's biggest banks are executing end-of-day equity trades off-exchange, matching orders in-house and bypassing closing auctions. The move is a sign that the financial industry has begun to embrace new technology as it tries to cut costs in an era when many firms have been forced by regulators to raise capital or sell assets. The move, prompted by exchange operators increasing fees, has gained popularity as index trackers created a surge in end-of-day volumes, but raises questions over transparency and closing price formation. Last year, closing auctions in S&P 500 stocks accounted for 8% of total volumes, a near four-fold increase since 2004, according to Credit Suisse.
Some of Wall Street's biggest banks are executing end-of-day equity trades off-exchange, matching orders in-house and bypassing closing auctions. The number of closing-price trades executed with “guaranteed close” by broker-dealers like Goldman Sachs increased from 16% to 32% between 2015 and 2017, according to Virtu. The move, prompted by exchange operators increasing fees, has gained popularity as index trackers created a surge in end-of-day volumes, but raises questions over transparency and closing price formation. Last year, closing auctions in S&P 500 stocks accounted for 8% of total volumes, a near four-fold increase since 2004, according to Credit Suisse.