2.2. Spot transactions on Euronext

Size: px

Start display at page:

Download "2.2. Spot transactions on Euronext"

Milton Sherman
5 years ago
Views:

1 2.2. Spot transactions on Euronext October 6, 2014 t : spot buying 500 XYZ at 24 EUR ownership transfer on t+2 delivery/settlement on t+2 October 16, 2014 : spot selling 500 XYZ at EUR delivery/settlement on October 18 day-return : gross : 5.00 % net : 2.95 % 31/12/2014 Pr. Didier Folus 1

2 2.3. Margin buying & short selling on Euronext Deferred settlement order : buying October 6, 2014 : buying DSO 500 XYZ at 24 EUR opening a «margin account» deposit 20 % : 2 0 EUR on t (+2) : broker pays stocks, seller delivers October 27, 2014 last trading day of DSO : Mon. 27 Tue. 28 Wed. 29 Thu Fri. 31 Decision : settlement, clearing, putting back 31/12/2014 Pr. Didier Folus 2

3 Decision at maturity : Stock settlement : paying stocks, receiving them on October 31 ownership transfer on October 31 Long position liquidation : selling DSO 500 XYZ on October 16 at EUR day-return : 25 % GEARING Paris DSO securities : capitalization EUR 1 bn & day-volume EUR 0,000 for long-only securities Putting back for 1 month : official settlement price on October 27 : 22 EUR position clearing + cost of borrowing = EUR 31/12/2014 Pr. Didier Folus 3

4 Short selling through a DSO October 6, 2014 : selling DSO 500 XYZ at 24 EUR opening a «margin account» deposit 20 % : 2 0 EUR on t (+2) : broker needs the securities in order to deliver them, buyer pays Market for security borrowing/lending October 27, 2014 : delivery, clearing, putting back 31/12/2014 Pr. Didier Folus 4

5 2.4. Order types Price condition : limit order pure market order (market peg) market to limit order (primary peg) pegged order stop loss order stop limit order volume weighted average price (VWAP) Other parameters : Validity : good-for-day, good-till-time Immediate or cancelled (IOC) 31/12/2014 Pr. Didier Folus 5

6 3. Stock market quotations : Euronext vs Nasdaq Closing auction Opening auction Continuous time Orderbook (non executed) 31/12/2014 Pr. Didier Folus 6

7 3.1. Euronext central orderbook fixing (auction) Pre-opening from 7:15 to 9:00 am Opening : XYZ stock Buy side Sell side Quantity Limit EUR Limit EUR Quantity 0 no limit no limit /12/2014 Pr. Didier Folus 7

8 Quotation (electronic) rules : Price Quantities Cumul Max limits purchases sales supply demand min (S,D) no lim EUR EUR EUR EUR EUR no lim executed orders at 24 EUR 0 non executed sales on the 24 EUR-limit 31/12/2014 Pr. Didier Folus 8

9 3.2. Euronext continuous time quotation Purchases Sales Last trades Quantity Limit Limit Quantity Time Quantity Quote :19 pm :19 pm :17 pm :16 pm :15 pm Current time 2:20 pm A 0 stock EUR limited buying order comes 31/12/2014 Pr. Didier Folus 9

10 Continuous time quotation (continuing) Purchases Sales Last trades Quantity Limit Limit Quantity Time Quantity Quote :19 pm :19 pm :17 pm :16 pm :15 pm Matching orders 31/12/2014 Pr. Didier Folus

11 Continuous time quotation (end) Purchases Sales Last trades Quantity Limit Limit Quantity Time Quantity Quote :20 pm :20 pm :20 pm :19 pm :19 pm Average price for 70 stocks : EUR Last quote : EUR Last fluct. : + 0. % 31/12/2014 Pr. Didier Folus 11

12 3.3. Euronext Paris main quotation rules Liquid shares Pre-opening at 7:15 am Opening fixing at 9:00 am Continuous quotation 9:00 am -5: pm Closing auction at 5:35 pm Confirmation/reporting up to 19:00 pm Illiquid shares Pre-opening at 7:15 am Auction at 11: am Auction at 4: pm Electronic orderbook 15 market interruption if quote varies % 31/12/2014 Pr. Didier Folus 12

13 3.4. Index calculation : CAC example Alstom floating cap., Sep 22, 2014 = 9,245, = bn Security selection : 0 first floating capitalization : Q i,t F i,t P i,t most liquid : volume, turnover Capping factor at 15 % Index formula : CAC Adjustment coefficient on Sep 22, 2014 : Index uses : diversification, benchmarking, hedging t i, t i 1 00 k t Q i 1 Q F i, t i, P i, t P f i, t i, EUR 370,437,433, /12/2014 Pr. Didier Folus 13

14 31/12/2014 Pr. Didier Folus 14

15 3.5. NASDAQ stock market model In 1971, the National Association of Securities Dealers created the NASD Automated Quotations NASDAQ Registered with the SEC since ,000 companies listed Each market participant competes for customer order flow by displaying buy & sell quotations for a guaranteed number of shares 31/12/2014 Pr. Didier Folus 15

16 Level II screen NASDAQ structure of competition Buyer/seller place an order Retail broker routes order through 1. Market maker = liquidity provider 2. ECN = automated system 3. Wholesaler broker Goldman Sachs Co. (MM) Knight Capital Americas (ECN) 31/12/2014 Pr. Didier Folus 16

3.2. Euronext continuous time quotation

3.2. Euronext continuous time quotation Purchases Sales Last trades Quantity Limit Limit Quantity Time Quantity Quote 40 25.05 25. 2:19 pm 50 25. 25.00 25.15 2:19 pm 150 25.05 24.95 25.20 2:17 pm 25.00