Abstract
The well-publicized launch of the OptiMark trading system on January 29, 1999 marked the start of a substantial initiative to apply advanced information technology to improve the trading of large block orders in the equities markets. While OptiMark did not advertise itself widely as a periodic call market, it had a number of call auction features including order aggregation and price discovery. In other important regards, differences exist. Call auctions typically match many buyers and many sellers at a single price; OptiMark’s algorithm was designed to find sequences of “1-to-many” matches. Unlike call auctions, which match orders at a single price, OptiMark trades can take place at more than one price in the same stock in a cycle. We describe the response to OptiMark’s auction-like matching algorithm, and identify its similarities and differences with the single price call auction structure. The closure of OptiMark’s trading system on September 19, 2000 illustrates how difficult it is to meet the needs of institutional traders.
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