January 25, 2018 / 5:19 PM / a year ago

NYSE, Nasdaq to appeal Cboe regulatory win on stock market close

NEW YORK, Jan 25 (Reuters) - Nasdaq Inc and NYSE, which operates the New York Stock Exchange, have said they will appeal the U.S. Securities and Exchange Commission's decision to allow rival Cboe Global Markets to compete for end-of-day stock orders.

The SEC on Jan. 17 approved Cboe's plan to offer brokers an order type that would give them the same official closing auction prices from Nasdaq and NYSE for stocks listed on those exchanges, but with lower execution fees.

Nasdaq and NYSE, which is owned by Intercontinental Exchange Inc, said in Wednesday filings with the SEC that they planned to appeal the decision.

The closing auctions at Nasdaq and the NYSE attract trillions of dollars' worth of trades as fund managers generally price their assets to the end-of-day prices of listing exchanges and execute most of their orders at that time.

Cboe only lists its parent company's stock, choosing instead to focus on exchange-traded funds.

Nasdaq and NYSE have said allowing Cboe to piggyback off their closing auction prices would siphon orders away from the listing markets, distorting prices and making it harder to get trades done.

Cboe said the price discovery process would be unaffected because the exchange would only offer "market on close" orders, which are instructions to execute trades at the final closing auction price, and not "limit on close" orders, which specify price limits.

"Cboe Market Close was designed to create competition around the closing auctions," Bryan Harkins, the exchange operator's head of U.S. equities, said in a statement on Thursday. "Its approval by the SEC staff after a robust and public comment period affirms the case for its introduction."

The average daily volume in closing auctions has risen more than 70 percent to almost 350 million shares in the past five years, while fees have increased 16 percent at the NYSE and 60 percent Nasdaq, Cboe said last year when it first asked the SEC to approve its plan.

On Jan. 8, the NYSE lowered its fees for market on close orders, saying this would increase their volume and "result in a higher level of orders matched and greater liquidity for all exchange auction participants." (Reporting by John McCrank; Editing by Lisa Von Ahn)

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