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IT - INET Nordic - Nasdaq Nordic introduces an auction model to support less liquid shares on Nasdaq First North Growth Market (16/23)

As announced in press release today, Nasdaq Nordic* will introduce criteria to allocate certain less liquid shares on Nasdaq First North Growth Market Finland and Nasdaq First North Growth Market Sweden to an Auction Trading model. This change will be implemented effective January 2024. The Auction Trading model may be expanded to Nasdaq First North Growth Market Denmark at a later stage.

For more than 15 years, Nasdaq First North Growth Market has served as an important growth platform, enabling Nordic and international entrepreneurs to access growth capital to develop and expand their businesses. The liquidity on Nasdaq’s Nordic markets as a whole has improved over the years. However, in parallel shares of some companies have had challenges with liquidity. When the spreads become too wide, relatively small orders can create dramatic price movements. The volatility in these shares can be particularly harmful to retail investors and dampen overall confidence in market integrity.

Criteria, procedures and communications

Criteria for allocating share to Auction Trading

The following criteria need to be fulfilled in order to transfer a share into Auction market segment:

1. The spread of the share exceeds 7% in continuous trading for two consecutive quarters. The spread is measured as an average of daily Relative Time Weighted Average Spread (RTWAS) during the quarter; and
2. The share is not subject to a Market Maker Agreement or any liquidity provision activity; and
3. In case of dual listings, both shares exceed the spread criteria.      

If the above criteria are fulfilled, the share and the equity rights and equity warrants related to the share will be automatically transferred to Auction Trading.

An assessment of whether the share still fulfils the criteria is performed by Nasdaq Nordic twice a year: for the first and second quarter of a year (Q1 and Q2) in the beginning of July, and for the third and fourth quarter of a year (Q3 and Q4), in the beginning of January.

Equity rights and equity warrants related to a share are not assessed separately against the spread criteria but follow the underlying share when allocating a market segment.

Based on the assessment, a share and equity rights and equity warrants related to it will be transferred to the Auction Trading market segment for the next two-quarter period.

Criteria to transfer a share from Auction Trading back to continuous trading

A share is transferred to a market segment with continuous trading immediately when the issuer contracts a Liquidity Provider, and the Liquidity Provider initiates quoting on the share in question, or when the liquidity of the share has improved as assessed by Nasdaq Nordic according to the following criteria:

1. The share has a quoted spread of not more than 7% in Scheduled Intraday auctions, measured immediately after Scheduled Intraday auction uncross. Spread can be measured only in cases where there are orders unexecuted after an auction uncross on both sides of the book; and
2. The share is traded on a consistent basis during Scheduled Intraday auctions, measured if trades are executed in at least 80% of Scheduled Intraday auctions; and
3. The share has orders on a consistent basis on both sides of the order book immediately after Scheduled Intraday auctions uncross at least in 80% of Scheduled Intraday auctions.

If the above criteria are fulfilled for two consecutive quarters, the share and the equity rights and equity warrants related to it are transferred to the market segment with continuous trading.

An assessment of whether the share still fulfils the criteria is performed by Nasdaq Nordic twice a year: for the first and second quarter of a year (Q1 and Q2) in the beginning of July, and for the third and fourth quarter of a year (Q3 and Q4), in the beginning of January.

Based on the assessment, a share and equity rights and equity warrants related to it will be allocated to Auction Trading for the next two-quarter period.

Procedures related to update schedule and communications

After the two-quarter periods ending in December and June, Nasdaq Nordic will analyze the shares and produce a list of shares that meet the criteria for Auction Trading for the next two-quarter period. When a share meets the criteria, equity rights and equity warrants related to it are also included in the list.

Latest the second Thursday of the calendar month following the two-quarter period, in January and July, Nasdaq Nordic will announce via an IT Notice the instruments to be traded in Auction market segments. Instruments will be moved into Auction Trading and from Auction Trading effective the third Thursday of January and July. If Thursday falls into a non-trading day, the following trading day will be used.

Implementation details

Auction Trading will be offered in dedicated INET market segments with normal opening auction, three consecutive Scheduled Intraday auctions during the trading at 11:00, 13:00 and 15 CET day without continuous trading between the auctions, and a normal closing auction i.e. with five auctions per day.

First North Growth Market Sweden

Auction Trading will be offered in existing “First North STO Auction only”, seq.no 215, currently used for First North Growth Market Sweden with another criteria for shares that have multiple classes. That criteria remains unchanged (however, at the moment there are no shares that meet the this criteria). Hence, going forward there will be two separate sets of criteria for First North Growth Market Sweden shares that result in a move to Auction Trading.

