What improvements could Cboe make to its Periodic Auctions offering to increase liquidity for thinly-traded securities?

Introduction

To improve Cboe's Periodic Auctions offering and increase liquidity for thinly-traded securities, we need to analyze the current market dynamics, user needs, and potential enhancements. I'll outline a strategic approach to address this challenge, focusing on key stakeholders, pain points, and innovative solutions.

Step 1

Clarifying Questions (5 mins)

• Looking at the product context, I'm thinking about the current market structure. Could you provide more details on the types of thinly-traded securities we're focusing on and their typical trading volumes?

Why it matters: Determines the scope and scale of the liquidity problem Expected answer: Primarily small-cap stocks with average daily volumes under 100,000 shares Impact on approach: Would tailor solutions to specific security characteristics and trader behaviors

• Considering user behavior, I'm curious about the current participation rates in Periodic Auctions for these securities. What percentage of eligible traders are actively using this feature?

Why it matters: Helps identify if the issue is awareness, adoption, or product functionality Expected answer: Around 30% of eligible traders regularly participate in Periodic Auctions Impact on approach: Would focus on either increasing awareness or improving the user experience

• Examining the product lifecycle, where does Cboe's Periodic Auctions offering stand in terms of maturity and market adoption?

Why it matters: Influences whether we should focus on feature expansion or optimization Expected answer: The product is in its growth phase but facing increasing competition Impact on approach: Would prioritize differentiation and scalability in proposed improvements

• Considering external factors, how has recent market volatility or regulatory changes affected the demand for liquidity in thinly-traded securities?

Why it matters: Helps align solutions with current market trends and regulatory requirements Expected answer: Increased volatility has heightened the need for efficient price discovery Impact on approach: Would emphasize stability and transparency in proposed enhancements