Price synchronicity: the closing call auction and the London Stock Market

Patricia L. Chelley-Steeley

Research output: Contribution to journalArticle

Abstract

In this paper, we consider the impact of the introduction of a closing call auction on market quality of the London Stock Exchange. We employ the market model, RDD and MEC metrics of market quality. These signify substantial improvements to market quality at both the close and open for migrating stocks.We note that these improvements are larger at the open than the close. An important contribution of our paper is that we show that changes to market quality are stronger in those securities that have the lowest liquidity in the pre-call period. In contrast, market quality changes following the introduction of a closing call auction are approximately neutral for high-liquidity securities. We conclude that the implementation of a closing call auction, for high-liquidity securities may not enhance market quality.
Original languageEnglish
Pages (from-to)777-791
Number of pages15
JournalJournal of International Financial Markets, Institutions and Money
Volume19
Issue number5
DOIs
Publication statusPublished - Dec 2009

Keywords

  • price synchronicity
  • call auction
  • market quality

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