> Congrats on the launch! What are the main benefits of this approach compared to creating additional combo (multi-leg) products on existing exchanges?
Thanks! There are two main differences. For one, combos are (as the name suggests) predefined. That works reasonably well for products like futures and options where the 80/20 approach of making combos for somewhat structural ones like different expiries in the crude and eurodollar complex or packs and bundles designed as standalone financial instruments/hedges. An implied generational liquidity mechanism can knock out some basic structural price arbs between combos, resulting in a combinatorial auction approximation.
This approach falls apart when the combinations are very general as they are in the markets for equities, credit, and many of the assets that trade in the screens.
The CLOB/predefined bundle approach also doesn't address substitutability and non-price factors, and dealing with those is key to unlocking Pareto efficiencies.
> There are already a lot of mechanisms in traditional markets that deal with revealing or concealing true demand (e.g. block trades, icebergs, etc)
The problem with block trading venues and other approaches, e.g., conditionals, boils down to incentives. Initiators of block trades are usually going in the same direction, so opportunities for direct interaction/coincidence of wants are rare. And market makers don't want to take large deltas unless they can hedge and/or know the counterparty. The net effect is not much size getting done. Conditionals are a similar story to blocks. They don't have the opportunity cost that a firm block resting on a venue does, but there's information leakage, and the surface area for interaction is still small. Market makers aren't incentivized to provide liquidity, and directional traders are worried about/behave strategically due to concerns over information leakage.
> what's to stop exchanges from (1) creating more common bundles that people want to trade
I'd say that the market has already done this in the form of ETFs and index products and an entire ecosystem of ETF market making emerged around it.
> (2) matching them with price-time priority so everyone gets a fair price? Wouldn't the auction model just create wider or locked/crossed markets?
I'm not sure that I follow this part entirely. The uniform price combinatorial auction that we're running results in everyone getting the same price on a symbol-by-symbol basis. And, we view time priority as a bad thing (the arms race dynamic of time priority was known to practitioners since markets first started going electronic but Budish et al. were the first to write about it in detail). Periodic auctions have better fairness and post-trade mark outs theoretically and in practice. Some of the European venues where batch auctions have made limited inroads demonstrated this.