Proposal To Allow Post Only Orders on Complex Orders Given by C2

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C2 plans on allowing Post Only order instructions within its complex order market. The broker believes that it will encourage market participants to increase the liquidity of the complex order market, ultimately benefiting all the investors involved.

Addition of Post Only Order To Complex Order Book

Cboe C2 Exchange Inc. will have the chance to implement it, as the Securities and Exchange Commission (SEC) has officially opened a consultation about the matter. The consultation will focus on whether or not the Exchange’s rulebook should be amended in order to allow Post Only order instructions on the complex orders that route to the exchange’s electronic book.

This new proposal came shortly after C2 adopted the Post Only order instruction to the exchange’s simply orders routed to the electronic book.

What is a Post Only Order?

The “Post Only” order itself is an order ranked and executed by the System. The System subjects it to the Price Adjust process or rejects and cancels. The Post Only order is prohibited from taking liquidity from the Simple Book, however, and isn’t allowed to route liquidity to another Exchange.

In other words, should a Post Only order be put into C2’s automatic trading system, it won’t route to another exchange or execute against an order within the Simple Book. The Post Only order is designed to add liquidity to the Simple Book, not take it away.

Keeping Liquidity

C2 works with a maker-taker fee structure. What this means is that an order execution that takes liquidity from the Simple Book is mandated to pay a taker fee to facilitate it. What the Post Only order instruction does, is it allows Trading Permit Holders (TPHs) flexibility in doing business by avoiding a taker fee. This is especially applicable should a TPH intend to simply increase the liquidity of the Simple Book by submitting an order.

As it stands now, C2 doesn’t have an offering of Post Only complex orders. Just like it operates in the Simple Book, execution of orders that take away liquidity from the Complex Book is subject to a taker fee. What’s interesting to note is adding liquidity to the Complex Book makes the TPH liable to maker rebate.

As it stands now, any TPH wanting to add liquidity to the Complex Order Book isn’t given the same flexibility in avoiding the taker fee. This is due to the marked absence of the Post Only instruction. Due to this, C2 is proposing to add the Post Only instruction to the applicable types of Complex orders that the Exchange has submitted.

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