Changes in existing INET segments

1. Name of “First North STO Auction only” segment will be changed to “First North Sweden Auction”;
2. Parallelly, name of “STO Equities Auction only” segment, seq. no 214, used for shares that have multiple classes, will be changed to “STO Equities Auction”;
3. Changes in Trading Phases of two above segments as the number of Scheduled Intraday auctions will increase from current one to three, resulting altogether five[1] consecutive auctions as follows (all times CET):

• Opening auction, no change: Opening auction starts at 8:00 and follows the normal opening schedules as per today. The auction period ends with an uncross that takes place randomly during the last 5 seconds between 09:00:00 and 09:00:05.
• The first Scheduled Intraday auction starts immediately after opening auction. The auction period ends with an uncross that takes place randomly during the last 5 seconds between 11:00:00 and 11:00:05.
• The second Scheduled Intraday auction starts immediately after the first Scheduled Intraday auction. The auction period ends with an uncross that takes place randomly during the last 5 seconds between 13:00:00 and 13:00:05.
• The third Scheduled Intraday auction starts immediately after the second Scheduled Intraday Call. The auction period ends with an uncross that takes place randomly during the last 5 seconds between 15:00:00 and 15:00:05.
• Closing auction: Opening auction starts immediately after the third Scheduled Intraday auction at 15:00. The auction period ends with an uncross that takes place randomly during the last 30 seconds between 17:29:30 and 17:30:00.

Order management, Manual Trade entry and pre-trade and post-trade transparency in Scheduled Intraday auctions follow the current functionalities as described in the INET Nordic Market Model. Nordic@Mid and Auction On Demand are not supported during any auctions, including Scheduled Intraday auctions.

The MIC code for all trades executed in INET segment “First North Sweden Auction” is SSME.

First North Growth Market Finland

New INET market segment “First North Finland Auction” will be created. Trading Phases consisting of five consecutive auctions will be the same as described above for segment “First North Sweden Auction”.

Order management, Manual Trade entry and pre-trade and post-trade transparency in Scheduled Intraday auctions follow the current functionalities as described in the INET Nordic Market Model. Nordic@Mid and Auction On Demand are not supported during any auctions, including Scheduled Intraday auctions.

The MIC code for all trades executed in INET segment “First North Finland Auction” is FSME.

INET and GCF-TIP identifiers for the new INET segment will be communicated separately. No new Turnover Lists and List Populations will be created.

Protocol specifications

There will be no changes to any protocol specifications. Latest protocol specifications are available at the Nasdaq Nordic Technical Information website, under INET Nordic Protocol Specifications.

INET Nasdaq Nordic Market Model

The INET Nasdaq Nordic Market Model will be updated to include the criteria for allocating shares to Auction Trading. The new version will be effective as of July 3, 2023.

The Market Model update related to changes in Trading Phases will be made effective as of October 19, 2023.

The Market Model is published at Nasdaq Nordic website under Market Models at Nordic Member Rules.

First implementation of the criteria will take place based on data on Q3 and Q4, 2023.

Implementation schedule

INET Test (NTF) August 21, 2023:

• New segment “First North Finland Auction” is made available with test order books;
• Changes in Trading Phases in segments “STO Equities Auction only” and “First North STO Auction only” as described above are made available for testing.

INET Production implementation in made in three steps:

1. July 3, 2023:
   • Name change of INET segments “STO Equities Auction only” and “First North STO Auction only” to “STO Equities Auction” and “First North Sweden Auction” takes effect.
2. October 19, 2023:
   • “First North Finland Auction” segment is implemented in INET Production without order books.
   • Changes in Trading Phases will take effect for INET segments “STO Equities Auction” and “First North Sweden Auction”.
3. January 18, 2024
   • Effective date for transferring the shares that meet the criteria to Auction segments.

Nasdaq Nordic will announce separately, by January 11, 2024, via an IT Notice the instruments that will be traded in Auction market segments as of January 18, 2024, during the first two quarters of 2024.

Technical support

For technical questions, please contact Nasdaq Cash Equity Operations:

Tel: +46 8 405 6410

E-mail: operator@nasdaq.com

Best regards,

Nasdaq Nordic

Nasdaq Nordic* represents the common offering by Nasdaq Copenhagen, Nasdaq Helsinki and Nasdaq Stockholm. Nasdaq Copenhagen, Nasdaq Helsinki and Nasdaq Stockholm, are respectively brand names for Nasdaq Copenhagen A/S, Nasdaq Helsinki Ltd and Nasdaq Stockholm AB.