Bid-Only is a trading status which indicates that the liquidity provider (usually the issuer) is only on the bid (buy) side in the orderbook. In other words, the liquidity provider is only buying back instruments that have already been sold to investors, but it is not selling any additional instruments.

There are different reasons why an instrument would have a Bid-Only status, such as the liquidity provider running out of inventory, i.e. the instrument is sold out. To comply with the AFM intervention measures, the liquidity provider must also go into a Bid-Only mode if the leverage of a Turbo exceeds the maximum authorised level.

FAQ

Bid-Only explained in detail

On live.euronext.com, on the instrument overview page of a Turbo (or any other structured product trading on Euronext’s Request For Execution market model) a warning is displayed near the top of the page if the instrument is in Bid-Only mode.

This warning also provides two important pieces of information: the bid (buy) price of the liquidity provider and the Virtual Offer Price (VOP).

The Virtual Offer Price (VOP) is a parameter unique to the Euronext Request For Execution (RFE) market model, Euronext’s market model dedicated to trading Warrants, Turbos and Certificates.

If an instrument is Bid-Only, the liquidity provider only has a bid (buy) order in the orderbook and no offer (sell) order. In this situation, Euronext calculates the VOP in order to give an indication of what the Bid-Offer spread would be.

The VOP is based on the liquidity provider’s bid (buy) order, calculated in real-time and updated as soon as the liquidity provider updates its bid (buy) order.

The Euronext Request For Execution market model aims to offer a high level of investor protection.

Even though investors are able to trade between themselves in the orderbook (and potentially improve the price at which they buy or sell an instrument), they are only able to do so within the bid-offer spread of the liquidity provider. This guarantees that an investor will never trade at a price worse than that of the liquidity provider.

During a Bid-Only situation, the liquidity provider only has an order on the bid (buy) side. The Virtual Offer Price (VOP) calculated by Euronext will provide the upper limit up to which trading amongst investors is possible.

If a product is Bid-Only, trading between investors will be possible between the bid (buy) order of the liquidity provider and the VOP. Any attempt to trade above the VOP will result in the automatic suspension of the orderbook.

Thanks to the calculation of the Virtual Offer Price (VOP) by Euronext, there is no risk to investors of paying an excessive price when buying a Bid-Only instrument. The VOP is closely linked to the liquidity provider’s bid (buy) price, and trading is only allowed between the bid (buy) order of the liquidity provider and the VOP. (See below: ‘How does the Virtual Offer Price provide any protection?’)

Furthermore, if the orderbook of a Bid-Only instrument has been suspended because of a potential match above the VOP, Euronext has put mechanisms in place that will automatically authorise a potential match which could incur at or below the VOP. This significantly reduces the risk of investors not being able to sell back Bid-Only instruments.

Let’s imagine the orderbook below of a Bid-Only instrument where the liquidity provider has a bid (buy) order at €0.45 and the Virtual Offer Price (VOP) has been calculated at €0.51:

Investor

Quantity

Price

Price

Quantity

Investor

LP

50,000

€0.45

€0.51

 

VOP

In this situation, it is possible to sell back the instrument to the liquidity provider at €0.45 or to trade against another investor at any price between €0.45 and €0.51.

Later on, investor A sends a sell order for 7,800 shares at €0.67. The orderbook becomes:

Investor

Quantity

Price

Price

Quantity

Investor

LP

50,000

€0.45

€0.51

 

VOP

 

 

 

€0.67

7,800

A

Some time after that, investor B sends a buy market order for 4,000 shares. Without any investor protection mechanism, investor B’s order would match against the order of investor A. Investor B would end up buying 4,000 shares at €0.67, or 49% more than the liquidity provider’s bid price (€0.45).

Thanks to the Euronext market model and the VOP, this trade between investors A and B is prevented because it would be above the VOP at €0.51. The orderbook is suspended and becomes:

Investor

Quantity

Price

Price

Quantity

Investor

B

4,000

Market

€0.51

 

VOP

LP

50,000

€0.45

€0.67

7,800

A

If the orderbook of a Bid-Only instrument has been suspended to prevent a trade above the Virtual Offer Price (VOP), it is still possible to sell this instrument. However, it is important to understand how and at what price.

Let’s assume the below orderbook, which has been automatically suspended to prevent a trade between orders of investors A and B at a price above the VOP:

Investor

Quantity

Price

Price

Quantity

Investor

B

4,000

Market

€0.51

 

VOP

LP

50,000

€0.45

€0.67

7,800

A

 

As previously explained, during a Bid-Only situation, trading between the liquidity provider’s bid (buy) price and the VOP is possible.

If investor C wants to sell their 3,500 shares of this instrument, they can do so at a maximum of €0.51 (the VOP). Investor C therefore sends a sell order for 3,500 shares with a limit of €0.51. The orderbook becomes:

Investor

Quantity

Price

Price

Quantity

Investor

B

4,000

Market

€0.51

3,500

C

LP

50,000

€0.45

€0.51

 

VOP

 

 

 

€0.67

7,800

A

When the orderbook of a Bid-Only instrument has been suspended to prevent a trade above the VOP, the Euronext matching engine will re-assess the situation every 30 seconds and determine if any potential match is possible between the liquidity provider’s bid (buy) price and the VOP.

In our example, such a match is now possible. Orders of investors B and C will match against each other for 3,500 shares at €0.51. The orderbook becomes:

Investor

Quantity

Price

Price

Quantity

Investor

B

500

Market

€0.51

 

VOP

LP

50,000

€0.45

€0.67

7,800

A

To prevent the matching between the remaining 500 shares of Investor B’s buy market order against the sell order of Investor A at €0.67 (above the VOP), the orderbook is suspended again after the trade between investors B and C.

  

Turbo trading measures in the Netherlands
A negociação de Turbos nos Países Baixos

O regulador holandês AFM anunciou medidas de intervenção no respeita à negociação e cotação de Turbos. Estas medidas visam proteger os investidores nos Países Baixos, impedindo os participantes profissionais no mercado, tais como os emitentes de Turbos, fornecedores de liquidez e criadores de mercado (liquidity providers), de oferecer instrumentos financeiros aos investidores particulares caso o seu rácio de alavancagem seja superior a certos limites fixados pelo AFM (os mesmos limites atualmente aplicados à negociação de CFD).